Tribunal de Contas da União
Productivity as a public good
In comparison to Brazil, what do countries like Holland, Denmark, France and Slovenia have in common? In addition to lower average temperatures and not having Portuguese as the official language, all these countries have higher productivity rates than the Brazilian one, that is, they need fewer hours of work to generate the same amount of wealth in relation to us. According to a World Bank report published in March 2018, the abyss has only increased: Brazilian worker productivity has increased by only 17% in the last 20 years, while high-income countries have seen an increase of 34%.
With the increase in the life expectancy of the population and the end of the so-called demographic bonus, it is imperative that Brazil have the capacity to do more with less and increase the amount produced by those who are active. Increasing a country's productivity benefits the population broadly, so that it can benefit from goods and services with lower and better quality production costs. At the same time, its increase is not exclusive or rival, because it benefits society indistinctly, enabling the classification of productivity as public good. It is clear that improving productivity can be one of the most eloquent outputs for improving the country's development patterns.
Actions to improve manufacturing technologies, streamline work and management methods, improve logistics efficiency, increase the quality of population education and reduce redundant bureaucratic procedures are key to raising productivity levels. Needless to emphasize the role of governments in promoting actions that foster collective well-being through increased productivity, regardless of the ideological orientation of the ruler on duty, as higher productivity rates benefit governments and citizens of all colors. What to do with productivity gains - reinvest to accelerate growth or redistribute to alleviate social inequalities - or the combination of the two is a choice to be made by the democratically elected representatives.
However, if productivity is beneficial, why do governments on the right and left of the political spectrum fail to untie this knot and put Brazil in a virtuous circle? The answer is simple: Governments have not placed this issue as a priority because of the associated high political costs and corporate pressures. The benefits of policies aimed at increasing productivity are diffuse and observable in the long run, but the political costs are paid in cash in the form of loss of parliamentary-based support and backlash from corporations that have become accustomed to living with privileges and that have an enormous ability to get their interests met. Thus, from the viewpoint of the standard politician - one who aims to optimize his chances of election rather than observe collective welfare - in the end it does not add up.
In fact, several fights would have to be picked to carry forward a productivity-enhancing agenda. The list of examples is long. It goes from the lobby of notaries against the bill that creates the electronic trade note – which would reduce bureaucracy and increase the security of the system of guarantees -, lawyers against the use of information technology to assist the elaboration of labor lawsuits that would increase the efficiency of the justice system, to civil servants who may have their privileges reviewed, national entrepreneurs defending market reserve and against the reduction of import taxes, leaders of employers' unions that survive thanks to public transfer or resources and are against a detailed examination of the impact of their entities, and interest groups well connected to the political system and thirsty for subsidized credits and tax benefits, just to name a few.
A report by the Federal Court of Accounts – Brazil (TCU) found that, out of total exemptions foreseen for 2018, 85% (R$ 240.6 billion) have no expiration date, and 44% (R$ 125.6 billion) was granted without studies showing social or economic benefits that justify the loss of collection to the public coffers. Every man for himself", which in a free translation means, “If there’s little flour, my broth first”. By acting in self-interest in an environment full of incentive distortions, corporations further aggravate the productivity problem in Brazil.
The 2018 elections are an excellent opportunity to discuss the issue of our low productivity in a mature way with Brazilian society, showing that increasing productivity is necessary for a permanent and sustainable growth.
Countries such as Australia and Chile have found in the so-called Productivity Committees a way to break with the status quo. Brazil can take the same path to coordinate harmoniously the actions of the various governmental sectors, to institutionalize and perpetuate the agenda and, specially, to clarify the implications of policies that block productivity. It can explicit, based on robust evidence, the winners and losers of a given arrangement. To avoid creating another government agency, such functions could be coupled with structures that already evaluate public policy. Of course, in addition to being sufficiently shielded from political influences, the productivity committee needs a high technical reputation and institutional empowerment to implement its recommendations to all spheres of the public machine.
Thus, beyond the logic of political cycles, productivity must be seen as a public good and be treated as state policy, not government policy. The time is now.
Débora Costa, Fernando Camargo and Sandro Cabral
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Débora Costa has a degree in Law and Economics, a master degree in Constitutional Law and works as a TCU Auditor.
E-mail: debora.costaferreira91@gmail.com
Fernando Camargo holds a degree in Public Administration and Law and works as a TCU Auditor. E-mail: fernandoscamargo@gmail.com
Sandro Cabral holds a Doctor in Business Administration and is a Professor at Insper. E-mail: SandroC2@insper.edu.br