EDUARDO CUCOLO
SÃO PAULO, SP (FOLHAPRESS)
The Luiz Inácio Lula da Silva (PT) government’s proposals to end tax advantages that allow richer people to pay less taxes will have a positive effect on the Brazilian economy, says Joseph Stiglitz, winner of the Nobel Prize in 2001.
“It’s no surprise that the rich say: don’t tax us because it will be bad for the economy. I would be surprised if they didn’t say that. It’s a selfish argument. But it has no economic basis”, says the economist in an interview with Folha de S. Paul.
The Nobel winner was in Brazil this week for a series of events and meetings, including a meeting with Lula.
Stiglitz states that the slowdown in the global economy makes it urgent for Brazil to increase revenue, stimulate growth and reduce interest rates.
He is optimistic about the US, but highlights problems in the European and Chinese economies. “It is not clear whether President Xi (Jinping) is fit to manage them.”
He also states that inflation fell in the USA and Brazil because of the normalization of supply and demand in the post-pandemic period, not because of the rise in interest rates. “The incredible thing about Brazil is how well it has done, given the bad policy of the Central Bank,” he says.
QUESTION – Mr. He had many meetings here in Brazil, including a meeting with President Lula. What is your impression of the country on this visit?
JOSEPH STIGLITZ – There is a stronger spirit that I haven’t felt in a long time. It’s like emerging from a kind of darkness. The government has done a very good job.
Some civil society groups would like him to do more. Some rich people wish it did less. Considering the difficulties, he is doing a very impressive job.
It would be good for the Brazilian economy and for all of Brazil if Congress approved the more progressive taxes he proposed. I would go even further, but what he proposed is important.
Some people say that taxing the rich is bad for the economy and that there is always a way to escape taxation. As part of an international movement for tax justice, like you. see the issue?
JS – It’s very good for the economy (taxing the rich). For many reasons. The government needs the revenue, and this is the best place to get it.
Secondly, Brazil is one of the countries in which the rich pay less taxes in relation to their income than the poor. They have legal ways to avoid taxes. Most people are honest and will pay their fair share if called upon to do so. If not, you won’t pay.
The third thing is that it leads to a more equal society. It is not a leftist view. The IMF, the OECD, they all come to the view that societies with less inequality have better economic performance, from which everyone will benefit.
It’s no surprise that the rich say: don’t tax us because it will be bad for the economy. I would be surprised if they didn’t say that. It’s a selfish argument. But it has no economic basis.
One of the objectives of this search for revenue is to eliminate the deficit in public accounts, but there is pressure for more spending. Is austerity important right now?
JS – Financial markets have overemphasized the importance of the deficit. Austerity has failed everywhere as an instrument for budget balance.
Austerity generally leads to lower growth. Lower growth leads to lower tax collection and more spending on unemployment insurance and the basic safety net. So the deficit worsens.
Even the IMF recognizes that it was a wrong policy. If you put growth at the top of the agenda, the economy grows, revenues increase and the deficit decreases.
What President Lula is doing is the correct strategy. In two ways. He says, look, I’m going to try to collect more, a moderate amount, from the rich people who aren’t paying their fair share. At the same time, I will use part of this money to promote economic growth, for the ecological transition.
Mr. Do you see an adverse international scenario approaching? What are the risks in relation to China, the USA and Europe at the moment and how does this affect Brazil?
JS – I believe the United States will do well. There is strong fiscal support that compensates for the monetary contraction. The Fed raised interest rates a lot. This caused interest rates to rise around the world.
In Brazil, they fell, but not enough. They are becoming more reasonable, but they are still not reasonable. The amazing thing about Brazil is how well it has done, given the bad policy of the Central Bank.
The second concern is China not managing its economy. In 2008, China was the foundation of the global recovery. Now it is contributing to the weakening of the global economy. They have many problems, and it is not clear whether President Xi is fit to manage them. They have the tools, but there is a high risk that they will not use them. It’s a big unknown.
Europe doesn’t have the fiscal support, so it’s going through a really weak period.
Returning to Brazil, given the weak global situation, it is even more important for the Central Bank to reduce interest rates. And it is important that President Lula’s fiscal policy, what we talked about before about taxes and expenses, the growth agenda, is adopted.
Talking a little more about the United States, why is inflation decreasing? Did the Federal Reserve do a good job?
JS – It has nothing to do with the Federal Reserve. I would say this is largely a supply-side disruption and a shift in demand.
Housing prices, on average, rose 40%. What is the solution to the housing shortage? Raise interest rates and reduce supply, or reduce interest rates and increase supply? It’s very clear. You don’t need to be a genius to figure it out. The Fed made the problem worse, not helped solve it.
About a third of inflation at the start of the pandemic came from car prices. Why? Chip shortage. Will raising interest rates solve the problem? No. Car prices have dropped. Was it because of the Fed? No.
I spoke to automaker executives. They figured out how to get the chips. Inventories increased and car prices fell.
Do we have something similar in Brazil?
JS – Exactly. This is why your inflation has decreased. It’s not the interest rate. It was solving supply-side problems, not monetary policy, that reduced inflation.
Have economists, central banks and governments learned anything from the pandemic in terms of the role of the State and the efficiency of markets?
JS – There were many lessons. The first is how important government is. When we have a crisis, we turn to the government.
From the point of view of economic theory, pandemics, like climate change, are externalities. Markets cannot deal with externalities. The government saved us.
Countries where there was more trust in the government fared better. The USA and Brazil, where there was a government that was terrible, didn’t do so well.
The other thing we’ve learned is that markets haven’t performed very well in the post-pandemic recovery. We had all kinds of supply shortages. The market was not resilient.
We have to trust the markets. A modern economy is too complicated to not have markets. But they don’t work well on their own. The challenge is how do we make markets greener, how do we make markets more resilient.
Sometimes I say that neoliberalism is dead. But it’s a slow death. One of the expressions I heard, I don’t remember the exact words, but it says that, when ideas die, they persist in Brazil.
What can you call this new economic scenario after what Mr. call the death of neoliberalism?
JS – It is not clear where the global economy is heading. The results of neoliberalism were so bad that there was a rise in inequality, people at the bottom didn’t do well, there wasn’t a ripple effect. There is an anti-democratic response, a fascist response in some parts of the world.
In other countries there is something I call progressive capitalism. We recognize the role of markets, but they are not unrestricted markets. They are regulated, with the idea of trying to shape society in a better way. In Europe they call it social democracy.
What is Brazil’s place in this scenario?
JS – One aspect of the change in the global economy that is very important is the new economic relations between the United States and China. This affects Brazil in particular, because many of its exports go to China.
We’re not saying you’re choosing one side or the other, but you have to recognize that we’ve had a lot of shocks in the last 20 years. We must not assume that they are over. A shock could be a disruption, a shock from China.
Right now, key points to make the economy more resilient, reducing risks, involve the green transition, because climate and climate change are a big shock.
President Lula also wants Brazil’s voice to be an important part of this new structure that emerges. Let’s go through the green transition. The Amazon is fundamental. Brazil plays a fundamental role in the world.
X-RAY
Joseph Stiglitz, 80
PhD in Economics from MIT (Massachusetts Institute of Technology). He is a professor at Columbia University in New York. He was chief economist at the World Bank and chairman of the Council of Economic Advisers under President Bill Clinton. He received the Nobel Prize in Economics in 2001.
The post Lula’s proposals to tax the richest benefit the country, says Nobel Prize appeared first in Jornal de Brasília.
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