This article aims to show how 3 countries in Asia (Japan, South Korea and China) have promoted their development and thus to demonstrate the absurd neoliberal economic policy of Michel Temer government in Brazil that seeks to limit public spending over the next 20 years to create the economic environment necessary for attracting private investors and, consequently, boost economic and social development of Brazil. In practice, Temer government believes that private market forces are more capable than the developmental role that his government could make to boost the Brazilian economy. The economic policy of the Temer government is diametrically opposed to those adopted by Japan, South Korea and China that have in the state key role in the development of these countries in the second half of the 20th century.

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ASIA SHOWS TO BRAZIL WAYS OF DEVELOPMENT
Fernando Alcoforado *
This article aims to show how 3 countries in Asia (Japan, South Korea and China) have
promoted their development and thus to demonstrate the absurd neoliberal economic
policy of Michel Temer government in Brazil that seeks to limit public spending over
the next 20 years to create the economic environment necessary for attracting private
investors and, consequently, boost economic and social development of Brazil. In
practice, Temer government believes that private market forces are more capable than
the developmental role that his government could make to boost the Brazilian economy.
The economic policy of the Temer government is diametrically opposed to those
adopted by Japan, South Korea and China that have in the state key role in the
development of these countries in the second half of the 20th century.
The economic and social development of a nation is not a simple process as
recommended by the makers of economic policy of the Michel Temer government that
think only private investment make Brazil grow economically. The complexity of
economic and social development process can be found by reading our book Os fatores
condicionantes do desenvolvimento econômico e social (The contributing factors of
economic and social development) (Curitiba: Editora CRV, 2012). It appears in this
book that the push factors of economic and social development are: 1) The role of the
state; 2) The role of private investors; 3) capital accumulation; 4) technical progress and
organization of production; 5) Industrialization; and, 6) production factors and internal
market. Michel Temer government should consider these 6 factors of economic and
social development to promote the development of Brazil at this juncture.
1. The role of the State
Since the sixteenth century, the national state played a decisive role in the development
of the great capitalist powers of Western Europe (Belgium, Netherlands, Luxembourg,
Scandinavia, West Germany, Austria, Switzerland, France, UK and Italy), North
America (United States and Canada), Oceania (Australia and New Zealand) and Japan.
The role of the state in the second half of the 20th century is shown in the extraordinary
development of Japan that changed from semi-peripheral country of the world economy
to developed capitalist country, Korea South that changed from peripheral country to
semi-peripheral country of the world economy and China that left the peripheral country
status in the 20th century and must climb the condition of greatest economic power in
the world in the mid-21st century.
Japan became a major economic power in the 20th century based on a development
project run by the state bureaucracy in the nation's name. The Japanese state directed
and coordinated the country companies that organized networks (keiretsu and Shudan
kygio) were helped with trade policies, technology and credit to compete successfully in
the global economy. It was adopted by the Japanese government industrial policy
advancing from the low-tech sectors to average technology and then to the high-tech,
following the evolution of technology, the global demand and the production capacity
of Japanese industries.
The Japanese government directed its economy for exports based on high
competitiveness, made possible by substantial increases in productivity, the quality of
labor and the protectionism of the internal market. He directed the flow of capital and

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scarce resources to certain sectors, limited the entry of foreign capital, negotiated
foreign technology licenses, managed exchange rates and provided various types of
assistance in export. The great Japan growth was based on a financial system funded by
the government to ensure security both to savers as banks and offer easy credit with low
interest rates to businesses.
In turn, in South Korea, the South Korean state took a business role through companies
and public investment. Given the limited purchasing power of the domestic market, the
government of South Korea has decided to maintain a fully focused strategy for export-
based industry. With control of the banking system and licenses for export / import, the
State brought about the fusion of Korean companies in the form of large vertical
networks (chaebol), similar to Japanese keiretsu, but without financial independence.
The chaebol were protected and strongly supported by the government of South Korea.
Strong protectionist measures were established by the government of South Korea in
order to preserve the internal market.
The government of South Korea has established a Council for Economic Planning that
designed and executed several five-year economic plans and directed the South Korean
companies to the sectors considered strategic for the national economy. It was only in
the 1970s, when the foundations of the South Korean economy were solidly established
under the strict control of the chaebol-driven state, the government moved to seek
foreign direct investment. The government was very selective in allowing foreign
investment, seeking, above all, companies that could facilitate some technology transfer.
The role of the Korean government in channeling capital was vital when the country
was suffering a shortage. The protection of domestic market against imports and foreign
investment was common. The Korean government sought to ensure the best conditions
for foreign technology licensing in selected industries, which reduced the cost of
obtaining this technology and hastened the process by which Korean companies have
developed their own expertise.
It was thanks to the state's role in economic development that China has shown in the
last 30 years the highest growth rates of GDP in the world. China boasts a significant
trade surplus, it is large recipient of foreign direct investment and maintains its external
accounts with a surplus, accumulating large volume of foreign exchange reserves.
Despite the high degree of trade liberalization, China's economy has proven quite robust
against external shocks, exceeding almost unscathed crises that plagued the emerging
economies since 1997. One factor that kept China in the development trajectory was the
administration by government of their integration pace in international trade.
The main factor explaining China's relative ability to absorb the shock of the global
crisis of 2008 is its limited integration into the global economy, particularly in terms of
financial markets. The government control of the links between the Chinese financial
system and global markets functioned as a shield, protecting the system to withstand the
movements of financial flows around the world. China demonstrates the ability to
benefit from globalization and at the same time, provide partial protection to the
country's economy against the uncontrollable forces of global markets. Contrary to what
made Japan, South Korea and China, Brazil, the Michel Temer government abdicates to
play a proactive role in promoting the country's development, transferring to market
forces this responsibility by adopting what it calls the neoliberal model based on the
Washington Consensus.
2. The role of private investors

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Private venture capitalists have always played a key role in investments throughout
history in many countries. The decision of entrepreneurs to invest depends, above all,
the existence of two factors: 1) favorable economic environment; and, 2)
developmentalist government policies. The economic environment is favorable to
entrepreneurs collaborating in their decision to invest when the possibilities of gains are
high. In Brazil today, the economic environment is largely unfavorable due to
exorbitant interest rates by the banking system, the risk of explosion of public debt and
the decline of the domestic market due to the economic crisis and the recessionary
policy of Michel Temer government. The disadvantages offered by the unfavorable
economic environment are added to the lack of developmental government policies
boosters of the implementation of productive projects in Brazil.
3. Capital Accumulation
In capitalism, private investors are mainly responsible for the capital accumulation
process. The capital accumulation process is vital for economic and social development
of a nation. In Japan, in the second half of the 20th century, it was the high domestic
savings rate which allowed to achieve high investment rates and rapid increase in real
wages. The abundance of capital resulted from the high savings rate and short-term
credit to banks of keiretsu by the Bank of Japan. Interest rates were low. The Great
Japan growth was based on a financial system funded by the government to ensure
security both to savers as banks and offer easy credit with low interest rates to
businesses.
In South Korea, the role of the Korean government in the channeling of capital was vital
when the country was suffering a shortage. It was only in the 1970s, when the
foundations of the South Korean economy were solidly established under the strict
control of the chaebol-driven state, the government moved to seek foreign direct
investment. The government was very selective in allowing foreign investment, seeking,
above all, companies that could facilitate some technology transfer. In China, whose
GDP is now the world's second, after the United States, its aggregate investment rate
reaches 40% of GDP. There is no parallel to the success of China's economic policy
over the past 30 years in support of high GDP growth rate (8.5% per year on average).
In Brazil, there is insufficient public and private saving that should be in the order of
25% of GDP to enable economic growth of 5% per year and currently is around 14% of
GDP. Private investment has been insufficient due to high and rising public debt,
scorching "spread" banking, high tax burden of 35% of GDP, high labor costs, higher
pension system costs, complex tax legislation and inefficient, high cost of electricity,
poor infrastructure and lack of skilled labor.
4. Technical progress and the organization of production
Technical progress and the organization of the production process were decisive factors
for increasing productivity and achieving economic and social development in countries
around the world. In Japan, high levels of investment in R & D and focus on advanced
industry enabled the country to take a leading position in the sectors of information
technology. There were sustained effort for technological development with programs
for the acquisition of technology and technological innovation sponsored by the
government. Japanese companies are the main research and development engine in
Japan. Japanese companies also have exceptional ability to achieve technologies abroad.
Engineers are in the direction of many of Japan's leading manufacturing companies

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where technical guidance is predominant. The lack of natural resources in Japan has
resulted in innovation in many Japanese industries.
In South Korea, the major Korean companies invest a lot in improving their technical
capacity. In China, the government has prioritized the development of the sectors of
information technology and has been negotiating partnerships with foreign companies
to absorb technological and obtain export channels. Simultaneously there is strong
support for national companies with significant recent expansion of R & D programs,
training of high level human resources. Unlike Japan, South Korea and China, in Brazil,
the technological gap is growing due to lack of industrial policy and scientific and
technological development, a fact that contributes to the rise of the technological
dependence of the country from the outside.
5. Industrialization
The industrialization process has always been considered the way in which countries
would leverage its economic and social development. In Japan, in the second half of the
20th century, the development process adopted by the Japanese government was
emphasizing the industry. In South Korea, there was the creation of an industrial
structure based on large companies organized as conglomerates. Many of Korean
industries have been benefited from the presence of large international trading
companies with international networks of well-established offices and helped the
Korean manufacturers to penetrate the world markets. In China, economic development
was based on so-called "Four Modernizations" that was deemed necessary and
fundamental: the modernization of agriculture, industry, science and technology and the
military. The industry has been and remains the engine of China's economic growth.
In turn, Brazil had an industrialization experience from 1930 when the government
economic policy came to value the internal market, which favored industrial growth and
consequently the process of urbanization. In 1930, the Getúlio Vargas government,
marks the change of the direction of the Republic, transferring the core of political
power from agriculture to industry. The industrialization process has advanced in the
second half of the 1950s with the implementation of durable consumer goods industry
and was continued from 1968 to 1973, when Brazil experienced high rates of economic
growth, creating a general climate of optimism soon called "economic miracle" and
industry constituted the main sector in the outbreak of development started in 1968.
From 1985 until now, Brazil has been undergoing a process of deindustrialization given
that contributed 35% of GDP in 1985 and today contributes 15%. This decrease resulted
from the Brazilian industry's inability to compete with imported products resulting from
the government policy of the Brazilian economy with the introduction of the neoliberal
model from 1990.
6. Factors of production and internal market
The factors of production (human resources, knowledge resources, physical resources,
economic and social infrastructure and capital) and the internal market consisted in
several countries in key elements to leverage its economic and social development. The
existence and development of human resources and natural resources in quantity and
quality, economic and social infrastructure compatible with the needs, knowledge
resources (universities, government and private research institutes, statistical agencies),
capital (high savings rate and credit and low interest rates), and domestic and foreign
markets for the goods and services produced in it, agglomeration economies that ensure

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productivity and competitiveness for products and services and business networks that
enable the creation of productive chains in highly competitive and are fundamental to
economic and social development of a country supported the development of the central
capitalist countries and, in particular, Japan, South Korea and China in the second half
of the 20th century.
Japan, for example, has large reserves of human resources literate, educated and
increasingly enabled. What is exceptional in relation to post-secondary education
system of Japan is the education and training provided in companies, both the workers
and the directors. The internal market, not the foreign markets, led to the development
of most Japanese industries. Only later, exports would become significant. In South
Korea, the Koreans have a high literacy rate and high average level of education. The
university system is large and particularly aggressive investments were made in
engineering. Academic research is complemented by a whole range of specialized
research institutes financed in whole or in part by the government.
In China, great emphasis was given to the training of human resources which resulted in
a sharp drop in the number of illiterates and large increase in higher education. The
scientific training was also greatly valued. In 1949, when there was the Chinese
Revolution, China had only 40 scientific research institutions and less than 50 000
scientists, of which only 500 were related to research institutions. Over the next 25
years, it was founded 840 research institutions, including 400,000 scientists and
technicians. China had in 2000 more than 24 million scientists, technicians and
administrative and support staff involved in science and technology, of which 2.77
million were scientists and engineers. This staff working in 5,856 state scientific
facilities, 2,550 scientific institutions affiliated to universities and 14,400 scientific
institutions affiliated to companies.
Japan, South Korea and China stand out also for their infrastructure, the transport sector
for the high investment that continues to be done on roads and railways, especially in
China. Infrastructure investment policies are China government priority since 1990 and
served in the center of the "five-year plan". In Brazil, the weakness is gigantic in
economic infrastructure (energy, transport and communications) and social (education,
health, sanitation and housing) that require resources in the order of R$ 2 trillion.
Government action in Brazil is quite weak in the development of science, technology
and innovation because there is no industrial policy that aims effective solutions to the
ongoing reduction of industrial production costs in Brazil compared to the Asian
countries, especially China .
These solutions should be supplemented in Brazil with the adoption of measures aimed
at: 1) to overcome the huge problems of Brazil's education at all levels; 2) the
development of knowledge resources by adopting programs for implementation of R &
D centers, strengthening of universities, technology acquisition and attracting brains
from abroad; 3) the appropriate allocation of infrastructure resources establishing
effective elimination programs of existing logistical bottlenecks; 4) fostering the links
between the supply chains of companies and their suppliers with the elimination of
gaps; and, 5) the fight against predatory competition from imported products with the
restriction or limitation of its entry into the domestic market.
Without the adoption of these measures, there may be the crash of large industrial
sectors, deindustrialization and denationalization of the Brazilian economy. The
denationalization of the Brazilian economy is evident when it is observed that of the 50

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largest Brazilian companies, 26 are foreign, according to the Foreign Capital Census in
Brazil. More than half of Brazil's leading sectors companies (automotive, aerospace,
electronics, information technology, pharmaceuticals, telecommunications, agribusiness
and mining) are in the hands of foreign capital. Foreign capital is present in 17,605
Brazilian companies that account for 63% of Gross Domestic Product (GDP), and has
36% control of the banking sector and has 25% of Bradesco shares and 20% of the
shares of the Bank of Brazil.
7. Conclusions
It is important to note that the economic crisis affecting Brazil at the time did not result
only of the incompetence of PT governments, but especially of the adoption of
neoliberal and anti-national economic model in place since 1990 by the Fernando
Collor, Itamar Franco, Fernando Henrique Cardoso, Lula and Dilma Rousseff
governments. It is unfortunate that the Michel Temer government insist on maintaining
an economic model that failed in the world adopting an ineffective fiscal adjustment
(PEC 241) which tends to deepen existing economic stagnation in Brazil and not to
develop an economic plan that contributes to the recovery the development of Brazil to
indicate to the population and productive sectors the prospect of renewed economic
growth.
Instead of adopting the recessive economic policy that limit public spending in a 20-
year horizon that is prejudicial to the interests of the population, the federal government
should seek the elevation of its tax collection: 1) taxing big fortunes that it is the only of
the seven taxes provided for in the Constitution that has not yet been implemented and
could yield about 100 billion Reais per year; and, 2) raising the tax on banks. In
addition, the federal government should also reduce their spending on: 1) reducing the
number of ministries and expenditures at all levels of government; 2) reduction of the
basic interest rate of the economy (Selic) to decrease the size of the public debt and the
burden of interest payments; and, 3) renegotiations with creditors to reduce the burden
of payment of the public debt which consumes about 45% of the Brazilian government
budget.
To combat economic stagnation, the federal government should: 1) drastically reduce
Selic interest rates and those charged by banks to encourage private investment; 2) take
measures to encourage productive activity; and 3) to encourage exports to promote
economic growth by undertaking the fixed exchange rate to replace the floating
exchange rate. The argument put forward by the Michel Temer government that first
need to reduce government spending and then to promote economic growth is totally
irrational from the Keynesian perspective. Moreover, is blackmailing with the
population to say that the alternative is cutting government spending or tax increases.
Anyone understood in Economics knows that in the economic stagnation that affects a
country, the economic growth takes place only if the government raise its spending to
compensate the fall in consumption and investment. Who formulated this teaching was
the great economist John Maynard Keynes in the mid-twentieth century. It was with the
Keynesian policies that the global economy has retaken its growth after the economic
depression of 1929. It is the lack of a development plan one of the factors that lead to
immobility of the private sector in carrying investment leading them to a real paralysis.
Michel Temer government takes a neoliberal economic policy that abdicates of its
intervention in the economic environment unlike the successful development policies

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adopted in Asia by Japan, South Korea and China in which the State played a key role
in their economic and social progress.
All this set of measures will only succeed if, among other measures, effective
government control of capital movements in Brazil that is central to the serious crisis
affecting Brazil at the time. Regarded as dogma by the worshipers of the god-market,
free flow of capital makes up the tripod of neoliberal macroeconomic policy adopted in
Brazil since 1990- along with the high interest rates and high primary surplus. The free
movement of capital, so idolized by neoliberals also has other negative effects. It makes
the risk of abrupt currency crises become permanent, as at any time foreign investors
can leave the country - and this danger is instant, online. This threat further strengthens
the power of finance capital, which uses it as blackmail against the Brazilian
government. The Brazilian state becomes hostage being forced to do more concessions -
liberalizing reforms, the Central Bank autonomy, etc. as are happening in Brazil since
the 1990s.
The neoliberal economic model that prevails in Brazil, anchored in the primary surplus
to benefit the financial system, the inflation target and a floating exchange rate, restricts
the scope of domestic policies for development of the country. It is this mechanism that
needs to be barred to prevent a catastrophic future for Brazil. It can be said that the
movement of capital free is the node that connects the excessive growth of public debt,
the rapid expansion of interest rates and the transfer of national wealth to the financial
system do the financial system with the primary surplus in Brazil. Pressured by brutal
public debt that reaches R$ 4.5 trillion, the Brazilian government is forced to maintain
extremely high interest rates (14.5% per year) to attract new capital for the poor
functioning of the economy. At the same time, it helps to understand the existence of
the primary surplus which aims to ensure the payment of interest to the creditors of the
public debt.
This fiscal tightening is required by lenders to give tranquility to the god-market and to
attract new foreign capital. The result of this nefarious model is known by Brazilians:
the economy stagnates, unemployment hits record, income plummets and the state has
weakened its ability to investments in economic and social infrastructure. At the other
end, money flows freely to the rich bankers. This mechanism, so idolized by neoliberals
also has other negative effects. It makes the risk of abrupt currency crises become
permanent, as at any time foreign investors can leave the country - and this danger is
instant, online. This threat further strengthens the power of finance capital, which uses it
as blackmail against the Brazilian government. The Brazilian state becomes hostage
being forced to do more concessions - liberalizing reforms, the Central Bank autonomy,
etc. as are happening in Brazil since the 1990s.
Another pernicious effect of the free flow of capital concerns the incentive for illegal
activities. Taking advantage of the financial liberalization, the absence of regulation and
control, much of the illegal activities that degrade the planet, such as corruption, drug
trafficking, weapons, and human body organs and organized crime, are the ideal
environment for their valuation and legalization. One fact is clear: we live under the
dictatorship of finance. The hegemonic fraction of capital, the financial oligarchy, does
what he wants in Brazil and worldwide, manipulates governments, undermines national
economies and legalizes illegal operations. The financial transaction is frantic, without
any control. The dictatorship of finance reigns supreme. The financial oligarchy
becomes the hegemonic fraction of the bourgeoisie.

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Faced with the risk of having to submit to the dictatorship of finance capital, many
nations began to seek alternative paths. The so-called "developing countries" in Asia,
after the financial and foreign exchange crisis of 1997, sought to overcome its external
vulnerability. Through various mechanisms, many countries returned to take measures
to regulate the entry and exit of capital. Overall, they now achieve greater economic
success and greater stability than those applying the neoliberal model as Brazil. This is
the case of China, where capital transactions rely on state authorization, financial
transactions with the outside, input or output, are authorized by the government.
Another example is India, where is predominant to use restrictions of quantitative and
administrative nature to capital transactions. China and India, who never left the control
of the capital, are now synonymous with continued economic growth.
Unlike China and India, Brazil is a highly vulnerable country. To keep the fragile
functioning of the economy, the Brazilian government depends on the annual inflow of
capital from foreign markets expanding its dependence. This situation of dependence, a
sad mark of national history, reached the absurd level during the FHC government that
threw the financial orgy in Brazil. The Lula and Rousseff government kept intact this
dependence of Brazil causing extremely high real interest rates that undermine the
national productive sector, the fiscal surplus extremely continued high which benefit the
creditors of the public debt and the free flow of capital that continues generating joy to
bankers. This is also maintained by the Michel Temer government with its recessive
economic policy that threatens to lead Brazil to bankruptcy.
It is important to note that the entry of foreign capital entails numerous side misdeeds.
One is the exchange rate appreciation that undermines the competitiveness of domestic
exporters. It is this concern that made China would adopt a cautious foreign exchange
management opting for fixed exchange rate instead of floating exchange rates that is in
force in Brazil. In the face of the evils provided by the capital flow liberalization, it is a
requirement that capital controls can be carried out with the taxation on foreign capital
inflows. You can also limit the volatility of flows requiring that a certain percentage of
foreign investment is retained in reserve for certain number of days with the Central
Bank. This type of control called "lock-in" policy prevents the sudden outflow of
capital.
It can be said that capital controls can be part important for a strategy of growth and
sustained economic development, especially in economies marked by macroeconomic
instability as Brazil. These controls select capital flows, confining speculative capital to
manageable volumes and isolating the economy, to some degree, from external shocks.
Thus, capital controls act to reduce the volatility of exchange rates and interest rates,
helping to stimulate investment decisions in the economy.
* Fernando Alcoforado, member of the Bahia Academy of Education, engineer and doctor of Territorial
Planning and Regional Development from the University of Barcelona, a university professor and
consultant in strategic planning, business planning, regional planning and planning of energy systems, is
the author of Globalização (Editora Nobel, São Paulo, 1997), De Collor a FHC- O Brasil e a Nova
(Des)ordem Mundial (Editora Nobel, São Paulo, 1998), Um Projeto para o Brasil (Editora Nobel, São
Paulo, 2000), Os condicionantes do desenvolvimento do Estado da Bahia (Tese de doutorado.
Universidade de Barcelona, http://www.tesisenred.net/handle/10803/1944, 2003), Globalização e
Desenvolvimento (Editora Nobel, São Paulo, 2006), Bahia- Desenvolvimento do Século XVI ao Século XX
e Objetivos Estratégicos na Era Contemporânea (EGBA, Salvador, 2008), The Necessary Conditions of
the Economic and Social Development-The Case of the State of Bahia (VDM Verlag Dr. Muller
Aktiengesellschaft & Co. KG, Saarbrücken, Germany, 2010), Aquecimento Global e Catástrofe
Planetária (P&A Gráfica e Editora, Salvador, 2010), Amazônia Sustentável- Para o progresso do Brasil e
combate ao aquecimento global (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2011),

9. 9
Os Fatores Condicionantes do Desenvolvimento Econômico e Social (Editora CRV, Curitiba, 2012),
Energia no Mundo e no Brasil- Energia e Mudança Climática Catastrófica no Século XXI (Editora CRV,
Curitiba, 2015) and As Grandes Revoluções Científicas, Econômicas e Sociais que Mudaram o Mundo
(Editora CRV, Curitiba, 2016) .