When the sovereignty wealth funds of the world (including countries such as China, Saudi Arabia, and so on..) look around for places to invest their money for the long-term, they don’t need to look any further than Brazil. Today, Brazil is positioned to become a powerhouse in the global economy in the coming years, and one of the great economic development stories of the 21st Century.
The United States Economy
Wall Street corporations were designed for the sole purpose of making profits, and they are in the money business – of making a lot of money or losing a ton of it. As the dot.com meltdown of 2000, and the stock market crash of 2008 have shown us, Wall Street is more in tune with losing trillions of US dollars with their gambling schemes and all kinds of financial shenanigans, than anything else.
And they are also capable of not only losing trillions of US dollars from investors from around the world, but also the pension nest eggs of American workers built over a long period of time. And trillions of US dollars have gone up in smoke almost overnight during every stock market meltdown we had such as in 2000, and in 2008; resulting in a real pension nightmare in the coming years for U.S. retirees and to retirees of other countries as well.
The U.S. economy is in deep trouble and dying a slow death with no hope for meaningful change in sight. The current US economic and government system is heavily influenced by powerful lobbying groups that want to keep the status quo going and their self-serving agendas in place, and making it almost impossible for the system to change and adapt to the new economic circumstances.
And some corporations such as Goldman Sachs have infiltrated the US government at the highest levels with their network of former Goldman Sachs executives in an effort to influence US government policies on behalf of the financial and banking industry and their financial games.
I just read the book “It Takes a Pillage – Behind the Bailouts, Bonuses, and Backroom Deals from Washington to Wall Street” by Nomi Prins, a book published in October 2009. The book explains in detail the demise and complete destruction of the US economy by the power brokers of Wall Street.
After reading this book you finally will understand why the new generations of Americans don’t have any future and how Wall Street stole their future and wasted the money to the tune of trillions of US dollars. The author gives an outstanding explanation and detailed information about what happened in the US financial markets that ended up in a global financial meltdown.
After reading this book you will have a much better understanding about what is going on with the US economy today, how we got to this point and the massive trouble that lies ahead of us.
Basically there is only one conclusion for this massive financial mess made in the USA, and the year 2008 marks the end of an era, and the capitalist brand of America.
Nomi Prins is a former managing director at Goldman Sachs, and her book exposes the corruption in Washington and Wall Street. Her articles are published in Fortune magazine, the Nation, Mother Jones, and other publications. And her latest book has become an important source of information about the corruption in Washington and its connection to Wall Street.
The book shows how the revolving door between Wall Street and Washington enabled and encouraged the disastrous behavior of large investment banks. You’ll meet the Pillage People: the men who funneled trillions of dollars directly to the banks and the executives whose companies drained the American economy.
And if you don’t believe me that the US economic system is in deep trouble and beyond repair, then you don’t need to look any further than what has transpired in the United States since the financial meltdown of 2008. The US financial system ended up in intensive care, and almost died a quick death. And what has happened in the United States since then regarding any efforts by Congress to try to fix the problems that caused the collapse of the US and global financial system in 2008?
As usual, Americans learned nothing from these past fiascos, and if anything the problems are becoming even bigger today with much bigger surviving financial institutions that are fighting very hard against any government regulation of their business, and they use their powerful lobbying connections to fight very hard to keep things as they were before the last financial meltdown.
How dumb can you be? And next time, when the coming collapse and financial meltdown become a reality once again, then the safety net of the US government won’t be there. This time around Wall Street has exhausted the financial resources of the United States.
Remember, since the Wall Street bailouts of 2008, the scoundrels of Wall Street have consistently been milking all the US government resources to the bone, and they also have been putting in place a structure for another major US government bailout of Wall Street in the future – for US taxpayers to pay for the bets that went sour for Wall Street.
When it comes to forms of corruption, in Brazil they still have a crude and old system and they use terms that include: bribery, extortion, cronyism, nepotism, patronage, graft, and embezzlement. In contrast, the United States has a much more polished and sophisticated corruption system called lobbying. And the American lobbying system works in a very efficient way by buying favors directly from the politicians through campaign contributions.
US Economic and Financial System Is Incapable of Meaningful Change
Let me give you another major example that would explain why the US economic and financial system is doomed, and incapable of meaningful change.
I remember a program that I saw on PBS a few years ago about the US oil industry – if I remember correctly the program about the US oil industry was made by Frontline.
Anyway, the American economic and financial system is in shambles, and it does not have a prayer to get better any time soon, because of the way lobbying and the free market work. The oil companies don’t want to give up their monopoly position, and they try to undermine in every way they can, any meaningful change to the rules of the game that affects the US oil industry – the US economic history of the last 35 years shows that Americans learned nothing from the oil shock of the 1970’s.
The United States has an economic system heavily influenced by powerful lobbying groups that makes it impossible to make meaningful change over time. And as the price of oil increases, the result is that hundred of billion dollars in real wealth is exported from the United States economy to the oil producing countries around the world. The US dependence on foreign oil becomes a vehicle to transfer wealth from the United States to other parts of the world.
A Legacy of the Military Government in Brazil: Ethanol
On the other hand, Brazil did not fix its energy problem based on free market solutions. If Brazil depended on the goodwill of free market players to fix its dependence on imported oil, then Brazil still would be a slave to that market like the United States still is today. During the oil shock of the 1970’s Brazil imported from foreign sources about 90 percent of its oil needs in Brazil, and in 2010 Brazil is an oil exporting country.
Who had the guts to fix that huge problem in Brazil?
The generals did! In the mid 1970’s when we had that major global oil crisis, the Brazilian economy was hurt very badly. Brazil had a military dictatorship at that time, and the generals decided that Brazil was going to fix that energy problem, and they put in place all the rules and regulations, and necessary financial incentives, to help develop ethanol production on a large scale in Brazil.
Brazil was able to develop the ethanol industry, and its distribution system based on sugar cane, because of the superb military government planning and implementation of that plan.
The State-of-the-art in Modern Technology
In early May 2007, I attended in New York City a very interesting forum: “The Sustainable Development Forum 2007 – Ethanol and Biofuels” – and one of the most interesting presentations in that forum was given by the president of Fiat.
The Fiat president presented a very interesting slide show – basically he described the development of the car industry in Brazil in the last 30 years caused by the use of ethanol and all the breakthroughs and improvements that they had to make on their car engines because of ethanol – and today they have a flex-fuel system that is an extraordinary achievement, and a major example of the state-of-the-art in modern technology.
The United States is supposed to be a democracy, and free market economy. But is the free market system really smart?
I don’t think so! After the global oil shock in the mid 1970’s, if anything the US economy learned nothing from that fiasco, and today the US economy is more dependent on foreign oil than they were in the mid 1970’s. And the US economy is dependent on importing oil from the most-unstable geopolitical areas of the world.
In Brazil ethanol production is made of sugar cane that gives 10 times more ethanol than ethanol made from corn. Americans were aware that the Brazilian ethanol production made from sugar cane was a lot more efficient than ethanol made of corn. And guess what ethanol production system was adopted by the United States free market economy? – The ethanol made from corn; because the United States has a very powerful corn lobby that influences US government policy.
Basically the current free market system, and the self-interest of a few groups with deep pockets (the lobbying groups) does not allow the US economy to bite the bullet. Americans need to make the necessary adjustments to place the US economy on a new path for long-term survival based on new sources of clean energy, and resulting in new growth and prosperity for the new generation of Americans.
The generals and their dictatorship system put in place the foundations that made Brazil use home-grown sugar cane as a source of energy independence. And here is a lesson about “oil self-sufficiency” from Brazil to the United States: “Brazil imported around 90 percent of its oil needs in the 1970s, but turned itself into a net exporter of oil in 2006.”
Brazilian Independence from Foreign Oil
April 21, 2006 marked an end to decades of Brazilian dependence on foreign oil, and fuel bills that plunged Brazil into debt when oil prices soared in the 1970s. On that date President Luiz Inácio Lula da Silva flipped the switch on a new oilrig that will usher in overall Brazilian independence from foreign oil.
As the Brazilian economy moves forward into the future with a very smart government energy policy, at the same time the United States economy becomes more risky with every passing day when you consider that the United States is so dependent on “foreign oil.” And the oil that the US needs to fuel its economy comes from places that are swamped with geopolitical trouble as in the areas of major civil wars such as in Iraq (Saudi Arabia, Kuwait, Qatar, Oman, UAE, and Iran) and in Nigeria, and so on.
And today the United States can’t guarantee to keep its future supply of oil coming even from next door in Venezuela, since China slowly is taking away from the United States that source of energy.
As Brazil is becoming the model for energy policy in the new century, at the same time the United States is getting desperate in their effort to keep its economy going with the energy sources of the past. In terms of energy policy, the United States is at least 30 years behind Brazil. And when you take in consideration the growing demand for oil from around the world that places Brazil in a class by itself, today Brazil represents the world of tomorrow.
With oil prices on the way up and supposed to reach at least US$ 100 dollars per barrel in the near future, once again the price of oil will have a negative on the economy of most countries around the world. And Brazil will benefit, and have a major advantage when compared with the other countries, because Brazil operates on ethanol.
Besides all that, in the last few years Brazil has found the largest new sources of oil in the world right around the Brazilian coastline, and Brazil, by developing these new sources of oil, will help in the coming years to feed the massive thirst for oil of the new global economy.
The Global Clash of Speeds
In December of 2006 I read a very interesting new book “Revolutionary Wealth” by Alvin Toffler. He said a lot of insightful things in his book and in chapter 3 “The Clash of Speeds” – he said the following: “The countries with the key economies in today’s world – the United States, Japan, China, and the European Union – are all heading for a crisis that none wants, that few political leaders are ready for, and that will set limits on future economic advance. This looming crisis is a direct result of the “de-synchronization effect,” an example of how we mindlessly deal with one of the deepest of all the deep fundamentals: Time.
Nations all over the world today are struggling at different rates of speed to build advanced economies. What most business, political and civil leaders have not yet clearly understood is a simple fact: An advanced economy needs an advanced society, for every economy is a product of the society in which it is embedded and is dependent on its key institutions.
If a country manages to speed up its economic advance but leaves its key institutions behind, it will eventually limit its potential to create wealth. Call it the Law of Congruence. Feudal institutions everywhere obstructed industrial advance. In the same way, today’s industrial age bureaucracies are slowing the move toward a more advanced, knowledge-based system for creating wealth…In all these countries, key public institutions are out of step with the whirlwind of change that surrounds them.”
Anyway, the book has 500 pages and one of the things that he mentioned in his book and I did not forget, is that the most extraordinary thing today is that we still can function at all here in the United States – he shows with many examples how everything is getting completely out of sync.
Not only here inside the US economy, but it is amazing that the US still is able to do business with countries from around the world when everybody is moving at different speeds.
By the way, one of the points that Alvin Toffler makes in his book is that the American legal system is completely out of sync with the reality of what is happening inside the United States, and around the world.
For years futurists such as Alvin Toffler and John Naisbitt have lectured the rest of us that the end of the industrial age also means the end of “mass production” and “mass labor.” What they never mention is what “the masses” should do after they become redundant.
I am reading the latest book by John Naisbitt – “China’s Megatrends: The 8 Pillars of a New Society.” And I am learning new facts about what is behind China’s economic development miracle in the last 30 years. And in this book Mr. Naisbitt said: “China in 2009 is creating an entirely new social and economic system. China is creating its own new society, its own political system.
…China is like a biracial child that, after it has undergone a significant emancipation process, starts to disconnect from its parents – communism and capitalism – using the strength it gained from both sides to start walking on its own feet.”
Regarding China he also said: ” You cannot understand a new paradigm by using the vocabulary of the old paradigm.”
Brazil is ready for the new economic miracle of this new century, and it is prepared to lift the Brazilian economy to new heights; to materialize and make a reality one of the great economic development stories of the 21st Century.
There is no question about it. And we have undisputable evidence in Brazil of the superb military government planning and implementation of the ethanol plan. And we should give all the credit that the military government deserves in that area for their extraordinary foresight and achievements, and the total recognition by all of us that the military government played a major role in getting Brazilian independence from foreign oil.
During the military dictatorship years they planted the economic seeds, and built the foundations of an economic system that is becoming one of the best in the world.
I would also like to suggest that all members of the economic team of the Brazilian government take the time to read the latest book by John Naisbitt – “China’s Megatrends: The 8 Pillars of a New Society” – since that book gives profound insights about all the transformations that have been going on in China’s economic and social systems.
His book serves as a guide and a road map to a totally new economic and social system that is still a work in progress. But so far this new system has delivered outstanding results for China and the Chinese population. And Brazil should study very carefully, and adopt the parts of this new complex system that has been so successful in lifting about 400 million people from poverty in China, and will continue lifting hundreds of millions of new people out of poverty in the coming years.
China in 2010 is creating an entirely new social and economic system model, which might also be relevant and serve as an inspiration to solve the economic and social problems in Brazil.
Books mentioned on above article:
1) “It Takes a Pillage – Behind the Bailouts, Bonuses, and Backroom Deals from Washington to Wall Street” by Nomi Prins, published in October 2009 by John Wiley & Sons Inc. ISBN: 978-0-470-52959-1
2) “Revolutionary Wealth” by Alvin and Heidi Toffler, published in 2006 – ISBN: 0-375-40174-1
3) “China’s Megatrends – The 8 Pillars of a New Society” by John and Doris Naisbitt, published in January 2010 – ISBN: 978-0-06-185944-1
You can read other articles by Ricardo C. Amaral at:
Brazzil magazine – Columnist: Ricardo C. Amaral
Ricardo C. Amaral is a writer and economist. He can be reached at email@example.com.