I am Professor Ladislau, I am an economics professor at the postgraduate level at PUC in São Paulo and the idea of recording a short video on how the economy works is that people get disoriented about all these financial flows, all these discussions about deficits, budget problems, fiscal framework, and so on, in reality things are not complicated and I wanted to convey to you the essence of what we call the economic cycle. People try to understand bits of the economy and do not understand why the process turns, it is a complete cycle and they will gradually grasp this in parts for you to understand. At the center of all economic reasoning is, why do we want the economy to work?
It is for families and families are at the center. It is not that we should work for the economy to be good, the economy should be suitable for families to live well, that's the point. This fundamental articulation is with the entire productive system of the country.
This works in a basically simple way, in the following sense, families will provide labor in exchange for a salary, this salary, this money will generate demand for products, which is essential for companies. Companies need to have people to work and create demand. the purchase of products to have, for whom to sell, that is the cycle.
This fundamental cycle, if this purchasing capacity of families is broken, the productive process is also broken, that is essential, there must be a balance between family income and the investment capacity of companies. Now, we have to add another essential group here, another character, right? Which is the State.
The State will be able to function, because taxes will be generated on family consumption, and also on productive processes, taxes will be generated. In other words, you will have revenue for the State. They say it's bureaucratic because it's a similar thing, the State is absolutely essential.
I worked in China, worked in Europe, rich and poor countries, where it works, the State represents at least a third and frequently, as in the Nordic Countries, half of the GDP. This is very important because the State then has money to finance here what we call social policies. Why is it so important?
You need security, but you don't buy the police. At least you shouldn't. The basic thing is that there are things, like security, that we depend on the State.
Take care of your health, get education, culture, a suitable park in your neighborhood, the system of having a paved street is part of well-being. In other words, the well-being of families. On a larger scale, one-third will depend on what we call indirect salary.
You pay taxes, but you will have a school for the kid to study, you will have the hospital, security, and the like. Again, I say, in countries that function properly, with various political nuances, all have a system of essentially public social policies. because it is much cheaper and more efficient than turning healthcare into an industry of illness and the like, right?
Here the State will also be able to make another essential area work, which is the infrastructure. Both for families, but particularly for businesses, it is essential to have access to cheap energy. They are networks that cover the entire country, electricity distribution.
For example, the entire fuel distribution network. You have this for energy, transportation system, telecommunication system, water and sanitation. Where it functions, and I have worked with the systems in China, Africa, Sweden, countries rich and poor, where all this infrastructure part also functions is also organized by State.
Because you do not go. Invest more or less in railway networks according to market fluctuations, it is not market competition, these are planned systems, it is planning that makes it work these things. So, this is the cycle that works and has worked particularly in what we called the welfare state post-war, it worked in Europe, in the United States and today it is under attack and is weakened.
It is weakened by a process that is characterized today as financialization and that radically distorts the entire process. Because here will prevail the so-called money, the system of bank interests, financial interests financial. You buy a refrigerator.
You buy a refrigerator. You buy a house that has total dedication to you, and you will pay twice, you will keep asking why I am paying twice. In reality, money has changed its characteristics.
I, at my age, still use these things that you must know, things issued by the government. Today we even have difficulty exchanging money, but 95% of what we call liquidity today is just magnetic signals. And this allows banks.
The big international financial groups to organize an exploit, through interest rates. So I will take the families here, in reality this money that the family earned from their work, it will be drained, in large part, through interest rates in Brazil 51%. My writing is really a disgrace.
51%. In Europe it's 4%. In China 4.
5%. 6% per year, here 51%, no family can afford that, we have 71 million adults who are delinquent in Brazil, they are stretching the debt and have already paid the debt several times and keep paying, this is the wrongdoing of the financial system. But this also affects the productive sector, the companies that are also paying interest rates on Brazilian cases, 21%, these are Central Bank data.
It is not feasible to run a company, take out a loan at this interest rate, pay 21% interest, repay a loan, and still make a profit, employ workers, this doesn't work here. So, in a way, what happens here? The entire system has weakened, which we particularly saw from 2016, is that families are paying interest instead of making more purchases, so companies Remember, the federal health budget is 320.
Only here in the SELIC rate they are taking out R$ 800 billion, that's the level. If you take how much they take, they are not producers, they are interest, they are lending money which, by the way, is not theirs, because the State's money is from our taxes and the money in the banks is from our deposits. In fact, you have net profit, which I called it, there's a book of mine, it's called The Age of Capital Unproductive.
You calculate a lot, including on the international level, because these gains are essentially on the work of others. You have to add strong things, like, for example, since 1995, these people we have today about 290 billionaires in Brazil, are billionaires, people with immense wealth. Right?
Virtually all of them are tax exempt, okay? Profits and dividends distributed in Brazil are tax-free. If you export primary goods, therefore, from the privatization of Vale, the export of meat, things like that, you're exempt from taxes, it's the Candir law.
And so on. In other words, we also have tax evasion, so, tax evasion, they should pay, but they are not paying. I pay 27.
5% on my salary. They don't pay because it's easier, immaterial money, computer and such, right? Here they take 6% of GDP, this is tax evasion.
The non-payment of tax by those who should pay is a lot of money that we don't have still figuring out how to calculate. But in order of magnitude, this whole system, order of magnitude at the bottom, it sterilizes 25% of the gas. In other words, a quarter of all the production efforts we develop in the country are captured by people who don't produce anything rigorously, to put it politely.
This is called financialization. Why is it so central? It's because in the past, the type of exploitation, of appropriation of money was done by a person who produced things.
He could exploit the worker, but to exploit the worker, you have to create a job, you have to produce something. Not here. It's simply financial intermediation.
You can take a look at your account or your neighbors' accounts to see who is in debt and how they got into debt. In reality, this is a loan-sharking system, a system that is paralyzing the country and when they say we have to be austere, there must be austerity when you're paying. Only passing as a gift, without corresponding productive effort, 800 billion just in the Selic rate, which is money from our taxes, which instead of becoming investment is turning into profit for the large financial groups.
It's important to deal with this, this money goes to whose hands? This is Faria Lima, the big banks, and particularly the global system. BlackRock.
State Street. Vanguard. JP Morgan.
Goldman Sachs. The big groups today managing this set of systems. It's not just money drained from the state, families, and internal producers, but it's also drained in the country.
When you privatize Vale, for example, you also denationalize it, the profit that was generated, the dividends. The interest paid, all this goes to international groups. That's the size of the challenge.
Our main challenge is for this money to become useful again and feed the productive process, this core that we saw. This scheme may seem simple, but it really constitutes the core of the economic issue. I invite you.
This will be here. On my website, we will be promoting this, but specifically, this has very solid sources. solid.
You can get ANEFAC, the National Association of Finance, Administration and Accounting. I am a part of them. And we present every month.
You can go there and find out what interest rates are being charged. You can check these numbers. How you can access the Central Bank and get credit monetary statistics and see these numbers, each one of them.
Why am I saying this? Because when people talk about the economy, everyone becomes suspicious of what the interests involved are. That's why I bring sources, because it really involves us in redeeming the social function of our money.
This is essential and we need more people who understand how the system works.
