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In Search of Sustainable Swagger

By ROGER COHEN

Published: April 2, 2012

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RIO DE JANEIRO — I came to Brazil in the 1980s at a time of funny money. Inflation peaked at 6,821 percent in April 1990. Today it's a place of funny prices. An ordinary Chilean red may go for $100 and brand-name sneakers for $350. Paris and New York seem like a steal.

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The funny money was given many names — cruzeiro, cruzado, cruzado novo, cruzeiro real — in search of an elusive credibility. But Brazil had only one name: instability. Then came the introduction of the real in 1994, solid democratic institutions, monetary reform, privatizations, booming commodities, trade with China, massive oil discoveries — and pizza margarita at $45.

This boom-era Brazilian pizza makes me glum. A certain swagger is needed to bake and flog flat, round bread for that price — the very swagger gone from the West. We are living the great global inversion. The price tag screams: You're history, baby!

It can certainly seem that way. Citibank officers once viewed Brazil as a basket case: there's a story of tables turned. Brazilian capitalism has fared better than U.S. capitalism of late and a lot better than U.S. banks. Inequality, still marked, has declined here in recent years. Of all the fast-growing Brazilian commodities, confidence is the most conspicuous.

Let's deconstruct this Gucci of pizzas. After all, it sells. Behind the fabulously expensive dough, tomato and mozzarella lurks an overvalued Brazilian currency. Behind that stand interest rates high enough and a nation stable enough to attract global corporations and the world's super-rich to put their money here. Behind that investment choice lie American and European crises that have cheapened major currencies, in part through the Central Bank cash infusions known as quantitative easing.

In short, this is a bellwether pizza. There is more belief in Brazil than in the Europe of the compromised euro or the United States of a compromised financial industry. Bullish Brazil, with its offshore oil and onshore Olympics coming, offers a mirror image of a brittle West. Looking for the promise of the Americas? Come here.

The global agenda in 2012 has no more important focus than finding a balance between the extremes of developing-world optimism and developed-world moroseness. The post-9/11 wars are over or ending. They were not entirely lost but nor were they won.

The recent murderous rampage of Staff Sgt. Robert Bales — a U.S. infantryman in southern Afghanistan on his fourth deployment in those wars, plagued by financial problems, in danger of losing his home — summed up the frustrations of those conflicts. Bales lost it. Many have lost everything. After the wars and the trillions of dollars they have consumed comes the hard slog of overcoming debt and deficits and high unemployment and anemic growth and shaken self-esteem.

This digging-out from a time of injury cannot be anything other than a joint effort. Developing economies like China and Brazil will have to see their surpluses come down if the debilitating deficits of the West are to be addressed.

That overvalued real, which punishes manufacturers trying to export, is no better for Brazil in the long term than a euro lurching from one salvage operation to the next is for Europe. Brazil, China and all the emergent economies are not served by a U.S. and Europe seized by doubt and plagued by youth unemployment. The world is still looking for a sustainable path out of the meltdown of 2008. Papering-over, at moral cost, has averted the worst. It has not laid credible new economic foundations.

When an outgoing Goldman Sachs executive, Greg Smith, wrote recently in The New York Times that, "It makes me ill how callously people talk about ripping their clients off," his disgust with his company mirrored a widespread disquiet over the way big American financial institutions, bailed out by the taxpayer, walked away from the 2008 crisis without any serious reckoning.

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