Brazil’s economic debate has long been dominated by a persistent dogma: fiscal austerity as an unquestionable virtue. Since the 1990s, a broad consensus has taken root claiming that economic growth depends on privatization, labor market deregulation, and an almost religious commitment to balanced public accounts. Yet international experience, most notably China’s rapid industrial ascent, reveals that so-called “fiscal equilibrium” is not a prerequisite for development. It is, rather, a political choice that has systematically constrained Brazil’s industrial potential.
The belief that public debt must be avoided at all costs ignores the historical foundations of industrial capitalism. From the creation of the Bank of England in the late 17th century to the contemporary Chinese development model, public debt has functioned as a strategic instrument of state policy. It has enabled nations to resolve structural bottlenecks, finance infrastructure, and build complex industrial ecosystems. In Brazil, however, austerity is routinely framed as a technical inevitability, despite the absence of any consistent link between fiscal tightening and sustainable industrialization.
One of the most damaging myths in this debate is the idea that the state cannot “afford” to invest in its own currency. Unlike households, sovereign governments that issue their own money are not financially constrained in the same way. Their real limitation lies not in accounting figures, but in the availability of concrete resources: skilled labor, productive capacity, technology, and raw materials. When the state finances a subway system, an energy plant, or a research center, it is not merely spending, it is creating durable public assets that expand the country’s productive base.
This process follows basic accounting logic: every public liability generated by investment corresponds to an increase in national wealth. Ignoring this reality reduces fiscal policy to a narrow bookkeeping exercise, detached from development goals. For an economy seeking industrial maturity, this mindset is not just insufficient, it is actively harmful.
In Brazil, the situation is further complicated by the increasingly “semi-private” nature of the national currency. Monetary policy decisions are concentrated in a Central Bank that, despite its formal independence, is largely shaped by professionals drawn from the financial sector. This structural overlap generates clear conflicts of interest. High interest rates on public debt disproportionately benefit financial institutions, reinforcing a cycle in which rent extraction takes precedence over productive investment.
The persistence of fiscal austerity, even within progressive segments of Brazil’s political landscape, underscores the ideological strength of this framework. Since the 2008 financial crisis, even orthodox economists in the United States and Europe have acknowledged that money is not neutral and that active state intervention is essential in times of instability. Yet Brazilian orthodoxy remains strikingly resistant to these lessons, clinging to policies that systematically undermine industrial expansion.
This resistance is not accidental. As economists such as Michał Kalecki observed, the refusal to pursue full employment through fiscal policy serves a clear social function: disciplining labor. By maintaining artificial unemployment and suppressing public investment, workers’ bargaining power erodes, enabling higher profit margins for financial and corporate elites. Austerity, therefore, is not merely an economic doctrine, it is a political strategy.
Defending Brazil’s industrial development requires confronting this reality head-on. Reclaiming the currency as a public instrument and restoring the central role of strategic state investment are not radical propositions; they are historically proven paths to development. Without them, Brazil risks remaining trapped in a low-investment, low-productivity equilibrium. With them, the country can build a sovereign industrial base capable of delivering sustained growth, technological autonomy, and tangible improvements in living standards.
In this context, the debate over fiscal policy is not about numbers on a balance sheet. It is about choosing the future Brazil intends to build.
