The idea that expanding fortunes at the top is good for the economy, generating overall prosperity through “trickling down”, belongs to junk economics: the economy has to be directed to the common good.

(Ladislau Dowbor)

Inequality is structural when policies keep some groups of people from obtaining the resources to better their lives.

(Amadeo Kimberly)1

Economists love narratives, all of them claiming scientific legitimacy. How could you proclaim the business of business is business (Milton Friedman, 1970), allowing corporations to ignore the environmental, social and economic impact of their activities? The corporations loved it, and he got the Bank of Sweden “Nobel”. If you add his “greed is good” motto, you have the complete free-for-all that justifies any way of making money, if you keep within the law. And since the law is written in great part by politicians elected with corporate money, the circle is closed. And in more thorny issues you always have tax havens, in Delaware, Geneva or the British Virgin Islands. There are always justifications for our dramas, Iraq, Kabul, Kiev and the pandemic. Attempts to make amendments, through ESG conformity statements, are unfortunately coming from the public relations departments. The fact is that we are facing a slow-motion catastrophe, in economic, social and environmental dimensions.

Economic initiatives must be aimed toward the common good, responding directly to what the populations need. As Brazil faces a new political cycle, we have drawn up the possibilities of inclusive development, meaning the organization of economic and social initiatives on the basic assumption that if you center on the needs of the population, directly and not through some convoluted long-term trickling down hypothesis, you have best chances of success. And success means bringing political and economic democracy together. With structural inequality such as it prevails in Brazil, democracy makes no sense.

At the end of 2022, Brazil is completing eight years of economic stagnation, social dramas and environmental destruction. Lamenting public deficit when the financial source of public revenue, which is the country's productive base, has been paralyzed, is useless. Weakening the population's consumption, blocking access to social policies, reducing investments in infrastructure, freeing environmental destruction and increasing unemployment have resulted in a general crisis. Only primary commodities exports and financial rentierism are working. The reorientations we here suggest are aimed at boosting the economy from the bottom up, generating a virtuous cycle of development: income redistribution, social policies, investments in infrastructure and public employment policies.

Ensure income at the bottom of society

In Brazil, in 2022 we have 33 million people going hungry, of which about 20% are children. That's a crime. And we have 125 million (58% of the population) in food insecurity. This is in a country that produces over 3 kilos of grain per day per capita, but basically for export, simply because with the Kandir Law (1996), which exempts exports from taxes, and the appreciation of the dollar, exporting yields more for commodity traders. But there is also a lack of housing and other basic goods and services, while companies operate with an idle capacity between 25% and 30%, simply because of weak demand and extorsive interest rates. This understanding is central to the design of a development strategy, as we have both unmet needs and underutilization of capacity.

Moving money to the bottom of the social pyramid, through enhanced basic income, a growing minimum wage, expanded social security, and minimum prices for small farmers (we know well how to ensure a greater flow of income to the base of society) generates well-being for families, stimulates companies, expands employment and does not generate inflation, as it did not during the productive inclusion phase from 2003 to 2013 in Brazil, nor in other distributive experiences such as the American New Deal or the Welfare State in many countries. And a stimulated economy raises returns to the State.

Some things cannot be lacking for anyone: it is a crime for children and adults to go hungry when there is food, for a mother not to be able to pay for medication for her children, people living on the street in sub-human situations. The Bolsa Família was immense progress, it generated efficient forms of organization and regulation, but we cannot keep families in permanent anxiety, according to flows and political backlashes: universal access to a minimum is a matter of good economic sense, but also of a feeling of security essential for families. We have the financial resources, we have developed all the necessary transfer technologies, and we know that it is politically right and ethically just to ensure a stable, predictable flow of income to the base of society. In particular, we know that in a country with immense underused resources, boosting the economy through aggregate demand is fundamental, and financial resources return with a surplus. To suggest that if people have a basic income they will avoid working is an intolerable prejudice, even belied by the facts: it is a floor, which allows people to build their lives.2

Ensuring investments in social policies

Family well-being does not depend only on money in your pocket. As an order of magnitude, 60% of the families' economic security depends on being able to pay bills and purchases, but the other 40% depends on access to collective consumption goods: we need security, but police stations cannot be bought. You don't buy schools, hospitals, parks, clean rivers, tree-lined streets and so many essential services for a dignified life. The Teto de Gastos (2016) law and other limitations on the provision of social policies with universal free access constitute economic nonsense. Privatizations in the health area result in the disease industry (see the costs and inefficiency of private health plans), in education they generate elitism and an authentic diploma industry, in security, they generate militias, as we see both in Brazil and in the United States.

Instead of ideological discourses about 'minimal state' and 'spending reduction', we have to rescue the public dimension and universal access to services that are, after all, absolutely essential, such as health, education, security, and, of course, environmental sustainability. With the exception of the United States, developed countries ensure public, free and universal access simply because it is incomparably less bureaucratic and more efficient. Health costs in the US are twice as high as in Canada, but Americans are at the bottom of the OCDE countries in the population health quality, Canada near the top.

For Brazil, this rescue of social policies through the State is particularly important, insofar as public, free and universal access constitutes a powerful tool for reducing inequalities, our main structural challenge. And the systemic impacts are immense, as a healthier population, with increasingly higher levels of education and scientific knowledge, with more access to culture, and sustainable policies, will not only have a better quality of life but will also become more productive. Qualifying social policies as “expenditures”, and placing a ceiling, while resources transferred to financial groups are qualified as 'profits and dividends' and tax-exempt, is simply absurd in economic terms, yet understandable in terms of the interests of the financial corporations that drain the country.

Social policies are investments of prime importance for our future. Pocket money for daily expenditures and access to public goods and services complement each other. And the money comes back: every real in the Bolsa Família generated 1.85 reais in GDP growth3. Free and universal access to social policies is essential for the well-being of families, which is the aim of development, but also for the productivity of the entire production system: healthy, well-educated workforce, wealth of cultural activities, security, better social balances are essential for a dynamic country-building environment.

Expanding investments in infrastructure

Equally important are investments in infrastructure, which both improve the comfort of families – with paved streets, green spaces, public transportation systems, internet infrastructure, access to cheap energy, water supply and sewage treatment systems, for example, and improve the productivity of companies. In this sense, the use of public resources can be greatly expanded, as it improves social productivity and ensures a return on investment. What is essential, of course, is to invest in a planned manner to ensure increasing systemic productivity. It's a productive investment, not “expenditure” as the austerity theories present it.

The role of the State is fundamental, as evidenced by investments in infrastructure in Europe, China, South Korea and other countries: integrated and articulated networks of transport, communications, energy and water and sanitation infrastructures ensure savings for productive activities. In Brazil, the options guided only by private interests, have led to the transportation of people in cities being largely individual, transportation of cargo essentially by road and truck and intercity travel relying heavily on planes; in all cases, the least efficient options compared to mass public transport, cabotage and freight rail networks, and high-speed trains for regional intercity mobility. In other words, with planning, there are immense gains in terms of systemic productivity to be recovered.

Brazil has both financial resources and technical capabilities, but investment has been taken over by private corporations, with little public control. The reorganization of infrastructure in the country can be the source of a set of labor-intensive initiatives, policies that generate at the same time better systemic productivity through the quality of infrastructure, income for families through the jobs generated in the construction of infrastructures, and dynamization of the aggregate demand at the base of society.

Public employment policies

The immense mass of underutilized human resources constitutes a challenge and an opportunity: as Celso Furtado suggested, when a person's production is zero, any activity is profit. Brazil, with a population of 215 million, of which 150 million in working age, has less than 50 million formal jobs, of which 11 million are in the public sector. Around 40 million survive in the informal sector, 13 million are unemployed, and 6 million have given up (desalentados): a gross underutilization of over 50 million adults, around the official workforce of 106 million.

Waiting for “the markets” to solve it makes no sense, particularly considering the penetration of new technologies in production processes. The Biden Government is studying the Public Employment Program, India has municipal labor-intensive public project programs (National Rural Employment Guarantee Act, 2005) that guarantee 100 days of paid employment per year. Basic sanitation works, for example, which are usually labor intensive, generate savings in the health area that are on the order of 4 times the cost of sanitation: they are investments that generate employment and multiply resources.

National and international examples abound: the drama of unemployment, informality and the underutilization of human resources, with all the suffering they generate, can and must be transformed into productivity: they are not expenditures, they are investments. We need public employment policies, with the corresponding forms of organization, in particular municipal initiatives, since the workforce is local. The 5,570 municipalities in the country can be transformed into construction sites, with infrastructure, urban maintenance, afforestation, and so many initiatives that increase the systemic productivity of the territory4.

And there are countless opportunities for job creation by ensuring microcredit and technology support for small producers, local government purchases, price guarantees, improvement of transport and communications infrastructure, generalization of internet access and other initiatives that ensure better conditions for business initiative, as seen in so many undertakings in the 2003-2014 decade, for example with the productive and guided microcredit program of public banks. It is about freeing productive capacities and potential immobilized within the framework of the absurd “austerity” policies, in which the country was paralyzed in the name of fiscal responsibility, while generating unproductive financial fortunes. Environment protection is much more inclusive than burning the Amazon to export wood, soy and beef5.

Inclusive development follows the general orientation of stimulating the economy from the bottom-up, expanding the demand for goods and services for individual consumption, access to goods and services for collective consumption such as health, education and security, investments in infrastructure that improve overall productivity, tapping into the immense underutilized potential of manpower. All of this represents investments on the part of the State, but by enhancing the use of idle resources, it generates a return. Demand at the base of society stimulates production and business investment, access to public goods for collective consumption reduces costs through economies of scale and organization, better infrastructures reduce production costs in all sectors, while better use of the labor force generalizes both the well-being of families and systemic productivity. It's a win-win process.

Notes

1 Kimberly Amadeo – in David Rosen America: The Land of Inequality, Counterpunch. 8 September 2022.
2 Eduardo Suplicy's works are very enlightening: more than left-wing politics, it is about human decency, as well as economic common sense. While we discuss politics, let the children eat. The study, Basic Income and the Left, by Philippe Van Parijs, (2020), systematizes the arguments.
3 Ipea. Comunicados do Ipea N. 75 Fevereiro de 2011.
4 See in particular the research report National Policy to Support Local Development. With contributions from Márcio Pochmann, Pedro Paulo Martone Branco, Juarez de Paula, Paulo Vannuchi, Sílvio Caccia Bava and Ladislau Dowbor. See also Pavlina Tcherneva, The Case for a Job Guarantee. Polity Press, 2020.
5 George Monbiot presents an excellent synthesis in Regenesis: Feeding the World Without Devouring the Planet. Penguin Books, 2022.