The author recalls the development theory to illustrate the notable differences
between the patterns and results of capitalist accumulation in central and peripheral regions.
While in the former the result was an increase in wages and quality of life, he concludes that
in the peripheral regions there has been an upsurge in social inequalities and patterns of domination,
in order to, based on these reflections, establish the concept of underdevelopment
and reflect ways of overcoming it.

JEL Classification: O10.

This paper presents so conveyed idea nowadays that the economic problems
have a political origin, or that the economic problems have not been solved because of lack
of political support. We show how the acceptation of these ideas is related to the appearance
of the School of Public Choice, or School of National Choice – an analysis of a neoliberal
character – and the called political macroeconomics. We discuss how these approaches lead
to the proposition of adopting compensatory social policies which may guarantee the government
legitimacy.

JEL Classification: B20; B41; O10; D70.

By most standards, Brazilian inflation has been the most intractable in world
history. The time span of high Brazilian inflation is unparalleled: inflation has exceeded 50
percent per annum every year since 1979 and has been at double digit rates every year since
1957. Even Argentina, the perennial rival of Brazil for the dubious distinction or longestrunning
high inflation, has achieved price stabilization since April 1991. There have been
innumerable major and minor attempts at Brazilian stabilization, including at least five major
“Plans” since 1986. Each has failed. Brazil is currently in the midst of another major
stabilization attempt, the Plan Real. This paper assesses the difficulties inherent in Brazilian
stabilization programs, and the prospects for the Plan Real, including its particular motivations
and its chances for success.

JEL Classification: E31; E52.

The relative importance of different shocks on the level of economic activity
has been a hot subject of research over the last 25 years. The traditional view, retained by
Keynesians and Monetarists alike, is that shocks to aggregate demand are the impulses to
economic fluctuations, a phenomenon independent of growth. A succession of real shocks
and technological transformations gave rise to what is known as Real Business Cycle Theory.
Proponents of real business cycles do not consider growth separately from fluctuations and
seek to explain economic fluctuations abstracting from monetary considerations. This paper
reviews the empirical evidence on the permanence of shocks. Although much can be said for
the interdependence between growth and fluctuations it also concludes, contrary to the RBC
view, that economic policy is important in generating an environment conducive to growth.

JEL Classification: E13; C50.

This paper proposes a change in public debt policy, based on the placement
of new bonds with maturities between l and 30 years. By modifying the conditions of a
similar proposal presented by Giambiagi and Zini, it is shown that if all the internal public
debt were transformed into a debt of 7 years, paid through a monthly fix payment, with
an interest rate of 12% in US$ and a clause for payment in foreign currency, the primary
surplus of the Federal Government required for internal public debt service and payments
of interest on external public debt could, under certain conditions, be less than 2.5% of
GDP. Afterwards, some parameters are changed in order to present a menu of alternatives,
which imply a more rapid payment and require a higher primary surplus in the first year. It
is concluded that, with a fiscal effort of around 2.0% of GDP related to the data of 1993,
Brazil could adopt a stabilization plan with a fiscal and monetary toughness very similar to
that of the Convertibility Plan adopted in Argentina in 1991.

JEL Classification: H63.

The article tells about the travel made in 1988 by the Nobel laureate economist
James Edward Meade to the island of Utopia, a Perfect Place to live in. After much
effort, he could find the island Nowhere. However, on his way home, he found the island
of Agathotopia, a Good Place for people who made no claim for perfection to live in. After
studying the social arrangements of Agathotopia, Meade returned to his country convinced
that those arrangements were the best to attain the objectives of Liberty, Equality and
Efficiency. In Agathotopia there is much flexibility of prices and wages, a great deal of interaction
and partnership between capital and labor and a social dividend or a guaranteed
minimum income for all citizens. Meade has been proposing the social dividend since 1935,
after interacting with many other economists who have contributing to the idea of a guaranteed
minimum income or different forms of a negative income tax. The proposal is now
being discussed by the Brazilian National Congress.

JEL Classification: I38; O23.

This essay develops a deconstructive interpretation of some aspects of the
economics of science formulated by Michael Polanyi. In particular, the essay analyzes the
extent to which Polanyi’s libertarian positions can be seen as consistent from a logicaldeconstructive
point of view. Although the essay highlights the existence of inconsistencies
in Polanyi’s discourse, his contribution to the debate about the specificities inherent to the
knowledge process is equally emphasized. In other words, even though Polanyi has exaggerated
his Panglossian belief in the efficiency of the spontaneous coordination of scientific
activities promoted by the market, it is necessary to recognize that his positions regarding
the characteristics of knowledge must be seen as an important antidote against naive proposals
for centralization of scientific activities under a single authority.

JEL Classification: B20; B31; B41.

Since the outset of the Real Plan, the government has resorted to much higher
reserve requirements on bank’s liabilities, as well as to the creation of reserve requirements
on credit (a bank’s asset) in the attempt to restrict the expansion of monetary aggregates
and credit. The policy intention was right, although the design of the reserve requirements
profile, i.e., the relative structure of the reserve requirements on the different bank’s liabilities,
was flawed. This is because there is a very high (initially a 100% marginal) reserve
requirement on demand deposits, which is the liability that typically grows the most when
high inflations subside. Since the beginning of 1995, tax changes made profitable to transfer
even very short-term funds from demand deposits to short term mutual funds. Furthermore,
when such transfer is undertaken, the overall reserve requirement falls substantially. The
main policy recommendation is to use both the reserve requirements’ profile and the tax structure so that the aggregate financial wealth is distributed among its several components
in a way compatible with low inflation. This will avoid future reallocations of portfolio,
thereby increasing the efficacy of monetary policy.

JEL Classification: E58; E52.

This paper examines the experiences in the operation of a currency board in
North Russia, Hong Kong and Estonia, and discusses its implementation in Brazil.

JEL Classification: E42; E52.

The Mexican financial crisis in December 1994 provoked a series of
analyses, on the one hand, on the crisis itself, on the other, on the exchange rate policy
Brazilian economy and the consolidation of the Real Plan. We present below, as a document,
some of the main articles published in the newspapers.

Economist Pérsio Arida assumed the presidency of the Central Bank on January 10, 1995. On that date, he delivered the speech below.