Institutional Reform: When Self-Regulation Fails
The Federal Reserve and Brazil's judiciary have contrasting approaches to reforming institutions. Kevin Warsh, at the helm of the Fed, has taken a deliberate approach by forming task forces comprising experts from outside the institution to examine sensitive aspects of monetary policy before implementing changes.
This methodical process aims to build consensus and legitimacy for the reforms. In contrast, Brazil's judiciary has been plagued by corruption and abuse of power, with judges and prosecutors receiving excessive compensation above the constitutional salary cap.
A study by sociologist Sérgio Guedes-Reis reveals that more than 90% of judges and prosecutors received payments above the cap in 2025. The total amount paid above the cap was R$24.3 billion, with the median judge earning 48 times the country's median income.
Guedes-Reis argues that this situation is not due to individual moral failure but rather a self-reinforcing equilibrium built on three mechanisms: favoring greater inequality, corporate coordination, and the unique institutional design of Brazil's judiciary, which allows judges to propose rules governing their own compensation and adjudicate disputes over those same rules.
The study proposes two-pronged strategy to break this equilibrium: adopting the U.S. model for salary caps and creating an independent external body with binding authority over judicial compensation.