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Political Aspects of Unemployment: Brazil’s Neoliberal U-Turn

New paper by Franklin Serrano and Luiz Eduardo Melin. From the abstract:
Throughout the world, the reversion of fortune suffered by the Brazilian
economy since reaching its zenith as recently as 2010 has confounded shrewd commentators, seasoned analysts and market players alike. As 2015 unfolded, ominous projections (“An Economy on the Brink”, “Brazil’s Economy Falters” “Worse May Be To Come”) were no less widespread than expressions of bewilderment (“Whatever Happened to Brazil”, “Brazilian Waxing and Waning”, “Brazil’s Scandalous Boom to Bust Story”), and, more recently, of alarm (“Goldman Sachs Says Brazil Has Plunged Into ‘An Outright Depression’”) concerning the fate of the South American BRIC country. 
Despite profuse official protestations to the contrary, however, Brazil’s afflictions turn out to be of its own making, as it so often proves to be the case. Looking at the set of clearly laid-out policy choices made by the Brazilian government – and the almost as clearly spelled-out political objectives underlying them – should provide enough explanatory evidence to sort out this cautionary tale for developing countries everywhere.
Read full paper here

Comments

  1. Hi Matias,

    I found this a really interesting article. Neo-liberalism doesn't appear, to me, to be a good strategy to promote economic growth and reduce unemployment.

    (1) At the risk of gross simplification, I cannot see how there can be a supply led recovery in conditions of government austerity.

    (2) Gross investment adds to aggregate demand and net investment adds to productive capacity. An increase in aggregate supply, if not matched by an increase in aggregate demand, is likely to lead to a slowing down of economic growth and a further increase in unemployment.

    (3) Cutting back public sector investment will not automatically lead to and increase in private sector investment. The latter requires an improvement in entrepreneurs' profit expectations which is not likely in conditions of austerity.

    (4) Cuts in real wages, in the economy as a whole, are unlikely to improve the economy. The lower cost generating impacts on employment will probably be offset by the demand reduction impacts of lower real wages.

    John Arthur


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