Gustavo Franco:
Letters to a young economist
Editora Campus, 208 pages, £ 39.90
Gustavo Franco: "Marxism today is alternative medicine"
Jose Fucs
Magazine season, 11/09/2010
The former Central Bank president says there is only one type of economic school : The neoliberal economist
Gustavo Franco had a multifaceted career. He managed to combine a successful career in academia with a wealth of experience in government and private enterprise. He was professor at Catholic University of Rio de Janeiro, President of the Central Bank during the Cardoso administration and is now a partner at Rio Bravo, a small boutique investment. Few know how, then, the intricacies of the profession, the subject of his new book - Letters to a Young Economist (Editora Campus, 208 pages, R $ 39.90), to be released on the 14th, in São Paulo. In this interview he talks about the big economic issues, the existing ideological patrols at the university and the challenges of the next president. "Marxism is alternative medicine today," he says.
INTERVIEW - GUSTAVO FRANCO
WHO IS
economist and consultant, participated in drafting the Plan Real. He was chairman of the Central Bank (1998-1999). He is a partner of Rio Bravo Investimentos
WHERE STUDIED
He attended undergraduate and postgraduate studies in economics at PUC-RJ. Concluded his doctorate at Harvard, the United States in 1986
WHAT PUBLISHED
In the recently released Letters to a young economist, wrote The Man Who Stole Portugal (2008), The economy in Machado de Assis (2007) and The Brazilian challenge (1999)
TIMES - In his new book, you say that the economy is a complex issue and that many times, economists even more complicated. Why?
Gustavo Franco - The problem is communication. First, because you need the vocabulary of specialized knowledge. It's like the doctors. They have a language of their own which concentrates much substance in a nutshell. Second, because is a really difficult subject. And many professionals have the decency not to use analogies like "the country is like a family, who have a household budget." This has nothing to do. The shame in using the simplification in excess is a professional be careful how you express yourself - and I think that is correct. Now, it is curious that people admit that the doctor, dentist, but not the economist, because it is a subject that everyone thinks he understands.
TIMES - In an aspect people are tolerant of economists, but did not admit in physicians: the errors. Why do economists miss so much?
Franco - Doctors also make mistakes too. The kind of reality with which the economist deals is different. Compare, for example, an economist with a physicist who wants to do the weather. He is neither able to tell if it will rain tomorrow. Not that the laws of physics do not work. It's the systems that he examines, with the tools and computing technology available to it, do not allow predictions. In economics, it's the same thing. We make mistakes just like any other profession that strives to predict the future.
SEASON - You say that if I could choose a motto for the profession, pick "No free lunch," Milton Friedman. What's so important about it?
Franco - It combines a worldly tone with something with which each of us is involved all the time. In our daily lives, there are ten situations that happen during the day you can see that there is no free lunch. You must make choices. You have to choose between keeping the money and buy something, please buy a bicycle or a jacket. Are situations where you can not choose both. Otherwise, it would be easy, would not be fun.
"Economists err like any other professional.
A physicist can not even tell if it will rain tomorrow"
SEASON - You talk also about the patrols that existed in the teaching of economics in the country when he was a student in years 70 and 80. This still exists today?
Franco - When I was a student, there was more clarity in relation to schools of thought, especially as doctrinaire. Not today. That situation that had gone before the fall of the Berlin Wall, where you had left and the economist called bourgeois economist. Today, it still tries to keep this legend alive by creating the notion that there is the Neoliberal School and others. I think that no longer exists. The differences are more matters of packaging nuances. In Brazil, if you analyze the performance of the Central Bank under Lula, will not find a relevant difference was that the Central Bank under the Fernando Henrique Cardoso. Still, you'll always have Marxist economists. It is a kind of economic thinking that only survives as a curiosity and should only be regarded as alternative medicine. It will not help you think about the world today.
SEASON - You say that in Brazil there was a patrol and a lot of prejudice in academia against the international economists who emphasized the role of mathematics. This also has diluted today?
Franco - There are two types of patrol. The hottest, which is ideological, it is less important. The most important thing is to patrol the amateurs. Is any person who, when faced with an economist, doubts that he knows anything about economics that is not an economist who has not already discovered, based on the experience of everyday life. Many people believe that it is not necessary to be a professional economist, that anyone can understand the economy - and not so. In medicine, if the subject is put to the doctor without graduating, he can go to jail. In economics, all the time arises understood a lot of talking nonsense.
SEASON - What is the biggest challenge of the Brazilian economy for the next president?
Franco - is the growth, no doubt. Our growth is still somewhat below potential, and too dependent on consumption. It is intended therefore to be low. This is the great challenge, raising the investment. There will be differences of opinion over the best way to do this, and I hope the campaign will help to clarify the population.
TIME - You have been a harsh critic of government spending in the current government. This should be a priority for the new president?
Franco - Without a doubt. Today, unlike what happened at the time of high inflation, the government has to deal with a kind of evaluation of strength and consistency of economic policy by the market, in real time. When the government makes mistakes, things start to weigh almost immediately. In Brazil, at the time of the Dolphin (Netto, former Minister of Finance and Planning), the government could make nonsense for years. He had no market, had no freedom of press. It was a different world. Now, with globalization, capital flow serves as an ongoing plebiscite. This ends up leading the government to make things right. I can even say that some things made by President Lula has not been made out of conviction but because of this environment.
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