Economy & Energy
Year VIII -No 42:
February-March 2004  
ISSN 1518-2932

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Distribution of the Hydraulic Potential in a Hydrographic Basin

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Capital Productivity in Brazil from 1950 to 2000

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 Genserico Encarnação Júnior


In the previous article I have philosophized about Inflation. I use the verb philosophize because I don’t restrict myself to reasoning within the limits imposed by the text-books on Economy. As we have observed, in the case of inflation we mistakenly think about it and analyze it from the monetary point of view. It is not as simple as that.

The argument then used was that inflation could only be definitively erased with the relative equilibrium between  Demand and Supply of goods and services in a general way, that is, the satisfaction of the whole Brazilian society needs. A corollary of this conclusion would be the requirement of economic growth concurrently with adequate wealth distribution. Until then the best way of doing it would be through wages, namely a policy of full employment for the population.

I don’t believe any more in this daydream: the possibility of creating and guaranteeing jobs for the work force by the current world economic-financial system. This statement may be wrong and I really wish it were. Not realizing this new reality is frustrating not only at the personal level but also for the governments that intend to solve the unemployment problem using traditional methods.

The following paragraphs using different typing letters are quotations from a monograph by Antônio Maria da Silveira, retired professor from the Federal University of Rio de Janeiro (UFRJ).

In his work “ Possibilities for our Grandchildren” of 1930 Keynes has foretold that with capital accumulation, the goods and services that satisfy our absolute needs will be free. In opposition to our relative needs, that satisfy our desire of superiority, the absolute ones can be satisfied , in the “ sense that we prefer to dedicate our additional energy to non-economical purposes”.

For Keynes, the “economical problem”, the fight for survival is therefore temporary. The “technological unemployment” is evidently being solved by the human kind. We will change completely by overcoming it.

Silveira associates Keynes’ unfulfilled prevision (will it be fulfilled someday?) with the Minimum Income Program understood as a social dividend monetarily distributed to all inhabitants of a country, independently from the age or wealth of each one, free from any reciprocity, aiming at eliminating the misery and poverty and therefore guarantee human rights for all

Now, you hearken the stars! This is a verse by Olavo Bilac, an old style famous Brazilian  poet. Overlooking Keynes, Bilac and Silveira, let’s continue our peroration.

The advance of science and technology, the population increase, the feminine access to the work market and other less important factors result in the unemployment phenomenon. A good period of economical growth could lessen this tragedy. However I believe that unfortunately it is here to stay. As well as violence and terrorism that, when you ponder about it, are most of all products of the income and wealth distribution crisis. In what concerns the later – calm down volunteers and idealists ladies and gentlemen and those who believe in immediacy – there also exists the psychological disorder components (evil and perversity) when repressive measures are mandatory. With this commentary made in order to calm down those readers and permit them to continue reading, let’s go on.

           Some years ago the generalized adoption of determined social policies was unimaginable. I am talking about education and family grants, food and gas assistance, zero hunger etc. The school lunch program did not exist (a free meal given to children attending public schools). Measures in this field were considered supporting and charitable . Today these conquests, I repeat, conquests cannot be abolished. Just like a family helps teenagers and young people, less qualified and unlucky adults, handicapped and aged people etc., society must support these people.

The minimum income policy is a requirement for the general welfare A negative income tax where those without or with insufficient income would receive in cash a complement in order to adequately satisfy their real needs .

            I followed a course in the 1970s at the Institute of Social Studies in the Netherlands concerning Social Cost-Benefits Analysis. This methodology, adopted by the United Nations (UNIDO), was a tentative to complement the economical-financial calculations of project analysis so that the obedience to capitalism’s rule, namely profit generation, should not be strictly followed. It aimed at giving priority to satisfy the basic needs of a particular community.

            Using the shadow price artifice, the analysis made the projects viable from the social point of view. Therefore, labor in a society with abundant manpower, in spite of the salaries paid, was not considered a cost and it could be negatively valued in the project so that the adoption of labor -intensive technologies would be favored. In this case the governmental project could have a smaller financial result that would be compensated by an excellent social result. After all, the well being of a nation is not necessarily measured by its National or Internal Gross Product. The United Nation has opportunely created the Human Development Index.

In a bipolar world where capitalism and socialism fought, it was as if a tentative to unite both points of view was being carried out. The world turned round and so did the capitalism and worse than that, the financial capitalism raised its voice and we have now this nice one polar world that is more and more unequal and therefore more violent both at the local and world levels. No one talks about the Social Cost-Benefits  Analysis methodology anymore.

The current economic system must change and it will change because it will collapse if it doesn’t change. There is no more room for full universal employment and this does not prevent actions aiming at a larger economical development and job generation. However, we need right now to think about satisfying the needs of our population that has no income or a lower one by taking measures such as the Minimum Income Policy that assures a more just and human society.

 After the Fernando Henrique period, when there was a huge income, wealth and assets transfer to the richer population, we must try to reverse this process, transferring income to the poorer layer of the population. Exactly in a time when the system does not generate jobs anymore.

Domenico de Masi reminds : the advance of technology that could give us more leisure time and shorten the working time per person has produced unemployment and reduction of work remuneration. The system found itself hoist with its own petard.

The State, even though the conjuncture points out the opposite, will have to protect its society and its less fortunate citizens. It seems to be a paradox, since this need is a consequence of the recent neo-liberal policies.

Besides that, emphatic policies are indispensable, including mechanisms such as the Minimum Income Program. No matter its name – socialism, humanism – its omission will bring the law of the jungle and another gloomy ism, cynicism. From both sides, the fortunate and unfortunate components of the system.

An example that will help to clarify our thesis that is not absurd: aged Portuguese immigrants with low income who have lived in Brazil for a long time get monetary aid regularly from Portugal if they are registered and their situation is substantiated.

Clearly there are difficulties when this type of policy is established and evidently misdeeds will occur during its operation; the former should be circumvented and the latter corrected and those responsible for them should be punished. One of the main problems is the possible low self-esteem of those who will benefit from it and this will motivate them to remain in the situation where they are. The policy should encourage them to get out of the consequent passivity through educational programs or creative, sporting or artistic activities.

The reality that we have now can be very different from the one we are used to. The adoption of traditional policies that are not in agreement with the “brave new world” can frustrate the noblest intentions when you strike when the iron is not hot anymore.

Another difficulty: the isolated adoption of such policies creates a problem because we still are highly dependent on the world economic-financial power center. Our external vulnerability is high. To make these ideas politically viable is not easy either.

In an interview on TV last December the respected Prof. Francisco de Oliveira, even though he is in agreement with our diagnosis (the system does not generate the necessary jobs anymore), is against the mechanisms we have presented here (negative income tax or minimum income program). But, when he suggests the use by society of public funds (pension funds) as well as the transfer of the INSS (*) management to the BNDES (**), he admits that the State should finance eventual shortages concerning the operation of these pension funds. Therefore one can presume that he marginally agrees with us.

            The interpretation of the eminent Professor’s ideas is mine and does not necessarily corresponds to what he really thinks.

Under discussion.


(*) Government’s general pension fund

(**) National Bank for Economical and Social Development


Genserico Encarnação Júnior

Itapoã, Vila Velha (ES)

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