Friedman’s Prisoners
Since the beginning of industrialization, no advanced liberal capitalist democracy has left the high-income countries’ ranks or permanently regressed to authoritarianism. This is real data, and it is not a coincidence, say Torben Iversen, from Harvard University, and David Soskice, from the London School of Economics, in their 2019 book, ‘Democracy and Prosperity.’
Instead, they advocate that liberal democracy and capitalism of multiple degrees tend to reinforce each other in advanced economies. It is an important message, but it needs to be understood as an analysis of the past and not as a defense against the evolution and improvement of the capitalist economic system.
Without objectively addressing inequality and lack of representativeness, extremists who support models of illiberal democracy gain traction by cultivating frustrations and bitterness. It was what we saw in the last decade. After much loss of ground of the liberal democracy ideal, it is encouraging that there is a debate about possible corrections to the most successful — and imperfect — system ever tried.
In April last year, the Financial Times, the world’s most influential business newspaper, published an editorial advocating that the pandemic will force the world to rethink its social contract to address growing inequalities. The reference used was Western leaders’ learning during the Great Depression and after the Second World War: To demand collective sacrifice, you must offer a social contract that benefits everyone.
In September, also in 2020, the New York Times did a long special report to celebrate the 50th anniversary of the publication, in its own magazine, of the economist Milton Friedman’s manifesto: “The social responsibility of business is to make a profit.”
The manifesto justified generations of business people and executives’ behavior and helped exacerbate inequality in the world by placing shareholder return as the only objective. According to last September’s report, several global business leaders, including the CEOs of BlackRock and Salesforce, have understood that the manifesto had lost relevance with the evolution of the economy and society.
From the technology libertarian tribe, Bill Gates has just published his new book, which proposes an approach to tackle the climate challenge. In it, he argues that the American government has to quintuple its investment in clean energy innovation to have any chance of hitting its environmental goals. In another passage, he admits that there is a need for a public policy that encourages and creates more markets for innovation.
In the political dimension, the new administration in the United States embodies this new paradigm. In his first week in office, President Joe Biden started the most ambitious environmental agenda in the United States’ history, with a surprising commitment to bringing the country to zero net carbon emissions by 2050.
The president also signed several decrees that help accelerate the country’s energy transformation, among them, the use of federal lands for the exploitation of solar and wind energy. He also highlighted investments in the energy transition in his great economic support program, which is being voted on.
In the fight against inequality, he started to reconstruct several policies dismantled by Donald Trump. In addition to these internal policy measures, Biden signed the USA’s reintegration into the Paris Agreement to mark the country’s return to the world stage and the sustainability debate.
And are we, Brazil, able to participate in this debate? Here, passions aside, a portion of business leaders still trapped to the manifesto written by Friedman in September 1970.
This environment is less prone to evolution today due to the Brazilian economic team’s posture, which favors a very light touch of regulation — almost a dated, Friedman-type agenda — which translates into the absence of policies to foster the economy’s transformation toward more sustainable bases.
Like innovation, as Gates pointed out in his book, sustainability can and must be driven by appropriate public policy, as shown by the Biden package. Unfortunately, this is not what we have seen, and our past decade of history is not good in this chapter.
A federal document entitled “Reducing Brazil’s Cost” — circulating this February among business groups — lists dozens of federal government programs to tackle the cost of doing business in Brazil. I read the material and saw no reference to projects to encourage new development paradigms.
Paulo Dalla Nora Macedo is an entrepreneur in Brazil dedicated to civic initiatives to promote non-partisan political dialogue
However, I found a project that allows mineral exploration in indigenous lands. I went further and searched the document electronically. It was impossible to find the words ‘sustainability,’ ‘renewable energy,’ and ‘green economy’ at any time.
The same is seen with the Brazilian Covid Calamity Bill, which — given the delay in vaccinations — will allow for the new and necessary payment of emergency income support. The bill does not include the creation of mechanisms to accelerate investments in the new sustainable economy.
In addition to differing from the American package, the lack of these investments is dissonant with what Economist Joseph Stiglitz, awarded the Nobel Memorial Prize in Economic Sciences, recommends a recent interview in the Valor newspaper: ‘We will only get out of this with stimuli that support people, but also prepare a creation of a new sustainable economy.’
Apparently, we have not yet realized the transformation on the way. Therefore, there is an urgent need for Brazilian business and political leaders to pay attention to the risk of being just spectators in constructing the new social contract. It is certainly being matured and accelerated by COVID.
