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Institutions, State Capacity and Economic Development - the Political Economy of Import Substitution Industrialisation in Brazil

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Institutions, State Capacity and Economic Development - the Political Economy of Import Substitution Industrialisation in Brazil CORE Metadata, citation and similar papers at core.ac.uk Provided by Fundação João Pinheiro Institutions, State Capacity and Economic Development - The Political Economy of Import Substitution Industrialisation in Brazil Alexandre Queiroz Guimarães Department of Politics University of Sheffield A Dissertation Submitted for the Degree of Doctor of Philosophy. February 2003 For my parents, Claudino and Ana Maria Pendant deux long mois, les consciences et les providences qui sont dans l’invisible avaient assisté à ceci: d’un côté les étendues, les vagues, les vents, les éclairs, les météores, de l’autre un homme; d’un côté la mer, de l’autre une âme; d’un côté l’infini, de l’autre un atome. Durante dois longos meses, as consciências e as providências que existem no invisível tinham assistido a isto: de um lado, a extensão, as vagas, os ventos, os relâmpagos, os meteoros, do outro lado, um homem; de um lado o mar, do outro uma alma; de um lado o infinito, do outro um átomo. Victor Hugo – Les Travaillers de La Mer i SUMMARY This thesis deals with the determinants and limits of the process of import substitution industrialisation which took place in Brazil from 1930 to 1980. A first important objective is to understand the direction given to the process of industrialisation and the consequent pattern of policy making. Secondly, the thesis asks why the Brazilian state, a key agent in the process of industrialisation, was not able to adopt certain measures and to go in certain directions which could have produced a more solid and sustainable process of economic development. Key attention is given to the concepts of state capacity and the developmental state. The concern with state capacity justifies a careful analysis of industrial policy, undertaken for the capital goods sector in the 1970s. In addition, the thesis is also centred on a comparative analysis. Through the experience of other countries, I intend to highlight the contribution of certain institutional factors to the path of economic development in Brazil. As a conclusion, the thesis shows how institutional factors, e.g. the result of peripheral international insertion and the organisation of social forces and of the state apparatus, constrained the capacity of the Brazilian state to replicate the results achieved by the developmental states in Japan and Korea. The study of the capital goods sector shows this in detail, emphasising the negative effects of divisions inside the state and the resistance of social groups on the coherence and the achievements of Brazilian industrial policy. An important conclusion is that the success of a substantial process of industrial transformation, which affects the interests of several economic groups, demands the construction of a strong coalition able to increase the government’s basis of support. This was an important deficiency of the military government, whose form of domination disregarded the relevance of such political mechanisms. ii ACKNOWLEDGMENTS My main debt in this thesis is to my supervisor, Andrew Gamble. He taught me a lot during our meetings in the four years that I had spent in England. He taught me how to think in scientific terms and how to organise research. He gave me access to the best literature and his comments were always very sharp and valuable, directing the research at crucial points. In addition, as a very good supervisor, he never gave me the ready solutions; he stimulated me to think and to achieve the relevant conclusions. Similarly, he kept me motivated and made me feel that my thesis was the most important thing in the world. And finally, he was very patient and careful in giving the support that I needed during my time in Sheffield. For all these reasons, I would like to thank destiny for giving me this opportunity. I am sure that the lessons that I learned from Andrew will be very important in my future career as a lecturer and researcher. My students will be very lucky if I manage to emulate any of his characteristics. I would also like to thank Sarah Cooke and Sylvia McColm for all their support and attention during my activities in PERC and in the Politics Department. Besides very good professionals, they were always very pleasant and helpful people. I owe a special debt to many people in Brazil who gave me important direction and orientation. I want to thank specially Bruno Wanderley Reis for his precious orientation in the first phases of this thesis. Similarly, I would like to thank Eli Diniz, Lúcia Klein, Fábio Erber, Sabino Fleury, Otávio Dulci, Carlos Lessa, Maria Lúcia Werneck Vianna and Sebastião Velasco Cruz, who were very helpful in different steps of the thesis. In addition, I want to express my gratitude to João Camilo Penna, João Paulo dos Reis Velloso, Marcos Vianna, José Lúcio Pádua Soares, Einar Koch, Thompson Motta, Aníbal Villela, Henrique Fonseca and others for the important interviews that they granted to me. In all the cases, they demonstrated very high disposition and interest to help. iii I want to thank my colleagues from the Politics department for all the support and friendship during my four years in Sheffield. I would like to thank specially James Venables, Teruhisa Tse, Tony Heron, Ben Clift, Ian Atkinson, George Christos, Micky Kerr, Andrew Smith, Simon Hodgson, Rajiv Prabhakar and Bev Bishop. I owe a special debt to Bev Bishop for very carefully reviewing the thesis. I would also like to thank the members of the Sheffield Brazilian Society who contributed to make my period in Sheffield much more pleasant. I will always be in debt to the society, since I was never a very active member. I want to thank the people in Brazil who made possible this very valuable experience in England. I want to thank my Professors and friends, Antonio Maria da Silveira and Maria Regina Nabuco, for all their support and stimulus. I also want to thank the CAPES foundation for the financial support; I hope to show, in the next years, that they made a good investment. I would like to thank the Fundação João Pinheiro and the Pontifície Universidade Católica for giving me a leave during those years. I want to express my gratitude to the direction of the Fundação João Pinheiro for being very flexible during the fifth and last year of the PHD. In addition, I am in debt to the people of the FJP library, who gave me precious support during these five years. And last but not least, I would like to thank the Overseas Research Students Award Scheme for sponsoring part of my tuition fees. Finally, I owe a special debt to my friends in Brazil who, despite the distance, were very present during those four years and were very important to reducing, in part, my solitude. I need to thank specially my parents Claudino and Ana, my sister Maria Flávia, my brothers Artur, Cristiano, Gustavo and Henrique and my respective brother and sisters in law. I have also a special debt to my friend Moisés Machado, very present during all this time. I would also like to thank very specially Cláudio Burian, Chico Gaetani, Cristiano Fantini, Cândido Fernandes, Johann Nagl, Daniela, Fabiana Beregeno, Kelly Chung, Paula Macedo, John Shearon, Francisco Baracho, iv Paulo Gustavo, Eduardo Lisboa, Maria Carmen, Raimundo and Lízia and other good friends. I am sure I have failed to do justice to them all. v SUMMARY I ACKNOWLEDGMENTS II ABBREVIATIONS X CHAPTER 1. INTRODUCTION 1 State Capacity and Developmental States 4 Detailing the objectives 5 CHAPTER 2 - INSTITUTIONS AND ECONOMIC DEVELOPMENT - THE DETERMINANTS OF STATE CAPACITY 14 2.1. The Historical Institutionalist Approach – institutions, policy making and the trajectories of economic development 14 2.2. The Determinants of State Capacity. 25 Autonomy 26 Coherent bureaucracies 29 Embedded autonomy. 32 State-Business relationships and the importance of business associations 35 Instruments 38 The power of the developmental agency 40 Capacity to monitor the enterprises 41 Reducing risks 43 Imposition X collaboration 43 Politics and legitimacy 44 Final remarks 49 2.3 Further qualifications: the limits of the concept of developmental state and difficulties inherent to state intervention in the economy 51 Difficulties inherent to state intervention 54 CHAPTER 3. STATE - SOCIETY RELATIONS AND ECONOMIC DEVELOPMENT - FROM THE NINETEENTH CENTURY TO THE REVOLUTION OF 1930 57 3.1. Introduction 57 3.2. The state, the landowners and economic development in the nineteenth century 58 vi Introduction 58 Decentralisation, centralisation and the organisation of the Brazilian state in the nineteenth century 59 Economic stagnation and the limits of state intervention 64 The political elite and the autonomy of the state in the nineteenth century 68 3.3. State-society relations during the First Republic 75 Federalism and the republic of the oligarchies 75 Economic policy 78 Sources of opposition to the regime and the Revolution of 1930 81 3.4. Conclusion 89 CHAPTER 4. THE FIRST VARGAS GOVERNMENT (1930 – 1945) AND THE CONSTRUCTION OF THE DEVELOPMENTALIST STATE IN BRAZIL 92 4.1. Introduction 92 4.2. The autonomy of the political elite and the emergence of a new state. 94 The autonomy of the state 94 The emergence of a new state 96 4.3. Economic policy: industrialisation as the project of development 102 4.4. The adoption of a corporatist pattern and its impacts 106 4.5 Ideology and political culture 110 4.6. Obstacles to co-ordination and limits to a coherent state action 113 4.7. The autonomy of the political elite and the influence of the social groups 117 4.8. Conclusion – the emergence of a new state 121 CHAPTER 5. INSTITUTIONS, STATE CAPACITY AND ECONOMIC POLICY IN THE PERIOD 1946-1960 123 5.1.
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