Economy

Why The Bad Economic News From Brazil Is Not Just Cyclical

Dilma needs more than good will
Dilma needs more than good will
Patricia Campos Mello

-Analysis-

SÃO PAULO - Under Dilma Rousseff's government, Brazil is now slated to grow at a slower rate than previously forecast. What has happened? Simply put: the current economic model has stopped working, says Samuel Pessôa, researcher at the Brazilian Institute of Economics at the prestigious FGV university.

His widely debated article, (which predates the latest annual growth projections) published in Interesse Nacional magazine, asks whether slow growth — less than 1% in the first semester, comparing to the same period in 2011 — is cyclical or structural.

Under ex-president Lula, a member of Dilma’s party, Brazil bet on reducing unemployment and raising capacity thanks to two factors that are not going to recur, Pêssoa says.

He says that, from 2005 until today, credit capacity and the rising wages across social classes fed consumption, thus fueling overall economic growth. Summing the rate of growth and rate of investment — absorption rate — outpaced population grown.

This model has hit its limit because it pushes up wages too high, destroys competition, and generates an anti-industrialization dynamic in society. “Dilma is an ideologist, she thinks industry is a special sector and won’t let it keep going down.”

Bráulio Borges, head economist of LCA Consultores, disagrees. "Those who believe in it say that expansion of consumption wasn’t followed by investments. But government data show that this was not the case: investments were a bit more than 16% of the GDP from 2000 to 2007. Now it’s above an average of 19% from 2008 to 2011.

According to Alexandre Schwartsman, professor at Insper and ex-director of Banco Central (Central Bank), this model was effective while commodities prices were rising —in 2011, they reached a historic peak. “Global deceleration won’t let us keep the same rate”, he says. “This model is not necessarily finished, but now we will grow much less than 3%, instead of last year’s 4.5%."

Armínio Fraga, ex-president of Central Bank and founder of Gávea Investiments, agrees with Pessôa's theory.

Supply must fulfill demand

"It is natural and desirable that consumption grows, and that part of it takes place through credit," he says. "However, rising demand should be followed by rising supply, which hasn’t been enough to keep up with past performances,” he says.

According to the Central Bank, family debt in Brazil represents 43.4% of household earnings.

Pessôa says that Dilma’s places too much value in the effectiveness of interest-rate reductions. Lowering costs of public debts will ultimately have little impact.

The public sector pays about 5% of GDP in interest. Discounting currency adjustments and taxes over interest, the earnings would not cross 1.5% of GDP. "This is not irrelevant, but it isn’t going to save us.".

Pessôa says measures to stimulate the economy taken in recent years are reducing the fundamental efficiency and productivity of the nation. Schwartsman affirms this is the same action taken after 2008’s crisis—but this time it isn’t working. "In 2008, it worked because we were leaving behind higher unemployment rates."

Luiz Fernando de Paula, president of Brazilian Keynesian Association and professor at State University of Rio de Janeiro (UERJ) disagrees. "Considering the current panorama, with the strong tendency to reduce industrialization, this is better than nothing. We need to change high interest rates and currency appreciation, combined with smart industry policies that stimulate high-value exports."

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Society

Chinese Students Now Required To Learn To Think Like Xi Jinping

'Xi Jinping Thought' ideas on socialism have been spreading across the country since 2017. But now, Beijing is going one step further by making them part of the curriculum, from the elementary level all the way up to university.

Children from Congtai Elementary School, Handan City, Hebei Province

Maximilian Kalkhof

BEIJING — It's important to strengthen the "determination to listen to and follow the party." Also, teaching materials should "cultivate patriotic feelings." So say the new guidelines issued by the Chinese Ministry of Education.

The goal is to help Chinese students develop more "Marxist beliefs," and for that, the government wants its national curriculum to include "Xi Jinping Thought," the ideas, namely, of China's current leader.


Xi Jinping has been the head of the Chinese Communist Party (CCP) for almost 10 years. In 2017, at a party convention, he presented a doctrine in the most riveting of party prose: "Xi Jinping's ideas of socialism with Chinese characteristics in the new age."

Behind this word jam is a plan to consolidate the power of the nation, the party and Xi himself. In other words, to make China great again!

Communist curriculum replaces global subjects

This doctrine has sent shockwaves through China since 2017. It's been echoed in newspapers, on TV, and screamed from posters and banners hung in many cities. But now, the People's Republic is going one step further: It's bringing "Xi Jinping Thought" into the schools.

Starting in September, the country's 300 million students have had to study the doctrine, from elementary school into university. And in some cities, even that doesn't seem to be enough. Shanghai announced that its students from third to fifth grade would only take final exams in mathematics and Chinese, de facto deleting English as an examination subject. Beijing, in the meantime, announced that it would ban the use of unauthorized foreign textbooks in elementary and middle schools.

But how does a country that enchants its youth with socialist ideology and personality cults rise to become a world power? Isn't giving up English as a global language the quickest way into isolation?

The educational reform comes at a time when Beijing is brutally disciplining many areas of public life, from tech giants to the entertainment industry. It has made it difficult for Chinese technology companies to go public abroad, and some media have reported that a blanket ban on IPOs in the United States is on the cards in the next few years.

photo of books on a book shelf

Books about Xi-Jinping at the 2021 Hong Kong Book Fair

Alex Chan Tsz Yuk/SOPA Images/ZUMA

— Photo:

Targeting pop culture

The regime is also taking massive action against the entertainment industry. Popstar Kris Wu was arrested on charges of rape. Movies and TV series starring actor Zhao Wei have started to disappear from Chinese streaming platforms. The reason is unclear.

What the developments do show is that China is attempting to decouple from the West with increasing insistence. Beijing wants to protect its youth from Western excesses, from celebrity worship, super wealth and moral decline.

A nationalist blogger recently called for a "profound change in the economy, finance, culture and politics," a "revolution" and a "return from the capitalists to the masses." Party media shared the text on their websites. It appears the analysis caused more than a few nods in the party headquarters.

Dictatorships are always afraid of pluralism.

Caspar Welbergen, managing director of the Education Network China, an initiative that aims to intensify school exchanges between Germany and China, says that against this background, the curriculum reform is not surprising.

"The emphasis on 'Xi Jinping Thought' is being used in all areas of society," he says. "It is almost logical that China is now also using it in the education system."

Needless to say, the doctrine doesn't make student exchanges with China any easier.

Dictatorships are always afraid of color, pluralism and independent thinking citizens. And yet, Kristin Kupfer, a Sinology professor at the University of Trier, suggests that ideologically charged school lessons should not be interpreted necessarily as a sign of weakness of the CCP.

From the point of view of a totalitarian regime, she explains, this can also be interpreted as a signal of strength. "It remains to be seen whether the Chinese leadership can implement this so thoroughly," Kupfer adds. "Initial reactions from teachers and parents on social media show that such a widespread attempt to control opinion has raised fears and discontent in the population."

Die Welt
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