The Law of Unintended Consequences
All of us had already heard about the Murphy’s Law, the one that says that anything that can go wrong, will. What few people know is that Murphy’s Law is part of the Law of Unintended Consequences.
What does this Law say? It holds that “almost all human actions have at least one unintended consequence”. In other words, it states that each cause has more than one consequence, including unexpected results.
This Law came to my mind when I read the recent news, in particular two reports. The first, published last week, had the quarterly results announced by several Brazilian banks. Banks such as Bradesco and Itaú reported profits over 700 million dollars, while Banco do Brasil recorded a net profit of 1 billion dollars. One billion dollars! US$ 1,000,000,000.00.
These are astonishing results, as they refer to profit, not revenue, to one quarter and not the whole year, and are expressed in American dollars, not Brazilian reais. Besides that, we are talking about Brazilian banks and not Swiss.
The second report, published this week, described the serious events in São Paulo, where gangs decided to rebel against the state government’s decision to relocate some of the jailed gang leaders. After many days of a war-like situation, there was a balance of over one hundred deaths, a frightened population, and the confirmation, once more, of the total lack of readiness of the public safety system.
What does the Law of Unintended Consequences have to do with these two reports, apparently unrelated? In my opinion, everything. To prove my thesis, lets travel through time.
During the military dictatorship years, the government invested significantly on the security system, while at the same time it created the foundation of the modern Brazilian bank system.
The security area was obviously a priority for a regime that seized the power and kept it based on force. It grew and it was equipped, but with a distorted focus given the fact that its main mission was to protect the regime, instead of the population. The intelligence activities, crucial to prevent and fight crime, aimed at the identification of “communists” and did not notice the gradual evolution of the crime. The organized crime, until then, had as main leaders the “jogo do bicho” (a sort of illegal lottery) bookmakers, but new characters emerged as the drug trafficking grew and structured itself.
With the end of the military dictatorship there as an outburst of freedom and the newly elected officials wrongly took crime fighting for civil liberties violation. Demagogic political platforms avoided the establishment of a law abiding environment at the slums and poor neighborhoods, creating the conditions that led to drug dealers acting as government in those areas.
In parallel, the bank system grew significantly during the military government, as the country’s development model was based on large investments in infrastructure works funded by loans, assuming that at some point they would generate revenue and pay off. However, the corruption and bad management caused the expenses to largely offset the revenues, leading to successive increase of the internal and external debt. Besides that, during the ‘80s and ‘90s, due to the several international market crisis, the money that until then was cheap became more expensive and hard to get, forcing the government to roll the debts in conditions progressively less advantageous.
The Brazilian banks, brokers or direct suppliers of the product the government needed the most – the money, went through a surge of growth, fed by a policy of extremely high interest rates.
The government, as the largest borrower, became the main client of the banks, that no longer performed their original role as business fomenters. So, the non-productive market (capital funding capital) strangled the productive market (capital funding production), causing inflation, recession, unemployment, impoverishment, and a total lack of investment capacity by the government.
Even though some progress has been made in the last few years in the control of the public finances, with the reduction of the inflation, improvement of the national debt profile and more transparency in the use of public money, there is still a lot yet to be done. The social side, totally relegated in the last decades, continues to need serious long term initiatives, without demagogic or politic objectives.
At this point, the two disconnected facts combine: on one side, rich banks flourishing in a broken country unable to provide to its citizens minimum conditions of work, health, education and security. On the other side, gags well armed, firmly established, with effective control of whole areas within the cities, taking advantage of people’s misery and of the state’s absence.
Therefore, what happened in São Paulo should not be a surprise. I am afraid this is just the beginning of a clash between the organized crime and the (not so) organized society. For many years Brazil closed its eyes or looked the other way to avoid seeing the growth of the slums, the impoverishment of the population, the total inversion of values that should be the basis of a civilized society. Now, the reality bursts in front of us and we can’t pretend we are not seeing it.
Unfortunately, there is no simple short term solution. Serious and effective crime repression should be performed immediately, with the local, state and federal governments putting aside partisanship and prioritizing the well being of the population. Apparently, this opportunity was wasted in São Paulo, where allegedly it was chosen to negotiate with the gangsters instead of doing so within the various government layers.
At medium and long term, the solutions are well known and are not adopted just for the lack of political will and citizenship. They are solutions that although would not give votes in November, they could change the country. Basic solutions such as turn the state more efficient and less corrupt. Implement professional management practices, invest in education, health and security, and stimulate the labor, and production, instead of the unproductive capital.
It is not an easy task, but it is not impossible. There are plenty of examples of countries that were in a worse situation than Brazil’s and today they play at the international scene as competitive countries and generate opportunities to improve the well being of their peoples.
Brazil has the resources, talent, and a orderly and a hard working population. It only lacks the leadership. Until it rises, we will continue to see the country’s laws being broken and the Law of Unintended Consequences increasingly in evidence.
What does this Law say? It holds that “almost all human actions have at least one unintended consequence”. In other words, it states that each cause has more than one consequence, including unexpected results.
This Law came to my mind when I read the recent news, in particular two reports. The first, published last week, had the quarterly results announced by several Brazilian banks. Banks such as Bradesco and Itaú reported profits over 700 million dollars, while Banco do Brasil recorded a net profit of 1 billion dollars. One billion dollars! US$ 1,000,000,000.00.
These are astonishing results, as they refer to profit, not revenue, to one quarter and not the whole year, and are expressed in American dollars, not Brazilian reais. Besides that, we are talking about Brazilian banks and not Swiss.
The second report, published this week, described the serious events in São Paulo, where gangs decided to rebel against the state government’s decision to relocate some of the jailed gang leaders. After many days of a war-like situation, there was a balance of over one hundred deaths, a frightened population, and the confirmation, once more, of the total lack of readiness of the public safety system.
What does the Law of Unintended Consequences have to do with these two reports, apparently unrelated? In my opinion, everything. To prove my thesis, lets travel through time.
During the military dictatorship years, the government invested significantly on the security system, while at the same time it created the foundation of the modern Brazilian bank system.
The security area was obviously a priority for a regime that seized the power and kept it based on force. It grew and it was equipped, but with a distorted focus given the fact that its main mission was to protect the regime, instead of the population. The intelligence activities, crucial to prevent and fight crime, aimed at the identification of “communists” and did not notice the gradual evolution of the crime. The organized crime, until then, had as main leaders the “jogo do bicho” (a sort of illegal lottery) bookmakers, but new characters emerged as the drug trafficking grew and structured itself.
With the end of the military dictatorship there as an outburst of freedom and the newly elected officials wrongly took crime fighting for civil liberties violation. Demagogic political platforms avoided the establishment of a law abiding environment at the slums and poor neighborhoods, creating the conditions that led to drug dealers acting as government in those areas.
In parallel, the bank system grew significantly during the military government, as the country’s development model was based on large investments in infrastructure works funded by loans, assuming that at some point they would generate revenue and pay off. However, the corruption and bad management caused the expenses to largely offset the revenues, leading to successive increase of the internal and external debt. Besides that, during the ‘80s and ‘90s, due to the several international market crisis, the money that until then was cheap became more expensive and hard to get, forcing the government to roll the debts in conditions progressively less advantageous.
The Brazilian banks, brokers or direct suppliers of the product the government needed the most – the money, went through a surge of growth, fed by a policy of extremely high interest rates.
The government, as the largest borrower, became the main client of the banks, that no longer performed their original role as business fomenters. So, the non-productive market (capital funding capital) strangled the productive market (capital funding production), causing inflation, recession, unemployment, impoverishment, and a total lack of investment capacity by the government.
Even though some progress has been made in the last few years in the control of the public finances, with the reduction of the inflation, improvement of the national debt profile and more transparency in the use of public money, there is still a lot yet to be done. The social side, totally relegated in the last decades, continues to need serious long term initiatives, without demagogic or politic objectives.
At this point, the two disconnected facts combine: on one side, rich banks flourishing in a broken country unable to provide to its citizens minimum conditions of work, health, education and security. On the other side, gags well armed, firmly established, with effective control of whole areas within the cities, taking advantage of people’s misery and of the state’s absence.
Therefore, what happened in São Paulo should not be a surprise. I am afraid this is just the beginning of a clash between the organized crime and the (not so) organized society. For many years Brazil closed its eyes or looked the other way to avoid seeing the growth of the slums, the impoverishment of the population, the total inversion of values that should be the basis of a civilized society. Now, the reality bursts in front of us and we can’t pretend we are not seeing it.
Unfortunately, there is no simple short term solution. Serious and effective crime repression should be performed immediately, with the local, state and federal governments putting aside partisanship and prioritizing the well being of the population. Apparently, this opportunity was wasted in São Paulo, where allegedly it was chosen to negotiate with the gangsters instead of doing so within the various government layers.
At medium and long term, the solutions are well known and are not adopted just for the lack of political will and citizenship. They are solutions that although would not give votes in November, they could change the country. Basic solutions such as turn the state more efficient and less corrupt. Implement professional management practices, invest in education, health and security, and stimulate the labor, and production, instead of the unproductive capital.
It is not an easy task, but it is not impossible. There are plenty of examples of countries that were in a worse situation than Brazil’s and today they play at the international scene as competitive countries and generate opportunities to improve the well being of their peoples.
Brazil has the resources, talent, and a orderly and a hard working population. It only lacks the leadership. Until it rises, we will continue to see the country’s laws being broken and the Law of Unintended Consequences increasingly in evidence.
posted by Marco Malka | 3:38 PM
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