Brazil: A Keynesian paradise

A James Alexander post

Reading through the charts from this Economist blog made me wonder why the economy is doing so poorly.

The primary balance is going nicely into deficit. None of that fetish about austerity. Tick.

Public sector wages and government spending have been rising well ahead of RGDP. Tick.

Total debt has been rising nicely as households and government invest for the future. Tick.

There are some other great Keynesian ideas in practice too:

There has been a sort of “helicopter money” drop via a huge social welfare programme, Bolsa Familia. Two years ago the socialists at The Economist were very keen on it.

There has been a huge government-backed, more or less state-owned company led investment programme to develop nature’s offshore bounty in the oil fields of the Santos Basin.

Minimum wages have been hiked consistently faster than private wages or inflation.

There has been a massive expansion in subsidised housing finance for the poor.

What could possibly go wrong?

Two hints:

Brazil ranks 120 out of 189 in the World Bank’s 2015 “Ease of Doing Business” survey

Brazil ranks 69 out of 175 in Transparency International’s 2014 Corruption Perception index, and may well drop lower.


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