An emigrant economist in the tropics: Nicholas Georgescu-Roegen on Brazilian inflation and development

Abstract

Nicholas Georgescu-Roegen was a ‘travelling economist’ in a double sense: after emigrating from Romania in the late 1940s, he became involved with the economic problems of the developing world through his engagement in Vanderbilt University’s Graduate Program in Economic Development. One of his missions brought him multiple times to Brazil between the mid-1960s and mid-1970s, leading to an article on the complicated dynamics between inflation and economic growth in developing countries – his sole incursion into the field of monetary economics. In this paper, we will set Georgescu-Roegen’s contribution against the background of the lively debates about inflation taking place in Brazil during the 1960s. Relatedly, we will show how he anticipated important aspects of later arguments about the perverse distributive effects of inflation. Finally, we will discuss why Georgescu-Roegen’s arguments had only limited influence, despite his prestige and connections within the Brazilian community of economists.

The Development of the Sawtooth Wages Model of Inflation

“…In retrospect, Georgescu-Roegen's contribution to the debates on inflation and income distribution seems more deserving of attention than the mild reactions it generated at the time (see Carvalho and Suprinyak 2022). His model clearly showed that, with wages tied down by the centralized adjustment formula, profits and rents were free to accrue most, if not all, real income growth that followed development.…”

“…The side effects of the troubled process of development in the region were deep distributional conflicts coupled with large exchange rate volatility under severe foreign currency constraints and widespread productive bottlenecks. In such an underdeveloped system with rampant institutional flaws in fiscal and monetary policies, sectoral pressures and supply shocks (such as sharp exchange rate devaluations) continuously pushed prices up, triggering the wage-price spiral (see Carvalho and Suprinyak 2022, pp. 564–567).…”

“…At the time, Georgescu-Roegen was a visiting scholar at the University of São Paulo (seeCarvalho and Suprinyak 2022). A version of the paper written in English was published in Economies et Societés (Cahiers de l'I.S.M.E.A.)…”