Aug 28th 2012, 19:34 by H.J. | SÃO PAULO
TONY BLAIR and Bill Clinton were in São Paulo on August 28th, speaking at an event run by Itaú BBA, a Brazilian investment bank. Sharing the platform was Fernando Henrique Cardoso, whose two terms as Brazil's president, from 1995 to 2002, overlapped with both visitors' own periods in office. Ilan Goldfajn, the bank's chief economist, moderated a discussion that touched on foreign views of Brazil and Brazilian views of abroad—and what the developed world could learn about handling financial crises from a country that has suffered more than its fair share of them in the past, but is coming through the most recent one much better than most.
The euro and sovereign debt crises, said Mr Blair, had not created the need for reform in Europe's weak peripheral economies, merely exposed that need and made it more acute. Now, sadly, reforms that were neglected in the good times would have to be tackled during a crisis. Before becoming president, Mr Cardoso was Brazil's financial minister, and led the Real Plan which introduced a new currency, stabilised the economy and ended hyperinflation. That makes him a veteran of pushing through reforms during crises—and his take was interesting. "The political situation [in the run-up to the Real Plan] was chaos," he said. "Some people said it would be impossible, but my opinion was the opposite. When you don’t have order it is easier to do something, not harder. Europe is approaching a chaotic situation … when it will be easier to impose new rules."
Is the world suffering a "crisis of capitalism", Mr Goldfajn asked. "I hope not," replied Mr Clinton: "We’re all big free-market guys." But markets tend to contain within them a tendency to self-destruct, he said, and the proper role of government is to try to prevent this from happening. Mr Blair told of bumping into an old friend from university, a Trotyskyite ("mostly they became bankers, but this one really meant it"), who took the opportunity to gloat, saying: "I told you capitalism would fail." But the gains that Brazil has experienced in recent years came from opening up to global trade and sticking to economic orthodoxy, he pointed out.
The fashion these days, at least in Brazil, said Mr Cardoso, is to say that we need "more state", but this is not the right response to what was a failure of regulation. "We need more regulation, but we must not use the state as an instrument to stop innovation in the markets," he said. Later, asked to say how Brazil's current government looked from his perspective, he acknowledged it was getting many things right, but bemoaned its tendency to try to micromanage the private sector.
It must have been very sweet for Mr Cardoso to be praised for laying the groundwork for Brazil's recent reductions in inequality and poverty. Conquering hyperinflation was the first essential step towards getting Brazil growing and raising its poorest people's incomes, but his reforms were opposed at the time by both Luiz Inácio Lula da Silva and his Workers' Party (PT), and their benefits only really started to be felt by the population at large after he left office. But even if for what Mr Clinton called "obvious reasons" neither Lula nor Dilma Rousseff, Mr Cardoso's two PT successors as president, were particularly keen to say so, both continued along the economic lines he had mapped out, and Brazil has been the better for it.
Mr Clinton also mentioned by name Mr Cardoso's Bolsa Escolar programme, which gave poor families grants to keep their children in school. This was continued and greatly extended by Lula under a new name, Bolsa Família, and is now famous worldwide as a shining example of how to cut child poverty. It rankles with Mr Cardoso's fans that Lula—and his admirers abroad—rarely acknowledge its origins. Mr Cardoso is generally statesmanlike, but it sometimes slips that he finds it offensive the way he was airbrushed out of Brazilian history by Lula, who had been a co-traveller in the fight for democracy during the country’s military dictatorship, and a personal friend. (For more on Mr Cardoso's views on Brazil, Lula and the world, see The Economist's interview with him in January.)
Both Mr Blair and Mr Clinton finished with praise for the immense progress Brazil has made in the last two decades. Mr Blair told of his emotions on watching a documentary about Ayrton Senna, a much-loved Brazilian racing driver who was killed in a crash in 1994. It includes footage of reaction in the streets, with grieving Brazilians saying what a mess their country was and how it could do nothing right—but at least they could be proud of Ayrton Senna. Brazilians can think of plenty to be proud of today, said Mr Blair—and when speaking in Africa he sometimes tells his hosts about the Ayrton Senna documentary, concluding that if Brazil can come so far in such a short time, so can they. "The story of Brazil over the last 20 years is inspiring," he said. "If I had to bet on the fortunes of the big emerging markets," said Mr Clinton, "I would bet on Brazil first."
Photo credit: SM2 Fotografia
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