Fim de milagres econômicos - o caso do Brasil

Emerging markets face a limit to investment-led growth

Michael Pettis

DANI RODRIK is right, at least for the next few decades. Every growth miracle in the past century, and there have been many, was investment-driven. In every case it ended in an unsustainable debt burden. Why? Probably because towards the end of the growth period, thanks to distortions in pricing signals and skewed incentives for the policymaking elite, both of which were a necessary part of the original mechanism for rapid investment growth, the investment became excessive and led to debt rising faster than debt-servicing capacity. The seeming success of the growth model made it difficult to eliminate these distortions, especially since the policymaking elite tended to benefit disproportionately from the growth.

In some cases domestic investment was funded externally, but as concern about over-investment grew, sudden stops in external financing led to debt crises and a near-permanent collapse in the investment-driven growth model. The classic case is the Brazilian growth miracle of the 1960s and 1970s.
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