Vol. 36 No. 3 (2016): Jul-Sep / 2016

Vol. 36 No. 3 (2016)

Jul-Sep / 2016
Published March 1, 2020


Is this ‘it’? An outline of a theory of depressions
Fernando J. Cardim de Carvalho
Brazilian Journal of Political Economy

The crisis initiated in the United States in 2007, and spread worldwide in 2008, has been compared to the Great Depression of the 1930s. They have in common a deep fall in the level of activity (although in the 2010s government intervention was able to contain the fall before it could reach the dimensions of the 1930s), followed by a period where recovery is uncertain and fragile, as has been the case both in the US and in Western Europe. The paper outlines a theory of depression that comprises both aspects. The theory draws on the theoretical contributions of Keynes, Fisher, Minsky and Leijonhufvud, proposing that the concept of “corridor of stability” may help to explain how an initial adverse aggregate shock may lead to a contractionary spiral, where debt deflation is main mechanism to explain the downward movement of the economy and why one should expect a period of weak and volatile recovery to follow it.

JEL Classification: E32; E12; E44.

Sectoral capabilities and productive structure: An input-output analysis of the key sectors of the Brazilian economy
Nelson Marconi, Igor L. Rocha, Guilherme R. Magacho
Brazilian Journal of Political Economy

The complex relationship between production structure and economic growth has been the subject of considerable debate among Brazilian economists. This debate became especially relevant after the 2000s, when Brazil experienced a period of growth from the rise of commodity exports, which contrasted with the stagnation observed in the previous two decades. To analyse the capacity of commodity exports to generate long-term economic growth, this paper assesses this sector’s performance and its effects on related sectors in the upstream supply chain through input-output tables. These analyses lead to two main conclusions. First, expansion of agricultural and mineral commodities production exhibited little capacity to boost the economy because they have the lowest linkage indices. Second, the analysis of the Brazilian production structure demonstrated that sectors related to manufacturing can stimulate other sectors, such as sophisticated services, because of their high linkage effects on other sectors. This study also demonstrates that a development strategy should take benefit of comparative advantages in order to reach a structural change oriented toward expanding manufacturing.

JEL Classification: C67; L16; O11.

The reconstruction of the Brazilian industry: the connection between the macroeconomic regime and the industrial policy
Luiz Carlos Bresser-Pereira, André Nassif, Carmem Feijó
Brazilian Journal of Political Economy

This paper is predominantly analytical. Concerning the macroeconomic regime, we propose more consistency between monetary, fiscal, exchange rate and wage policies. Such consistency is to provide sustainable long-term economic growth with structural change. Also, it is to make it feasible to not only maintain average real interest rates below the average real return rates on capital, but also competitive real exchange rates (i.e. marginal undervalued real exchange rates) and real wages that increase in step with productivity growth. This will help guarantee sustainable economic growth. As for industrial policy, theoretical and empirical evidence suggests the need to pursue strategies that diversify production, especially within the manufacturing sector as well as within tradable segments of the service sector. Although theoretical arguments are favorable to strategies that diversify production in countries that did not manage to catch up with developed countries, such strategies should avoid semi-autarky policies, which means that production chains, segments and sectors that are not the focus of industrial policy should have zero import tariffs, or close to zero.

JEL Classification: O1; O23; O24; O25.

Renstism and capital accumulation: rescuing Marxs theory of rent to think about contemporaneous capitalism
Leda Maria Paulani
Brazilian Journal of Political Economy

The investigation of Marxist literature in recent years reveals the recurrence of certain themes that are indicative of the contemporary way of working of the capitalist system (commodity-knowledge, value added by brand, financialization). Although seemingly unrelated, these phenomena can be theoretically connected with the aid of Marx’s theory of rent, as it appears in Section VI of Book III of Capital, and in Theories of Surplus Value. The purpose of this article is to rescue Marx’s observations in these works to think about the interconnectedness of the contemporary phenomena mentioned above and the nature of the current process of capital accumulation. This theoretical exercise seems to show that the rent seeking is, nowadays, one of the most striking features of this process.

JEL Classification: B14; E40; P16.

Brazil: Geopolitics and "opening for Pacific"
Raphael Padula, José Luís Fiori
Brazilian Journal of Political Economy

The paper analyzes the challenges of the new stage of Brazilian foreign policy, and in particular its project of South American integration and economic forecast for the Pacific coast. It remarks the dynamics and the challenges presents in different integration initiatives in South America, especially in the Pacific Alliance, the Iniciative for Integration of Regional Infrastructure in South America and the South American Council of Infra structure and Planning.

JEL Classification: F15; F50; F53.

Fiscal costs of monetary policy: indirect effects of an interest rate shock on Brazilian public net debt
Laura Carvalho, André Diniz, Ítalo Pedrosa, Pedro Rossi
Brazilian Journal of Political Economy

The paper estimates the fiscal cost of an increase in the Brazilian policy interest rate – the SELIC – by considering not only the direct effect on the yield of public bonds that are indexed to the SELIC, but also indirect effects on: (i) the yield of public bonds that are indexed to the exchange rate and inflation, and (ii) the stock of public net debt through adjustments in the value of international reserves measured in domestic currency. Projections are based on the estimation of the relationship between interest rates, exchange rates and inflation by means of a vector auto-regression. We conclude that the inclusion of such indirect effects has an ambiguous effect on the response of the implicit interest rate on public net debt to shocks in the SELIC, when adjustments in the value of international reserves are not considered. However, the inclusion of the latter amplifies the fiscal cost of a more restrictive monetary policy. These results call fora better coordination between monetary, fiscal and exchange rate policies in Brazil.

JEL Classification: E43, E52, E63, H63.

The sources for orthodox and heterodox trade and industrial policies in Brazil
Jan-Ulrich Rothacher
Brazilian Journal of Political Economy

The Brazilian government has over the past years promulgated a mix of orthodox and heterodox policies for Brazil’s economic development. This paper seeks to test whether the existing economic ideas have been prescriptive in formulating the policies, or whether they have been the outcome of the “infusion of private interests” (Katzenstein, 1978) in the policy making process. To this end, the paper charts the origins of the unilateral opening for trade in the agribusiness and contrasts them with the policy process in the car industry, where trade barriers have been erected. The article will identify the channels through which private actors informed the government’s interventions and show that the industry bodies have largely prodded the government. The resulting policy maze has left both the representatives of the orthodox as well those of the heterodox approach unsatisfied and has failed to halt Brazil’s dwindling manufacturing capabilities.

JEL Classification: F13; L52; L62; L66.

Macroeconomic Foundations in the perspectives of Marx and Keynes: contributions to the heterodox thought
Pedro Garrido da Costa Lima, Adriana Moreira Amado, Maria de Lourdes Rollemberg Mollo
Brazilian Journal of Political Economy

The need to define microeconomic foundations for macroeconomic models, which is present in the mainstream thinking in contemporary economics, can be questioned on the basis of different theoretical approaches. Positions like those of Marx and Keynes permit the comprehension of the actions of economic agents (groups or classes) as influenced and limited by the social and macroeconomic environment, providing views of macroeconomic foundations of microeconomics, instead of the orthodox view of micro foundations of macroeconomics. This comprehensionsed slight on distinct perspectives in heterodox thought regarding the intervention in the macroeconomic context.

JEL Classification: E11; E12; B50.

Bounded rationality and decision-making in complex systems
Tatiana Massaroli Melo, José Ricardo Fucidji
Brazilian Journal of Political Economy

This article aims to present the behavioral model of bounded rationality proposed by Herbert Simon as a framework to analyze the process of decision-making of agents in complex systems, characterized by non-ergodicity and developing open trajectories. The article presents the notion of logically consistent choice and contrasts it with the axiomatic analysis of the neoclassical theory. It argues for the use of computer simulation models, like agent-based modeling (ABM) as a suitable tool for analyzing complex systems.

JEL Classification: B41; B52.

Boulevard to broken dreams, Part 2: implementation of the Polonoroeste road project in the Brazilian Amazon, and the World Bank’s response to the gathering storm
Robert H. Wade
Brazilian Journal of Political Economy

This is the second part of the essay on the circumstances that led the World Bank to embrace norms and operational policies for environmental and indigenous people’s protection in the late 1980s, as traced through the turbulent history of the Polonoroeste road project in the Brazilian Amazon. Polonoroeste became the spearhead with which environmental NGOs made their first attack on the Bank for participating in large-scale environmental and indigenous peoples’ destruction. 

JEL Classification: Q5; O13; I3.