Paulo Guedes defends his legacy and criticizes socialism in class

Back in the private sector, former Economy Minister Paulo Guedes harshly criticized socialist regimes and state control of the economy, which, according to him, were contrary to the growth and development of countries. He gave a master class for the launch of the MBA Macroeconomics & Portfolio Management this Monday (18).

The MBA, in digital format, was created in partnership with Grupo Primo, owned by financial influencer Thiago Nigro, known as Primo Rico. The idea, according to Guedes, is to share his knowledge at the head of the financial market, where he stood out as one of the founders of the former Banco Pactual (today BTG Pactual), in 1983. It is also an initiative to return to its origins, as the former minister launched the first executive MBA course in the country, in the 1980s, at the head of Ibmec (Brazilian Institute of Capital Markets).

In this Monday’s class, watched live by more than 5,500 people on YouTube, Guedes spoke about the economy’s “path to prosperity”, confronting the liberal model versus the state dirigisme of socialist economies, classifying the principles of democracy and free market as pillars of growth.

“These are the two great cooperation algorithms that humanity has built over millennia, since the incipient democracy in Greece or free trade between the Phoenicians or Babylonians,” he said.

The opposite aspect, socialism, was the creation of “half a dozen guys who gathered around a sect”, in the former minister’s view. Guedes stated that Marx’s labor theory of value is mistaken, outdated, obsolete and does not prove anything that practical experience shows. “Marxism stole the banner of the fraternity of the great religions, and transformed itself into a secular religion. It led countries and continents to misery and continues to do so,” said the former minister.

Guedes displayed graphs showing the trajectory of the world economy since the last century, showing significant growth in socialist countries – such as China – after entering global markets, opening up to exports and a market economy.

For Guedes, history demonstrates that there is a path to wealth. It was followed by England, which became an empire; by the United States, where 13 colonies became a free and independent nation thanks to the defense of freedom and against exploitation through taxes; by reunified Germany and Japan, in the post-war period, which recovered their economies on a liberal basis. “The liberal Democratic philosophy was the one that worked in the world,” he said in class.

In the same way, Guedes pointed out, history proves the disastrous experience of the opposite option. Argentina is the emblematic example of Latin America. Over the course of 100 years, it went from having the third highest per capita income in the world to a poor country with stratospheric inflation and public debt. Venezuela’s devastating impoverishment is also notorious, as is that of Cuba, which had a relatively stable economy for the region and, after the communist revolution, was plunged into misery.

“First, they blamed capitalism for exploiting workers. Then, they changed the system and now they attribute poverty to the American embargo and sanctions. I mean, if there is trade, there is exploitation. If there isn’t, they say it’s the fault. There is no logical basis in defending ideologies of dirigiste economies and closed political systems”, he maintained.

“We managed to transfer the economic growth axis, which was based on the public sector,” said Guedes

To exemplify the foundations of liberal thought, the former minister gave an account of his experience as head of the Ministry of Economy, defending his legacy. For him, during his administration it was possible to disarm the trap of low growth, despite facing the pandemic and the war in Ukraine.

“We managed to transfer the economy’s growth axis, which was based on the public sector,” he said. Guedes highlighted the promotion of economic freedom by encouraging entrepreneurship, fiscal and monetary stability, an independent Central Bank and pension reform.

“We stabilized spending on public debt, which was R$400 billion and fell to just over R$200 billion after two years. Privatizations helped with this. The deleveraging of public banks democratized credit to small and medium-sized entrepreneurs We put the foundations in place to start the growth trajectory,” he said.

Despite the pandemic having interrupted growth, Guedes stated that the economy’s “compass” allowed it to successfully face the biggest health crisis the world has experienced.

Market forecasts even indicated that the Brazilian economy would fall by more than 10% in 2020. The IMF projected a decline of 9.7%. But what fell to this level was England’s GDP. Italy’s fell by more than 8%, France’s by more than 7%, Germany’s by 5.6% and Japan’s by 4.5%. “Brazil only fell 3% because it had economic tools to overcome the scenario,” said the former minister.

Guedes highlighted that the emergency aid was “money in the hands” of those who needed it in record time. “It was the biggest reduction in poverty in 40 years. If you want to end poverty, don’t transfer resources to a public bank, to pass them on to the ‘national champion’ and get lost in bureaucracy. This is like ice cream in the desert, it melts”, he said.

The former minister also recalled the Emergency Employment and Income Preservation Benefit (BEm), in which companies were able to reduce working hours and remuneration, with help from the government to pay part of the salaries. The program preserved 11 million jobs, said Guedes.

“In the first 60 days we lost 1.2 million formal jobs. With the emergency benefit, we paid half of the salaries so that the businessman would not be laid off. A third of the jobs were saved by the efficient and quick policy”, he stated.

Guedes also cited the correct monetary policy, which made the country one of the first to be able to lower interest rates with inflation controlled post-pandemic. He remembers that the economy’s return was in a “V”, as he had predicted. “We reached 2022 with growth of 2.4%. We could have continued growing for ten years”, he believes.

The former minister said that, with the correctness of the measures, the debt/GDP ratio fell from approximately 76% before Covid-19 to 73% at the end of 2022. “We have already paid the debt caused by the war and Covid, we will not let for the next generations, as many developed countries are doing, including the USA”, he concluded.