Brazilian Monetary Paths — Marcos Manoel Silva Severiano”s (URCA) review of “A Moeda e a Lei: Uma história monetária brasileira, 1933–2013”, by Gustavo Franco

Gustavo Franco | Photo: Fábio Motta/Estadão

Abstract: Currency and Law: A Brazilian monetary history, 1933–2013, is the newest book by Gustavo Franco. It is a writing of the Brazilian economic past after the implementation of fiat currency in the country, which experienced the late genesis of the Central Bank and went through eight financial standards.

Keywords: Economic History, Coin, Brazilian economy, Inflation.


Currency and Law: A Brazilian monetary history, 1933–2013, by economist Gustavo Henrique de Barroso Franco, received its second edition in 2018, just one year after the original publication, by publisher Zahar. In its 848 pages, the author builds a dialogue between History, Law and Economy, rich in documentation, to try to present his thesis that Brazil has presented, throughout its economic history, moments of hyperinflation, as well as to highlight the importance of institutions such as the Central Bank in a country with a fiat currency, when it loses its direct link with something material, be it gold, silver or any metal, and begins to have its value only through the relationship of trust established in social relations, based on law . The author makes it clear, from the preface, that the legislation will serve as a guideline for a study on the Brazilian economy, covering eight decades and eight monetary standards adopted in Brazil during the period studied.

Gustavo Franco is an economist by training, with a master’s degree from PUC-Rio and a doctorate from Harvard University, holding the position of professor in the economics department at PUC-Rio since 1986, an institution notably recognized for its professors linked to the mainstream of Economic Science. As an economist, the author was part of the team that developed the Real Plan, responsible for creating the current Brazilian currency, and served as president of the Central Bank of Brazil in 1995, during the government of Fernando Henrique Cardoso. As a writer, Gustavo Franco has more than ten published works, having won the BNDES award in 1982, with his master’s thesis, entitled Monetary Reform and Instability During the Republican Transition¸ where he studies the encilhamento crisis in the Brazilian Old Republic, and the 1987 Haralambros Simionides Prize for his doctoral thesis Aspects of the Economics of Hyperinflations: Theoretical Issues and Historical Studies of Four European Hyperinflations of the 1920s, defended at Harvard, where he studies European monetary crises after the First World War. Gustavo Franco was also awarded other awards in the area of economics and worked in the founding of the Partido Novo in Brazil. Currency and Law: A Brazilian Monetary History, 1933–2013 is his most recent work and compiles many of the learnings and theories developed in his professional career and in his previous works.

In A Moeda e a Lei, Gustavo Franco develops the narrative, over nine chapters. In the first two, the author presents a summary of the history of fiat currency in Brazil. Starting with the first actions taken during the Vargas government to build alternatives to the crisis caused by the crash of the New York Stock Exchange in 1929, highlighting the promise of a stronger currency capable of dealing with market flows, until the stabilization promoted for the creation of the Real Plan, of which the author himself helped in the construction, and the challenges for the Brazilian economic future. The conceptual bases to be worked on throughout the book are also highlighted, introducing the reader to economic jargons and the approaches adopted for them. In the first chapter, the author also outlines his plan for the book, guiding the reader about the discussions that will be listed, allowing us to organize the reflection from there on three axes: Theories about currency (developed in chapters 3 to 4) , The role of the Central Bank in exchange rate policies (covered in chapters 5 and 6) and the economic plans of governments after redemocratization (in chapters 7 and 8), with final considerations on the topic in the last chapter, but leaving Of course, the discussion does not end with the temporality adopted.

In these first two chapters, the author superlates the moments of crisis in the Brazilian economy, trying to highlight to the reader the concept of hyperinflation he adopted, since according to the official concept, Brazil would not have reached the levels necessary for this framework. The author uses several sources, such as central bank reports, analysis of exchange rates and legislation adopted throughout the period to support the narrative he outlines throughout the work. Concepts such as nominalism and deindexation are broken down to make it easier for the reader who is not well versed in Economics terms, but even so, requiring them to pay close attention to the data, statistics and projections presented, so that they do not get lost in the narrative paths covered.

In chapters three and four, the author traces a temporal journey through Brazilian currencies, going through the eight currencies adopted by the state (Cruzeiro, Cruzeiro Novo, Cruzeiro, Cruzado, Cruzado Novo, Cruzeiro, Cruzeiro Real and Real) presenting the economic policies developed in the hope to “save” the country from crises or revitalize social life through the injection of money. From Vargas to the PT governments in the 21st century, the author analyzes that the currency had a much stronger political impact than a real economic reflection, going through periods of great State control over fiscal issues, such as in the Vargas Era, slipping into expansion of external and internal debts, in favor of a developmental project without economic awareness. This analysis favors Gustavo Franco’s speech, to exalt the construction of the economic plan of which he was part: the Real Plan. At this point, a highlight for his contributions to the “victory” of this currency in controlling the social problems generated by price rises, international charges and governance difficulties, but the author does not shy away from criticizing the paths that this same currency would take after its leaving the post of national economic manager, valuing past and present political interference in the economy as points causing a “disastrous” situation for the economy.

In chapters five and six of Currency and Law, Gustavo Franco takes us to know the history of the Central Bank of Brazil, a body created in 1964 to be the country’s main monetary authority. According to the author, this federal agency, despite being autonomous, has always been equipped by government officials in favor of populist actions. Born late, starting to operate in 1965, during the Military Dictatorship, it ended up serving to promote a false idea of an “economic miracle” at the expense of increasing national debts. Its duties in relation to the issuance of currency, exchange management and execution of monetary policies to control interest rates, which should aim to stimulate economic development and guarantee the supervision of other national banking entities, private and public, were distorted in anticipation of a disastrous situation that would result in the inflationary crises experienced in the 1980s/90s, where the lack of control and existing debts began to affect the country’s citizens more incisively.

Chapters seven and eight are intended for the author’s main purposes in the construction of this work. Presenting the failures of the measures adopted after redemocratization with plans such as Bresser (1987), Verão (1989), Collor 1 (1990) and Collor 2 (1991), trying to correct the existing devaluation with actions that impacted savings balances. Inflation control became complicated and generated disastrous measures on the part of the State, culminating in an increase in inflation to rates above 50% per month. Privatizations and reduction of the public sector were actions adopted to contain, according to the author, in a hasty way the financial chaos that the country found itself in. At this point, the author returns to the idea of Hyperinflation existing in Brazil, comparing the peaks existing in the country with specific cases in Europe (Germany, Hungary) and Latin America (Argentina).

This entire scenario serves the author to exalt his contribution to the national economic recovery with the Real plan, inspired by the achievements of Hjalmar Schacht during the Weimar government in Germany.

Hjalmar Schacht | Image: Central BankingLibrary of Congress

In his conclusion, in chapter nine, the author proposes a resumption of the Central Bank’s autonomy and a more balanced economic policy, with tax control and better monitoring of social policies, for a resumption of the economic issue. Everything is superlative in this route constructed by the author, with emphasis on the economic dramas that guarantee an exaltation of the author’s own participation in the conception of an economic solution for the country portrayed in the Real plan. Brazil, for Gustavo Franco, suffers from this specter of politics hovering in the economic fields, always waiting for salvation from a brilliant idea or a savior (like the author himself).

The book exposes rigorous research work on the Brazilian economy, carried out throughout his career as an economist and professor and the result of the course taught by the author to students at PUC-Rio over several years. With a language full of economic and legal jargon, readers less familiar with the medium may feel scared and deprived of the understandings that the author tries to achieve. The chapters on the genesis of the Central Bank and its development are able to reach readers more familiar with the historical aspects, being able to perceive in them the political-economic relations, which the author tries to bring throughout the book, more easily. The parts about the Real plan make it clear how much Gustavo Franco’s involvement in the project’s conception distills personal feelings, even if subtly, creating more subjective heroes and villains.

The tour through the history of Brazilian currency, following the paths of the law, outlined by Gustavo Franco, also allows access to a wide range of references for reflections on the topic, mostly public. The variety of sources used increases the credibility of the work, but the fact that the author is part of some episodes worked means that some documents used for his analyzes are the result of access guaranteed by the prerogatives of the positions held. Despite this, the work stands out for its theoretical foundation on the topic, trying, even if not always successful, to bring the lay reader closer to understanding the political impacts of an idea of currency based on the trust that exists between citizens and the State. Currency and Law deserves a thorough reading by those interested in knowing more about Brazilian economic history, especially the relationship established between Economy and the spheres of power when currency loses its link with the material and starts to rely on the immaterial of social relations, something so complex in a country like Brazil where these relations do not hide their interests.

Summary of  A Moeda e a Lei: Uma história monetária brasileira, 1933–2013

  • 1. Moeda fiduciária no Brasil: um sumário de oitenta anos, 1933–2013
  • 2. As metamorfoses da moeda: nominalismo, desindexação e dívida
  • 3. A moeda brasileira e a dos outros: a era dos controles, 1933–1983
  • 4. A moeda brasileira e a dos outros: a liberalização e seus descontentes, 1983–2013
  • 5. A gênese tardia do banco central: antecedentes, projetos e criação
  • 6. O Banco Central desfigurado: anatomia do desastre, 1964–1993
  • 7. Planos heterodoxos, suas ilusões e inovações
  • 8. O Plano Real e a reconstrução da moeda
  • 9. Balanço e perspectivas do aperfeiçoamento institucional da moeda
  • Lista de siglas úteis
  • Notas
  • Referências bibliográficas
  • índice Onomástico

Reviewer

Marcos Manoel Silva Severiano has a degree in History (URCA), a bachelor’s degree in Psychology (UniLeão), with a specialization in School Management (Faculdade Descomplica) and Higher Education Teaching (UniLeão), and a master’s degree in History from ProfHistória (URCA). He develops activities in the areas of education, history and psychology, working with school management, pedagogical direction and pedagogical coordination, in addition to being a high school teacher in the state and private schools in the State of Ceará. He is also a digital content creator through the Paradigmata Channel on YouTube and Spotify. Redes sociais: marcosrua47 ID Lattes: http://lattes.cnpq.br/5429477567940296. ID ORCID: https://orcid.org/0009-0009-0876-624X. Email: [email protected].


To cite this review

FRANCO, Gustavo H. de B. A moeda e a lei: uma história monetária brasileira (1933-2013). 2.edição. Rio de Janeiro: Zahar, 2018. 848p. Rewiew by: SEVERIANO, Marcos Manoel Silva. Percursos Monetários Brasileiros. Crítica Historiográfica. Natal, v.3, n.12, july./aug., 2023. Available at <https://www.criticahistoriografica.com.br/en/brazilian-monetary-paths-marcos-manoel-silva-severianos-urca-review-of-a-moeda-e-a-lei-uma-historia-monetaria-brasileira-1933-2013-by-gustavo-franco/>


© – Authors who publish in Historiographical Criticism agree to the distribution, remixing, adaptation and creation of their texts, even for commercial purposes, provided that due credit is guaranteed for the original creations. (CC BY-SA).

 

Crítica Historiográfica. Natal, v.3, n. 12, july./aug., 2023 | ISSN 2764-2666

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Brazilian Monetary Paths — Marcos Manoel Silva Severiano”s (URCA) review of “A Moeda e a Lei: Uma história monetária brasileira, 1933–2013”, by Gustavo Franco

Gustavo Franco | Photo: Fábio Motta/Estadão

Abstract: Currency and Law: A Brazilian monetary history, 1933–2013, is the newest book by Gustavo Franco. It is a writing of the Brazilian economic past after the implementation of fiat currency in the country, which experienced the late genesis of the Central Bank and went through eight financial standards.

Keywords: Economic History, Coin, Brazilian economy, Inflation.


Currency and Law: A Brazilian monetary history, 1933–2013, by economist Gustavo Henrique de Barroso Franco, received its second edition in 2018, just one year after the original publication, by publisher Zahar. In its 848 pages, the author builds a dialogue between History, Law and Economy, rich in documentation, to try to present his thesis that Brazil has presented, throughout its economic history, moments of hyperinflation, as well as to highlight the importance of institutions such as the Central Bank in a country with a fiat currency, when it loses its direct link with something material, be it gold, silver or any metal, and begins to have its value only through the relationship of trust established in social relations, based on law . The author makes it clear, from the preface, that the legislation will serve as a guideline for a study on the Brazilian economy, covering eight decades and eight monetary standards adopted in Brazil during the period studied.

Gustavo Franco is an economist by training, with a master’s degree from PUC-Rio and a doctorate from Harvard University, holding the position of professor in the economics department at PUC-Rio since 1986, an institution notably recognized for its professors linked to the mainstream of Economic Science. As an economist, the author was part of the team that developed the Real Plan, responsible for creating the current Brazilian currency, and served as president of the Central Bank of Brazil in 1995, during the government of Fernando Henrique Cardoso. As a writer, Gustavo Franco has more than ten published works, having won the BNDES award in 1982, with his master’s thesis, entitled Monetary Reform and Instability During the Republican Transition¸ where he studies the encilhamento crisis in the Brazilian Old Republic, and the 1987 Haralambros Simionides Prize for his doctoral thesis Aspects of the Economics of Hyperinflations: Theoretical Issues and Historical Studies of Four European Hyperinflations of the 1920s, defended at Harvard, where he studies European monetary crises after the First World War. Gustavo Franco was also awarded other awards in the area of economics and worked in the founding of the Partido Novo in Brazil. Currency and Law: A Brazilian Monetary History, 1933–2013 is his most recent work and compiles many of the learnings and theories developed in his professional career and in his previous works.

In A Moeda e a Lei, Gustavo Franco develops the narrative, over nine chapters. In the first two, the author presents a summary of the history of fiat currency in Brazil. Starting with the first actions taken during the Vargas government to build alternatives to the crisis caused by the crash of the New York Stock Exchange in 1929, highlighting the promise of a stronger currency capable of dealing with market flows, until the stabilization promoted for the creation of the Real Plan, of which the author himself helped in the construction, and the challenges for the Brazilian economic future. The conceptual bases to be worked on throughout the book are also highlighted, introducing the reader to economic jargons and the approaches adopted for them. In the first chapter, the author also outlines his plan for the book, guiding the reader about the discussions that will be listed, allowing us to organize the reflection from there on three axes: Theories about currency (developed in chapters 3 to 4) , The role of the Central Bank in exchange rate policies (covered in chapters 5 and 6) and the economic plans of governments after redemocratization (in chapters 7 and 8), with final considerations on the topic in the last chapter, but leaving Of course, the discussion does not end with the temporality adopted.

In these first two chapters, the author superlates the moments of crisis in the Brazilian economy, trying to highlight to the reader the concept of hyperinflation he adopted, since according to the official concept, Brazil would not have reached the levels necessary for this framework. The author uses several sources, such as central bank reports, analysis of exchange rates and legislation adopted throughout the period to support the narrative he outlines throughout the work. Concepts such as nominalism and deindexation are broken down to make it easier for the reader who is not well versed in Economics terms, but even so, requiring them to pay close attention to the data, statistics and projections presented, so that they do not get lost in the narrative paths covered.

In chapters three and four, the author traces a temporal journey through Brazilian currencies, going through the eight currencies adopted by the state (Cruzeiro, Cruzeiro Novo, Cruzeiro, Cruzado, Cruzado Novo, Cruzeiro, Cruzeiro Real and Real) presenting the economic policies developed in the hope to “save” the country from crises or revitalize social life through the injection of money. From Vargas to the PT governments in the 21st century, the author analyzes that the currency had a much stronger political impact than a real economic reflection, going through periods of great State control over fiscal issues, such as in the Vargas Era, slipping into expansion of external and internal debts, in favor of a developmental project without economic awareness. This analysis favors Gustavo Franco’s speech, to exalt the construction of the economic plan of which he was part: the Real Plan. At this point, a highlight for his contributions to the “victory” of this currency in controlling the social problems generated by price rises, international charges and governance difficulties, but the author does not shy away from criticizing the paths that this same currency would take after its leaving the post of national economic manager, valuing past and present political interference in the economy as points causing a “disastrous” situation for the economy.

In chapters five and six of Currency and Law, Gustavo Franco takes us to know the history of the Central Bank of Brazil, a body created in 1964 to be the country’s main monetary authority. According to the author, this federal agency, despite being autonomous, has always been equipped by government officials in favor of populist actions. Born late, starting to operate in 1965, during the Military Dictatorship, it ended up serving to promote a false idea of an “economic miracle” at the expense of increasing national debts. Its duties in relation to the issuance of currency, exchange management and execution of monetary policies to control interest rates, which should aim to stimulate economic development and guarantee the supervision of other national banking entities, private and public, were distorted in anticipation of a disastrous situation that would result in the inflationary crises experienced in the 1980s/90s, where the lack of control and existing debts began to affect the country’s citizens more incisively.

Chapters seven and eight are intended for the author’s main purposes in the construction of this work. Presenting the failures of the measures adopted after redemocratization with plans such as Bresser (1987), Verão (1989), Collor 1 (1990) and Collor 2 (1991), trying to correct the existing devaluation with actions that impacted savings balances. Inflation control became complicated and generated disastrous measures on the part of the State, culminating in an increase in inflation to rates above 50% per month. Privatizations and reduction of the public sector were actions adopted to contain, according to the author, in a hasty way the financial chaos that the country found itself in. At this point, the author returns to the idea of Hyperinflation existing in Brazil, comparing the peaks existing in the country with specific cases in Europe (Germany, Hungary) and Latin America (Argentina).

This entire scenario serves the author to exalt his contribution to the national economic recovery with the Real plan, inspired by the achievements of Hjalmar Schacht during the Weimar government in Germany.

Hjalmar Schacht | Image: Central BankingLibrary of Congress

In his conclusion, in chapter nine, the author proposes a resumption of the Central Bank’s autonomy and a more balanced economic policy, with tax control and better monitoring of social policies, for a resumption of the economic issue. Everything is superlative in this route constructed by the author, with emphasis on the economic dramas that guarantee an exaltation of the author’s own participation in the conception of an economic solution for the country portrayed in the Real plan. Brazil, for Gustavo Franco, suffers from this specter of politics hovering in the economic fields, always waiting for salvation from a brilliant idea or a savior (like the author himself).

The book exposes rigorous research work on the Brazilian economy, carried out throughout his career as an economist and professor and the result of the course taught by the author to students at PUC-Rio over several years. With a language full of economic and legal jargon, readers less familiar with the medium may feel scared and deprived of the understandings that the author tries to achieve. The chapters on the genesis of the Central Bank and its development are able to reach readers more familiar with the historical aspects, being able to perceive in them the political-economic relations, which the author tries to bring throughout the book, more easily. The parts about the Real plan make it clear how much Gustavo Franco’s involvement in the project’s conception distills personal feelings, even if subtly, creating more subjective heroes and villains.

The tour through the history of Brazilian currency, following the paths of the law, outlined by Gustavo Franco, also allows access to a wide range of references for reflections on the topic, mostly public. The variety of sources used increases the credibility of the work, but the fact that the author is part of some episodes worked means that some documents used for his analyzes are the result of access guaranteed by the prerogatives of the positions held. Despite this, the work stands out for its theoretical foundation on the topic, trying, even if not always successful, to bring the lay reader closer to understanding the political impacts of an idea of currency based on the trust that exists between citizens and the State. Currency and Law deserves a thorough reading by those interested in knowing more about Brazilian economic history, especially the relationship established between Economy and the spheres of power when currency loses its link with the material and starts to rely on the immaterial of social relations, something so complex in a country like Brazil where these relations do not hide their interests.

Summary of  A Moeda e a Lei: Uma história monetária brasileira, 1933–2013

  • 1. Moeda fiduciária no Brasil: um sumário de oitenta anos, 1933–2013
  • 2. As metamorfoses da moeda: nominalismo, desindexação e dívida
  • 3. A moeda brasileira e a dos outros: a era dos controles, 1933–1983
  • 4. A moeda brasileira e a dos outros: a liberalização e seus descontentes, 1983–2013
  • 5. A gênese tardia do banco central: antecedentes, projetos e criação
  • 6. O Banco Central desfigurado: anatomia do desastre, 1964–1993
  • 7. Planos heterodoxos, suas ilusões e inovações
  • 8. O Plano Real e a reconstrução da moeda
  • 9. Balanço e perspectivas do aperfeiçoamento institucional da moeda
  • Lista de siglas úteis
  • Notas
  • Referências bibliográficas
  • índice Onomástico

Reviewer

Marcos Manoel Silva Severiano has a degree in History (URCA), a bachelor’s degree in Psychology (UniLeão), with a specialization in School Management (Faculdade Descomplica) and Higher Education Teaching (UniLeão), and a master’s degree in History from ProfHistória (URCA). He develops activities in the areas of education, history and psychology, working with school management, pedagogical direction and pedagogical coordination, in addition to being a high school teacher in the state and private schools in the State of Ceará. He is also a digital content creator through the Paradigmata Channel on YouTube and Spotify. Redes sociais: marcosrua47 ID Lattes: http://lattes.cnpq.br/5429477567940296. ID ORCID: https://orcid.org/0009-0009-0876-624X. Email: [email protected].


To cite this review

FRANCO, Gustavo H. de B. A moeda e a lei: uma história monetária brasileira (1933-2013). 2.edição. Rio de Janeiro: Zahar, 2018. 848p. Rewiew by: SEVERIANO, Marcos Manoel Silva. Percursos Monetários Brasileiros. Crítica Historiográfica. Natal, v.3, n.12, july./aug., 2023. Available at <https://www.criticahistoriografica.com.br/en/brazilian-monetary-paths-marcos-manoel-silva-severianos-urca-review-of-a-moeda-e-a-lei-uma-historia-monetaria-brasileira-1933-2013-by-gustavo-franco/>


© – Authors who publish in Historiographical Criticism agree to the distribution, remixing, adaptation and creation of their texts, even for commercial purposes, provided that due credit is guaranteed for the original creations. (CC BY-SA).

 

Crítica Historiográfica. Natal, v.3, n. 12, july./aug., 2023 | ISSN 2764-2666

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