Developmentalist policies in financialized economies: contradictions and impasses of the Brazilian case

BRUNO, MIGUEL; PAULANI, LEDA MARIA

doi:10.1590/0101-31572024-3473

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Brazilian Journal of Political Economy

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Articles • Brazil. J. Polit. Econ. 44 (2) • Apr-Jun 2024 • https://doi.org/10.1590/0101-31572024-3473 copy

Developmentalist policies in financialized economies: contradictions and impasses of the Brazilian case^* * An initial version of this text was presented at the 4th Workshop on New Developmentalism, held at Getulio Vargas Foundation - FGV-SP, in São Paulo, in 2019, and at the XXIII Brazilian Congress of Economics sponsored by the Federal Council of Economics in Florianópolis (Santa Catarina State) in the same year. We appreciate the comments received there, as well as the observations of two anonymous reviewers of this journal, which helped us to improve the text. It is part of broader scope research developed by the authors and funded by the National Council for Scientific and Technological Development (CNPq).

Políticas desenvolvimentistas em economias financeirizadas: contradições e impasses do caso brasileiro

Authorship SCIMAGO INSTITUTIONS RANKINGS

ABSTRACT

This paper discusses the applicability of economic policies and other developmentalist governmental actions to financialized economies. It mobilizes the theoretical-methodological regulationist principles for a historical and institutional macro-analysis. After a brief review of the concepts of the Regulation School, including the “economic policy regime” (Théret, 1992THÉRET, Bruno. Estado, Economia Pública e Regulação: Uma visão crítica das intervenções econômicas do Estado. Brasília: Editora Universa/UCB, 1998; Lordon, 2002LORDON, F. Theórie de la Régulation et politique économique. In BOYER, R. e SAILLARD, Y. (org.). Théorie de la Régulation: l’état des savoirs. Paris: La Découverte, 2002; Boyer, 2015BOYER, R. Économie politique des capitalisms: théorie de la régulation et des crises. Paris: La Découverte, 2015), the Brazilian case is analyzed as a remarkable example of institutional compatibility with rentier-financial accumulation to the detriment of the accumulation of productive fixed capital. Several indicators of this case are presented.

KEYWORDS:
Economic development; institutional structure; regulation school; financialization; Brazilian economy

		KEYNESIAN-DEVELOPMENTALIST	NEOLIBERAL-MONETARIST
CHARACTERISTICS
Stability Periods	Type of economic policy	• aggregate demand management policy	• monetarist policy
		• fiscal progressivity	• market incentives
		• social security
	Hierarchy of institutional forms	• implied hegemony of wage earners,⁵ 5 The “hegemony of wage earners” means here that, in the Keynesian-developmentalist economic policy regime the wage relation is not only at the center of the accumulation regime (which is always true if we are talking about capitalism), but also constitutes the determining institutional form of its dynamics, through the expansion of direct wages (indexed to productivity gains) and indirect wages (expansion of welfare state institutions, which account for the long-term reproduction of workforce). We will come back to the question. agreed upon with industrial capital	• hegemony of financial capital
	Degree and type of democracy	• encompassing political coalition	• capture of the State by powerful groups
Periods of crisis	Reform strategy	• reinforcement of public intervention	• privatizations
		• income policies	• liberalization
		• indicative planning	• openness to global competition
		• industrial policy

	NEOCLASSICAL-WALRASIAN OR ORTHODOX	KEYNESIAN-DEVELOPMENTALIST
ECONOMIC POLICIY REGIME
Monetary policy	• focused on inflation control (inflation target)	• liquidity management and credit incentives
	• currency and long-term interest rate neutrality	• non-neutrality of money
	• under the management of independent central banks	• should also contribute to full employment
Fiscal policy	• ineffective (crowding-out)	• effective demand management (crowding-in)
Fiscal policy	• under financialized economies, it becomes a means of generating cash for the central government	• under demand-led growth regimes, an effective tool to stimulate the level of activity and promote full employment
Exchange policy	• determined by the financial market in floating exchange rate regimes	• exchange and capital flows controls are necessary to promote industrial development
Trade and financial liberalization	• priority to high financial mobility and the rentier accumulation of short-term capital	• should be linked to a national economic development strategy
Government social spending	• minimization of the social State to favor rentier and financial accumulation based on public and private indebtedness	• justification of the power to tax
Government social spending		• they are the expenditures of legitimacy of every democratic rule of Law (Welfare)
Hegemonic bloc	• led by bank-financial capital	• based on the political pact between industrial capital and wage labor

Monetary Regimes	Structural Characteristics	Long Run Elasticities of Financial Added Value (AV) to Inflation	Economic Policy
Regime 1 (1947-1970)	Underdeveloped banking and financial system and absence of inertial inflation	Coefficient: - 0.113874	Orthodox policy of fiscal adjustment, based on monetarism, to combat inflation (Government economic action plan - PAEG 1964-1966)
		Std. Error: 0.105002
		t-Statistic: - 1.084.497
		Prob.: 0.2917
		There is no statistically significant long-term relationship between financial AV and inflation
Regime 2 (1971-1994)	High inertial inflation expands the added value of the financial sector and promotes concentration and banking accumulation	Coefficient: 0.290273	• Inflation is inertial and monetarist orthodox policy is ineffective to control it
		Std. Error: 0.015769
		t-Statistic: 1.840.824
		Prob.: 0.0000
		There is a statistically significant long-term relationship between financial AV and inflation
Regime 3 (1995-2019)	In the post-Real period, inflationary gains are quickly replaced by high real interest income (usurious gains) and banking accumulation reaches a new level	Coefficient: - 0.024839	Other transmission channels respond to inflation control, such as the tendency towards real appreciation of the exchange rate
		Std. Error: 0.047106
		t-Statistic: - 0.527301
		Prob.: 0.6030
		There is no statistically significant long-term relationship between financial AV and inflation

	1970-1980	1981-1994	1995-2021
CHARACTERISTICS
Financialization index	1,24	4,05	17,28
Taxonomy	Incipient	Restricted	Extended and high
Origin	-	Inflationary gains derived from the generalized indexation of contracts from the public indebtedness	Interest income and other financial gains with financial assets derived from internal and private public indebtedness
Origin	-		Private finance subverting public welfare provision
Macroeconomic and social implications	Institutional conditions for indexation practices via monetary correction	Development of rentier accumulation thanks to “financial currency” or “indexed money”: elitized financialization	Government attempts to reconcile the interests of banking and financial sector with social policies
	Rising concentration of income and wealth	High inflation with stagnant productive investment	Stabilization of inflation (1995) and moderate recovery of productive investment as of 2004, but strong fall from 2015
	Fall of the wage share	Low levels of wage share, compared to the international average	Mass financialization through a moderate increase in wage share, collateralization of social policy, expansion of the supply of consumer credit, private pension funds, insurance and new financial services to families and companies.

Period	Employment elasticity of GDP	Employment elasticity of wage
1985-1989	0.377	0.208
1995-2001	0.726	-0.375
2002-2019	0.839	-0.170

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[TFN1] Source: Own elaboration, inspired by Boyer (2015BOYER, R. Économie politique des capitalisms: théorie de la régulation et des crises. Paris: La Découverte, 2015, p. 181, fig. 24).