Vol. 9 No. 3 (1989): Jul-Sep / 1989

Vol. 9 No. 3 (1989)

Jul-Sep / 1989
Published July 1, 1989


Inflationary tax: an analysis for the Brazilian economy
Fernando M. DallAcqua
Brazilian Journal of Political Economy

The paper analyses the relationships among inflation, inflationary tax, and
public deficit for the Brazilian economy during the eighties. Initially, these relationships are
described somehow simplistically using the so-called inflation tax model. The working hypothesis
are (1) there is an absolute limit to the government’s deficit financing by inflationary
tax; (2) a given amount of inflationary tax can be collected at an either high or low rate of
inflation and (3) the inflationary tax collected by the government depends on the monetary
conditions of the economy. Using this analytical framework, a simulation exercise is carried
out to estimate the inflation-tax finance of the public deficit for the Brazilian economy during
the period 1982-88. The main conclusions are: (1) the conditions of the inflationary tax
finance changes after 1986, when the focus of the economic policy shifts from the conventional orthodoxy to what is called the heterodox approach; (2) the accelerating inflation has
radically weakened the ability of the government to collect inflationary tax and (3) under
these conditions price freezes and exchange rate fixing may be considered necessary to ensure
a transition from a high to a low level of inflation.

JEL Classification: E31.

Hyperinflation in Latin America
Eliana A. Cardoso
Brazilian Journal of Political Economy

This paper discusses why inflation is so high in Latin America and· what can be
done to stop it. The first part starts with an analysis of monetarism. It also discusses seignorage
models, the impact of the debt crisis and of dollarization on inflation. Next, we review
structuralism and its most recent insight: inflation inertia. Then we integrate the different
interpretations of inflation. The second part examines stabilization programs, beginning
with the analysis of programs derived from the monetarist diagnosis, or orthodox programs.
Next, we turn to heterodox programs, including both populist programs and programs
based on a new interpretation of inflation. The stabilization programs of the 1980s failed
to obtain budget consolidation and large budget deficits have pushed the economy into a
classic inflationary finance situation.

JEL Classification: E31.

New technological patterns, industrial competitivity, and social welfare: Brazilian perspectives
José Ricardo Tauile
Brazilian Journal of Political Economy

This text begins by exploring the Japanese Model of industrial relations and
organization as an alternative to the crisis of Fordism-Taylorism occurring in Eastern Developed
Countries. Acknowledges for such, the importance of improved capital-labour relations,
i.e., workers’ participation in the definitions and in the benefits of common objectives
that results for example in better income distribution. Taking the Brazilian case, it is
diagnosed that the present model of “development” is leading the country to chaos. Radical
economic, social, and political changes are required to recreate a contemporary model of
capitalist development based on Brazilian specificities. In such model, social welfare is one
of its major economic strengths, a genuine international competitiveness will naturally result
from the strengthening of the internal market, and labour is not merely considered a cost of
production but an important resource for building dynamic comparative advantages.

JEL Classification: L53; O15; O10.

Monetary correction of interests of the internal debt
Sílvio Rodrigues Alves
Brazilian Journal of Political Economy

The aim of this paper is to defend the viewpoint that, in the same way as the
amortizations payments don’t represent part of the public sector debt, the monetary correction
of the debt and other similar charges shouldn’t be considered as part of this deficit. This
assertion should be even more emphasized in the case of countries with high inflation rates
where expenditures with monetary indexation and other similar charges became, progressively,
a bigger share of the Gross Domestic Product. Regarding to a better understanding of
the Government’s real financial situation, an adjustment was done at the national account
series. In this sense, and in order to work out the fiscal policy, the amount corresponding to
the monetary correction was excluded from the expenditure of domestic debt charges. This
meant that monetary indexation in a context of high inflation rates is better classified as
principal rather than debt charge. It is important to note that this paper is based on a previous
one, also by Sílvio Rodrigues Alves, entitled “O Desafio do Déficit Público”, published
in Revista de Economia Política n.” 30 (April-June/1988). Afterwards, in June 1988, the same viewpoint was defended by Mr. Blezer, Mr. Tanzi and Mr. Teijeiro in the paper “The Effects
of Inflation on the Measurement of Fiscal Deficits” (Occasional Paper 59, International
Monetary Fund, Washington, D.C., June 1988).

JEL Classification: H63

The epistemology of transformation: a criticism of the neoricardianism
Cláudio Gontijo
Brazilian Journal of Political Economy

In the solution of the “transformation problem”, Marx erred in believing that
the profit rate determined in the value system was the mediation between values and production
prices. This error invalidates Marx’s “doble postulate”, according to which the sum
of values equals the sum of prices and the sum of surplus value equals the sum of profits. By
using a linear operator from the value system, it is possible to fully determine the average
profit rate and the system of production prices. ln this way, we can preserve Marx’s fundamental
epistemological postulate, according to which the realm of essence (values) determines
the realm of transparent reality (prices).

JEL Classification: D46; B51.

About the crisis of the Brazilian State
José Luís Fiori
Brazilian Journal of Political Economy

In the center of the present crisis of the Brazilian economy and society is the
crisis of the State. To understand this crisis, this paper makes a revision of the nature and the
role of the Brazilian State in the present and in the past. The paper argues that in peripheral
capitalism, like Brazilian, the State has played different roles and has produced different effects
as compared to the State of developed countries. Here the State is not only an essential
and fundamental component of the process of capital accumulation but has difficulty playing
the role of arbiter of class conflicts and competition between different interest groups.
Among other things, the nature of the Brazilian State has produced and reproduced increasing
inequality and structural heterogeneity.

JEL Classification: H11.

The cyclical pattern of State intervention
Luiz Carlos Bresser-Pereira
Brazilian Journal of Political Economy

The present wave of prívatization and the relatíve success of the neoliberal criticism
against the economic role of the state are part of the cyclical character of state intervention.
We are now in the downturn of the cycle. During the upturn state intervention,
measured in terms of nationalization and increase in regulation, is initially successful, but
after some time it runs into increasing distortions. The crisis and the criticism that comes
with the distortions lead to a reduction and particularly to a change in the pattern of state
intervention. But never to a return to L’Etat gendarme dreamed by neoliberals.

JEL Classification: H11.

A dynamic approach to the theory of effective demand
Anwar Shaikh
Brazilian Journal of Political Economy

This paper attempts to resituate the theory of effective demand within a dynamic
nonequilibrium context. Existing theories of effective demand, which derive from
the works of Keynes and Kalecki, are generally posed in state equilibrium terms. That is to
say, they serve to define a given level of output which corresponds to the equilibrium point
between aggregate demand and supply. We propose to generalize this analysis in three ways.
First, we will extend the analysis to encompass a dynamic (i.e. moving) short-run path of
output, rather than a merely static level. Second, we will show that his dynamic short-run
path need not imply an equilibrium analysis, since it can arise from either stochastically
sustained cycles or deterministic limit cycles. And third, we will prove that the preceding
generalization of the theory of effective demand will allow us to solve a long-standing problem
in growth theory: namely the puzzle surrounding the apparently intractable instability
of warranted growth. We will show that the actual path of growth does indeed gravitate
around the warranted path in a cyclical sense.

JEL Classification: E12; E32.