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Vincoletto on 29 January 2018
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torok said:
Vincoletto said:

This guy knows things.

I would just add that I dont know if we can really say that Europe follows the Keynesian model all the time, ar if they accept it as they mantra. I think in a sense they float between Keynes and Freidman, depending on the era, level of debt, crisis etc. Btw I dont believe Keynes model is self sustaining in the long run and it can have several other impacts in the economy, specially for poor countries like in latin america.

I think first you need to get rich, then you can start spreading the wellfare. In Latam we try do distribute the money that we dont even have.

You're right, I wouldn't say that the entire EU is Keynesian. If you compare, let's say, France and Netherlands, they are quite different.

As you said, I think a Keynesian model works better when your country already is developed enough. It also needs a low level of corruption, something that depends on the increase of the education standards of the general public (once again, the country has to be developed). So, it is adequate to solve the inequality issues that rise when a country grows.

I also believe that Keynesian approaches works well when you have a situation where the market itself creates a problem due to speculation. The 1929 crisis was followed by increased regulations to give a new direction and it worked.

In Latin America, is hard to think about wellfare when the countries are still relatively poor. I wouldn't say that Brazil has enough money to really provide free education and health. The Keynesian approach also fails due to high corruption. I do think that a more Liberal, Austrian, approach would work better. A smaller state would result in less corruption. We need less regulation, less bureaucracy and a simplified tax system.

One misconception people have about Brazil is that taxes are sky high. Surprisingly, they aren't. Pretty much on the OCDE average. The issue is that we have high indirect taxes (products) and low direct taxes (inheritance, property, income). If you look at the income tax in Europe, it's waaaay higher. The problem is that direct taxes are good: rich people pay more. It's not enough to make them "not-rich", they just contribute more. The indirect taxes affect the poor. In Brazil, someone that gets minimum wage loses almost 33% of the salary to taxes. Someone that gets 10 or 15 minimum wages loses around 20% tops. It's basically a reverse Robin Hood. It's also necessary to feed the "wellfare" state, even if public health is terrible and the only part of public education that works are the universities, that are actually used more by rich people (reverse Robin Hood strikes again).

On top of that, the tax system is overly complicated. A company does not have to pay a single tax or just a few. It's literally dozens or hundreds of small taxes, creating a massive bureaucracy. Big companies deal with it, since they have an entire department to do the accountant job. But small entrepreneurs frequently suffer a lot and end up going out of business. Stuff like the Individual Micro-entrepreneur and the National Simple program helped a lot, but we still can do much better.

Yep. Agree with everything you say. Maybe one day our leaders, or our people, will wake up. Probably not. I just gave up hope.