Opinion – Why? Economês in good Portuguese: Some lies you will hear in the presidential campaign

This year there is a presidential election. Before the crazy race even begins, it’s good to alert the public to the barrage of socio-economic policy bullshit ahead. And from the sides. And behind the back. It is the year of magic proposals and easy solutions. As in the fight against Covid-19, it is necessary to start the inoculation program now. So here is a list of some of the lies that will be sold as undisputed truths.

The fault that we have not made progress in the social area in recent years lies with international imperialism/capitalism (or something like that)

This is an old myth, but still widespread. Whenever things go wrong, it is the fault of some external, capitalist actor. It becomes childish. As far as we know, there are no sanctions imposed on our economy and we are not following any guidelines (from the IMF, the Washington Consensus, etc.). It’s our fault, but it’s hard to admit.



Spending cap is constraining growth

It is one that will surely be trumpeted. It is worth remembering that the spending cap only prevents the emerging country with one of the highest levels of taxation — that is, us — from having to continue raising taxes to avoid a debt default or the return of a hyperinflationary process. More: the law does not prevent more spending on education, it only prescribes that for that it is necessary to spend less elsewhere.



We need more public investment to grow again

Well, this has been tried countless times, but never with the expected results. We recently embarked on this, with BNDES offering credit for large companies to become monopolists, to the detriment –obviously– for all of us. Large investments through state projects can even be a pro-growth factor in very poor economies with problems of private coordination. This is not our case (and even if it were, the problems of political economy associated with a managing State make the undertaking very risky).



Let’s spend more on education to solve the fundamental flaw in our socioeconomic equation

There is no doubt that human capital is one of our biggest constraints to development: 30% of adult Brazilians are functionally illiterate. But from there for the solution to spend more there is a giant leap. We can even direct more resources to this area, but only after we solve the problem of inefficiency in the public education sector. Why do we have a few excellent public schools and many others where almost nothing is learned? How to better coordinate the incentives of teachers with those of students? How to promote the good teacher?



Inflation can be defeated without other sacrifices (or: the Central Bank favors bankers by raising interest rates)

It cannot, unfortunately. Some sacrifice is inevitable, although its magnitude can be lessened with intelligent and credible strategies. Obviously we are not referring to price controls or other witchcraft, but, for example, to a more gradual, albeit firm, convergence towards some 3.5% annual inflation. And to an exceptional collaboration of fiscal policy –which needs to become more contractionary– in times of substantial price rises. A quick note about banks and interest rates for the unsuspecting: credit givers don’t like high interest rates. You read correctly. Very high interest rates attract bad debtors and this is not good news for those who lend.

This is an appetizer-list, a pre-list. When the thing starts for real, it’s going to rain economic bullshit. The current government, which has done little to make us a modern economy, will invent stories; and part of the opposition will suggest the usual failed path. We will be with our ears and eyes open.

Mauro Rodrigues (Economics professor at USP and author of the book “Under the magnifying glass of the economist”) and the Por Quê?