Skip to main content

2a20360446f86f380e9af024_ms1775.jpg Margaret Scott

Brazil’s Economic Revolution

In 2012, Brazil, beset by fallout from the global economic crisis, undertook bold measures to reinvigorate growth, including interest-rate reductions, tax reform, and steps aimed at stimulating private investment. More important, the government’s policies will have a permanent – indeed, revolutionary – impact on Brazil’s economy.

BRASILIA – Large emerging economies were hit hard in the past year – particularly in the first half – by the crisis in developed countries, with Europe in recession and the United States staging only a meager recovery. But 2012 will also be remembered as the year when structural changes in the Brazilian economy were consolidated.

The global economic crisis that began in 2008 is similar to the Great Depression of the 1930’s not only in terms of its depth and duration, but also in view of advanced countries’ policy errors and hesitation. It is worrying that European leaders find it so difficult to agree on fiscal adjustment policies that make room for the stimulus measures needed to revive economic growth. Until now, European countries with fiscal leeway have insisted on spending and investment cuts that, together with tax increases, have reduced economic activity and increased unemployment, ultimately compromising tax collection – and thus fiscal consolidation.

In the US, despite a slight improvement, uncertainty lingers. In addition to the risk posed by the “fiscal cliff” in 2013, the main problem remains: the lack of effective counter-cyclical fiscal policies – for example, a public-investment program – to boost economic activity. Instead, the US has placed all of its chips on monetary easing, unleashing what I have called a currency war, in which global investors, chasing higher yields, flood into emerging countries, driving up their exchange rates.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.

https://prosyn.org/TUcE6B5;
  1. haass105_Gustavo BassoNurPhoto via Getty Images_amazon Gustavo Basso/NurPhoto via Getty Images

    The Amazon and You

    Richard N. Haass

    Sovereignty entails obligations as well as rights, and where compliance cannot be induced, pressure must be applied. And though positive incentives to encourage and enable compliance would be preferable, Brazil's government is showing that there must be sticks where carrots are not enough.

    2
  2. GettyImages-1151170958 ADRIAN DENNIS/AFP/Getty Images

    The Meritocracy Muddle

    Eric Posner

    Although populism in Western democracies is nothing new, resentment toward elites and experts has certainly been on the rise. Does this trend reflect a breakdown in the system, or a system that is actually working too well?

    11

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated Cookie policy, Privacy policy and Terms & Conditions