Economic and Political Development: A Theoretical Approach and a Brazilian Case Study [Reprint 2014 ed.] 9780674499126, 9780674499102

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Economic and Political Development

ECONOMIC & POLITICAL

DEVELOPMENT

A Theoretical Approach ό A Brazilian Case Study

HELIO JAGUARIBE Harvard University Press Cambridge, Massachusetts 1968

© Copyright 1968 by the President and Fellows of Harvard College All rights reserved Distributed in Great Britain by Oxford University Press, London Publication of this book has been aided by a translation grant from the Rockefeller Foundation Library of Congress Catalog Card Number 68-14260 Printed in the United States of America

To the memory of JORGE AHUMADA Master Social Scientist and Reformmonger

PREFACE

This book is an updated and revised translation of the first Brazilian edition published in 1962. The original comprised two parts, written as separate but interconnected studies: one, dealing with the problems involved in the deliberate promotion of national development and with a general theory of political models, written in 1960; the other, related to the former, analyzing the special case of Brazil, written in 1961. The present edition brings the book up to date and includes an analysis of the events which have occurred since the time it was first written up to the end of 1966. T h e obvious need to extend the description and analysis attempted in the original work, to bring in such relevant new facts as the Brazilian and Argentinian coups (of 1964 and 1966 respectively), the rise to power in Chile of the Demo-Christians (1964), the overthrow of the M N R in Bolivia (1964) and the beginnings in Peru, with Belaunde (1963), of an attempt (however cautious) to promote reform and development after decades of impasse and stagnation, called for a general revision of the text rather than a simple updating. The primary aim of this revision was to adjust the text to comprehend the broader conflicts and the more complex reality of Latin America in the mid-sixties. The opportunity was also used to make certain other adjustments. Political science, as a discipline, has made giant strides in the last few years in the direction of finally approaching a paradigmatic level comparable to the levels already reached by the more advanced social sciences. For me, it was particularly rewarding to see that some of my theoretical ventures in the fields of systems analysis and political development have been followed and confirmed by the mainstream

viii

Preface

of the discipline. On the other hand, it was obviously convenient to adjust the original vocabulary, when appropriate, to conform to the vocabulary which is gradually gaining the consensus of students in this field, except where different meanings were implied. Apart from these terminological adjustments, editorial changes have been made in many parts, either to clarify the text or to adapt certain theories or qualify facts in accordance with my present views. In the first part of the book, the section of Chapter 4 which deals with the nonviability of the small underdeveloped nations was rewritten for the sake of greater clarity; and the section of Chapter 5 dealing with the demonstration effect and the models for surmounting the social crisis was rewritten to conform to currently held views. Finally, Chapter 7 was completely rewritten to incorporate the new events already mentioned, and to permit of a clearer comparison between events in the rest of Latin America and those in Brazil, analyzed in detail in the second part of the book. The unity of the book as a whole and the relation between its two parts have thus been enhanced. Changes in the second part of the book followed the same lines. The original Chapter 4 has been omitted, and the theoretical digressions on the subject of systems analysis which it contained have been incorporated in Chapter 6 of Part 1, where they more properly belong. Four new chapters have been written to replace the one omitted. These deal with events in Brazil from the resignation of President Quadros up to the end of the Castelo Branco regime. Among those persons who have made noteworthy contributions to this book in its original or present form I would like to single out the late Jorge Ahumada, at whose request the book was undertaken, with whom many of the ideas have been extensively discussed, and to whose memory I have dedicated this present edition. His sudden death in 1965 when, in his middle forties, he was at the height of his creative powers, has certainly been one of the major losses suffered by Latin America in the last years. It is not necessary to stress that he bears no responsibility for the limitations and errors of this book. I am also grateful to Philippe Schmitter, who championed the initiative of the present translation, and to Suzette Macedo, who has done it so well, and who edited the new chapters and corrections written directly in English. H. J. Stanford, California 1967

CONTENTS PART ONE Chapter 1 2 3 4 5 6 7

Development as Process Development as Project Political Conditions for Planning Planning and the National State Planning and the Social Crisis Planning and the Political Crisis Political Conditions for Latin American Development

PART TWO Chapter 8 9 10 11 12 13 14

National Development and Political Models 3 13 30 32 40 48 66

A Case Study: Brazil

The Colonial Administration Dom Joäo VI and the Foundation of the Empire The Process of Development The Development Targets and their Attainment The New Structural Crisis The Alternative Solutions The Course of Events

97 113 120 151 163 175 183

PART ONE National Development and Political Models

1 / DEVELOPMENT AS PROCESS

Economic Development The practice of determining a country's degree of development by comparing its real per capita product and its real per capita income with that of fully developed countries, such as the United States, is universally accepted. Since the simplicity of this method makes it possible to attempt a quantitative analysis of the different levels of development — once the by no means easy problems of exchange rates have been solved — its application is indispensable in spite of its serious limitations and the equally serious distortions in comparison which it may produce. Without laboring the point, which is in itself of only marginal interest to the theme of the present study, the dual inadequacy of conceiving economic development in terms of per capita national income calls for some comment. T h e first inadequacy manifests itself on the economic level proper. Any estimate of the degree of a country's economic development based on the per capita figures of its national accounts fails to take into consideration the complexity of its economic structure and the rate of endogenous and autonomous growth in its income-formation process, and tends to overestimate the influence of the relationship between production and population in the country's economy as a whole. According to the net national per capita income figures for the 1952-54 period, a country like Japan, with its annual net national income per capita of U.S. $190 would appear to be 220 per cent less developed than Puerto Rico, with its net national per capita

4 Economic and Political Development income of U.S. $430; whereas Italy and Cuba, both averaging U.S. $310, appear to have attained the same level of development. The second inadequacy manifests itself in relation to any understanding of economic development in purely economic terms. The concept of economic development is as legitimate and useful as the concept of cultural or political development. Insofar as economic, cultural, or political activities can be objectively detached from the community's social activities as a whole and studied in separate categories, the development process can be conceived as economic, cultural, or political. It should always be borne in mind, however, that there is a methodological expediency in the concept of a development process as economic, cultural, or political. For the fact is that all societal processes are structurally correlated, and if it is true that they proceed on levels vested with relative autonomy — the economic level, the social level in the strict sense of the word "social," and the cultural and political levels — it is no less true that only by abstraction can any of these levels be conceived independently of the overall social process. Thus, whether economic development precedes political development and acts as a spur to it, as in eighteenth-century England, or whether, on the contrary, political development precedes and provokes economic development, as in the Soviet Union from the Revolution up to the period of the Five Year Plans, there is always a structural interdependence between the different levels of the historicosocial process. It is for this reason that pronounced development on one of these levels must either provoke corresponding processes in the others, or regress to a stage compatible with that of the others. This is what happened in Mustafa Kemal's Turkey, where the political revolution of the Young Turks outstripped the country's economic and cultural possibilities and consequently suffered a setback in the middle third of this century. • Proposition 1: Development is a total social process, and only for methodological convenience or in a partial sense can one speak of economic, political, cultural, and social development.

The Process of

Development

Considered within the broader framework of the overall social process, the process of economic development is one of growth of the real

Development as Process 5 income, characterized by better utilization of the factors of production in accordance with the real conditions of the community and the cultural level of the time. The idea of development thus differs from that of economic growth. T h e latter refers only to the quantitative increase in wealth or per capita product, whereas the idea of development includes the sense of qualitative improvement in the economy through a better social division of labor, the use of an improved technology, and the better utilization of natural resources and capital. The concept of development differs equally from that of progress, as this came to be defined in the course of the eighteenth century. The idea of progress is the secularized concept of Divine Providence. Characteristic of the Enlightenment outlook and the transcendental Deism peculiar to it, the idea of progress implies a continuous incorporation of values throughout a process, in itself unlimited, of discovery and creation of values. On the other hand, the idea of development, which is a radical and immanentalized secularization of the original concept of Divine Providence, implies that virtually preexistent possibilities have been made explicit and actualized. It thus conveys a sense of limitation in quantitative terms, and implies the existence of basic guidelines of legitimacy or validity in qualitative terms. Only certain given indices of development can be arrived at for a given community and for a given period. Development can be fostered only within the framework of certain norms and according to certain criteria dictated by the effective conditions in which the society to be developed finds itself. Regarded in this way, the process of economic development is peculiar to a given civilization, namely, that of the West, from a given period of its history, namely, the Renaissance. In other civilizations, and in other periods of Western civilization, there were doubtless phenomena of economic growth and even of economic development, in a restricted and accidental sense. Economic development, as the structural transformation of an economy and a society, became possible only with the emergence of a secularized, rational, naturalistic, and individualist vision of the world such as that which emerged in the W e s t after the Renaissance. This outlook, which was both the cause and the effect of the new mode of life inaugurated in Europe toward the end of the fourteenth century, led to the division of life into separate levels: subjective life — objective life; sacred life — profane life; private life —

6 Economic and Political Development public life. T h e historicosocial process was thus seen as unfolding along four distinct and autonomous structural levels: social, in the strict sense of the word, economic, cultural, and political. From the Renaissance onward, then, we can speak of a process of economic development as something separate in real and conceptual terms. Nevertheless, we cannot, as has already been pointed out, carry the notion of the autonomy of the economic process within the social process as a whole to the point of considering it as separate from this process. The process of economic development, whether spontaneous or planned, is one aspect of the development process of the society as a whole.

Development as Rationalization In this wider and more global sense, then, what is involved in the process of development? As observed earlier, the concept of development, which is an immanentalized version of the idea of Divine Providence, even more secularized than the concept of progress, differs from this last in that development does not postulate the values, toward the incorporation of which it tends, as something transcending the social process itself, or as something unlimited. In development, the incorporation of values implies that possibilities virtually pre-existent in the developing society are made explicit and actualized. Such pre-existent possibilities are the means of exercising rationality. T h e process of development is thus the historicosocial process as it moves objectively toward the economic, social, cultural, and political development of a given community. It is the historicosocial process of a community insofar as it really orients itself toward its increasing rationalization. 1 This rationalization persists regardless of whether development is spontaneous or planned. The former differs from the latter, however, in the rationality of its motivation. In spontaneous development, what the agents have in mind is not development as such, but their own interests. Development is an eventual verifiable result of the attempts made by the economic agents to further their own interests. In planned development, on the other hand, the emphasis is on the programing of development as such, and all efforts are concentrated on this with a view to attaining the objectives pursued. In both cases, 1 T h e meaning of "rationalization" in this and in similar contexts should not be confused with the one used by Mannheim for the process of the ideological justification of interests.

Development

as Process

7

however, what makes possible the end result, that is, development, is the fact that the historicosocial process is capable of being rationalized and that, in principle, there is scope for an increase in its rationalization at any given moment, whether by spontaneous or by deliberate action. It was the fact that modern Rationalism took cognizance of man's aptitude for rationalizing that led it to regard the historicosocial process as subject to a pre-established harmony. If individuals rationally pursued their proper ends on the economic level, this would ultimately lead to the development of society as a whole. In its most radical and complete form, this rationalism — the idea of progress being immanentalized in that of the development of the Absolute Mind — was to lead, with Hegel, to an identification of Reason with Reality. The process of Reason became the process of History; the rational was the real, the real rational. In fact we know today that reality always manifests itself through a given structure. W e know, on the other hand, that the more rational the man-world relationship, the more effective it will be and that it is impossible for Man to survive in the world or to form an image of the world unless he starts with a minimal basis of rationality. This does not signify that the historicosocial process is always rational. W h a t matters is to recognize that only through the exercise of rationality can this process develop; in other words, that development is always a process of rationalization.

• Proposition 2: Development as an idea is distinguished from, and in some ways opposed to, the Enlightenment's idea of progress. Development in conceptual terms is the explicit formulation of preexistent capabilities in the historicosocial process. These capabilities are the means of exercising rationality. T h e process of development, in real terms, is the historico-social process as it moves toward its growing rationalization.

Spontaneous

Development

T h e idea of the historicosocial process as a necessarily rational process subject to the laws of progress, and the belief in the preestablished harmony of society, were concepts that reciprocally implied one another. In fact, the idea of a pre-established harmony

8

Economic and Political

Development

preceded that of progress. Originally, this was a religious concept founded on the idea that creation reflects the perfection and harmony of God, which referred back to the Christian view of God as the indissoluble harmony of the three Persons in the Trinity. The same concept of pre-established harmony led Kepler, in astronomy, to formulate his theory of planetary orbits; Leibnitz, in metaphysics, to monodology; the Encylopedists to their belief in the essential goodness of Man, and the Physiocrats to the doctrine of laissez-faire. With the evolution of the idea of progress toward that of development, and the replacement of the idea of harmony — in nature or in society — by that of structure, the concept of spontaneous development was deprived of the character of logical necessity which had seemed self-evident to the Physiocrats and early Liberals. The historicosocial process was no longer necessarily rational. Hence failure in history was not simply casual and external but due, in innumerable instances, to the intrinsic irrationality of a given process. Nevertheless, the fact is that contemporary economic development, which began spontaneously in eighteenth-century Britain and reached its peak in that country toward the end of the nineteenth century, later rising to its zenith in the United States, likewise spontaneously, helped to keep alive, long after its theoretical foundations had been undermined, the concept of the "Invisible Hand" which ordered and assured the development of the community if each individual consistently pursued his own interests. In principle, it is true, there is nothing to prevent development from taking place spontaneously, without the aid of deliberate planning. But spontaneous development is a statistically remote possibility, which recedes still further as the differences between the developed and the underdeveloped countries become, with the passage of time, increasingly accentuated. Even before the First World War brought to its close a historical cycle more favorable to spontaneous development than the present one because of the considerably greater mobility of the factors, only a very few countries had managed to attain a reasonable level of development, and among these only Great Britain and some of her former colonies had done so without any deliberate programing effort. This peculiar circumstance was due to equally singular factors in the British historical experience. An analysis, however brief, of the very special conditions which gave rise to spontaneous development in Great Britain and some of

Development as Process 9 her former colonies, notably the United States of America, lies outside the scope of this work. On the economic level, we need only recall that Britain is an island relatively small, since the eighteenth century, for the size of its population, easy to integrate as a market, and endowed with the natural resources needed by eighteenth- and nineteenth-century technology; and that it enjoyed the advantages of having initiated the Industrial Revolution after a prosperous mercantilist period characterized by energetic and consistent guidance by the state. W e should also recall the important fact that Britain's political evolution was extremely favorable to the economy, which developed along broad lines as though it had been planned to make possible a subsequent economic upsurge of the liberal-capitalist type. Thus, absolute monarchy was overthrown by Cromwell's Revolution, which undermined the privileges of the aristocracy in the age of Louis XIV; and early in the eighteenth century, the reign of George I saw the introduction of cabinet government responsible to Parliament at a time when France, during the Regency and reign of Louis XV, was steering an opposite course. Finally, it should be pointed out that, since the religious struggles of the seventeenth century, England had always been able to export her social conflicts to the United States, taking advantage, as the United States was later to do, of the escapevalve provided by the open frontier. "Bismarckian"

Development

Unlike Britain, the most developed countries of Europe — France and Germany — did not strictly experience a development as spontaneous as that of Britain, in spite of having acquired and maintained in the nineteenth century many of the characteristics of liberal capitalism. One cannot speak of development planning for the France and Germany of the last century, but one can properly refer to deliberate political conditioning of the economy by the state through various forms of guidance. Faced with the challenge of British development and the conquest of their markets by the products of British industry, France and Germany reacted, in the course of the nineteenth century, by attempting to make up for the deficiencies hindering their economic development and industrialization through state action. Napoleon III and Bismarck were the chief political agents in promoting this effort. Despite the differences between them, and the inconsistencies of Napoleon III in the economic field deriving from

10 Economic and Political

Development

his Free Trade bias — which French industry nevertheless managed to contain within tolerable limits — they had two characteristics in common which define their historical role: their concern to preserve the national market for national industry, which led in the case of Germany to a customs union and subsequent unification of the country under the House of Prussia; and, in the domestic policy of both countries, their exercise of arbitration between conflicting social forces, which permitted development to proceed with the active collaboration of the state. In France, arbitration by the state, exercised through an authoritarian executive which was heir to the name and some of the hopes of greatness of the first Napoleon, maintained the balance between the bourgeoisie, victorious in 1830 with Louis Philippe, and the proletariat, victorious in 1848 with the Second Republic. In Germany, the House of Prussia, austere, military, and bureaucratic, exercised arbitration through Bismarck between the progressive and bourgeois forces of the Rhineland, preponderant in 1848 with the Vorparlament, and the reactionary and aristocratic forces allied to Austria. If we consider the experiments of Napoleon III and Bismarck, particularly those of the latter, since the circumstances were more favorable to state intervention and the personality more clearly defined, we see that they offer features which clearly transcend their historical context to take on the significance of a prototype: Bonapartism and Bismarckism. Coined by Marx in his "Eighteenth Brumaire of Louis Bonaparte," the expression "Bonapartism" designates exercise by the state, through a strong executive, of arbitration between classes and social forces, to assure the necessary conditions of stability for the promotion of development under the leadership of the bourgeoisie. Although the concept of Bonapartism retains its validity for political and social analysis, I have preferred in this study to use the term "Bismarckism" to express a similar concept. This term carries implications which are lacking in the former term and which validate its application to the economic and cultural levels. Bismarckism, as well as being arbitration between classes, by the state, is also a policy of national guidance. More consistent than Napoleon III, Bismarck was not impressed by the authority of British theories on liberal internationalism. Faced with the expansionist challenge of a more powerful and developed country, he carried out a domestic and foreign policy of national consolidation and emancipation, providing Ger-

Development

as Process

11

man entrepreneurs with the active collaboration of the state in fostering Germany's development as a nation. Without developing this analysis of Bismarckism further, it should be pointed out that there has been a parallel revival of the phenomenon in the France and Germany of our own time. In neither country did Bismarckian development come to an end with the nineteenth century. With the overthrow of the Empire in the Franco-Prussian War, social struggles in France once more brought development to a standstill despite periods of economic growth in the Third Republic after — but particularly before — the First World War. This economic, social, and political immobility reached a climax after the Second World War, when immobilism became the Fourth Republic's philosophy of government. In Germany the development which had taken place in Bismarck's time suffered a severe setback with the First World War and the economic, social, and political crises of the Weimar regime. Nazism, in spite of certain Bismarckian features, neither managed to establish a consistent policy nor to consolidate its achievements because of the insane romantic irrationalism that plunged the country into a catastrophic war. This unfinished Bismarckism, however, was restored both in Germany and France under the Adenauer and De Gaulle regimes. In this instance, it was a Bismarckism fully conscious of its own characteristics and possibilities, adopted almost as an economic, political, and social model. The results of this second Bismarckism seem to be even more brilliant than those of the first, notably because social arbitration under present-day conditions becomes simple and effective for countries like Germany and France, in which the level of income permits the effective establishment of the welfare state and thus makes it possible to promote the social well-being of the masses. Furthermore, in the case of France and Germany, this new Bismarckism, unlike its nineteenth-century form, leads to close collaboration between the two countries, who have at last become aware of the suicidal nature of their former antagonism. Spontaneity

and

Bismarckism

The analysis of Bismarckism as a process of development through social arbitration, with the concomitant consolidation and emancipation of the nation, throws new light on the phenomenon of spon-

12 Economic and Political

Development

taneous development. Indeed, once Bismarckism is understood, it becomes possible to see spontaneous development as something that took place in the case of Britain because, in addition to other favorable circumstances, the political conditions needed for such development had already been created. Social difficulties, in the broad sense of the term "social," rather than relative scarcity of the factors of production, prevented French and German entrepreneurs in the eighteenth and first half of the nineteenth century from undertaking economic action as vigorous and successful as that of their British counterparts. British entrepreneurs, unlike their Continental colleagues, did not have to cope either with serious obstacles set up by conservative forces representing the ancien regime, since these had been domesticated by Cromwell's petty bourgeois Puritan dictatorship and harnessed by the parliamentary system, or with any dangerous rebellion by the masses. It was only much later that trade union movements really got under way. Similarly, colonial expansion, only belatedly undertaken by France and never successfully achieved by Germany, enabled Britain, up to the eighteenth century, to export her nonconformists and surplus population to the colonies, and after the Industrial Revolution to export her manufactured goods in exchange for raw materials. On the other hand, also partly as a result of political conditions in Britain during the eighteenth and nineteenth centuries, the individualistic efforts of her capitalists and entrepreneurs to enrich themselves were channeled in a direction favorable to the economic development of the community as a whole. Far from being a general rule, then, this type of development is an exception, since in most cases individual efforts at enrichment result less in an increase of the product than in an exploitative redistribution of income, on the same basis as at the outset, for the benefit of the sectors and individuals who have managed to secure the lion's share.

• Proposition 3: Only in statistically rare cases, historically almost unrepeatable, as was that of Britain and some of her former colonies, does development take place in a completely spontaneous form. French and German development before World War I proceeded within the framework of state intervention, which can be termed "Bismarckism," and since World War II has been proceeding along neo-Bismarckian lines.

2 / DEVELOPMENT AS PROJECT

The

Significance

of

Planning

By economic planning, in the wide sense of the term, is understood the technique of provoking the occurrence of a certain result by means of deliberate intervention in the economic process based on a rational knowledge of this process and oriented in accordance with a plan. In a narrower sense, economic planning is understood as an economic policy, generally that of the state, aiming at certain results through the application of appropriate plans. If it is true that state intervention in planning the economy has a long history — and indeed it can be traced back to ancient Oriental civilizations — it is no less true that it was only after the First World War that fully conscious and effective planning efforts were undertaken. These planning efforts, linked in one way or another to a new concept of the economic process, understood as subject to certain laws but also open to deliberate intervention by the organs of the community, derive from three main sources: socialism, anticyclical policies, and economic development planning. For theoretical socialism before the Russian Revolution, planning was a necessity deriving from the suppression of the market. It was around the theoretical possibility of replacing, through planning, the functions performed by the market that was centered the famous debate concerning the supposed insubstitutability of the market, a thesis which met with its first formal refutation in Enrico Barone's study, II Ministro della Produzione netto Stato Colletivista ("The Ministry of Production in the Collective State"), published in 1908

14 Economic and Political Development by the Giornale degli Economists but which continued, despite this and the practical reply provided by the Soviet regime, to have its supporters, notably Von Mises. With the Great Depression of 1929, while the capitalist economy did not need planning for fixing the values of its products, it did become needful to recover an adequate level of employment and generally to control supply and demand, investment, and consumption. The third source of deliberate planning endeavor was the need to devise economic development programs for underdeveloped countries. Strictly speaking, this type of development programing started in 1928 with the Soviet Five Year Plans which, although based on socialist ideology and oriented toward its promotion, have in fact been economic development plans. Programed development independent of such ideological commitments has been systematically undertaken since World War II. Underdeveloped countries became aware that, whatever their attitude toward the residual validity of economic liberalism, programed development had the advantage of achieving, through rational and deliberate effort, results equal or superior to those that could be achieved through the spontaneous action of conditions favorable to development.

Stages and Moments of Planning Essentially, all planning is carried out in two stages: the preparation of plans, and their execution. The first stage can be divided into three parts: analysis and diagnosis of the situation, choice of objectives to be reached within the framework of that situation, and determination of the means needed in the given situation to attain the objectives selected.1 The second stage, relating to the execution of the plans, can be similarly divided, although not always in quite so clearcut a manner, into two parts: establishment of the new legal and administrative mechanisms, or the new private or public bodies that will enable the ends pursued to be attained; and the operation of these mechanisms with such ends in view. The above distinctions, although somewhat obvious, take on added importance when determining the conditions under which planning will be effective. Insofar as planning is a technique for producing cer1 The tripartite division of planning results from the requirements of the decision-making process as such. See, among others, Herbert A. Simon, "Political Research: the Decision-making Framework," in David Easton, ed., Varieties of Political Theory (Englewood Cliffs, N.J.: Prentice-Hall, 1966), pp. 18-21.

Development

as Project

15

tain effects in the historicosocial process, what matters most is its effectiveness. On what does this depend? From the two stages described above, it can be said that the effectiveness of a plan depends, on the one hand, on its validity as a plan, and on the other on its effectiveness as a norm; in other words, on its effective implementation by the agents entrusted with its execution. The validity of the plan depends, in its turn, on the validity of its three formative steps: the analysis or diagnosis of the situation, the choice of objectives compatible with the situation and with one another, and the adoption of adequate means, in accordance with the needs of the situation, for the successful attainment of the objectives chosen. Among the means to be adopted, a further distinction must be made between the means, in a broad sense, which substantiate the measures designed, through their application or action, to achieve the ends envisaged — the policy to be adopted and the projects inherent in this policy fall within this group — and the means, in a strict sense, which constitute the motivations or causations by virtue of which it is hoped that the policy and the constant projects embodied in the plan will be effectively carried out. In this group belong the incentives and disincentives, and the orders and prohibitions designed to ensure that the plan is put into effect. The conditions under which a plan can be successfully implemented depend, within the internal ambit of the plan, on its validity with respect to the soundness of the diagnosis of the situation, the reasonableness of the objectives chosen, the rationality of the means, in a broad sense, adopted to attain these objectives, and the appropriateness to conditions and objectives of the system of incentives and disincentives or orders and prohibitions, adopted to ensure that the plan is observed. Apart from this, however, successful implementation of a plan depends on circumstances external to it, which in principle can and should be taken into account in diagnosing the situation but which, in theory, lie outside the area conditioned by the plan. The ways in which these various aspects of programing are considered, chosen, or carried out, determine the particular form it will take. To begin with, let us consider the first stage of planning: the preparation of the plan as such, and the three steps involved in this stage, as outlined above. The situation can be analyzed in a rational way, as when diagnosis is entrusted to a group of experts, or when, in less technical matters, it is the result of prevailing opinion in the com-

16 Economic and Political Development munity, founded on common feeling. But analysis of the situation can equally be undertaken in a charismatic, magical, or mystical way, as when it is respectively announced through prophetic revelations, adopted through the consensus of the community arrived at by means of certain practices, such as the taking of auguries and the hermeneutical consultation of sacred texts, or accepted in the name of some explanatory principle in itself neither evident nor proved, as when evil effects are blamed on the actions of Jews, witches, communism, or capitalism, regarded in mythical terms. The second step involved in the preparation of the plan, the choice of objectives, can be approached in two different ways. As regards the merit of the choice, this can be more or less reasonable according to whether the objectives chosen are more or less compatible with one another. It is obvious that the second step will be reasonable only if the first step, the diagnosis of the situation, was rationally undertaken. Still with regard to the second step, in addition to considering it from the point of view of the reasonableness of the choice of objectives, we must consider it from the point of view of the way in which the choice is made. This can be regarded as a technical corollary of diagnosis of the situation, and entrusted to those who undertook this diagnosis. On the other hand, it can be regarded as an act of decision which is up to a point voluntaristic, and as such can be entrusted ex ofEcio to the community's higher authority, or be submitted to the free choice of the community itself, either through parliamentary channels or by way of plebiscite. The third step involved in the preparation of a plan — determination of the means to be employed for the pursuit of the chosen objectives— can, like the first, be approached in a rational or in a magico-ritualistic way. In the case of the first approach, the choice of adequate means will vary according to the degree of compatibility sought between the measures needed to attain the ends pursued and the free initiative of the agents involved. T o give effect to the means, in a broad sense, compatibility with the free initiative of the agents involved calls for the adoption of means in a narrow sense, based on incentives and disincentives rather than on orders and prohibitions. Conversely, incompatibility with the free initiative of the agents involved heightens the importance, with respect to the means in a narrow sense, of orders and prohibitions and reduces the significance of incentives and disincentives.

Development

as Project

17

On the other hand, with respect to the choice of means, we must also distinguish between the choice made by decision of the programing authority, as a corollary to this authority's power to elaborate the plan, and the choice left to the ex officio decision of the higher authority, or submitted to the free choice of the community expressed through parliamentary channels or by way of a plebiscite, because it is regarded in itself as the choice of an objective, which can be as relevant as the general aims of the plan. Let us now consider the second stage of planning: the execution of the program. If the plan is based on an adequate analysis of the situation, oriented toward the attainment of objectives compatible with the situation and with one another, substantiated by policies and projects satisfactorily adapted to the ends pursued, and based on a system of motivations suited to the conditions under which such projects are to be put into effect, it will have the intrinsic conditions needed for its successful implementation and will be effectively carried out provided there is no interference from external circumstances. There are thus two sets of conditions which can adversely affect the implementation of a plan: its intrinsic lack of validity at any of the steps specified, or the extrinsic interference of negative circumstances. Intrinsic

Validity

of

Planning

Since development is a process of rationalization, any plans not based on a rational analysis of the situation, oriented toward the attainment of objectives compatible with the situation and with one another and backed by means which, in the circumstances prevailing, are satisfactorily adapted to the ends pursued, will be automatically invalidated. The complexity of the problem is even more evident when we come to consider the ways in which the situation is analyzed, the objectives chosen, and the means to be employed for the pursuit of these objectives determined. For most countries today the first step in the preparation of the plan is no longer controversial. It is generally agreed that, for complex and specialized matters, such as economic development plans, the only way to make a start is to entrust the analysis of the situation to a group of experts. The choice of experts and the way in which they should be selected will always be open to discussion. This is no

18 Economic and Political Development great problem in countries where the government is considered legitimate and reasonably competent, and where the choice is made by persons of recognized ability. Much more difficult is the question of goals. Indeed, in this respect possibilities and circumstances vary enormously. T h e more developed the country, the greater tends to be the consensus on the principal objectives that are to be pursued. T h e development already achieved constitutes a broad basis for evening out the conditions under which the people live, so that individual expectations will correspond to the real participation they enjoy, and social projects expressing these expectations will tend to match the extent of individual participation in society. Conversely, in underdeveloped countries — which by hypothesis are the very countries most in need of development plans — their underdevelopment implies a narrower common base for the living conditions of the people, accentuating the marked differences that exist in their relative participation in the community. Hence there will be a corresponding difference of opinion with respect to the objectives to be pursued. Wide differences of opinion as to the objectives worth striving for will produce a twofold effect. With respect to the way in which the aims are chosen, wide disagreement makes any expectation arbitrary vis-a-vis the conflicting expectations, thus invalidating any choice made through the decision of an authority and rendering a choice by way of popular election unrepresentative, so that, in the latter case, the objectives that gain majority approval tend to include only a fraction of the total preferences. W i t h respect to the choice itself, wide disagreement will lead to irrational compromise, involving the simultaneous choice of incompatible aims. Such a situation, peculiar to communities in which there is very little integration and development, makes it impossible to determine the validity of the content of a decision by the application of purely formal criteria such as "competent authority" or majority vote. The validity of the content in such cases can only be determined by a rational analysis of the merits of individual decisions, which is the same as saying that, a priori, one cannot settle the controversy over the merits and demerits of conflicting proposals by applying any criterion which is in itself uncontroversial. Only the subsequent course of the historicosocial process will reveal which were the more valid proposals. This problem, which in its most fundamental and irreducible as-

Development

as Project

19

pccts is common to all societies whatever their degree of development, led Plato and the school of thought associated with him to propose the authoritarian solution of the philosopher-king, the man who, by virtue of his reason, is able to follow the most valid course of conduct, and by virtue of his socially accepted authority, is equipped to lead the community along that course. In itself, the solution of the philosopher-king is tautologically correct; but considered as a social fact it raises the very problem it sets out to solve: who is to choose the philosopher-king, and how is he to be selected and controlled? In the light of modern social science the problem can be approached from another angle. In fact, there is no criterion for establishing a priori the most valid course of conduct but that of social consensus; and there is no criterion for forming an adequate consensus in a severely underdeveloped community where the area of social integration is minimal and the differences in expectations founded on the extreme differences in participation are maximal. In such communities, the only empirical corrective is the fact that, in most cases, the status of those members of the community whose participation is insignificant is either de facto or de jure passive or marginal, so that the political debate over options takes place in a very much reduced area, between those members of the community who enjoy greater participation.2 If it is true, however, that there is no criterion which allows an a priori compensation to be made for the lack of a minimum of social consensus, it is no less true that in the long run the experience of the free exercise of choice through the democratic mechanisms of election and representation of the will of all the community's members broadens the basis of integration, and leads to a more even pattern of participation, thus promoting development and a corresponding increase in the area of social consensus. The Problem

of

Means

Once the nonrational ways of determining the choice of means have been excluded, the two chief problems that arise relate to the way in which the means are to be selected and, in what concerns these means in a narrow sense, the discrimination between the system of incentives and disincentives and the system of orders and prohibitions. " A fact which, per se, does not increase the logical facility of decision-making and, politically, tends to the self-perpetuation of mass/elite discriminations.

20 Economic and Political

Development

The choice of means raises questions similar to those involved in the choice of aims, insofar as the relation of means to ends forms a chain of alternatives. It is man's own projects — that is, expectations founded on demands of psychophysical origin qualified or transformed by acts of freedom and the mediation of society — that determine whether something is to be set up as an end, or object, requiring the adoption of certain means for its attainment. W h a t was a means of attaining the original expectation, however, becomes an end for the expectation of the successful attainment of the original expectation, and the process is successively repeated as far as conscious analysis can be carried. If the problem is considered in politicosociological terms it can be said that the choice of means, in the broad sense of the word, satisfactorily adapted to the ends pursued, involves options of a finalistic character, which may be more or less perceptible or perceived. T o the extent that the means are given a technical orientation, their finalistic content becomes less perceptible, and the delegation of their choice to the programer becomes justified, the exercise of the express manifestation of political will being limited to the selection of goals. On the other hand, to the extent that the finalistic content underlying the choice of means is clearly perceptible, it becomes subject to the same conditions as those governing the choice of the plan's objectives. W i t h respect to the means in a narrow sense, discrimination between the system of incentives and disincentives and the system of orders and prohibitions is guided, above all, as we observed earlier, by the degree of compatibility between the plan and the free initiative of its agents. It must at once be said that neither system can be applied to the total exclusion of the other. A program backed only by incentives and disincentives, and unaccompanied by orders to sanction it as a legal or administrative norm, would be simply a theoretical pronouncement lacking the character of policy, and as such it would be inapplicable by the public power, since it would not have been incorporated in the existing laws. Conversely, a plan based only on legal and administrative commands prescribing it as a norm to be obeyed, under penalty of certain sanctions against transgressors, would not be observed if compliance did not bring benefits to an appreciable section of the community, or if the penalties attached to transgression (and enforceable in practice) were not at least a greater disincentive

Development

as Project

21

than the inconveniences resulting from observance of the plan. Nevertheless, if the situation which led to the formulation of the plan and the objectives it seeks to attain has been reasonably diagnosed, the extent to which the plan will be compatible with the free initiative of its agents tends to be directly proportionate to the degree of the community's integration and development. The reason for this tendency has been analyzed earlier. It is yet another manifestation of the vicious circle of development. In societies which have reached an advanced stage of development, and in which there is consequently a wide area of common interest based on relatively similar patterns of participation, programs can be almost free of sanctions, implementation of the plan being dependent less on its legal and administrative enforcement than on the fact that its intrinsic validity will lead the interests of the agents to coincide with the aims pursued. Conversely, in societies where development and integration are not advanced, there is an insignificant area of agreed interests in comparison with the enormous inequalities in participation. Thus programs which, based on a rational analysis of the situation, are consistently oriented toward the principal objectives of development, tend to antagonize the two extremes into which the members of the community are divided: the privileged minority, against whose privileges development will be directed, and the exploited masses, against whose unfounded expectations of a rapid rise in living standards through unfeasible redistribution measures and assistance, any valid plan will be equally directed. In such cases, only measures backed by orders and prohibitions with severe sanctions attached (if and when enforceable) will ensure the validity of the means programed, and hence make it possible to ensure that the planning norms are put into effect.

• Proposition 4: The planning of development is a technique of rationalization, whose validity depends on a consistent analysis of the situation, a consistent choice of objectives compatible with this situation and one another, and a consistent adoption of means satisfactorily adapted to the objectives pursued. The implementation of the plan as a norm depends, intrinsically, on its validity and, extrinsically, on the duration of circumstances external to the plan and assumed by it as such.

22

Economic and Political Development The External

Circumstances

As has already been pointed out in this study, the effective implementation of a plan depends, on the one hand, on its validity in the terms previously analyzed, and on the other on circumstances external to the plan which make up the real and ideal situations in which the community finds itself. Basically these circumstances must and can be taken into account by the program. They should be referred to in analyzing the situation, which is the first step in the preparation of a plan, and in choosing the plan's objectives, since attainment of these objectives will depend on the extent to which they are compatible, not only with one another, but also with these external circumstances. The elements that go to make up the circumstances lying outside the plan are the natural conditions under which the community lives, and the historicosocial process of the community itself, including its external relations, such process being considered within the ambit of the macroprocess of the civilization to which the community belongs and of its relations with other civilizations. If it is assumed that the first requisite for any program's validity is rational analysis of the community's situation and hence, by and large, of the plan's outlying circumstances, it follows that — setting aside the problem of the degrees of accuracy or refinement involved in such analysis — the outlying circumstances will interfere, as such, with effective fulfillment of a program to the extent that they are liable to change, and display a character other than that originally foreseen. This occurs, for instance, when seismic phenomena alter the structure of natural resources or their geographical distribution, and even more so when technological innovations alter the economic significance of certain natural resources, or impose a change in production methods. Again, wars and other unforeseen conflicts alter the framework of the community's external relationships. Of all the changes affecting the community's situation, however, the most relevant, for the purposes of this study, is a change affecting the community's own sociopolitical structure. To begin with, any development program, whether originally conceived for the economic or for the political level, ultimately entails social change, as an effect inherent in the ends envisaged, and will thus bring about a greater homogeneity in the patterns of partici-

Development

as Project

23

pation, with corresponding changes in the community's sociopolitical structure. In this sense, then, it must be said that there is a certain margin of change in the conditions outside the plan resulting from the very success of its application. The interference of external circumstances which have been altered by the plan's very effectiveness may, at a given point, harm the plan as such, although by definition it cannot harm the objectives pursued.3 Changes of another kind, brought about by the fact that the original sociopolitical situation gradually alters during the implementation of the plan, whether or not in direct consequence, can and do occur. In other cases, the original sociopolitical situation may not have been really representative, or may prove to be no longer tenable, so that it later manifests itself in a form different and even contrary to what it originally seemed. In either case, however great its intrinsic validity, a plan would cease to be effectible, since the process of power would have become, or would have been revealed to be, different from that on which the plan was based. Both of the above hypotheses may in fact arise, in which subsequent developments alter the original sociopolitical situation; but the first is more usual in countries where stagnation is due to a secular process of exploitation of the masses by the ruling strata, as in the case of underdeveloped European countries, while the second is more frequent in countries which are underdeveloped because they have recently emerged from a colonial or semicolonial situation, as in the case of the newly independent Afro-Asian countries and, to some extent, of the Latin-American countries.

• Proposition 5: Of all the circumstances external to the plan on which its successful implementation depends the most relevant are the political circumstances in the broad sense of the term "political," these circumstances being also those most subject to change. The more underdeveloped the community, the greater its need for programed development, and the more liable to change the political circumstances on which successful implementation of the plan depends. 'This is, for instance, the typical result of successful authoritarian plans of development, as in the case of the USSR. It generates increasing contradictions between authoritarian centralism and development. Hence the recent correction of Lieberman's planned decentralization.

24 Economic and Political Development Planning and the Process of

Development

As observed earlier in this study, development planning can as readily be based on the conviction that spontaneous development is a statistically rare and historically unrepeatable case as on the idea that programing merely speeds up, in the interest of development, processes which would spontaneously have led to development, although at a slower pace. These two distinct outlooks, besides corresponding to two equally distinct concepts of development, correspond to the two possibilities which, in principle, can relate development programs to the development process: planning can precede and provide the impetus for the development process, or a development process actively under way can provide the impetus for its deliberate programing. Britain and some of her former colonies, notably the United States and Canada, offer the finest examples of a spontaneous development process which, during the present century, and after having already reached the highest levels of economic and political development, became the object of deliberate programing in order to raise the level of employment or, in the last analysis — and with due regard to the anticyclical policies involved — in order to speed up and accomplish social development. In contrast, Mustafa Kemal's Turkey and Soviet Russia are typical examples of development deliberately planned on the basis of an existing situation which, although very different in these two countries, was far from showing any propensity to spontaneous development and was characterized, in the case of Turkey, by stagnation and retrogression and a growing gap, in the case of Russia, between the nation, which as such remained stagnant, and the foreign industrial consortiums embedded within it. The problems to which this gives rise are of the most varied kind, since they relate as much to the factual question of how to embark on the work of programing development in a stagnant or retrogressive community, as to the axiological question of how to determine the validity of a plan for a society unable to form any consensus as to its aims. These questions were raised earlier in this study, although only touched on from a different angle, when we considered the process of development as a process of rationalization, and when we studied the choice of the plan's ends and means.

Development

as Project

25

For our present purposes, the first point to be noted is that a completely stagnant or retrogressive society lacks the conditions needed for planning development so long as the state of stagnation equilibrium is maintained. In such societies, some new factor is needed to upset this stagnation equilibrium, whether through contact with other societies or by alteration of existing relations between subsistence conditions and the population which may be brought about by the retrogressive process itself. Development planning precedes the development process in societies in which, within the framework of the prevailing stagnation or retrogression, certain groups or social strata claim a more favorable share in the social product in terms more or less compatible with the fundamental interests of the society as a whole. In a stagnant society, a given group or social stratum can only improve its participation either by embarking on an exploitative process, which will be to the detriment of other groups and strata and provoke or accelerate the society's retrogression, or by making a deliberate effort to promote development through appropriate planning. The first solution is limited, socially, to the ruling stratum, economically, to the decreasing possibilities for exploitation in a retrogressive economy, and politically, by the growing reaction which exploitation tends to provoke in the exploited strata. On the other hand, a development project reconciles, in principle, the aspirations of a given stratum with the interests of society in general. Turning to the opposite hypothesis, we find that in a society already in the process of economic development, all its social strata, from the ruling stratum downward, tend to improve their living standards through increased participation in the results of development. The planning of development will thus fall into line with trends already on the move and seem, in principle, to be the acceleration or rationalization of these trends. In this case, the problems tending to arise will be those relating to the social redistribution of the future benefits and present sacrifices of development, including the propensity of each social stratum to increase its own participation exploitatively in the present, offering the other strata the presumed future benefits of development by way of compensation. With the above considerations in mind, to what extent do the criteria for determining a program's validity depend on whether the process of development precedes or follows its programing? It has already been shown that a priori determination of a plan's

26 Economic and Political Development validity is only possible, in indisputable terms, through social consensus in societies which have already attained a level of development that permits formation of popular consensus on the main objectives to be pursued. In disputable, but theoretically correct terms, a plan's validity can be determined, in principle and within certain limits, by appropriate analysis in the light of social science, the statistical information available, and so on. Such analysis, however, will be conclusive (within certain limits) only for those equipped to judge it on the basis of its intrinsic scientific merit, given that, in the absence of the minimal conditions of social consensus referred to above, no objective criterion transcending the scientific assessment of the plan will enable its validity to be predetermined. In this case, only time will tell whether the plan was valid. This question becomes especially important in view of the fact that it is precisely the less-developed countries, and hence those most prone to stagnation, that need to plan their development before the development process is under way, and that it is impossible for them to make use of objective criteria which would enable them to determine a priori the validity of their programs. On the other hand, these countries, for the same reasons, can only prepare their development plans through an authoritarian choice of objectives to be attained and the most adequate means, in the broad sense, to be employed for this end. Indeed, it is precisely because the necessary conditions for the development process to start spontaneously were lacking that only a decision to promote development by the group or social stratum which, in accordance with what has already been observed in this respect, has taken on this task, will make it possible to lay the foundations for any development program. Thus it is a condition peculiar to communities in which the planning of development precedes the development process that such planning must be embarked on by authoritarian decision, and that its validity cannot be predetermined by applying an indisputable criterion which would not depend on the scientific appraisal of the plans. It should be made clear, however, that this authoritarian decision is not necessarily illegitimate in the legal sense of the word; nor is it necessarily despotic. Thus, in Russia, Peter the Great promoted the most revolutionary reforms in his legitimate capacity as Czar. Japan's Meiji Revolution, even more radical than that of Peter the Great, followed the revitalization of imperial authority, after the death of Emperor Komei, during the reign of his son, Mutsu-Hito.

Development as Project

27

Authoritarianism in embarking on a development plan and in choosing its objectives can, however, be distinguished from authoritarianism in deciding on the immediate means to be employed for carrying out the plan. The first, as we have seen, is the essential condition for embarking on a planned development effort in a stagnant community. Conversely, the option of a system of incentives and disincentives, or a system of orders and prohibitions, is determined by the extent to which the chosen objectives are compatible with the free initiative of the agents. There is undoubtedly a correlation between the first and second type of authoritarianism. T h e same conditions of marked underdevelopment which make it necessary to take an authoritarian decision to plan development, in order to break out of the vicious circle, will likewise require the adoption of severe administrative sanctions to ensure the execution of the plans, in view of the expectations aroused by the extreme differences in participation. On the other hand, it should be added that authoritarian plans, by their very nature, tend to overestimate the effectiveness of orders and prohibitions as instruments for ensuring implementation of the plans, and can obviously be manipulated to secure abusive or exploitative advantages for the ruling stratum much more easily than plans based on the consensus of the community. Despite these caveats, the conditions that determine authoritarianism in the choice of the plan's objectives can be distinguished from those that create the need for authoritarianism as an effective instrument and support. As we have seen, the choice of a system of incentives and disincentives or one of orders and prohibitions is governed by the degree to which the objectives of the plan are compatible with the free initiative of the agents. By hypothesis, in very underdeveloped communities with little social integration, the area of compatibility between different expectations is too small to insure voluntary observance of the plan. Moreover, compatibility will also be insufficient when planning implies drastic changes in existing cultural patterns and takes away from private agents the control or ownership of the largest share in the net product of their activities. Examples of the first hypothesis are provided by the more radical and deliberate cases of Westernization in communities which did not belong to Western culture: Japan, following the Meiji restoration, and Kemal's Turkey. An example of the second case is provided by socialist planning. In whatever way the socialist regime

28 Economic and Political Development comes to be adopted, socialist programs, even if their objectives are democratically chosen, must be backed by a system of orders and prohibitions for their execution, however much the majority of the people may continue to accept the regime. This was the case of British planning under the Attlee government. On the other hand, dictatorial governments, whose programs are based on acts of authority involving an authoritarian choice of objectives, are led to base the execution of their plans on a system of incentives and disincentives whenever they opt for the maintenance of the market system and private enterprise. This was the case of Peron's Five Year Plans for Argentina and, by and large, of the European fascist governments.

• Proposition 6: Development planning will vary according to whether it follows or precedes the development process: in the first case, in which the aim is to speed up the process of development, it can be based on social consensus, and will tend to allow considerable agreement between the objectives of the plan and the free initiative of the agents; in the second case, in which the aim is to promote the development process, starting from a situation of marked underdevelopment, the extreme differences in participation prevent the formation of any consensus on objectives, and weaken the criteria for determining the plan's validity a priori, making it necessary to impose it by means of an authoritarian decision backed by severe sanctions.

Planning and Political

Regimes

T o conclude this analysis of development as project, let us look briefly at the possible relations between planning and political regimes. In principle, the technique of programing development as an act of the public power is compatible with all political regimes except those based on the more extreme forms of liberalism. Political regimes, however, are forms of political tutelage of existing social systems, which in their turn are founded on existing patterns of participation. And if many social systems are also compatible with planning technique in theory, this compatibility ceases to exist, for the purposes of fostering development, in the case of stagnant or retrogressive

Development as Project 29 social systems, based on the exploitation of the community by its dominant stratum. The existing correlations between the social and political systems will determine, making due allowance for the other factors involved, a government's propensity to plan development, the scope offered for its promotion, and the characteristics this will assume. It was because they stood for exploitative social systems that the Franco and Salazar governments — despite the efforts of the former in the industrial sector, and of the latter in the public works sector — undertook no real development plan. It was for a similar reason that, with few exceptions, Latin American countries up to the Second World W a r did not make any attempt to overcome their stagnation or to speed up development through appropriate planning. Within the framework of their theoretical compatibility with planning techniques, social systems will determine the type of program viable in each case. Other factors doubtless play an equally determining role: the structure and geographical distribution of natural resources, the size of the population, its per capita income, the culture of the community, its standard of education, and so on. Whether the plan is to be based on social consensus or some other criterion, whether the choice of objectives is to be democratic or authoritarian, or whether it is to be backed mainly by a system of incentives and disincentives, or by a system of authorizations and prohibitions, will depend on whether the prevailing patterns of social participation are relatively homogeneous and open, or extremely heterogeneous and rigid.

3/POLITICAL CONDITIONS FOR PLANNING

An attempt will be made in the ensuing chapters of this study, based on the data and categories presented in the two preceding chapters on development as process and as project, to determine the political conditions which make it possible to plan development with a particular analysis of the Latin American case. These political conditions, in the broad sense of the word "political," fall into three groups: the conditions for a politically independent national community, so long as the system of national states persists, to develop as a viable national state; the conditions for surmounting the social crisis brought about by the combined result of excessively uneven regimes of participation and the demonstration effect of the fully developed countries; the conditions for surmounting the political crisis, in the strict sense of the word "political," caused by the lack of representativeness in the process of the formation and exercise of power, and the consequent incompatibilities between the process of power and the aims of a given plan. The reason for this threefold distinction, although almost obvious, merits brief elucidation. Political conditions, in the broad sense of the word "political," which make it possible to plan development, are those which, while external to the validity of the plan, relate to the chances that the public power will consistently be able to pursue its development policy in the formulation and execution of the plan. The first possibility in this connection relates to the viability of the politically independent national community's development as a national state because, given the existing system of national states, all

Political Conditions for Planning

31

effective planning is, as a rule, an act of the national state and its object is the nation itself. The second of these possibilities refers to the surmounting of the social crisis. Since all differentiated underdeveloped communities are affected by this crisis as the combined result of the excessive inequality of their regimes of participation and demonstration effect of the fully developed countries, unless the evolution of the process of social crisis is directed in a way compatible with the aims of the plan, no development plan will be sufficiently effective. Finally, the third possibility refers to the surmounting of the immediate political crisis because effective implementation of any plan will obviously depend on the effectiveness of the process of power on which it is based.

• Proposition 7: The political conditions, in the broad sense of the term, which make it possible for a community to plan its development, embrace those conditions external to the validity of the plan that relate to the likelihood that the public power will be able consistently to proceed with the formulation and execution of the plan. • Proposition 8: The conditions referred to above relate to three orders of possibility: I. The community's possibility, as a politically independent national community, of developing as a national state. II. The community's possibility, as an underdeveloped society, of surmounting the social crisis induced by the combined result of excessively unequal regimes of participation and the demonstration effect of fully developed communities. III. The community's possibility of surmounting the political crisis provoked by the lack of representativeness in the process of the formation and exercise of power.

4/PLANNING AND THE NATIONAL STATE

The National

State

There are two senses in which development planning by modern states must be regarded as national: the first expresses the fact that modern states as political organizations are national states; in other words, that communities politically organized in the form of a state are nations. In this sense, to say that development programing is national is to refer to the idea of sovereignty, an idea which expresses the community's exercise of its faculty of political self-determination. On the other hand, the community that aims to develop itself through planning is a nation, affirming itself as such. In this second sense, to say that development planning is national is to refer to the idea of nationalism and to voice the community's intention, as a nation, of making use of the technique of planning through the state apparatus to preserve and foster its nationhood. The process of the formation of nationality and the process of economic development have a common historical origin. Both are products of Western civilization after the Renaissance. It was the new vision of the word — secularized, rationalist, naturalist, and individualist— established by the Renaissance that made possible economic development as structural change of the economy and of society. And it was capitalist development, extending and promoting the interchange of goods between town and country, that tightened the bonds uniting peoples sharing common ethnic and cultural traits and occupying neighboring territories. In the interests of their economic development and defense (although under various forms of coercion), these

Planning and the National State 3 3 peoples joined together to form a larger unit, the nation, an integration expressing their aspiration toward a common politico-juridical order was successfully established through the national state. Constituted as a form of association through which the communities of medieval Europe accomplished their development and entered the modern age, the nation, politically organized as a national state, is today still the most logical form of association for the development of communities, now no longer simply within the framework of a single continent or culture, but of the whole world and all cultures. W i t h o u t going into a detailed analysis of this subject, which lies outside the scope of the present study, 1 the two main reasons for the continued importance of the nation as a framework for development call for some comment. T h e first of these derives from the very nature of nationality. T h e nation is a particular form of society, characterized by the objective solidarity binding the nation to its individual members, founded on common characteristics and interests, and the subjective solidarity binding these members to the project of nationhood founded on common aspirations for political integration. Thanks to this twofold solidarity, the national form constitutes a corrective to the centrifugal forces generated in a community by the disparity of the regimes of participation. Given their common nationalist feelings toward the national society as a whole, the masses and the elite, in their relationship to each other, tend to be considerably more compromising — that is, on the one side, less exploitative, and on the other, less demanding — than they would otherwise be. Among other factors, it was because of national solidarity that the bourgeois-proletarian class struggle has followed a course other than that foreseen by Marx since the last quarter of the nineteenth century. And it was because Marx misunderstood the nature of the nation, considering it a simple superstructure of the capitalist mode of production, that Stalin's un-Marxist policy of building socialism in a single country has been crowned with success. T h e same reason accounts for the increasing independence of the socialist countries among themselves and vis-a-vis the USSR. Nationalism, as the subjective expression of national solidarity, con1 For a more extensive treatment of the subject by this writer, see Ο Ναcionalismo na Atualidade Brasileira, ISEB, Rio, 1958. See also "Brazilian Nationalism and the Dynamics of its Development," W a s h i n g t o n University, Studies in Comparative International Development, vol. II, no. 4, 1966.

34 Economic and Political

Development

stitutes a built-in force of social integration, urging toward broader and more egalitarian participation and therefore national development. The second reason for the persistence of the national state as a framework for development is a consequence of the first: the nationalism of others. In an international set-up in which all politically organized and self-determining nations are national states, any community which fails to organize itself as a national state cannot defend its members from the nationalism of others, and consequently, within its own territory and within the very limits of its political jurisdiction, it will be vulnerable to the discrimination practiced by other national entities at the expense of its own members. This discrimination is determined by the nationalistically oriented actions of other nations and the inability of the non-national community to take counteraction. It is true that the institution of the national state has been in crisis since the First World War, and even more so since the Second, in view of the technological and military conditions of our time and of the incompatibilities which have arisen, not only between the sovereign nations severally but also among those nations jointly, and the absolute need for an effective and transnational politico-juridical order for the whole world. Like all historical formations, nations had a beginning and will have an end. This inevitable end notwithstanding, the national form will continue to be indispensable so long as the most powerful states in the world continue to be nationalist, and hence so long as national entities stand in need of national protection against the discriminations practiced as the result of the nationalism of others, and so long as there continues to be no other viable form of association to replace whatever it is that constitutes, in the national form, both a corrective to the centrifugal forces at work in the community and an immanent propensity to development. This situation, although transitory from the historical viewpoint, still exists and gives rise to two serious consequences for the planning of development in present-day communities. The first is that development for small underdeveloped nations is becoming increasingly nonviable. The second is that, in the large underdeveloped nations, development tends to provoke a contradiction between the political conditions and some of the economic prerequisites for development to proceed.

Planning and the National State 3 5 Nonviability

of the Small Underdeveloped

Nations

What makes development nonviable in the small underdeveloped nations today is the fact that, given the limitations of their natural and human resources, the external conditions to which they are exposed and, as a rule, their own internal workings, they neither have the means to achieve their socioeconomic development individually, nor are they in a position to do so collectively, through profitable international exchanges or equitable association with other countries. The major obstacle to the individual development of the currently underdeveloped small nations is that the scantiness of their natural and human resources bars them from using their domestic markets as a means to protect their industrialization. Since the nineteenth century the classic strategy used by the latecomers to higher technology to promote their industrialization (whether by capitalist or by socialist methods) has been (1) the protection of their own domestic markets, through suitably high customs tariffs and other devices, from otherwise overwhelming foreign competition, and (2) the possibility of expanding at a convenient rate, under their own control and for their own purposes, their own investment processes.2 This dual process enables the country to control the gradual formation, expansion, and diversification of a domestic industrial system until such time as it reaches economic and technological maturity, 1 While the protectionist aspect of this strategy has been widely acknowledged and accepted by most economists, there is, chiefly among classic liberals, much less agreement on the relevance of relative self-sufficiency in the investment process. The United States, in the nineteenth century, and Canada in the twentieth, are usually presented as examples of successful national development supported initially by foreign capital. What is easily forgotten in such examples is that foreign investment in the United States was provided by individuals and small firms who were led to spontaneous nationalization by the very success of their ventures. Today, however, foreign capital is provided by gigantic corporations, mostly based in the U.S., whose resources and life expectancy surpass, often many times over, those of the nations in which they are investing. The controversies which have arisen in Canada through her excessive dependence on and control by U.S. capital invalidate this particular example and confirm the author's views. Moreover, the many similarities between Canada and the U.S. make of the former a special case, not comparable to others.

For a more extensive analysis of this question, see the author's study in How Latin America Views the U.S. Investor, Raymond Vernon, ed. (New York: Frederick Praeger, 1966), pp. 67-94

36 Economic and Political

Development

and becomes capable of international competition and self-sustained development. Such strategy cannot be adopted if a country's natural and human resources are inadequate, given the existing technological level, to support the financial cost involved, to provide the input for the developing industries, and to guarantee the consumption of their products. This amounts to a definition of what may be considered, at any historical moment, a "small" country, in terms of national viability. On the other hand, given the conditions of our time, characterized by the strong nationalistic orientation of the structure and policies of the developed countries and the superpowers, international cooperation and other similar prescriptions do not offer a real alternative for the developing countries. Lacking the means to develop individually, then, the small underdeveloped nations are at present also barred from collective ways to do so. Such ways are ultimately (1) the promotion of a profitable international trade, and (2) an equitable enlargement of the country's own territory through the establishment of common markets, and similar multinational arrangements. But the underdeveloped small nations of today cannot develop through promotion of international trade, because, being primary goods producers, they are affected by a secular propensity to a deterioration in their terms of trade, as demonstrated so exhaustively by the studies of ECLA and Raul Prebisch. On the other hand, they cannot change the composition of their international trade because, as we have seen, they lack the conditions for industrializing. The second way of collectively promoting development — through common markets and similar arrangements — is also, de facto although not de jure, beyond the real scope of the small backward nations. In the first place, with very few exceptions, their domestic conditions prevent them from pursuing, in any lasting and consistent form, an international policy oriented toward furthering their national interest. Divided internally between the claims of uneducated and unorganized masses and the exploitative interests of the ruling elites who depend on foreign forces to maintain their local privileges, and who tend to be, as a rule, merely the representatives and agents of foreign concerns, such countries are not capable of formulating nationally oriented international goals; and still less are they capable of implementing them. Moreover, whatever their policies, international conditions at present do not allow them to become members

Planning and the National State

37

of any valuable common market system on equitable terms. They cannot associate with the developed countries or the superpowers except at the price of some sort of neocolonial or satellitic economic and political dependence. Nor can they form among themselves, as has been demonstrated in the typical case of the Central American Common Market, a new and larger economic system, oriented toward the promotion — albeit within the framework of a collective commitment and the consequent restrictions this entails — of national development in the member-countries. Wherever such common markets have managed to come into being, the strategic sectors are taken over or controlled by foreign interests. The small member-nations merely provide the geographic and social setting for processes lying outside their sphere of decision and a means of capitalization for foreign companies, mostly the large U.S. corporations — the end result being the same neocolonial or satellitic dependence. As has been noted, smallness is, of course, a relative concept. In the case under review, it varies historically according to technological development. This, among other factors — notably the distinct international conditions prevailing in the nineteenth and early twentieth centuries — is why the small developed countries of today, such as Switzerland, Belgium, Holland, and Denmark, have been able to reach their present stage without having lost their nationhood or independence. They were not too small for the level of technological requirements they had to meet at the take-off phase.3 Furthermore, at that time the gap between the advanced and the less advanced countries was not yet so tremendously wide. These small European countries could thus make full use of their own national resources to support their development; later, by timely and convenient specialization in a few items for which they enjoyed special advantages, natural or acquired — such as Swiss watches, Belgian precision instruments, Dutch and Danish dairy produce, and so on — they were able to find a comfortable niche in the international market and continue their development by means of a profitable international trade. Nonetheless, these countries and even much larger ones — as is, actually, the case of all the European countries except the Soviet • It is worth noting that under the technological conditions of the nineteenth and early twentieth centuries, a good-sized steel plant would economically be based on a 10-ton-a-day blast furnace, while today a 1,000 t / d blast furnace would be considered the minimum acceptable size, and most blast furnaces have a capacity of 5 , 0 0 0 t / d .

38 Economic and Political Development Union — can no longer continue in the same way, and are obliged to form common markets and to make similar multinational arrangements. W i t h their previous achievements and present development, however, they are equipped to form or join common markets on equitable terms, without sacrificing their national character or becoming satellites of the superpowers.4

• Proposition 9: So long as the present system of national states persists, small underdeveloped nations cannot develop, either as independent national communities for which they lack the real support needed, or by renouncing their national sovereignty under penalty of subjection to the discrimination practiced by other national entities.

Contradiction

of the Large

Nations

The contradiction confronting the large underdeveloped nations seeking to foster their development is that their capital needs clash with their need for national affirmation and consolidation. Faced with gigantic tasks to be accomplished in relatively short periods, these nations tend to need massive foreign investments to complement their own deficient investment capacity and sustain the minimal rate of growth required to overcome their economic backwardness. The greater their desire to maintain a free-market capitalist system and the less they are willing to accept sacrifices by their own people, the greater will be their need for foreign capital. If they adopt this course of action, however, such countries will be allowing the great international consortiums to acquire growing control of strategic sectors of their economy, which will come to be dominated by interests that differ from and are potentially opposed to the national interest. W h e n such a contradiction is virtually or actually formed between the interests dominating the economy and the national interest per se, if the conflict is resolved in favor of the national interest, the ' T h e favorable conditions of ( W e s t e r n ) European nations do not, however, spare them the serious political problems arising from the need to adjust their national interests, not only to collective European requirements but also, and to an even greater extent, to the international interests of the United States. T h e degree, nature, and limits of any European self-determination not influenced by the Americans is the issue which ultimately separates De Gaulle from the United States.

Planning and the National State

39

consequent withdrawal of foreign investment will jeopardize the country's rate of development. If the conflict is resolved in favor of the foreign interests controlling the economy, the nation will lose its power of self-determination to the detriment of its own destiny and, in the last analysis, to the detriment of the economy itself, since economic development will be incompatible with the community's political retrogression. Given the conditions previously mentioned — and so long as the system of national states persists — for the small nations their only chance of escaping the dilemma of stagnation or colonialism is for them to confederate and form a broader economic, cultural, and political unit, as long as they are allowed to do so by the domestic and international political conditions. Ideally, this should be the way out for the Central American countries. Similarly, in the case of Greece, this was the aspiration of the Greek majority in Cyprus, balked by the strategic designs of Britain and the nonconformity of the Turkish minority. For the large underdeveloped countries — insofar as the system of national states persists — the only chance to foster their development and resolve the contradiction between the need to absorb foreign capital for maximum expansion of their investment capacity and the need to affirm and consolidate themselves as national states, lies in adjusting their economic structures to the imperative of preserving national autonomy, and firm adherence, through appropriate planning, to a policy of savings, investments, and production which will sustain the maximum rate of development that the community will stand. 5 • Proposition 10: Large underdeveloped nations are faced with the contradiction of needing massive foreign investment to attain an appreciable rate of development while being unable to develop as national communities if the key sectors of their economies fall under the control of foreign interests, and thus, in order to resolve this contradiction, they must adjust their economies to the imperative of national autonomy by pursuing a policy of savings, investment, and production which will sustain the maximum rate of development that the community will stand. ° Focusing on the Latin American case, this problem has been more extensively discussed in my article in How Latin America Views the U.S. Investor, Raymond Vernon, ed., pp. 67-98.

5/PLANNING AND THE SOCIAL CRISIS

Social Crisis and the Welfare State Although development planning is an eminently rational act, whose validity can be determined by applying objective criteria which can be scientifically established, this rationality does not embrace all the assumptions involved in a program or all the ends envisaged. There is a voluntaristic element in the beginning and end of all planning which influences the premises upon which the objectives pursued are based. One of the most significant components of this voluntarism is the amount of participation in society enjoyed by the members of the community. In differentiated societies, only in theory is there equal participation for all members of the community. Empirical observation suggests a tendency in all such societies to formation of three main social strata — lower, middle, and upper — arranged quantitatively in decreasing order from the lower stratum upward. The propensity of the lower stratum to increase its participation in society to the detriment of the advantages enjoyed by the upper stratum, and the propensity of the latter to cling to its benefits and increase them at the expense of the lower, generates social tensions between the two and guides the society's ideological formulations. 1 Any marked increase in social tensions converts the existing social relations of the different strata into social struggle and brings about 1 Such a propensity, in periods of stagnation equilibrium or in pretechnological societies, when the total amount of consumer goods lags behind population growth, leads to a "zero-sum" game at the expense of the masses.

Planning and the Social Crisis

41

a crisis in the existing social order. Such a crisis will occur whenever the relations of participation cease to accompany the changes instituted in the community by any modification of the real or ideal factors which condition it. Social tensions and ideological influences will of necessity affect all political acts, notably those which, in planning economic development, will interfere with the structure of supply and demand, consumption and investment, and will therefore alter the conditions affecting the relations of participation, affording an opportunity for these to be altered accordingly. In the early stages of the Industrial Revolution the substitution of machines for men, and later the substitution of steam for the old natural sources of energy, wrought a complete change in the system of real factors conditioning society, bringing with it corresponding changes in society itself: an enormous increase in the supply of manufactured goods accompanied by a sharp drop in prices, considerable accumulation of profits in the hands of the owners of the means of production, and a great increase in productivity. But this profound change in society was not followed by corresponding improvement in the living standards of the lower social stratum. In the rural areas, village communities disappeared, common lands were sold, and the surplus manpower created by the greater rationalization of agriculture was exported to the towns. T h e growing contingents of workers seeking employment in the nascent urban industries permitted these new industries to keep wages down to subsistence level despite the increased productivity achieved through machinery and steam-power. Hence the profound social crisis which erupted in the second half of the nineteenth century, leading the proletariat to organize trade unions and to ally the growing bargaining power of the unions to the revolutionary pressure of the masses in the streets and their electoral power at the ballot box. This reaction enabled them to improve their living standards, depressed at the beginning of the Industrial Revolution, by political means. By the end of the nineteenth century, the proletariat had managed to raise its living standards to a level far higher than before the Industrial Revolution, without basically altering the standards of living of the middle class and the bourgeoisie. T h e benefits of the increased productivity achieved through economic development, at first the monopoly of the bourgeoisie, were more equitably redistributed among the different social strata as a result of pressure from the masses. In the fully developed countries

42 Economic and Political

Development

this process was accentuated after the First World War. The "welfare state" was established, class differences were attenuated, and the participation of the proletariat was put on the same footing as that of the middle classes. On the other hand, income tax and death duties reduced the relative share of the bourgeoisie to a level approximating that of the middle class, so that in order to stay in the upper stratum of society the bourgeoisie was forced to abandon its role of simple ownership of the means of production and become an entrepreneurial class. This evolutionary process, however, was made possible by the fact that a great increase in productivity could be achieved through economic development, which in turn was based on technological innovations, and the massive investment of capital which had been accumulated by the Industrial Revolution arid saved from consumption because labor was consistently underpaid and because of the attitude toward savings prevalent among the property-owning classes of the nineteenth century. The Demonstration

Effect

What happens in the case of countries still in a state of underdevelopment and engaged in promoting their development is that, although their real conditions differ from those of developed countries in that they lack accumulated capital and generalized education, their ideal conditions are the same, since these are inherent in the present day. The masses in the underdeveloped countries aspire to the benefits of the welfare state and want to share in the advantages of an increase in productivity which is only just beginning to take place. This aspiration, strongly reinforced by the example and propaganda of the developed societies — the so-called "demonstration effect"— encounters a dual and interconnected difficulty: the circular causation process of uneven participation and low productivity. This process is, in fact, precisely what underdevelopment is about. Too many have too little, or almost nothing, of everything — too few opportunities, too little education (in values and skills), wealth, and influence — while, at the same time, if the means monopolized by the privileged elite were to be directly redistributed among the rest of the society, they could not perceptibly raise the living standards of the masses or, unless such redistribution were accompanied by structural changes, generate a durable and self-sustaining increase in the general productivity of that society.

Planning and the Social Crisis

43

The trouble with the demonstration effect, therefore, is the shortterm impossibility either of meeting the needs created by the "revolution of rising expectations" or of correcting the social distortions which lie at its roots. Only by a substantial extension of social participation, allied to a corresponding increase in a society's general productivity, is it possible in the course of time to satisfy the rising expectations of the masses and keep the process moving. Such a result can, however, be achieved only if — aside from the elites being willing or compelled to grant a wider participation and greater rewards to the masses — there is an effective per capita rise in productivity, which again calls for a corresponding rise in the investment capacity of the society and in the level of education, both in quality and in orientation, of the population. Societies affected by the demonstration effect tend, then, to fall into one of two equally fatal traps: (1) a self-defeating redistribution of wealth in anticipation of increased productivity, or (2) a selfperpetuating stagnation brought about by the coercive prevention of any broadening in the participation of the masses. Anticipatory redistribution of the benefits of increased productivity, particularly when carried out under the direction of the former elites, tends to be effected by inflationary means.2 And even when the former elites are overthrown and dispossessed, the new rulers cannot avoid the need to reduce still further the consumption level of the masses — in accordance, for instance, with the Soviet model — if they want to escape the trap of self-defeating policies. Coercive "marginalization" of the masses (usually adopted and justified as a means for economic austerity) is a no less self-defeating practice because, on the one hand,, it perpetuates, with continued underdevelopment, the very causes of the social crisis, and on the other hand creates an uncertain equilibrium, maintained by force and doomed likewise to be upset. Models

for Surmounting

the Social

Crisis

As we have seen, there are two aspects of the problem of the social crisis and the demonstration effect it induces. It is caused by the extremely uneven participation regime prevailing in underdeveloped societies, exposed as they are to the example of the generalized levels of affluence attained by the developed countries. This is the source of ' Inflation ultimately consists in the distribution of nominal shares of wealth without any real counterpart.

44 Economic and Political Development the revolution of rising expectations talcing place among the masses in the underdeveloped countries. But the problem is complicated by the fact that neither the simple satisfaction nor the outright rebuff of such expectations is likely to be successful. If the expectations should be directly satisfied, either by elites prepared to compromise or by revolutionary counter-elites, the results would be self-defeating, since the inadequate accumulation of wealth and the low productivity of such societies would be aggravated by any real increase in the consumption ratio. On the other hand, if the marginal status of the masses should be maintained by force, and their expectations continue to be repressed, the end result would be no less self-defeating, since the cause of the trouble — underdevelopment — would be perpetuated, and the political instability this generated would ultimately prove uncontrollable. Solution of the problem thus implies a dual requirement. It calls, on the one hand, for the promotion of the society's socioeconomic development, by whatever means prove adequate, which would ultimately bring about a rise in the social productivity and the level of participation of the masses. On the other hand, whoever is in power and whatever the prevailing regime of participation, the percentage of investments from G N P must be substantially increased, with the inevitable consequence that national consumption must be reduced as much as is necessary to provide that proportion of domestic savings needed for investment.4 The only consistent way to counter anticipatory consumption of the possible gains to be derived from increased productivity is to bring to public knowledge the national accounts and, in the light of these, to lead the community to opt for a rate of consumption and savings compatible with its investment needs, apportioning the adopted capacity of consumption and of savings among the social strata. Such an operation will, however, be essentially controversial, given, within the admitted consumption ceiling, the propensity of the lower strata to improve their living standards to the detriment of the upper strata, and of the latter to increase their advantages at the expense of the lower strata. The latter aspect of the question removes it from the social to the political sphere. The strength of each social stratum varies from 1 The theoretically possible alternative, involving a substantial inflow of foreign investment, would ease restrictions on national consumption only at the expense of national autonomy, as analyzed in Chapter 4.

Planning and the Social Crisis 45 country to country and from period to period. As we saw at the beginning of this study, Cromwell's Revolution enabled eighteenthcentury England to establish bourgeois parliamentarianism, which at one and the same time institutionalized social tensions and secured a political and juridical order which so adequately safeguarded bourgeois interests that the bourgeoisie managed to promote spontaneous development of the community while pursuing its own interests. For the underdeveloped countries of today the solution of bourgeois parliamentarianism on the British model is completely out of the question. On the other hand, any solution of the social problem is dependent on the preliminary question of the country's viability within the framework of the national state. Given this, three hypotheses, or models, are available to the modern underdeveloped nation for coming to grips with the social crisis and effectively programing its development. These three hypotheses, or models, are Bismarckism, state capitalism, and socialism. As we shall see from the analysis that follows, these three hypotheses, in accordance with the empirical conditions existing in the developing society, are related, respectively, to the political predominance of the bourgeoisie, of the middle classes, and, in the case of socialism, to the occurrence of a special set of circumstances according to whether the particular form of socialism involved is "primary socialism" or "derived socialism." Bismarckism, better described as neo-Bismarckism, to stress its adjustment to modern conditions, is the political model involving the exercise by the head of government of arbitration between the different social strata, based on objective national accounting, which will ensure the greatest possible investment capacity that the community can stand, regulating each stratum's participation in accordance with its political capacity for pressing its claims and securing for national entrepreneurs the leadership in promoting the development of the community, conceived as a nation, in accordance with the program devised by the state. State capitalism is the political model that involves overcoming the social crisis by transferring initiative and control of private enterprise to the state and by considerably leveling the consumer capacity of all social groups and individuals. It is distinguished from socialism by the fact that it does not legally abolish private ownership of the means of production and does not do away with the market economy.

46 Economic and Political

Development

It is distinguished from neo-Bismarckism in that the state does not confine itself to programing development and regulating patterns of participation through arbitration, but also becomes, through taxation, the principal source of savings and investment, and assumes responsibility, through its technocratic bureaucracy, for embarking on the initial undertakings. Lastly, developmental socialism, whether "primary" or "derived," displays the characteristics of state capitalism in an even more radical form, suppressing the right to private ownership of the means of production and the market economy. W e will take a closer look at the main characteristics of this model in the next chapter and consider the conditions under which it can be applied. It may be as well to note immediately, however, that socialism, as a political model for surmounting the social crisis and promoting the economic development of underdeveloped countries, is quite different from European social democracy and British Laborism — not because it need be less democratic in principle, although as we shall see later, the democratic content of regimes engaged in fostering development is determined, if they remain consistent with their aims, less by the political ideals of the protagonists than by the degree of compatibility between the objectives pursued and the free initiative of the agents. For this reason, developmental socialism is always an authoritarian regime, and in its "primary" form represents the successful overthrow of the ancien regime by a revolutionary counter-elite. Nevertheless, what essentially distinguishes the socialism here envisaged from the Continental and British models is the fact that the latter constitute the most finished forms of the welfare state, whereas by contrast socialism for development is a regime which, at the expense of consumption, maximizes the savings for investment, following the example of Soviet socialist achievements.

• Proposition 11 A. The social crisis can only be surmounted by making public the social accounts in order to lead the community, in the light of these, to opt for a certain rate of consumption and savings proportionally distributed among the social strata. B. To enable this pro rata distribution to be carried out, a political formula must be adopted which corresponds to the real possibilities of the exercise of power by the ruling social stratum, and

Planning and the Social Crisis

47

the type of leadership it is able to provide; given present-day conditions, there are three possible models for this effect: I. Neo-Bismarckism: suitable for countries in which the ruling stratum is the entrepreneurial bourgeoisie. This model corresponds to the exercise of arbitration by the head of government between the different social strata, based on objective social accounting, which will ensure the maximum power of investment that the community can stand, regulating the participation pattern of each stratum in accordance with its effective political capacity for pressing its claims and securing for national entrepreneurs the leadership in promoting the development of the community conceived as a nation, in accordance with the plan devised by the state. II. State capitalism: suitable for countries led by the technocratic middle class. This model corresponds to the transfer to the state of initiative and control of private enterprise and the pronounced leveling of the consumer capacity of all strata and individuals. III. Developmental socialism, in its two versions, "primary" and "derived": the former suitable for the very special cases of countries in which exploitation by the dominant stratum and its obscurantism condemn the middle class to a marginal and clandestine status, and create conditions for the emergence of a counterelite of professional revolutionaries; "derived" socialism corresponding to the need to strengthen state capitalism economically or politically. In both cases this model corresponds to a more radical form of state capitalism, which socializes the means of production and suppresses the market economy.

6/PLANNING AND THE POLITICAL CRISIS

The Plan and the Process of Power In the two preceding chapters we had the opportunity of analyzing two of the political conditions, in the broad sense of the term "political," on which the implementation of a program depends, with regard to the circumstances external to the plan: the country's viability as a nation within the nation-state framework, and, for underdeveloped countries, the possibility of surmounting the social crisis brought about by the demonstration effect of the more fully developed countries and by the heightened social tensions. W e must now look at the third of these political conditions, namely, the political compatibility, in the strict sense of the word "political," between the plan and the process of power. On the hypothesis that development programing is an act of the public power, performed in the exercise of its attributions and under the sovereignty of the national state, in principle the plan and the process of power should be compatible. Nevertheless, as has already been indicated in Chapter 2 of this study, in certain cases the original politicosocial situation may take a turn which makes it incompatible with the objectives or methods of the plan and, in other cases, the politicosocial situation as it originally appeared may have been unrepresentative or untenable, and thus come to reveal itself in a different and even contrary light. The problem in focus, then, is that of the effectiveness and representativeness of power in time, i.e. the true effectiveness of the

Planning and the Political Crisis 49 existing power. Strictly speaking, this question should be analyzed from both the domestic and the foreign viewpoint, the latter including the relations between the national power and the spheres of influence created by the two superpowers. So as not unduly to extend the scope of the present study, however, only the process of power within the framework of the national state will be considered in this chapter. The more relevant questions of an international order will be considered, where necessary, in the following chapter, in connection with the study of the political conditions for planning in Latin American countries. Power as Phenomenon

and as Norm

Modern political science, influenced particularly by North American ideas, has been concerned with identifying two distinct moments in the process of power: the formative moment, which is the specifically political process or, to use American terminology, the "input"; and that of the exercise of power, which is the governmental process, or "output." Regarded from another angle, power expresses itself in a community as a phenomenon and as a norm. As a phenomenon, power is the enforced "ought to be" which effectively shapes the behavior of a community's members. As a norm, power is the legitimate "ought to be" — that which has the capacity to engender a belief in its selfevident claim to obedience. The process of power is a dialectic of effectiveness and validity. The forces that really reflect the society and express the existing social system tend to be vested with validity and to secure assent, as well as effectiveness, by relating obedience to something which intrinsically engenders consent, that is, validity. On the other hand, formulations vested with validity arouse a desire to charge them with real effectiveness, thus making their obedience compulsory; in other words, rightful power becomes effective power. The order of effectiveness, considering the question in its broadest terms, is founded on the fact that the social group, being as it is, imposes itself as such. In other words, to use the language of political science, it is founded on the fact that power is the process whereby a community safeguards the existing social system, and insures, in accordance with this system, the realization of its ends. The order of validity is founded on the fact that human relations can only be established through the mediation of culture. The order of validity

50 Economic and Political Development is that of the effectiveness of a given culture, and within each culture constitutes the guiding line of significance and values in all communities. Representativeness as Political Mediation In politically developed countries the orders of effectiveness and validity tend to coincide: what is effective is valid, what is valid is in some way effective. Such a coincidence is due to the fact that the process of the formation, constitution, and exercise of power is representative of the social expectations as they arise from the regime of participation. This representativeness is not to be confused with the formal existence and operation of the mechanisms of representative democracy forged by nineteenth-century European liberalism, although it does depend on some mechanism of formal representation. There are politically underdeveloped countries, as, for example, Brazil, where the mechanisms of representative democracy existed and functioned before the 1964 coup, but in a largely formal way, representatives of the people being elected to the legislative and executive powers through the medium of these mechanisms. In spite of this, true political representativeness is still lacking, since the mere free and open functioning of democratic institutions does not lead to representativeness of governmental functions vis-ä-vis the political, or of the political functions vis-ä-vis the social. The machinery of representative democracy, when purely formal, may operate freely and openly and yet achieve a result of no more than passing significance. The deputies really express the clear majority of votes freely cast under universal suffrage by the citizens. The president of the republic, likewise elected by clear majority vote, under universal suffrage, expresses the strongest current of electoral preferences in numerical terms. However, since there is no political mediation between citizens and their legislative or executive representatives, these representatives cannot continue to represent the electorate throughout their term of office, nor can the electorate demand from their representatives the governmental decisions for which they were elected. There is thus a widening gap between the effectiveness and the validity of power and between real and apparent effectiveness. On the other hand, in politically developed societies, it is effective political mediation rather than the formal existence and operation

Planning and the Political Crisis 51 of the mechanisms of representative democracy that ensures political representativeness, although in principle one should not offset the other. The exercise of power, that is, governmental action, is guided by the political premises on which the government was formed — the ideological orientation and platform of the party in power. The party in power, in its turn, was elected and entrusted with the responsibility of government because it provided the most satisfactory ideological or programatic formulation of the community's interests and expectations, and the firmest guarantee that its actions would be consistent with its platform. These interests and expectations, in their turn, are duly represented by labor unions, associations, leagues, clubs, institutes, and similar bodies, which occupy the intermediate area between the sectional interests — professional, regional, vocational, and so on — and the expectations founded on the different patterns of participation, on the one hand, and the political parties and the government on the other. True political representativeness is arrived at through a process of growing rationalization of the community's "demand" for government action in terms of the different patterns of participation and collective interests, and the growing rationalization of the government's "supply" of enforceable programs to the members of the community, or the likelihood of government action on the part of the political parties aspiring to power. Rationalization of the demand for political decisions leads to the organization of collective interests through the medium of representative bodies, and to the mobilization of popular aspirations for improved living standards through the medium of class associations and claims for social justice. Rationalization of the supply of political services leads politicians aspiring to power to organize political parties representing social expectations and sectional interests, by offering platforms which take account of these expectations and interests and inspire confidence in the likelihood that they will be carried out if the party is elected. 1

Political Responsibility as Rationalization This same process of rationalization, moving from the members of the community to the political parties, and from the electoral parties to the community, will make the exercise of power at one and This analysis, first published in the Brazilian edition of this book ( 1 9 6 2 ) has since been independently developed by David Easton in A Systems Analysis of Political Life (New York: John Wiley, 1 9 6 5 ) . lr

52

Economic and Political Development

the same time both representative and responsible — representative, because the election will no longer resemble a snapshot of a discontinuous process, taken at an arbitrary moment, but will reveal a process vested with continuity and significance; responsible, because the government established will not, once the election campaigns are over, be left to carry on arbitrarily, cut off from any mediation with the community. It will have been formed by the selection of leaders from a party to which it is immediately responsible, and through which it is immediately responsible to the community. It is this responsibility that accredits the political parties and, to the public eye, makes it possible to regard the party platforms not as just inconsequent electoral expedients but genuine promises of future government action. In return, this responsibility, from the standpoint of the political parties, signifies that government programs, if they are to be carried out, must be tailored to the possibilities of the situation and contain objectives compatible with one another. If we analyze briefly the relations involved in representation along the lines proposed above, we find that in politically developed countries they operate on four levels: (1) the level of civil society; (2) the parapolitical level, involving representation of social interests and expectations; ( 3 ) the strictly political level of the parties; and (4) the level of the state, namely, the governmental level. This is set out in Table 1. Essentially, these relations take the form of demand and supply of political services, in the broad sense of the word "political," and can be considered in two ways: as the relations obtaining (1) within the community itself, including its associations of interests and classes and its political parties; and (2) between the political parties and the government. It is the degree of political representativeness that determines, in the course of a political mandate, whether power will be more or less effective in time, and consequently, with respect to the programing of development, whether the political premises upon which the plan was based will be maintained. Here again we find the contradiction that is peculiar to all efforts to promote development: the less developed the community, the more it needs to program its development, and the less likely it is that the plans adopted will be consistently implemented in view of the purely temporary effectiveness of power, consequent upon the lack of representativeness of the political process.

Planning and the Political Crisis 5 3 Table

1

Scheme of Political Representativeness Activity Level

Representative

Demand

Supply

4. Political level (aggregation of interests)

Political parties (in and out of power)

Power (preferably legitimate)

Government decisions (actual or prospective)

3. Cultural level (rationalization of interests)

Political clubs, newspapers, journals, groups of intelligentsia

Government decisions

Ideological and programatic formulations

2. Social level (articulation of interests)

Unions, associations, organized groups

Ideological and programatic orientation

Facilities for organization of interests, prestige, protection

1. Economic level (emergence of interests)

Classes, sectors, interest groups

Organization of interests, prestige, protection

Support

Underdevelopment

as

Political

Intransitiveness

2

Political underdevelopment is characterized by the lack of mechanisms and processes capable of ensuring political representation, Since publication of t h e Brazilian edition of this book there has been a rapidly growing literature on the subject of political development. This has become one of the most important branches of political science and has resulted in a fresh approach to t h e subject matter of the discipline. In the new studies there has been a shift from the former ethnocentric and static position, which tended to measure the development of any political system by its resemblance to a fixed standard — that of Western democracy, particularly in its current British or American versions. Political development is now regarded as the process of adjustment of a political system, at any historical stage of t h e overall development, to the functions required by this system as they arise from the economic, cultural, social, and political structural conditions. This historicofunctionalist position (shared by the present writer) is evident in the studies on political development recently published, and has led writers following lines of inquiry independent of this book to reach theories of political development and to propose political models similar to those here presented. See particularly David Apter, The Politics of Modernization (University of Chicago Press, 1965); 2

54 Economic and Political Development in the general sense of the term, for the community's social interests and expectations. On the parapolitical level, regional and class associations and allied bodies are almost nonexistent, and, when these do exist, the interests they purport to represent are not sufficiently integrated into the structure of the organization, so that such bodies tend to pursue their own corporate interests. An irresponsible and intransitive system of combinations among those in control of the party machine is thus brought into being, and they seize on it as a private tool for carving out slices of personal power. Cut off from the community, the political parties not only fail to represent different shades of public opinion, but act as instruments for distorting and violating this opinion. Since new elements are recruited by co-option, the system can be continued indefinitely. In those politically underdeveloped countries where the democratic machinery formally exists and functions, the parties at election time put up candidates chosen to suit the interests of the party bosses, and the people are obliged to vote for one of these candidates, in spite of the fact that the true social interests have failed to find adequate expression.

Governmental

Irresponsibility

Deprived of genuine representativeness by the characteristics originally vitiating the political parties, a government thus elected, although roughly expressing the preference of the majority of voters at the time of the election, will not be in a position to continue doing so, marked as it is by a dual irresponsibility. In the first place, such a government is irresponsible in the sense Edward Shils, Political Development in the New States (Mouton & Co., s'-Gravenhage, 1 9 6 2 ) ; John Kautsky, Political Change in Underdeveloped Countries (New York: John Wiley, 1 9 6 2 ) ; and Louis I. Horowitz, Three Worlds of Development (New York: Oxford University Press, 1 9 6 6 ) . See also the six volumes on political development published, under the sponsorship of the Committee on Comparative Politics of the Social Science Research Council, by Princeton University Press; Lucien Pye, Aspects of Political Development (Boston: Little, Brown, 1 9 6 6 ) ; Samuel Huntington, "Political Development and Political Decay," World Politics, 1 7 : 3 8 6 - 4 3 0 (April 1 9 6 5 ) ; Almond and Powell, Comparative Politics: A Developmental Approach (Boston: Little, Brown, 1 9 6 6 ) ; S. N. Eisenstadt, Modernkation: Protest and Change (Englewood Cliffs, N.J.: Prentice-Hall, 1 9 6 6 ) ; Jason L. Finkle and Richard W . Gable, eds., Political Development and Social Change (New York: John Wiley, 1 9 6 6 ) .

Planning and the Political Crisis

55

that it is really answerable to no one for its actions. Once the elections are over, the political parties, which are little more than selfserving machines for conquering power, practically disappear, to hibernate until the next elections come round. In place of the parties we have the government/opposition dichotomy, based on the allocation of government posts and signifying little more than the opposition between those who have gained a place in the administration and those who have not. In such conditions, the government finds itself responsible to none, since politicians will be divided on the issue of who wields power rather than on how it is to be oriented. Hence, government comes to be confused with the personalities of those in power, or those who stand for the existing power structure, and so comes to be exercised in a manner which has nothing to do with the expectations of the voters.3 The second form of irresponsibility of such governments takes the opposite turn: their inability to fulfill the expectations vested in them by taking appropriate administrative action. T o the extent that the machinery of representative democracy formally exists and functions, the aspirations of the masses — however feasible or coherent — tend to conflict with the interests of the ruling class and the professional politicians. Since there is no true political party to afford a means of mediation between government and community, the government cannot stave off pressure from the ruling class and the politicians, frequently backed by threats of military intervention and allied to all kinds of external pressure from one or other of the two superpowers. Thus we have the apparent paradox that the greater the bargaining power of the masses when the moment comes to cast their votes, the less responsible to the voters will the government become, in view of the vicious circle created by its lack of rapport with the community. This is the origin of the political dilemma in which popular governments, elected by mass movements of protest against the status quo, usually find themselves when confronted by the popular expectation of a new deal. If they stick to their electoral promises and try to fulfill the popular expectations these have aroused, they face a growing and implacable opposition from the elites, who are likely to mobilize the military against them in a successful coup. If they ' Aside from cultural influences, this is the structural cause of personalismo Latin American politics.

in

56 Economic and Political

Development

seek to placate the elites to assure their own survival, they are forced to abandon all the more relevant aspects of their progressive program and to betray their electoral promises. The Political Process as a Dynamic

Factor

A community's political underdevelopment can be regarded either as the political aspect of its overall underdevelopment, or as being more or less pronounced than its economic, cultural, and social underdevelopment. The first case is included in the hypothesis already considered in this study of societies in a state of stagnation-equilibrium. In this case, political underdevelopment can only be overcome when this equilibrium is upset, either by the intervention of some external factor, or because the course of the regression process unduly alters the existing relations between the population and minimal conditions of subsistence. In cases where the society, although politically underdeveloped in comparison with others, is less markedly underdeveloped politically than on the other structural levels, the political process will become the dynamic factor in its development. This hypothesis is usually verified in the early stages of political revolutions vested with historicosocial consistency, that is to say, revolutions effectively oriented toward the greater rationalization of the community. Thus in Lenin's Russia, prior to the Five Year Plans and their consequent transformation of Soviet society, when the crises provoked by the Revolution and foreign intervention had depressed the economic indices to far below their prewar levels, the Soviet political process, although underdeveloped compared with those of the more advanced Western countries, was the dynamic factor in Russia's development, being much further advanced than the Soviet economy and culture. The same holds true of Kemal's Turkey and, in our own time — although to a different extent — of Mao Tse-tung's China and Nasser's United Arab Republic. The Political Process as a Retarding

Factor

The hypothesis that most concerns us in this study, however, is the opposite one, namely, that of political underdevelopment which is more pronounced than the society's economic and cultural development. In this case, the society shows a tendency to economic, cultural, and social development either because a dynamic sector of entrepreneurs has been formed among its bourgeoisie, or because a

Planning and the Political Crisis 57 technocratic vanguard has developed among its middle class, capable of leading the public administration in the direction of development. This propensity to development, however, is not accompanied by a corresponding political change, and, as we have seen from the foregoing analysis, the formation and exercise of power continues to lack true representativeness. As pointed out in the first chapter of this study, development is a total social process, characterized by certain correlations between the structural levels of the society. Stagnation on any of these levels, especially on one of the two dynamic levels — the political and the economic — must either be overcome by developmental pressures from one of the two dynamic sectors, or must bring about stagnation of the whole system. In cases where political development fails to keep pace with overall development, the social forces fostering development in the economic field are thwarted by the obstacles hampering political development and tend to be mobilized in order to surmount such obstacles. T h e alternatives open to the community in which the political process is the chief obstacle to development are determined by the social forces which provided the impetus for the community's development on the other structural levels, notably on the economic level. On the other hand, since underdevelopment in our time always brings about — albeit in different forms and in differing degrees — a social crisis, produced by the demonstration effect of the fully developed countries and class tensions, as analyzed in the previous chapter, the choices before the community for overcoming the political obstacles to development are determined by the way in which the community succeeds in surmounting the social crisis. There are three possible choices, corresponding to three political models for overcoming political underdevelopment: national capitalism, state capitalism, and developmental socialism.

National Capitalism In cases where development has been promoted mainly by the entrepreneurial sector of the bourgeoisie, that class can be led to support the establishment of true political representativeness through the organization of a "development party," committed at one and the same time to the interests of the entrepreneurial group and to the interests of the masses. T o surmount the social crisis, this party demands arbitral leadership of the neo-Bismarckian type. Repre-

58 Economic and Political Development senting the interests and expectations of the entrepreneurial bourgeoisie, the development party — as an ideal type — formulates a national capitalist ideology with a strong emphasis on heavy initial public and basic investment, on increased productivity of capital and labor, and on the consolidation and future greatness of the nation through its complete economic emancipation and its freedom from external political pressures — an emphasis which makes the party incline to neutralism. On the other hand, being linked with class aspirations, the development party discountenances precapitalist forms of economy, favors the socialization of public sectors, strives to promote equal opportunities, and attempts to insure the maximum social well-being compatible with the needs of productive investment. This type of party is thus at one and the same time opposed to the reactionary parties with a stake in stagnation, and the radical revolutionary parties opposed to private ownership of the means of production. To the extent that bourgeois leadership of the community succeeds in establishing itself, the development party tends to become the majority party, and through it, the politicians representing the bourgeois entrepreneur group manage to gain control of the government by electoral means, and to wield power for advancing national development. The most typical example of this solution has been post-Independence India. Indian democracy is a national-capitalist democracy, the Congress Party is a development party, and Nehru was a neoBismarckian leader who leaned as far to the left as the conditions of his country and of his time demanded, without jeopardizing the national investment capacity and the effective administration of public or private undertakings. This solution is similar in some ways — although in this case the degree of representativeness was far less — to that of the alliance effected in Brazil, after the downfall of Vargas (1945), between the Partido Social-Democratico (PSD) and the Partido Trabalhista Brasileiro ( P T B ) . President Kubitschek's developmental administration (1955-61) also displayed characteristics of neo-Bismarckian arbitration.

State

Capitalism

When the dynamic factor in the promotion of a community's development is not its bourgeois entrepreneur class but the technocratic sector of its middle class, the conditions for the formation of a development party of the type described above will be lacking. The

Planning and the Political Crisis

59

technocracy is recruited from the ranks of the bureaucracy and armed forces of the ancien regime. It becomes aware of the country's problems, the need to promote its development, and the means required for this end; but it inevitably comes up against the political obstacle created by the forces controlling the process of power with a stake in stagnation and underdevelopment. The only solution available to the technocracy in such a case is the coup d'etat based on a conspiracy of "progressive officers" who, by assuming control of key military posts, mobilize the armed forces against the existing regime and establish state capitalism oriented toward the promotion of development. Given present-day conditions, it is part of the internal logic of this process that the new regime should ally itself with the urban proletariat and the peasant masses to keep itself in power and achieve its ends, thus taking on the character of a social revolution, that is to say, a revolution which, besides having economic development as its immediate aim, also seeks to promote social development by reducing the existing inequalities in participation. Furthermore, it is equally inherent in the logic of the process that the new regime, while not excluding the right to private ownership of the means of production, or suppressing the market economy, should take the form of state capitalism with the characteristics reviewed earlier. Its political control once achieved through the coup d'etat, the new regime soon begins to feel the need for an instrument of mediation between administration and community. This leads to the emergence of an "official" or "revolutionary" party which tends to be the only party allowed. Unlike democratic-bourgeois parties, and even the development party of the hypothesis outlined above, this party will not function as an organ for formulating "government programs" to put before the electorate. In the state capitalist regime, government programs are formulated by the government itself, both as effective government and administrative directives and as ideological fuel to feed the revolutionary passions of the masses. On the other hand, the role of the revolutionary party will be to organize the masses along revolutionary lines, to provide the revolution with a contingent of militants from whose ranks will be recruited both the group of professional activists and the personnel for the new administrative posts and armed forces. Nasser's Egypt is a typical example of this process of overcoming underdevelopment. Typical, too, is the country's evolution toward

60 Economic and Political

Development

the left, as the protagonists of the revolution, impelled by the objective logic of the process they have set in motion, shift from the original parafascist position peculiar to middle-class radicals (the Nagib and Revolutionary Council period) to state capitalism, forging and strengthening alliances with the Fellahin of the Nile Valley and the Cairo workers. Developmental

Socialism

W e have seen that the solution of a development party associated with neo-Bismarckism is the most viable for communities in which the bourgeois entrepreneurial group is instrumental in promoting economic development, but will only be viable given this hypothesis. W e have also seen that the solution of the coup d'etat and the implantation of state capitalism tends to be effective for societies in which significant bourgeois entrepreneurial leadership is lacking, and in which development is promoted from above, through a middle-class bureaucratic and military technocracy. The third hypothesis — that which is conducive to "primary socialism" — tends to arise in societies in which the ruling stratum not only keeps the country subject to the stagnation and regression-inducing effects of exploiting the masses, but exerts control through feudal and semifeudal processes which leave no room for the utilization of the middle-class intelligentsia in the bureaucracy and armed forces. Denied any participation in the state apparatus and economic system congruent with its qualifications, the middle-class intelligentsia is relegated to a marginal status and repressed to the limits of endurance. Condemned by the existing social system to clandestine and conspirational activity, it becomes a contingent of professional revolutionaries. It was the autocracy of Czarism and the semifeudalism of the Celestial Empire that forged the social revolutions of Russia and China. When in 1927 China, after Sun Yat-sen's republican revolution, reverted under Chiang Kai-shek to a reactionary regime, which exploited the masses and violently repressed reformist ideas, Chinese socialists, hitherto inclined to collaborate with the "Kuomintang," were driven to resort to a state of permanent revolution, which culminated in complete victory for the Party in 1949. "Primary socialism," conceived as a model for development and independent both of Cold War considerations and of ideological preferences, is thus the extreme solution for an equally extreme situation. Up to now, this form of socialism and this type of solution have

Planning and the Political Crisis

61

been fully adopted only by Russia and China. It must be added that in both cases the socialist revolution was successful only when the bureaucratic and military machinery of the ancien r6gime had already been practically dismantled by war with an external enemy: Germany in the case of Russia, and Japan in the case of China. The other version of this model is that of derived socialism. This would be a fitting designation for the adoption of a socialist model of development to replace an earlier distinct model, usually state capitalism. This hypothesis arises from the fact that state capitalism does not appear to be a permanent stage in the promotion of development. Implanted by the middle-class technocracy, in the absence of an efficient bourgeois entrepreneurial group, the success or failure of state capitalism tends equally to create the need to supersede it. If, at least legally, private ownership of the means of production and the market economy are retained, the success of the regime may lead to the gradual formation and expansion of a national bourgeoisie which, at a given stage of development, will seek to play a more decisive part in public affairs, leading the country toward a national capitalist regime through the emergence of a development party. This was what happened in Mustafa Kemal's Turkey, which, under the leadership of Mustafa Kemal's successor, Ismet Inonu, evolved from state capitalism to a form of national bourgeois capitalism, with the People's Republican Party functioning, to some extent, as a development party, and Inonu, also in terms peculiar to Turkish conditions, exercising a neo-Bismarckian arbitration. This was also the evolution of the Mexican revolution, from Obregon to Cardenas (state capitalism) to the national capitalism of Camacho and his successors. On the other hand, it can also happen that while still under state capitalism, the government, either to protect its economy from coming under the control of foreign capitalism — a control to which Turkey was to succumb after the Second World War under the cosmopolitan government of Menderes — or to embark on a more systematic and radical development effort, will be induced to suppress private ownership of the means of production, and to this end will have to adopt a socialist system of production. In this case — which seems to be the way in which the Nasser regime is moving — we would have derived socialism, not because of any original ideological choice, but because an operational decision had been taken as the prerequisite for the success of the efforts to promote development.

62 Economic and Political Development

and Political

Development Models

Three models of political development emerge from the foregoing analysis: (a) National capitalism: for countries where development is being promoted by the bourgeois entrepreneurial group, a regime established through the medium of a "development party" with neoBismarckian leadership which becomes — with the support of the masses and in opposition to both the reactionary and the radical "socialist" parties — the majority party, and as such assumes power, which it exercises in the interests of national development. (b) State capitalism: for countries where development is being promoted by the technocratic middle class, a regime usually established by coup d'etat, which, allied to the peasant masses and the workers, exerts power through the medium of a "revolutionary party" — generally the only one legally authorized — and tends to evolve toward either "national capitalism" or "derived socialism." (c) Developmental socialism as a radical form of state capitalism: characterized by socialization of the means of production and abolition of the market economy, and taking one of two forms, "primary socialism" or "derived socialism." Primary socialism meets the needs of those countries in which exploitation by the ruling stratum and its obscurantism condemn the middle class to a marginal status and the intelligentsia to a clandestine existence which leads to the emergence, mostly from its ranks, of a contingent of professional revolutionaries who, taking advantage of any weakness in the bureaucratic and military machinery of the ancien regime, gain power by revolutionary means with the backing of the exploited classes, who are incorporated into the revolutionary party. Derived socialism meets the need to strengthen the state capitalist regime in order to defend the economy from foreign interference, or to increase the national savings and investment capacity. These three models of development, although constituted as such on the political level, will acquire overall significance for the community in the course of the process of the conquest and exercise of power by the dynamic sector of the ruling stratum. In each of the typical situations in which the community may find itself, and accepting the basic premise that national entities will continue to exist, such models express the way in which the community can promote its development. Hence the premise that national entities will persist

Planning and the Political Crisis

63

is as relevant as the three forms which the process of development can assume. This has already been sufficiently dealt with in a previous chapter, and only one further point need be made. Should the international situation change, so that nations as such cease to exist, the three models described above would cease to prevail, or would take on a different form and meaning. Nevertheless, although the death of nations as such is the ultimate trend of our technological civilization, the hypothesis is still too remote to merit attention for the purposes of this study. Returning, then, to the subject in hand, we must note that the three models described above have general scope and significance. The relative influence of the social strata in the political process of the community is not the only determining factor in the community's propensity to develop in accordance with one of the models proposed. The economic and cultural situation in which the community finds itself is an equally determining factor. Faced with the need to draw a theoretical boundary-line between developed and underdeveloped societies, most economists today agree that societies in which the per capita net product does not exceed U.S. $500 per annum should be included in the latter category. In this study, the unreliable and misleading elements involved in conceiving development in terms of per capita product have already been stressed. With these caveats, it must, however, be said that classification of a country's degree of development according to its per capita product does afford an objective index, and that the figure of U.S. $500 per annum set as the boundary-line between development and underdevelopment does seem to be a reasonable one. This criterion accepted, then, it will be seen that the underdeveloped category can be divided into three groups: national per capita incomes of under U.S. $100; national per capita incomes of U.S. $100—$250; and national per capita incomes above U.S. $250. Each of these three groups shows a different economic structure which, for the group with the lowest national income, makes it completely impossible to envisage any form of development based on private enterprise, or even on compatibility between the free initiative of the agents and the objectives of any plan consistent with development. On the other hand, the group with the highest per capita national income does have the necessary conditions, and already shows a propensity, to base its development on consensus. The same observation must be made with respect to cultural de-

64

Economic

and Political

Development

velopment. In countries where the vast majority of the population is illiterate, only a minority having had any secondary school education and only a tiny elite having been to universities, the machinery of representative democracy cannot be used to promote development. The three political models of development analyzed in this study are thus also models of overall development. Among the underdeveloped countries, those with the lowest levels of income and culture can only develop as independent national communities under developmental socialism or state capitalism. On the other hand, underdeveloped countries with a higher level of income and culture find the most appropriate model in neo-Bismarclcian national capitalism, with power exerted through the medium of a development party. Intermediate solutions, presenting different blends of national capitalism and state capitalism or of the latter and developmental socialism, are not only possible but tend, empirically, often to occur since the three basic models are ideal types and effective social conditions in underdeveloped countries range from capitalist elite to counter-elite leadership.

• Proposition 12: A. To overcome the political crisis, the process of the formation of power (political functions) must be truly representative of the community, and the process of the exercise of power (governmental functions) must be representative of the first process, and hence truly responsible. B. For this purpose, a political model must be adopted which corresponds to the relative importance and strength of the social strata, the models being similar to those available for overcoming the social crisis; viz: I. National capitalism: for cases in which the bourgeois entrepreneurial group is dominant — supported by a "development party" which, under neo-Bismarckian leadership, becomes the majority party and as such exercises power with the backing of the masses, in opposition to the reactionary and radical-revolutionary forces, and orients the community toward national development by means of appropriate planning — securing for

Planning and the Political Crisis 65 the bourgeois entrepreneur group the direction of all undertakings. II. State capitalism: for cases in which the technocratic middle class is dominant; which gains power by coup d'etat, forms a "revolutionary party" so that, through the medium of this party, it can ally itself with the rural and proletarian masses, and with their support promote national development through appropriate planning, securing for the technocratic bureaucracy the direction of all undertakings. III. Developmental socialism: either "primary" or "derived" — for cases indicated above, which promote development through planning, securing for the revolutionary bureaucracy the direction of all undertakings.

7/POLITICAL CONDITIONS FOR LATIN AMERICAN DEVELOPMENT

The Need for a

Typology

As we have seen in the preceding chapters, the adoption of a political model for national development is not a matter of subjective or ideological preference, insofar as one seeks and is able to proceed in a rational and empirically confirmable way. Political models are not in themselves "good" or "bad," although their ideal characteristics and propensities may be differently appraised in terms of such yardsticks as the extent of consensus, the degree of adjustment between the free initiative of the personalities and their roles, and so on. This fact is irrelevant, however, from the viewpoint of the objective soundness of the political model chosen, since the choice of a model is exclusively determined by its suitability to the structural characteristics of the society concerned. The objective selection of the most suitable model for any country, such as those of Latin America, at a given phase in its history, such as the present, will therefore require a preliminary historicostructural analysis of the country concerned, in order to permit the objective determination of its main structural features and trends. In other words, any theoretically sound attempt at selecting a political model is only possible and valuable if supported by an adequate typology of the society concerned. The theoretical and technical problems involved in typological analysis and in typology-building in general or, more specifically, in a typological classification of the Latin American countries are, of course, too broad and complex to be dealt with in the present con-

Conditions for Latin American Development

67

1

text. It will suffice to mention that the usual procedure adopted is the admeasurement and comparison of relevant variables concerning (1) the economy: for example, absolute and per capita figures of the national accounts, and of the production and consumption of important items; (2) the ethno-demographic situation: size, composition, and movements of population; (3) the social and cultural situation: such factors as social mobility, urbanization, and education; (4) the political system: the degree of rule by consensus and by force, of law enforcement, the differentiation and autonomy of the political subsystems, the prevailing values of the political culture and subcultures, and so forth. Given the correlation between the structural planes of a society (economic, political, cultural, and social, in the strict sense of the word), the admeasurement and comparison of the main variables of these four planes of systems (to the extent that such admeasurement and comparison is possible) permits a typological classification of the society concerned and an objective comparison of the respective degree of development. The only additional relevant question to be considered, and one which has so far escaped the attention of most analysts, is whether these countries are viable as nations. As we saw in Chapter 4, the admeasurement of a country's viability as a nation is an indispensable requirement for determining whether it is in a position to promote its own development, either individually or collectively. On the other hand, such admeasurement must take into consideration the relativeness of the viability concept. A country's viability as a nation, besides depending on the technological level of a given time, varies according to the internal processes involved (ultimately, the degree of the country's overall development) and the external circumstances to which it is more directly and permanently exposed (ultimately, the country's geopolitical situation). A proper typological analysis of any group of countries will therefore require a double parameter: one relating to the degree of overall development of the countries studied, the other relating to their viability as nations. The first can be determined by analysis and, as 1

A special study of the subject has been undertaken by Roger Vekemans and his group at DESAL, Santiago, Chile. His basic work, Τipologia Socioeconomica de los Paises Latinoamericanos was published in Revista Interamericana de Ciencias Sociales (segunda e'poca), vol. 2, numero especial, Union Panamericana, Washington, D.C., 1963. This typology has since been continuously refined and kept up to date by DESAL.

68 Economic and Political Development far as possible, by admeasurement of the more important variables relating to the structural planes of the society concerned. The second can be determined by a functional and comparative analysis and, as far as possible, by the admeasurement of the country's individual and collective capacity to develop along autonomous and endogenous lines, given the technological level of the time, their degree of social development, and geopolitical situation. Viability

of Latin American

Countries

as

Nations

Vekemans' typological findings, set out in Tables 1 and 2 of his typology, led him to the classification of the Latin American countries into six groups, arranged in ascending order according to their level of development: Group I Haiti, Guatemala, Honduras, Dominican Republic, Nicaragua, El Salvador Group II Paraguay, Bolivia Group III Peru, Ecuador, Colombia Group IV Brazil, Mexico Group V Panama, Costa Rica, Venezuela, Cuba Group VI Chile, Uruguay, Argentina The main trouble with Vekemans' typology, as can be seen at once in the light of what has previously been said, is that it considers only the parameter relating to the comparative development of the countries studied, omitting any express reference to their viability as nations. This is why countries with such different capacities for the realization of their nationhood as Panama and Costa Rica, vis-a-vis Venezuela, for instance, and, consequently, so differently equipped to perform the sociopolitical functions requiring the nation as framework or medium, are put into the same group. On the other hand, it is clear that Vekemans in some way sensed

Conditions for Latin American Development

69

a few of the problems of national viability from the fact that he classified all the Central American and Caribbean countries in Group I, with the exception of Panama, Costa Rica, and Cuba, the highestincome countries in this geographical area. This ranking is established in spite of the fact that there is a greater difference between the development indices of Haiti (per capita G N P of ca. U.S. $100) and El Salvador (U.S. $314), both classified in the lowest group, than there is between those of El Salvador and Chile (U.S. $479), which is classified in the highest group. The major shortcoming of Vekemans' typology can be corrected by introducing the parameter of national viability into the comparative analyses of the Latin American countries. It must be recognized, however, that the analysis of national viability and, to an even greater extent, the admeasurement of such viability, is far from being a simple task. Whereas the rather complex problems involved in the comparative analysis and admeasurement of different degrees of social development can be satisfactorily (but not accurately) solved by making use of the techniques already mentioned — that is, quantitative comparison of such relevant variables as per capita GNP, education indices, availability per head of doctors, and so on — these techniques are less readily adaptable to the analysis of national viability (relating rather to potential than to performance). Nor is much of the relevant information (for instance, data on availability of the amount of natural resources, arable land, and so on), available at present. As I have already indicated, however, a discussion of the theoretical and technical problems involved in the analysis of national viability lies outside the scope of this study. Suffice it to point out that, once the indispensability of such analysis is clearly established, certain acceptable broad conclusions can be drawn by using the situation of the small European nations of today — as, for example, the Netherlands, Belgium, or Switzerland — as a yardstick for measuring the viability as nations of the currently underdeveloped small countries. Indeed, we have evidence enough to suppose that in present conditions these small European countries would fail to reach the level of development they managed to achieve in the conditions of the nineteenth and early twentieth centuries, to pursue their development or preserve their nationhood today if they were not supported by the various collective facilities they have obtained, from a well-

70 Economic and Political

Development

established share in international trade to the advantages of the European Common Market and Free Trade arrangements, not to mention the closer Benelux system. From these premises it can be stated that the presently underdeveloped countries of a size comparable to the small European nations are not individually viable and are not in a position to develop as viable national states if they cannot support such development by collective means. Given their present stage of underdevelopment, the only means available to these countries, in practice, is — as indicated in Chapter 4 — the substantial enlargement of their national and human resources through multinational arrangements of the common market type. If we examine the Latin American picture in the light of these considerations, it emerges that the Central American and Caribbean countries, as Vekemans somehow sensed, are not at present in a position to develop as viable national states.2 Ranging from tiny El Salvador (ca. 8,200 sq. mi.) to Nicaragua (ca. 53,900 sq. mi.), these countries, besides being deprived of individual viability, also lack the conditions for becoming viable by collective means. Their weak and unrepresentative governments are incapable of consistently pursuing their national interests in their international policies, whenever such designs and intents come into conflict with important domestic and external interests. And their geopolitical situation, in the most unchallenged area of United States imperialism, does not allow them, even if their governments should so desire it, to effectively safeguard, by collective means, their autonomy and endogeny. The Central American Common Market, whatever its favorable impact on the member-nations may be, is a good example of this impossibility. The essential purpose of the arrangement, and indeed its justification, should be and is actually alleged to be the provision of conditions for (1) a substantially increased production capacity for the member nations to allow for their satisfactory industrialization, and (2) a corresponding increase in their financial capacity, allowing them sufficient autonomy in capital formation and investment processes. This twofold purpose, however, is only nominally ' A n y appraisal of national viability is a historical judgment which can vary with the historical conditions. This signifies that nonviable nations may become viable if relevant technological or geopolitical changes alter the pre-existing situation. On the other hand, nations are subject to irrecoverable disruptions under unfavorable conditions which persist for too long.

Conditions for Latin American Development

71

realized because the so-called "integration industries" — the larger industries which were to have been made feasible by the creation of the market — are owned and controlled by foreign companies (large U.S. corporations), and the bigger investments, made possible by the larger market, and required for the implantation and operation of the integration industries, are made by foreign capital. The Central American countries, therefore, merely contribute the geographical space and human resources of the common market. The economic process is controlled by foreign decisions and foreign factors serving alien interests. Cuba and the Dominican Republic are, for opposite reasons, also good examples of the nonviability as nations of countries in that particular area. The former (which, from the viewpoint of her natural and human resources, should be considered a borderline case between viability and nonviability) was led, after a dramatic revolution, to adopt the political model most suited to her structural conditions: developmental socialism. Whatever the mistakes made by the Castro government that could in principle have been avoided, the fact remains that, given the conditions of the country, the government's central orientation could hardly be substantially different. In spite of this, Cuba does not seem capable of surviving without the fundamental economic and politico-military protection of the Soviet Union. For lack of sufficient natural and human resources and, more particularly, because of her geopolitical situation, Cuba is unable to promote her own national development in an autonomous and endogenous form, and, to escape United States neocolonialism and imperialism, must become dependent on the USSR. The Dominican Republic, on the other hand, is a good example of how far the direct and unchecked intervention of the United States in the Caribbean can be pushed, to carry out purely unilateral U.S. decisions, often taken in the least advisable and least justifiable way. Independently of whether or not developmental socialism, or some other model, would allow the Dominican Republic to overcome the internal limitations in the way of development as a viable national state, external circumstances due, among other factors, to her geopolitical situation, preclude any possibility of this country's achieving viability by collective means. While the extreme case of the Central American and Caribbean countries can readily be classified with the group of nonviable nations and while the large Latin American countries (Mexico, Brazil,

72 Economic and Political

Development

Argentina) can by contrast be reasonably included in the viable group, the intermediary cases are naturally more difficult to appraise. As far as natural and human resources are concerned, Uruguay (ca. 72,000 sq. mi. and 2.7 million inhabitants), Ecuador (ca. 104,000 sq. mi. and 4.8 million inhabitants) and Paraguay (ca. 157,000 sq. mi. and 2 million inhabitants), fall into this intermediate category. The case of Paraguay is complicated still further by the prolonged structural stagnation of the last four decades, which has given rise through a process of reciprocal causation to a colonial-praetorian regime. In all attempts to classify a reality which presents itself more or less along a continuum, there is an unavoidable margin of convention. In the hypothesis under consideration I suggest that the borderline cases, although acknowledged as such, be classified, for the present, in the viable group. Uruguay, the smallest of these borderline nations, is markedly better endowed with natural resources than Nicaragua, the largest of the nonviable nations in Central America. And if Uruguay's smaller population (ca. 2.7 million) compares unfavorably with those of Cuba (ca. 7.2 million), Haiti (ca. 4.5 million), and Guatemala (ca. 4.4 million), its incomparably higher economic and sociocultural level, which places it among the most developed of the Latin American countries, allows this nation to make far better use of its human and natural resources than the larger, less developed countries. On the other hand, whereas the geopolitical situation of the Central American and Caribbean countries is most unfavorable, Uruguay is at present favored by its geographical location. A southern coastal country bordering Brazil and Argentina, Uruguay was in the past rather adversely affected by this proximity, when these big countries were competing to absorb her territory or at least to control her internal affairs. Under present conditions, this proximity is a decided advantage for the Oriental Republic, 3 since it places her at the dynamic center of the Latin American common market, making her territory a kind of "District of Columbia" for Latin American integration and an ideal site for regional joint ventures. In contrast to Uruguay, Ecuador and Paraguay figure among the least developed countries of the region. Nevertheless, their considerably larger territories (Ecuador being approximately twice the size a

Uruguay's official title is "Republica Oriental del Uruguay." — Tr.

Conditions for Latin American Development

73

of Nicaragua, and Paraguay almost three times as large) and their ample natural resources constitute a very important asset which makes it possible for them to develop as viable national states, provided the proper economic, cultural, and political advancement is achieved in time to prevent their national disruption. Toward, a Latin American Typology It is now possible to return to Vekemans' typology, introducing the parameter of national viability. This would give us a broad division of the Latin American countries into two groups in accordance with their (present) viability as nations, with a further subdivision of the viable nations into the five groups classified by Vekemans as Groups II to VI. I would suggest, however, a simpler classification, distinguishing (1) the nonviable nations, (2) the viable but less developed nations, and (3) the viable and more developed nations. Although most of Vekemans' distinctions (with the exception of some of his ethnological and political variables) are categorically valuable and empirically observable, his conceptual framework seems to imply a refinement superior to the effective possibilities of comparative analysis and admeasurement. There seems to be an excessive and unnecessary arbitrariness in the inclusion of Ecuador, for instance, in the same group as Colombia rather than in Group II (Bolivia and Paraguay) and in the classification of Mexico as less developed than Venezuela. A two-group classification of the viable nations, taking into account the necessary qualifications concerning the borderline cases of viability, has the advantage of being less arbitrary while permitting the necessary distinctions to be made in terms of policy between countries at considerably different levels of development and with corresponding differences in their social structures. Table 2 sets out, with some of the relevant socioeconomic data, a typological classification of the Latin American countries into three groups in accordance with the criteria suggested above. For the purpose of this study it does not seem necessary to expand the analytical and comparative treatment of the subject. It should be pointed out, however, that Table 2 is merely a crude and partial beginning of a typology. The political variables are entirely missing. They will be dealt with to the extent deemed necessary in the rest of this chapter and, in the case of Brazil, they will be considered in

74

Economic and Political Development

Table 2 LATIN AMERICAN Group 1. The Data GDP per capita (U.S. dollars 1960) Area sq km sq mi Population: total 1965 total 1970 urban 1965 urban 1970 Rural density Infant mortality % Public taxes on GDP % Central government expenses for Education Housing Public Health % of illiterates on the eligible" % of elementary school registration % of high school registration % of university registration Physicians per 100,000 inhabitants"

Guatemala

Honduras

El Salvador

Nicaragua

307 108,889 42,042

201 112,088 43,277

314 20,000 8,260

298 130,700 53,938

4,432,000 2,224,000 5,163,000 2,580,000 1,521,000 518,000 1,946,000 645,000 1,382 440 92.8 47.0

2,800,000 1,635,000 3,220,000 1,887,000 1,102,000 683,000 1,304,000 836,000 1,350 531 65.7 50.0

6.9

8.7

9.9

10.1

14.0 8.2

21.2 0.7 6.2

22.1 1.8 10.9

15.6 0.6 8.4

71.0

65.0

61.0

62.0

26.7

31.6

40.6

36.3

2.2

2.3

4.0

2.8

10.2

6.4

7.3

8.5

—

17

15

17

32

"All data are for the year 1964 unless otherwise specified. b Statistical Abstract of the U.S., 1965-66, Table 1274. 0 Roger Vekemans and J. L. Segundo, Tipologia Socioeconomica de los Paises Latinoamericanos, Revista Interamericana de Ciencias Sociales (segunda e'poca), vol. 2, N.E. Union Panajnericana, Washington, D.C., 1963, p, 31, All our other

Conditions for Latin American Development

75

TYPOLOGY: SOME BASIC DATA» Nonviable Nations Costa Rica

Panama

450 50,900 19,575

475 77,082 29,209

1,459,000 1,780,000 509,000 628,000 614 69.6

1,231,000 1,440,000 504,000 577,000 518 42.4

10.1

10.1

28.7

22.4 11.0f\ 12.9

21.0

Dominican Republic

Haiti 105d 27,750 10,714 4,570,000 5,050,000 730,000 810,000 4,414 171.6

(GNP) 218 48,442 18,816 3,560,000· 4,230,000 1,185,000 1,530,000 1,350 79.5

Cuba 399" 44,218 b 7,203,000b 8,107,000" 3,960,000·» — — —

18.2

—

10.8

11.5

—

11.4

6.4

—

30.0

89.0

57.0

22.0

59.6

59.0

24.7

60.0

53.0

10.0

12.6

1.7

2.8

4.6

22.3

27.6

2.4

12.3

35.8

36

30

9

20

7.8

—

100

data from Banco Interamericano de Desarrollo, Fondo Fiduciario de Progreso Social, Quinto Informe Anual, 1965; Washington, D.C., 1966. d Bruce M. Russet et al., World Handbook of Political and Social Indicators, Table 44 (GNP for 1967), Yale University Press, New Haven, 1965. • 1963. (continued on following page)

76

Economic

and Political

Table

2

Development

(continued)

Group 2. The Less Developed Nations a Data GDP per capita (U.S. dollars 1960) Area sq km sq mi Population: total 1965 total 1970 urban 1965 urban 1970 Rural density Infant mortality % Public taxes/GDP % Central government expenses to Education Housing Public health % of illiterates on the eligible1» % of elementary school registration % of high school registration % of university registration Physicians per 100,000 inhabitants'1

Ecuador

274 283,561 104,506 4,800,000 5,537,000 1,834,000 2,327,000 695 94.1 17.1

11.6 2.1 2.3

Peru

Bolivia

265 1,284,215 496,223

126 1,098,581 424,163

Paraguay

196 406,752 157,047

11,250,000 3,710,000 1,946,000 13,000,000 4,000,000 2,238,000 5,610,000 1,300,000 694,000 6,520,000 1,400,000 797,000 — 373 217 94.8 86.0 100 16.5 7.2 7.9 1.3 6.6

25.2 0.3 2.7

44.0

53.0

68.0

34.0

50.0

45.0

39.7

62.6

4.9

5.2

5.3

4.3

16.1

17.6

13.9

21.9

26

22

25

46

—

»All data are for the year 1964 unless otherwise specified. b Tipologia Socioeconomics de los Paises Latinoamericanos.

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78 Economic and Political

Development

greater detail in the second part of this book. Nonetheless, such variables must obviously be included in any comprehensive typological analysis. Other socioeconomic data are also conspicuously lacking in the typology outlined above. A further point to be made is that any thorough typological classification would require, as in the case of the Vekemans typology, the conversion of absolute into relative figures, in order to permit quantified comparisons among the countries involved. Structures

and Political

Models

Typological analysis of the Latin American countries reveals, besides the distinction between nonviable and viable nations (with the borderline cases noted), three different structural types of societies, at lower, medium, and higher levels of development. The more developed countries (see Table 2, Group 3), with per capita gross products (1964) of more than $300 (at the 1960 dollar value), with urbanization and literacy rates of 50 per cent or more of the total population, and with many other above-average relevant indices, have given rise to an active entrepreneurial national bourgeoisie which, since the 1930's, and more particularly in the late 1940's and early 1950's, has been making a very important effort at industrialization through import substitution with various forms of assistance and protection from the state and with varying degrees of foreign participation, shifting the largest contribution to the national product from agriculture to industry. In these countries, alongside the traditional sector of the middle class ("cartorial" civil servants, liberal professionals, and shopkeepers), a new administrative and technical middle class has emerged, and is managing the new industries and the new modern sectors of the state. And in addition to the new middle class, these countries have seen the emergence of a growing working class, providing the labor for the new industries and services, although the rural masses have remained basically excluded from this process of development and the deteriorating conditions of the countryside have generated a migration to the cities unrelated to industrial demand and substantially larger than the employment capacity of the new industries and services. As we saw in Chapters 5 and 6, for promoting overall development, correcting the most blatant aspects of the social crisis induced by the excessively uneven regime of participation and of the political crisis, originating in the lack of representativeness of the process of

Conditions for Latin American Development

79

power, this type of structure calls for a national-capitalist model under neo-Bismarckian leadership. The second type of structure to be found in Latin America among the less-developed viable countries (Table 2, Group 2) is marked by the contrast between the oligarchical elite, which is little affected by modernization and clings to its disruptive privileges, and the new managerial and technocratic sectors of the middle class, which operate, under the domination of the elite, the state's few modern industries and sectors. The urban proletariat is still on the threshold of becoming a working class, and the peasants have no participation in political life. These countries exhibit the features required for the state-capitalist model.4 The developmental socialist model, setting aside for the moment the problem of national viability, seems to be the most suitable model for the countries in Group I of our typology (see Table 2). Subject, as a rule, to the control of a traditional rural oligarchy, without having developed either an entrepreneurial national bourgeoisie or a technocratic middle class, these countries can only be mobilized by the intelligentsia of the counter-elite. The same considerations are applicable to the particular case, of which Batista's Cuba was a paramount example, in which a coalition of rural oligarchs, urban bourgeoisie, middle-class professionals, and privileged working-class leaders, under a populistic facade, exerts an exploitative domination over the peasants and the marginalized sectors of the urban masses. The lack of individual national viability of the Central American and Caribbean countries meanwhile precludes the effective use of this model by any of them in isolation. Only through a collective effort bringing them into closer association at all levels could they recover their viability. However, this seems to be completely impossible in present conditions because of United States policy. Any political model for Central and Caribbean America, therefore, is subject to the outcome of this particular question. 4 Paraguay could be the exception in this group. The failure of the Paraguayan military, since they seized power in the late 1930's, to adopt the state-capitalist model, or to carry out any consistent policy of socioeconomic development, has substantially affected Paraguayan conditions. The military rule has gradually degenerated into an exploitive colonial-praetorianism, and there are many indications that Paraguay's reorientation in the direction of social development will require the more radical remedy of developmental socialism.

80 Economic and Political Development The Course of Events T o make a broad comparison between the actual course of events during the last decades and in more recent years and the political models indicated by our analysis as the most suitable for the develop ment of the various Latin American countries, one must first distinguish between the countries that have made a systematic, consistent, and continuing effort to promote their development and those that have not. Mexico (through the Mexican Revolution), Guatemala (during the Ardvalo-Arbenz regimes), Cuba (with the Castro revolution), the Dominican Republic (under the Bosch-Camano regimes), Venezuela (with the Accion Democratica), Peru (during the first phase of APRA and under the present Belaunde regime), Bolivia (with the M N R ) , Brazil (from Vargas' second government to Goulart), Argentina (under the Perön-Frondizi regimes), and Chile (with the Christian Democrats), have all under very different conditions and with varying results, made such serious attempts. The other Latin American countries, for several reasons, have not succeeded, over a longer period or in a significant way, in bringing about any structural change. Some, as in the case of the Central American and Caribbean countries (with the exception of those mentioned above and Costa Rica), have not yet challenged their traditional establishments. Some have failed to give a consistent and purposeful orientation to their attempts: Colombia 5 and Ecuador fall into this category. Others, like Paraguay, have fallen under a stagnating colonial-praetorian regime. Finally, there are those that have been prematurely led to establish a welfare state, as in the case of Uruguay and to a certain extent and at a much lower level, Costa Rica, before having achieved a sufficiently high and self-sustaining level of economic development. Among those countries that have made a significant attempt at change, a first objective distinction should be drawn between the nonviable and viable nations. The developmental efforts of Guatemala and the Dominican Republic have been liquidated by the covert or overt intervention of the United States. Cuba has been protected against the more extreme forms of U.S. intervention by the Soviet Union, but only at the price of total adherence to and dependence on the Soviet bloc. 6

Colombia, however, seems to be on the threshold of a more serious attempt.

Conditions for Latin American Development

81

A second objective distinction must be made among the viable nations of this group, separating those that have been relatively successful in the deliberate promotion of their political development from those that have had abortive results. Mexico, Venezuela, and Chile are the most conspicuous examples of success. Peru, after the tragic impasse of APRA in the 1930's and early 1940's, which led to the final deterioration of the party's significance and of Hayas's political meaning, seems to have a new chance — precarious and ambiguous as yet — with the reformist government of Fernando Belaunde. Brazil, Argentina, and Bolivia, after having covered, in different conditions and through two distinct models, a considerable distance of their route to development, were led to an abortive outcome and once again have a long cruise ahead of them. Is it possible to distinguish any common features among the different experiments in all these countries, including the "successful" and the "abortive" cases? And if so, what are they, and why have Brazil and Argentina, which in many senses seem to enjoy favorable conditions, failed where Mexico, Venezuela, and Chile seem to be succeeding? Setting aside any advance theoretical knowledge of the problems of development and of the models for political development, which in any case are of recent origin, what is common to all the countries of the group, both those which have succeeded and those which have failed, is the fact that under the pressure of their problems they have been led to adopt, in a sufficiently characteristic way and for a significant length of time, the basic requirements of the political models most suited to their respective structural conditions. On the other hand, what has distinguished the successful from the abortive attempts has been the greater consistency and skillfulness of the former in the implementation of the models implicitly adopted. Among the countries that have been barred from continuing their political experiments by United States intervention, as in the case of Guatemala and the Dominican Republic, or that have been driven to complete dependence on the economic aid and military protection of a foreign power, as in the case of Cuba vis-ä-vis the Soviet Union, it seems relevant to point out that they were all individual nonviable nations in a geopolitical situation that prevented their collective viability. The comparison of the various experiments and cases is not a simple task, given the difference in circumstances and even in the

82 Economic and Political

Development

historical time in which they occurred. Besides, an analytical consideration of such comparison calls for a lengthy treatment beyond the scope of the present study. I will therefore limit myself to a brief indication of the main features common to the successful cases of Mexico, Venezuela, and Chile, the partially successful experiment of Peru, under Belaunde, and the abortive results of Bolivia, Brazil, and Argentina. The Successful

Cases

The common feature of the successful cases, as already suggested, is the fact that although the countries concerned were not aware of the theoretical aspects involved, they were objectively led to adopt and to implement the political models most suited to their respective structural conditions in a sufficiently consistent and skillful manner. Mexico had experienced, with the Porfiriato (1877-1910) an early version of colonial fascism. Backed by the army and the mounted police (the Rurales), Porfirio Diaz and his cientificos (crude predecessors of the technocrats who took control of public affairs in Brazil through the 1964 coup) thought they could achieve the modernization and development of the country by a combined policy of internal stability maintained by the ruthless repression of popular rights and demands and unrestricted access to foreign capital and technique. The result of these policies was an extraordinary concentration of wealth and influence in the hands of a small group of landowners® and urban capitalists, most of whom were foreigners (two thirds of the total investment was in foreign hands). The final result for the country as a whole of these massive investments, oriented toward the export sector (mining and railways) in spite of manifest sectoral progress, was merely to accentuate the colonial character of the Mexican economy7 and the appalling level of misery and ignorance of the masses.8 •Ninety-seven per cent of the arable land was owned by 835 families. See Victor Manzanilla Schaffer, "La Reforma Agraria," Mexico, Cincuenta Anos de Revoluciön (Mexico City: Fondo de Cultura Econömica, 1963), pp. 296-305. ' O f the 1902-1903 GNP (700 million pesos), 86% was provided by primary products, while foreign investments in 1911 reached 3.4 billion pesos, 40% of which was in railroads, 30% in oil and mining. Only 8% went into industrial investment. See Alfredo Navarete R., "El Financiamento del Desarrollo Econömico," Mexico, Cincuenta Anos de Revoluciön, pp. 116-124. 8 In 1910 only 26% of the children of school age were actually attending school, and 70% of the population was illiterate. See Victor Gallo Martinez, "La

Conditions for Latin American Development

83

The Mexican revolution (1910-40) was the inevitable outcome of this situation. It was carried on through a protracted and chaotic process of violence. Starting with the moderate middle-class democratic claims of Madero, with Zapata and Obregon, after a short but hideous counterrevolutionary period under Victoriano Huerta, it took on the shape and meaning of a social revolution. With Cardenas (1934-40) the revolution was carried a stage further, its most profound and consistent consequences being fulfilled with the nationalization of the foreign oil companies and railroads, the massive redistribution of land and the reorganization of labor. From Camacho (1940-46) onward the Mexican revolution became an institutionalized process of national development, increasingly favorable to and dependent on a national bourgeoisie, created by the revolution itself. If we analyze this lengthy process, now more than fifty years old, we see that after the tumultuous days of the fight against Victoriano Huerta's counterrevolution, the Mexican political system was gradually led to adopt a state-capitalist model. A middle-class elite brought into being by the revolution took over control of the state apparatus, of the official party (founded in 1929 as the Revolutionary National Party), and of the economy, mobilizing the workers and peasants, through the official party, in support of the new policies. After Cardenas, the institutionalization of the revolution led to the increasing influence of a rising national bourgeoisie, formed partly of the remnants of the old upper class, absorbed by the new occupations and living in the new style, but mostly made up of new elements formed by the revolution. The political system was thus led to shift from state capitalism to national capitalism, mobilizing, under the neoBismarckian leadership of the president of the Republic, and through the combined mechanisms of the state bureaucracy and the Partido Revolucionario Institutional, the middle class and the masses in a continuous process of national development. In Venezuela and Chile, under circumstances as distinct from those of Mexico as they are from one another, a national-capitalist regime has also emerged from Betancourt's "Accion Democratica" Educaciön Preescolar y Primaria," Mexico, Cincuenta Anos de Revoluciön, pp. 390-400. In the same period, the expectation of life was only 27.4 years, while infant mortality was among the highest in the world, with 323 infant deaths per 1000 live births. See Xavier de la Silva Rodriguez, "Salubridad y Asistencia Medico-Social," ibid., pp. 2 2 6 - 2 8 3 .

84 Economic and Political

Development

and Frei's Christian Democrats. The Venezuelan experiment was carried out in two stages. In the first stage (1945-48) Betancourt came to power through a successful coup which combined the efforts of his recently founded (1940) party, Accion Democratica, with the military actions of a coterie of junior officers. This alliance proved to be a shaky one, and Romulo Gallegos, who had been elected to the presidency in 1947 with the support of Accion Democratica, was overthrown by another military coup, this time with a reactionary tendency, in 1948. The second stage of Accion Democratica was initiated in 1958, when the military dictatorship was finally toppled and Betancourt was elected president. Although he lost some support from the left wing of his party and continued to excite the hostility of the traditional right, Betancourt and his successor, Raul Leoni, have managed to maintain, under neo-Bismarckian leadership and through the political mobilization of Accion Democratica, a working alliance between the progressive sectors of the national bourgeoisie, the middle class, the rural masses, and large sectors of the urban proletariat, oriented toward national development. In Chile, the Christian Democratic Party, under the leadership of Eduardo Frei, after having won the 1964 presidential elections, gained a significant victory at the following year's congressional elections. Opposing both the radical left of the Socialist-Communist coalition (FRAP) and the rightist parties (Conservatives, Liberals, and middle-of-the-road Radicals), Frei's Christian Democrats are able to implement a national-capitalist model, mobilizing the progressive sectors of the bourgeoisie and the middle class, together with large sectors of the peasants and sizable sectors of the working class in a reformist approach to national development. Starting at different times (1910 in Mexico; 1945 and 1958 in Venezuela; 1964 in Chile), in different countries, and under different circumstances (the Porfiriato cientificos in Mexico, the military dictatorship in Venezuela, and the conservative elite democracy in Chile), each of the three movements has managed to evolve or shape a political system embodying the basic features of the nationalcapitalist model and to consistently put such system into effect. Under the neo-Bismarckian leadership of the president of the republic, exercised through the combined action of the state machinery and a "party of national development," a working alliance has been formed between the progressive sectors of the national bourgeoisie (mostly industrial entrepreneurs), the managerial and technical sectors of the

Conditions for Latin American Development

85

middle class, large sectors of the peasantry (mobilized through agrarian reforms and rural modernization), and the urban proletariat (given increasing economic and political participation). While tensions within such alliances (which enjoy greater support from the middle-class sectors than from the bourgeoisie and working classes) and between the progovernment coalitions and their opponents on the extreme left and right, continue to exist, these alliances have proved sufficiently strong and durable to maintain the basic unity of the regimes and their capacity for action. The objective results achieved by these regimes, even by that of Chile, the most recent of the three, are already impressive, and in the case of Venezuela and Mexico are really extraordinary when viewed in historical perspective. Furthermore, they command a sufficient margin of allegiance to be regarded as more consensual than coercive, and the political systems they have evolved or remodeled are likely to lead them to an irreversible stage of self-sustained development — a stage which Mexico seems to be on the verge of reaching. T h e case of Peru can be regarded as semisuccessful. Having been kept at a much lower level of development and national integration by the stagnating and disrupting effects of uninterrupted oligarchical rule, Peru is now experiencing a period of renewal under the reformist and development-minded government of Fernando Belaunde. And the military, responsible for the reactionary veto against all the heroic attempts to introduce socioeconomic change promoted by Haya de la Torre and APRA in the thirties and early forties, have somehow taken a course opposite to that of their erstwhile foe. While Haya, increasingly disillusioned with age, had led APRA to ally itself with the oligarchical establishment and reactionary forces, the younger generation of officers had become progressively concerned with socioeconomic development, national integration, and national emancipation. This led them to form a working alliance, however loose and unstable, with Belaunde and his Accion Popular Party. The trouble with Belaunde's attempt, however, is that it is subject to two specific weaknesses. The first stems from the lack of correspondence between Peru's structural conditions and the nationalcapitalist model to which Accion Popular and the military are adhering. The second, partly resulting from the first, is that Belaunde has failed to create the machinery needed to carry out his plans. Unlike the three countries analyzed above, Peru did not develop a national bourgeoisie composed of modern entrepreneurs, able to rec-

86 Economic and Political

Development

oncile their own interests with the needs of the people in a way conducive to general welfare and national development. Because of this it does not seem feasible to incorporate the large numbers of Indian peasants (60 per cent of the population) into the modern civilization of Peru within a reasonable period of time, through the present policy of reclaiming arable lands by means of costly irrigation and colonization projects. Accion Popular, moreover, does not command enough congressional support to carry out a more aggressive program by parliamentary means, and is not mobilizing enough popular support to press Congress for change or to gain a stronger position in Congress.

The Abortive Cases The circumstances attending the three abortive cases of Argentina, Brazil, and Bolivia have been as different as those under which the developmental experiments of Mexico, Venezuela, and Chile have been crowned with relative success. Their development efforts have also started at different times. Brazilian mobilization for development began with the 1930 Revolution and, with brief interruptions (1954 and 1961-62), was deliberately accelerated from the second Vargas government (1950-54) up to the deterioration of the Goulart government in the latter part of 1963 and its final overthrow by the military coup of 1964. Argentina's mobilization was attempted in two successive and distinct experiments, with Peron (1945-55) and with Frondizi (1958-62), both interrupted by reactionary military coups. Bolivia, like Venezuela, made an unsuccessful first attempt with the first Movimiento Nacionalista Revolucionario ( M N R ) regime, under Villaroel (1943-46), followed later by a systematic effort with the victorious revolution of 1952, which came to an end in 1964, after a time of crisis, when the regime was toppled by a military coup. It is interesting to note that, unlike Peru, which attempts to implement a political model inappropriate to the country's structural conditions, the attempts carried out in the three countries under consideration have been appropriate to their respective structures: national capitalism in Argentina and Brazil, state capitalism in Bolivia. In all three countries the models adopted have been implemented with an impressive degree of success. In the period under review, the socioeconomic development of these countries has been the most significant in their history since the Great Depression. Peron (and to

Conditions for Latin American Development

87

a certain extent, Frondizi), Vargas, his successors, and Paz Estenssoro and Siles Suazo, all attracted wide popular support. In spite of this, after considerable progress on the road to success, these regimes were all affected by a sharp deterioration in their images and performance; their capacity to regulate internal affairs and promote their development was irreparably damaged, and they were easily toppled by rightist military coups. In analyzing the final failure of these three distinct experiments, we can distinguish certain common causes. The first, more clearly evident in the cases of Argentina and Brazil, was the lack of sufficient social support for the regimes concerned, contrasting with the powerful challenge they presented to the interests vested in the status quo. While the followings of Peron and Vargas were certainly massive, they were limited to the urban proletariat. They never succeeded in giving their movements a multiclass meaning and were always opposed by most of the middle-class sectors and the elites. On the other hand, they never managed or even really tried to organize massive peasant support. Frondizi, unlike Peron, started with substantial middle-class support, as did Janio Quadros, to an even greater extent. But Frondizi never won enough support from the Peronist masses to strengthen his bargaining position vis-ä-vis the bourgeoisie and the military; he rapidly exhausted his government's popular credit without gaining in return enough support from the bourgeoisie to contain the military. Paz Estenssoro, in his turn, never succeeded in organizing peasant support. Bolivian agrarian reform was a spontaneous revolution of the rural masses endorsed post factum by the Paz regime, which never effectively incorporated the peasants into the government party. The second deficiency common to the three experiments was the weakness of their party apparatus. Both Vargas' P T B and Peron's Partido Justicialista, although the latter was more effectively organized and had a much larger and more active membership than the former, were populist parties. They were characterized by the direct relationship between members and the charismatic leader, lacked valid intermediary ranks (Evita's role being as top-ranking as Peron's), and all systems of communication were centralized at the top. Under these conditions, any failure in the leadership or the sudden elimination of the leader from the political scene was an almost irreparable setback and did in fact prove fatal. In the case of Paz Estenssoro, his party was far more organic and

88 Economic and Political Development representative than the populist models of Vargas and Peron. But the weakness finally displayed by the M N R , when it failed to resolve the crises which arose between the government and Paz Estenssoro, on the one hand, and between the miners and their leader, Juan Lechin, on the other, proved fatal. Paz Estenssoro, whose moral authority had been undermined when he unconstitutionally ran for re-election in 1964, felt the need to reinforce the military in order to contain the miners. W h e n this proved possible, the military, taking full advantage of their newly acquired control of the country, found it easy enough to oust Paz Estenssoro. This last aspect of the Bolivian case points to the third general cause of the failure of the three experiments: their inability to deal with their respective elites. T h e Brazilian and Argentine elites have never been properly mobilized by the national-capitalist experiments promoted in their respective countries, although such experiments were very much to the advantage of the local bourgeoisies themselves. This is due, among other factors, to their lack of awareness of the significance of such experiments. And here we have what is probably the most severe limitation arising from the fact that a political model is objectively adopted in an implicit way, without a theoretical formulation of its significance or a basic understanding of its implications on the part of the political leadership. The lack of ideological awareness in the leadership seriously affects that of the supporting sectors and is reflected in their failure to grasp the extent of the commitments needed. In conditions of stress — which tend to be created by the resistance of the sectors with a vested interest in the status quo and by the fact that during the initial phase of socioeconomic development resources are invested or consumed faster than they can be regenerated — the solidarity of classes and groups with the common cause tends to be neutralized or offset by their egoistic reactions. In conditions of growth and success, their participation tends to decline — particularly that of the elites, who are more inclined to seek out ways of exercising personal or group influence than to provide systematic institutional support. W i t h the exception of some new entrepreneurial groups the Argentinian national bourgeoisie has never understood the nationalcapitalist meaning and implications of Peronism. They have tolerated Frondizi but failed to grasp the full significance of his government.

Conditions for Latin American Devebpment

89

The second Vargas government was equally misunderstood by Brazil's national bourgeoisie, who finally joined forces with the reactionary coalition that overthrew him. Kubitschek managed to win the support of the large majority of the modern entrepreneurial sector but failed to mobilize the middle class. W h a t is interesting in the case of these two countries is that the elites could have been properly mobilized in time to avoid disaster. Had they been given a greater say in the establishment of goals and the decision-making process they would have become more conscious of their own class interests and of the extent to which these were being furthered by the policies that the government was pursuing. On the other hand, sectors of the subelites, such as the intelligentsia (so senselessly antagonized by Peron), the military (neglected by Vargas, and bribed but not actually mobilized by Peron), and so on, could have been allowed much more effective participation, creating new bonds of loyalty and providing a sufficient deterrent to persuade the elites to behave in a more cooperative manner. It is worth pointing out that, as we have seen from the analysis of the preceding chapters, political models are after all simply the optimum systematization of an existing social structure. The models will thus either be appropriate to the existing structure and hence able to mobilize a corresponding response in the sectors concerned, or, when such response is really not forthcoming, the diagnosis of the social situation must have been wrong, the structural conditions must have been different, and a different model will thus be required. In the case of Bolivia, Paz Estenssoro likewise failed to deal with the problem of the elite. For him the problem was to keep the way open to the formation and recruitment of new elites after the revolution. With the defeat and dispersal of the old "Rosea" elite, the new M N R elite, once in power, succumbed to the usual tendency to close the gates to newcomers and thus found itself unable to provide enough qualified party members to man the state, the statecontrolled economy, and the party, all at the same time. As a result, the party was depleted in favor of the state and the economy, and became a mere nominal entity, actually absorbed by and confused with the government bureaucracy. When it became necessary to rally the party in defense of the regime and to mediate between government and miners, the party had become no more than a shadow of the government and was no longer able to play the role of mediator.

50 Economic and Political Development Summary

and

Prospects

The analysis of the successful and abortive cases of political development in Latin America, viewed in the light of the theory of political models discussed in the preceding chapters, now enables us to reappraise the whole question of Latin American development. From that analysis it seems clear that whereas ten Latin American countries have attempted in the course of this century and more particularly in the last three decades, at different times and in different circumstances, to adopt and implement one of the three models (or the possible combinations of the three) studied in this book, only Mexico, Venezuela, and Chile have achieved or seem to be achieving relative success. Peru seems to be a semisuccessful case, due to the fact that it is currently adopting more national-capitalist features than the country's structure seems likely to require. Although Argentina, Brazil, and Bolivia were led to adopt the models most suited to their respective structures, they were ultimately doomed to failure because of serious deficiencies in the way these were implemented. Finally, the other countries are either handicapped by their lack of national viability, in which case their development as national societies depends on external conditions that have not so far materialized 9 and can actually never do so (Central America and the Caribbean islands) or have not yet been able, for various reasons, to make a consistent and durable effort to promote deliberate change. Among the countries falling within the second group, Colombia appears to be on the verge of initiating such an effort, either with the reform-minded government of Lleras Restrepo or in the not too distant future. What is likely to happen, however, to the countries in which development experiments have proved abortive? What can be expected of those that continue to put off making a start on their own? Finally, what would be the consequences of an interruption to the development processes now going ahead, with varying degrees of success, in Mexico, Venezuela, Chile, and Peru? It is not the purpose of this study to attempt any exhaustive analysis of the questions raised above. Given a too emphatic predictive tone, they would not even be answerable inasmuch as any con* Such conditions would include a working system of Latin American integration. See Factores para la Integration Latinoamericana, by a group of experts appointed by the Inter-American Development Bank, Fondo de Cultura Economica, Mexico City, 1966.

Conditions for Latin American Development

91

crete future is ultimately unforeseeable. Two points, however, are worth discussing in the context of this study. The first relates to the oft-stressed relativity of political models as ideal types. The second, to the conditions of viability of any nation. As we have seen, political models are not good or bad in themselves: they are simply more, or less adequate for promoting the national development of a given national society, at a particular time, given the structural conditions of the society at the time. These structural conditions change, for better or worse, in terms of the possibility of increasing or decreasing the rationality of the social processes operating in them. If the most suitable model for a given society is adopted at the wrong time, or inconsistently implemented, the society's structure tends to deteriorate, and after a certain degree of deterioration the society changes its type of structure. Such change will be in the sense of reducing the level of rationality of its processes and will consequently demand more radical methods of coercive regulation to promote the society's subsequent development. This increasing dependence on stricter regulation and coercion makes it increasingly difficult to apply the corresponding model. The easier the problem the easier the solution. As we shift from the basically consensual national-capitalist model to the coercive statecapitalist model, and then from this to the ultra-coercive developmental socialist model, the number of statistical requirements for the consistent adoption and implementation of the model concerned will increase accordingly, for both domestic and international reasons. The probability of a given model's success — and consequently of successful national development — therefore tends to decrease as we move from the more consensual to the less consensual models. It should be made very clear, however, that such a correlation is not due to the fact that the more coercive models are, per se, "worse" or "less efficient" than the more consensual ones. On the contrary, it can even be argued that, within certain limits, more coercive models as such are more efficient than consensual models, in the sense that since they are comprehensive they have a greater configurative capacity than the looser and more open ones. Moreover, there is no doubt that in certain cases only coercive models could be adopted and implemented in accordance with the theory of models discussed earlier in this book and that only such models would therefore prove efficient. What is less statistically probable, in the case of the coercive models, is (1) the likelihood that such

92

Economic

and Political

Development

models will actually be consistently adopted; (2) that they will be implemented for any length of time; and (3) that they will be allowed to be effectively put into practice, for long enough to ensure their success, by the domestic and international forces interested in the preservation of the status quo. The second point worth discussing is the problem of national viability. W e have seen from the discussion of this question in Chapter 4 of this study that the concept of national viability is essentially historical and relative. It is primarily determined by the relationship between a nation's available human and natural resources at a given time and the existing level of technology at the time. Some technological development malces increasing demands on the quantity and diversity of the resources needed; the small underdeveloped nations find themselves facing increasing difficulties for their individual development, and even reach the point of losing their individual viability. Collective viability, on the other hand, is particularly influenced by geopolitical considerations and tends to decrease when such countries are within easy reach of action by a far more powerful neighbor with imperialistic interests. Another element in national viability, however, is the internal cohesion of a national society. This tends to increase with overall development, insofar as this brings about a rise, not only in absolute and per capita income, but in all other economic, social, cultural, and political indicators of development, with the corresponding enlargement of participation on all planes. As more and more people share (although on unequal terms) more and more interests, values, and social roles, national cohesion also increases. In underdeveloped nations, because participation in the society is extremely uneven, with a high proportion of marginality, national cohesion is correspondingly less. As long as these societies remain traditional and most of their people continue to be unaware of their condition, the lack of national cohesion can be kept in the background and can even be easily countered, in times of emergency (as in the case of Russian and Spanish national resistance against Napoleon), by appeals to patriotism. In the cases of protracted underdevelopment, in which the status quo is maintained through successive failures to promote development or through the coercive preservation of the ancien regime, the increasing internal tensions, while unable to induce change, weaken national cohesion (as in the case of Russian defeatism in World W a r I ) . The relationships between masses and

Conditions for Latin American Development

93

elites become liable to a self-perpetuating conflict and decreasing cooperation. The dualistic character of the society splits the nation in two and saps the subjective allegiance of the conflicting sectors to the national society as a whole. National viability is thus undermined by internal disruption. The two points discussed above provide some answer to the questions posed earlier. It seems clear by now that the statistical probabilities of success for the deliberate promotion of national development in Latin America will decrease if structural conditions seriously deteriorate, as a result of the untimely adoption or inconsistent implementation of the adequate political models, while these structural conditions still require the more consensual models. On the other hand, it seems equally clear that underdevelopment cannot be indefinitely protracted without irreparable disruptive effects on the national structures. What the result of any large-scale disruption of the Latin American national structures would be, other than a problem belonging more to the future than to the present, lies outside the scope of the present study, which is confined to the analysis of economic and political development within the framework of the nation and the national state. It requires no effort of the imagination, however, to anticipate an unprecedented increase in tension and violence which could revolutionize the whole continent and probably the world.

PART TWO A Case Study: Brazil

8 / T H E COLONIAL ADMINISTRATION

Sixteenth

Century

During the century of its discovery, Brazil's colonial administration was led by force of circumstance gradually to replace decentralized and indirect forms of exploiting the land by direct control of colonial undertakings, by way of governors-general immediately responsible to the Crown. Discovered in 1500, during the reign of Dom Manuel I, Portugal's new possession — in both the geographic and economic sense of the word — was to be exploited by the Crown in a way that would not prove burdensome to the Royal Exchequer. Portugal at that time was at the zenith of her navigational skill in long voyages, and possessed a vast colonial empire; but with a population of no more than a million, the kingdom's limited resources compelled it to be parsimonious in its allocation of effort among its colonial possessions. With the exception of the nearby Atlantic islands, occupation of these possessions was confined to the control exercised over the trading settlements established at various points along the coast. The demands of the India trade, the source of the kingdom's prosperity, mobilized nearly all its naval and military resources. Thus when the Portuguese Crown acquired Santa Cruz, it was obliged to adopt a policy of economy of means in exploiting this new land. On the other hand, and other motivations notwithstanding (such as the desire for power and prestige, and a nominal rather than real religious and missionary zeal), the Crown's attitude to its possessions was predominantly fiscal.

98 Economic and Political

Development

In these circumstances the Crown sought to develop techniques for deriving fiscal benefit from its sovereignty. Disappointed in its initial hopes of finding mines and treasure in the new lands, the Crown soon found that there was an immediately accessible natural source of wealth: Brazil wood — pau brasil — a red timber used in the production of dyes, which was finding a growing market in Europe. It adopted the policy of granting concessions to private individuals, generally "New Christians," to exploit the dyewood subject to certain conditions: the concessionaires were to finance annual maritime expeditions to discover 300 leagues of new land; in the land so discovered they were to found fortified posts and be responsible for their upkeep for a period of three years; during the first year of their concession they were to be free of fiscal obligations, but during the second and third they were to contribute to the Crown one sixth and one fifth, respectively, of all cargoes of dyewood they brought into the kingdom. Prominent among the early dyewood concessionaires was the New Christian, Fernäo de Noronha, whose name was given to the island he discovered.1 The fact that the prospects of profit from the dyewood trade were far from negligible is borne out by its extraordinarily rapid growth. According to a letter written from Lisbon in 1506 by a Venetian agent, Leonardo de Ca Messer, exports of dyewood to Portugal amounted to 20,000 quintals (the quintal being the Portuguese hundredweight), valued at 2\ ducats a hundredweight, and Fernäo de Noronha's tribute to the Crown was estimated at 4,000 ducats2 which, according to Simonsen, was equivalent in 1937 to 13,500 contos3 for the exports and 1,000 contos for the revenue derived by the Crown. The system of granting royal concessions for exploiting Brazil wood continued until 1530, when exploitation was leased or farmed out by the Crown in other ways. In 1602 the dyewood cost a contractor one thousand cruzeiros per cwt. in Brazil, and was sold for four thousand in Lisbon. At the end of the sixteenth century, Brazil wood contracts yielded the Crown forty thousand cruzados — equivalent, according to Simonsen, to 3,600 contos in 1937 (worth U. S. 1

Rodolfo Garcia, Ensaio söbre α Histöria Politica e Administrate do Brasil (Rio de Janeiro: Livraria Jos6 Olympio, 1 9 5 6 ) , p. 35. 'Ibid. See also Roberto Simonsen, Historic Econdmica do Brasil (Säo Paulo· Cia. Editora Nacional, 1 9 5 7 ) , p. 55. 3 A conto = NCr. $1,000. — Tr.

The Colonial Administration

99

$200,000 at 1937 prices). Although the dyewood trade declined after the seventeenth century, the wood continued to be exploited in Brazil across the centuries. In 1827 exports to London amounted to £87,000; in 1834 they yielded £51,909, and in 1856, £18,041. The contract system, although extremely practical for the Crown, had to be abandoned because of the activities of the corsairs, particularly the French, who harried Portuguese shipping. The French had frequented the Brazilian coast since 1504, attracted by the profitable dyewood trade. With the object of affirming Portuguese sovereignty over the new dominions, the Crown dispatched a number of coast guard fleets, such as that under the command of Christoväo Jacques in 1527, to intercept and destroy or capture all pirate ships. With more far-reaching objectives, including systematic survey of the coast and the founding of settlements, Martim Afonso de Sousa sailed for Brazil in 1530 at the head of a large fleet, and accomplished his mission by exploring the northern coast from a point just above the theoretical boundary-line between Portuguese and Spanish possessions laid down by the Tordesillas Treaty, to the south, where he ventured well beyond the Tordesillas line, halfway between Buenos Aires and Santa F6. Meanwhile the Crown had realized that it could not hope to maintain dominion over Brazil if it continued only to exploit the land by granting dyewood concessions, even with the support of the coast guard fleets. It therefore introduced the system of hereditary captaincies, based on the policy so successfully pursued in colonizing Madeira and the Azores. The hereditary captaincies were a compromise between the concession system and direct colonization. They were grants, of an inalienable nature, allegedly given in consideration of services rendered, to nominees of the Crown. The coastline was divided into captaincies of approximately fifty Portuguese leagues (equivalent to 330 km each), various royal rights and privileges being transferred to the proprietary landlords — donatdrios— and their heirs, each grant being accompanied by a charter setting forth the dues, tributes, and so on, to be paid to the king or the donatärio by the colonists or vassals in each captaincy. Customs duties, royal monopolies of "drugs and spices," one fifth of all precious metals and precious stones, and tithes, were reserved for the Crown. The donatarios were given extensive administrative and judicial powers, an effective grant of twenty per cent of the land in the captaincy, fifty per cent of the value of its Brazil wood

100 Economic and Political Development and fishing catch, one tenth of the Crown's revenues and dues, the right to enslave the Indians and to sell in Lisbon up to thirty-nine Indian slaves a year. Like the earlier systems of granting concessions and leasing or farming out contracts for the exploitation of Brazil wood, the captaincy system enabled the Crown to maintain its sovereignty over the new land and to collect fiscal dues without having to find the capital to finance exploitation of its resources or being obliged to carry out the administrative and judicial duties of sovereignty directly. It was thought that the founding of towns and fortified posts along the coast would ward off foreign interlopers by barring access to the natural resources of the land. As we know, the system of hereditary captaincies failed because none of the donatärios was rich enough to finance such costly undertakings. Some of the original grants were never settled by their donatarios, and the others, with the exception of Pernambuco, Säo Vicente, and Santo Amaro, succumbed to attacks by hostile Indians, or collapsed for some other reason. The failure of the captaincies, the death of many of the donatarios, the Colony's complete lack of organization, and the imminent risk of its occupation by the French, confronted the Crown with the fact that if the settlements were to be saved from collapse a systematic colonization effort was necessary. Accordingly, Tome de Sousa was sent out as Governor-General of the "State of Brazil," with a large company and ample resources to establish himself at Bahia. The Crown bought out the heirs of the original donatärio of the Captaincy of Bahia, Ferreira Coutinho, who had died in the vain attempt to settle his captaincy. This became standard practice for the Crown, and the rights and privileges originally granted to the donatarios were systematically acquired in course of time from their heirs. The new policy established with the creation of a central authority proved a salutary one from the political and administrative points of view, assuring Portugal's dominion over Brazil and creating the conditions for the Colony to prosper. From the fiscal point of view, however, it fully confirmed — at least throughout the sixteenth century — the Crown's fears that it would have to spend more on the new colony than it could hope to recover in dues and tributes.4 'According to Simonsen, the revenue derived by the Crown from Brazil in Τοιηέ de Sousa's time was equivalent to 10,940 contos in modern (1937) currency, made up as follows: 6,200 contos from exploitation of the Brazil wood

The Colonial Administration The Sugar

101

Cycle

Under the efficient administration of the governors-general, among whom Mem de Sä (1557-1572) is worthy of mention, the colony expanded and prospered. The source of this prosperity was the rapid rise of commercial sugar production, which took place late in the sixteenth century as the growing demand for this new commodity in Europe stimulated expansion of Brazil's sugar economy. The sugar cycle which replaced the simple extractive economy based on Brazil wood established a slavocratic-capitalist economy in colonial Brazil, raising the incomes of the free population to a level as yet unequaled. Celso Furtado estimates that the average national income of the free population during the prosperous sugar period was equivalent to U.S. $350 per capita in modern currency.5 Table Table

3

Yield of Sugar Exports for the Years 1560-1831 Year 1560-70 1580 1600 1650 1710 1760 1806 1822 1831

No. of sugar plantations

Amt. exported (in arrobas)»

Total value (in £ sterling)

Total value (in grams of gold)

60 118 200 300 650

160,000 350,000 1,200,000 2,100,000 1,600,000 2,500,000 1,500,000 4,790,000 5,200,000

270,406 528,181 2,258,300 3,765,620 1,726,230 2,379,710 665,774 2,184,910 1,903,220

1,960,000 2,867,500 16,536,000 27,537,000 12,640,000 17,425,000 4,875,000 15,996,600 13,936,000

— — — —

Source: Roberto Simonsen, Histöria Econömica do Brasil (Säo Paulo; Cia Editora Nacional, 1957), pp. 114ff. * arroba: the old Portuguese quarter, equivalent at present to 15 kg, or 32 lb avoirdupois weight. — Tr.

3, taken from Simonsen, shows the income from sugar exports for the years 1560-1831. monopoly, leased or farmed out to various contractors; 4,100 contos from tithes collected on sugar; and 600 contos from various other fiscal sources. On the debit side, the cost to the Crown of founding the City of Salvador alone was 300,000 cruzados, equivalent to 40,000 contos in 1937. 5 Celso Furtado, Formacäo Econömica do Brasil (Rio de Janeiro: Fundo de Cultura, 1959), p. 58.

102 Economic and Political

Development

The spectacular rise in sugar exports, the value of which, according to Simonsen, amounted to £300 million sterling for the three centuries of the colonial period, reaching the sum of £200 million sterling in the seventeenth century, explains the efforts of the Dutch to escape the tolls exacted by Lisbon middlemen. In order to build up a sugar trade of their own, the Dutch invaded the sugar-producing area of the Northeast in 1624, extending their control of the Brazilian coast over a large area and managing to hold on for thirty years, until finally forced to withdraw in 1654. During this period, when the sugar economy reached its zenith, Holland succeeded in gaining control of approximately half of Brazil's sugar exports. During the peak period of the sugar cycle, the internal situation confronting the Kingdom of Portugal was extremely unfavorable. The flower of the kingdom's military strength, the elite of its nobility and even its king, Dom Sebastiäo, had perished in the senseless mystic-epic adventure of Alcdijar-Kebir in 1578, leaving the dynasty of Aviz without an heir and the kingdom defenseless. Taking advantage of this, and on the strength of his maternal descent from the House of Aviz, Philip II of Spain laid claim to the Crown of Portugal and prevailed over Portuguese national feeling, fostered by the Alca^ar-Kebir disaster but also rendered powerless to express itself. Thus the two Iberian kingdoms and their vast colonial empires were united under the omnipotent scepter of Philip II. The union of the two crowns, besides violating Portuguese national feeling, meant that Spain's traditional enemies, especially the Low Countries, also became enemies of Portugal, which entailed, among other consequences, the Dutch occupation of the Brazilian sugar-producing area. In the second half of the seventeenth century, Portugal had to recompense England for the support she had given the Portuguese cause during the anti-Spanish revolt of 1640 and the proclamation of the Duke of Braganza as King John IV of Portugal, by giving preferential treatment to English trade. The Anglo-Portuguese treaties concluded in 1642, 1654, and 1661 gave the English important shipping and commercial privileges and allowed them to establish up to four English merchant families in the ports of Goa, Cochim, Dili, Bahia, Pernambuco, and Rio de Janeiro. These concessions made in return for diplomatic and military support were rounded off by the Treaty of 1703, negotiated by Methuen, the English Ambassador to the Portuguese Court, the commercial agreement which was to play so

The Colonial Administration

103

prominent a part in the subsequent evolution of the Portuguese economy. From the point of view of the colony, however — with the exception of the Dutch occupation which, despite the period of enlightened rule under administrators like Nassau,® had never been accepted by the mass of the people — the troubles that beset the kingdom had little visible effect. During the union of the two crowns, the Court at Madrid had the foresight to allow Portugal to continue to administer her colonies. After the Restoration the same colonial system was retained. Administrative methods and colonial policy applied from the end of the sixteenth century thus remained unaltered throughout the seventeenth century. The most characteristic feature of this administration, as we have seen, was its fiscally oriented outlook. T h e Crown and its agents in Brazil were not really interested in the colony's economic and cultural progress, and there was little solidarity between the colonial administration and the "Senhores de Engenho" (sugar-mill owners) who produced the country's major source of wealth. T h e Crown's main concern was the collection of taxes. In the eyes of the colonial administration, sugar was of interest chiefly as a commodity which yielded a handsome revenue in tithes and various export duties on leaving Brazil, and import duties on entering Portugal, where it was possible to levy heavy taxes. So long as it was in production at the mills, or in storage, sugar, being practically beyond fiscal reach, was of little interest to the Crown. This was why, although the Crown gave the sugar planters no worthwhile assistance, there was little occasion for any conflicts of interest to arise, since duties were levied at the ports when the sugar was already on its way out of the country.7 "Prince Johann Moritz, Count of Nassau-Siegen, who was Governor-General of Netherlands Brazil from 1637 to 1644. — T r . 'According to Rodolfo Garcia (Ensaio söbre α Histöria Politica e Administrative do Brasil, pp. 187ff.), the revenue of the Royal Treasury at the beginning of the seventeenth century derived from the following main sources: the quint on metals; tithes on all products of the land; customs duties at 10 per cent on all Portuguese merchandise; an additional duty of 3 per cent on all customs duties to cover "consular charges"; taxes on wine and spirits and salt; a transfer tax of 10 per cent on the sale of real estate; a capitation tax on imported slaves at 3$500 a head; special taxes, such as the practically compulsory "voluntary contributions" to defray extraordinary expenses, including the subsidies raised in Pombal's time to rebuild Lisbon after the earthquake, or the so-called "literary subsidy" to provide for education in the colony; the proceeds from the royal monopolies of Brazil wood, tobacco, and whale oil fanned out to contractors.

104 Economic and Political The Mining

Development

Cycle

Spanish discovery of precious metals in the early days of the Conquest encouraged Portuguese hopes of finding the mines originally believed to exist in Brazil. But the search proved fruitless: if precious metals did exist in the new land, they were not to be found along the coast. The sole accessible source of wealth was apparently Brazil wood and, as we have seen, colonization was founded on its exploitation. Once the Portuguese settlers had been finally confirmed in possession of their new land by the establishment of a central government in the person of the Governor-General, the Crown began to make systematic efforts to discover precious metals in the hinterland. The first Governor-General, Tom6 de Sousa, had been given instructions to discover mines, but all attempts failed. The efforts of his successors proved equally disappointing. Several unrewarding expeditions were undertaken in the second half of the sixteenth and throughout the seventeenth century, but only at the end of the latter was gold struck in paying quantities. During the last thirty years of the sixteenth century there were growing indications that gold and precious stones were to be found in the hills of what is now Minas Gerais and the Central Plateau. Thus, in 1574, Antonio Dias Adorno explored the Caravelas River, on the order of Governor Luis de Brito e Almeida, and having gone as far as the Serra das Esmeraldas (Emerald Mountains), he brought back some tourmalines. Joäo Coelho de Sousa, of Jequiriga, acting on information supplied by Adorno, led an expedition which managed to find gold before Sousa died, near the headwaters of the Paranagua River. At the beginning of the seventeenth century, Francisco de Sousa reached the gold mines reported by Adörno, but died during the search, and his son, who was bringing back samples of the gold discovered, was captured by Indians. In 1612 Salvador Correia de Sä was appointed to open up mines in the southern captaincies, having managed to persuade the Court at Madrid to declare that all diggings could be freely exploited, a decree which considerably encouraged prospecting. The first really rich gold strike in 1694, in the Itaberaba region, was Rodolfo Garcia estimates that the revenue yielded from the manifold exactions at the beginning of the eighteenth century amounted to 1,000 contos in the currency of the period. According to Varnhagen, the duties and taxes levied by the Crown absorbed one quarter of Brazil's total production.

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followed, at short intervals, by fresh discoveries of alluvial gold in the beds of rivers and streams. By the first quarter of the eighteenth century the chief deposits of gold and precious stones had been found. A swarm of prospectors from all over the colony and from the kingdom poured into the mining districts in a fantastic gold rush. The existing towns and villages in Minas Gerais rapidly expanded, new ones were founded, and the region became the most flourishing in the colony, artistic activity keeping pace with mining developments to make of this region the colony's most important baroque center. According to Baron Eschwege, who came to Brazil with Dom Joäo V I in 1807 and was appointed by the King to study the mining situation (his main work, Pluto Brasiliensis, was published in Berlin in 1830), gold production in Brazil for the years 1600-1820 reached 63,417 arrobas, equivalent to 951,252 kg and worth £130 million sterling. Calögeras, in his classic work, As Minas do Brasil, published in 1904, estimated that between 1700 and 1801 the gold mines yielded 65,000 arrobas of gold (983 tons), to the value of £135 million sterling. Humboldt estimated the value of gold production in Brazil for the period 1500-1803 at £155 million, and the value of contraband gold at £33 million, making a total of £194 million. Simonsen,8 taking into account the figures just quoted, came to the conclusion that gold production in the colonial period yielded something in the region of £160 million sterling. Joäo Lucio Azevedo, cited by Simonsen, estimated that Brazilian diamond exports totaled three million carats from the time the diamond deposits were discovered in 1728, to 1801, and that these exports yielded as much as £10 million sterling. There had been no real conflict of interests between the authorities and the planters during the "century of sugar." But relations between the colonial administrators and the miners were far from cordial or even peaceful. Even though sugar had brought about a greater increase in the colony's wealth than gold, the conditions prevailing in the mining districts, and the mercantilism with which the administration had always been imbued, gave rise to serious conflicts when the Crown sought to pursue its fiscal policy in relation to gold and precious stones. In theory the Crown's fiscal aspirations remained the same: from colonization's earliest days it claimed one fifth of all precious metals and gems for the Royal Exchequer. But what made it difficult to ap* Roberto Simonsen, Histöria Econömica do Brasil, chaps, x-xi.

106 Economic and Political Development ply this ancient principle in the eighteenth century was the problem of devising a satisfactory method of collecting the Royal Fifths. How was the Crown effectively to control the collection of twenty per cent of the value of gold and diamonds mined, and to see that this made its way into the royal coffers? Several different methods were tried out. When the gold rush began, the collection of the Fifths was confined to the smelting-houses set up near the newly discovered mines, to which the miners were supposed to bring their gold to be weighed and cast into bars, after deducting a fifth of its value for the Crown. The miners failing to comply with this requirement, the Treasury adopted a new system in 1714. The Royal Fifths would be collected on the basis of an assessment which stipulated that town councils would pay the Crown a yearly tax of 30 arrobas (440 kg) in commutation of the Fifth. This measure, too, meeting with scant success, the Crown tried again, in 1725, to channel the flow of gold through authorized smelting-houses, to which all gold must be taken for casting into bars, stamping, and payment of the quint. The bars were returned to the owners with an official receipt (guia) which authorized their free circulation. In 1732 this system was replaced by the "capitation tax," each miner being obliged to pay a fixed minimum yearly sum based on the expected average yield from his diggings. In 1750 the Marquis of Pombal reopened the smelteries, and the system of sending all gold to these establishments for smelting and quinting was once more enforced. These systems were all unpopular with the miners, and relations between them and the colonial authorities continued to be strained. The miners felt, not without reason, that the taxes were a crippling burden and made exploitation of the mines unprofitable when they began to yield less. The Crown's agents, who were also justified, felt that the miners turned in only a fraction of the gold and smuggled out the rest. Despite all the smuggling activities — and the amount of contraband gold has been estimated at not less than twenty per cent of the total mined — the Crown derived a fabulous revenue from the mines of Brazil, estimated at more than £30 million sterling. This wealth revitalized the Portuguese economy and enabled Dom Joäo V to establish one of the most sumptuous courts in Europe, and to devote himself to the building of grandiose monuments, such as the Convent of Mafra. It likewise enabled the Marquis of Pombal to rebuild Lis-

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bon after the earthquake, and made easier his administrative reorganization of the kingdom. Conflicts between the colonial administration and the miners, who had become with the decline of the sugar industry at the end of the seventeenth century the colony's most important social group, bred in the colony a mounting antagonism to the Crown, which ultimately led to independence. Origin and Significance

of Colonial

Fiscalism

Colonial fiscalism, as described above through its manifestations from the sixteenth to the eighteenth century, is a phenomenon which has been clearly identified by Brazilian historians and generally recognized by all writers. But the origin and significance of this fiscalism on the part of the Portuguese Crown has not yet been adequately interpreted. Partial explanations of this constant in Portuguese colonial policy have been produced and as such have not been without some foundation. Some writers have accounted for the Crown's fiscal outlook in terms of the impoverished condition of the kingdom, committed as it was to a maritime and colonial endeavor beyond its limited resources, and crippled by the Alca^ar-Kebir disaster which robbed it of the finest fruits of this endeavor and the subsequent loss of India during the union with Spain. Others have explained the fiscalism of the Portuguese Crown as due to the survival in Portugal of a primitive and narrow mercantilist spirit, which bound her to the idea of hoarding the treasure of precious metals and gems instead of leading her to develop manufacturing industries and productive techniques in the way that Holland, England, and France had done. The first explanation is only a partial one because it fails to account for the fiscalism which preceded the death of Dom Sebastiäo, and which guided the whole maritime and colonial enterprise. The second explanation, while broader in its implications, is impaired by the tautological reasoning, which fails to grasp that the hoarding spirit and fiscalism are two facets of the same phenomenon, or process, evidence of the existence of the one being in no way an explanation for the other. The causes and significance of Portuguese fiscalism must be unraveled if we are to understand relations between the state and the economy in Brazil, not only throughout the colonial period, which

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would in itself be useful, but in the hundred years that followed, during the period in which the colonial and semicolonial conditions governing the Brazilian economy remained unaltered until the economic, social, and political crisis of the 1930's. As with all deep-rooted and long-lasting historical phenomena, the fiscalism of the Portuguese Crown can only be understood in the light of a sociological investigation of Portugal's social structure during the Age of Discovery and that which immediately preceded it. Some important aspects of this problem have already been indicated by Nelson Werneck Sodre,9 firstly in emphasizing Portugal's distinct social structure at the beginning of the sixteenth century in comparison with that of other European countries, and secondly in stressing the rapid decline of the Portuguese bourgeoisie during that same century. Nevertheless, he does not draw the inferences needed to permit an understanding of the fiscalism of the Portuguese Crown, not only because his study did not concern itself with this aspect but also because his analysis of Portugal's social structure in the sixteenth century was too summary and confined itself to that century alone. Be that as it may, the two observations made by Nelson Werneck Sodre are very useful for an understanding of the problem, and he rightly stressed the peculiarity of Portugal's social structure on the eve of the modern age and the rapid decline of the Portuguese bourgeoisie. Portugal's different social structure vis-a-vis the other European countries was not clearly characterized as such in the sixteenth century, but seemed on the contrary to be the outcome of the late Middle Ages in Portugal, which had been taken up with reconquering the kingdom from the Moors. The very foundation of the kingdom by Dom Afonso Henriques was bound up with this endeavor, and the reconquest enabled the Portuguese Crown to become, at the height of the Middle Ages, a strongly centralized and national government, valid both on account of its dynastic legitimacy and through its position as the kingdom's politico-military center, representative of the nation and the interests of the community. Although many parallels can readily be traced between the Spanish and the Portuguese patterns of experience, the conditions under which the reconquest proceeded in Spain were distinguished from those obtaining in Portugal by the greater size and more heterogeneous nature of the 'Introducäo a Revolucao Brasileira 1958), pt. 1, chaps, ii and iii.

(Rio de Janeiro: Livraria Josd Olympio,

The Colonial Administration 109 former country, where the separate medieval kingdoms were only unified under Ferdinand and Isabella, retaining their diversity and antagonisms right up to modern times. The Portuguese reconquest placed a united kingdom and a national society under the direct authority of the Crown, which had undertaken and organized the expulsion of the Moors. There were no powerful feudal lords possessed of individual resources and subject to the king only through the slack bonds of vassalage. There was a landed nobility, whose estates — even smaller in extent than the limited size of the country would prescribe — had been granted by the king in exchange for services rendered. There was also a titled nobility, which lacked independent means and was really a nobility of service, not only because it had received its titles in reward for service rendered to the Crown but above all because it derived its income from the military and bureaucratic services it continued to provide. And there was a powerful clergy whose power was based on influence rather than on feudal privilege, since it lacked the feudal land base. Below the clergy and the military and bureaucratic nobility was an emerging mercantile bourgeoisie, mainly of Jewish origin. This Jewish elite was composed of the descendants of the North African Jews who had accompanied the Moors when they invaded the Peninsula in the eighth century, and had stayed behind after the reconquest. In the case of Portugal they had been incorporated into the nation, although still subject to certain discriminatory rules and practices in accordance with the distinctions made throughout Medieval Europe between the Jews and the Christian population. Nevertheless, up to the fifteenth century, the Portuguese attitude toward the Jews was far more liberal than that prevailing in other Christian kingdoms. Besides the express protection they were accorded by various legal dispositions and royal decrees, the Jews were increasingly employed by the Crown to collect taxes on a contract basis, and for other duties calling for administrative and commercial ability. The inevitable conflicts arising from their exactions on behalf of the Crown, and their practical monopoly of certain commercial activities, were among the principal reasons why the Jews became the target of the growing animosity toward them which developed in Portugal throughout the fifteenth century. There were frequent outbursts of concerted violence against Jews in the Portuguese cities, and clashes between the people and the Jews proved to be increasingly beyond the control of the Royal Guards. Anger mounted against the

110 Economic and Political Development Israelites in the Cortes, 10 and numerous petitions were addressed to the king, asking him to curtail their immunities and privileges. Fully aware of the advantages to the Crown of the services of the Jews, the kings were nevertheless reluctantly obliged to yield to public pressure and to make a few concessions to popular opinion, although managing to keep these to a minimum. Conscious of the dangerous course of developments within the country and the exacerbation of feeling, fed in part by religious fanaticism and still more by the pretext afforded by religious differences to disguise this animosity's essentially economic origin, many Jews chose ostensibly to turn Catholic, and a numerous class of " N e w Christians" thus came into being. The third layer of Portuguese society at the close of the reconquest was made up basically of the peasant masses, who were practically free of glebe servitude because a feudal peasantry had never been completely organized and because, after the reconquest, village communities had acquired or retained their immunities and privileges vis-a-vis the new landlords. Furthermore, an urban plebeian class, made up of free workers, was gradually emerging in the towns and it was from the ranks of this class that the Crown recruited sailors to man her ships and soldiers for her armies. T h e topmost level of this urban group was occupied by the artisans and craftsmen, who worked under a semicorporate system but without the degree of organization and exclusiveness attained by the craft guilds in other European countries during the fourteenth and fifteenth centuries. This social structure is distinguished from that of the rest of Europe by the fact that the peculiar conditions of the reconquest had transformed the Portuguese Crown into a modern government in a feudal age — modern in the sense that it was justified by its functions rather than by its traditional origin, and that power was exercised by way of a military and bureaucratic apparatus immediately subject to and directly dependent on the Crown. The same characteristics made it possible for Portuguese society to become a national society at a time when other European countries were still prone to feudal fragmentation and conflicting dynastic loyalties. The evolution of this social structure from the fourteenth to the sixteenth century accentuated the nobility's dependence on the Crown, underscored the absolute commercial and financial superiority of the New Christians over the indigenous merchant community, and ex10

The Parliament of the Three Estates: nobility, clergy, and commoners. — Tr.

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acerbated the animosity of the Old Christians toward the prosperous and envied New Christian bourgeoisie. The limits of this study preclude detailed description of the process whereby the Portuguese Israelite bourgeoisie, relatively integrated into the nation during the late Middle Ages, gradually became after the fifteenth century, despite its conversion — or nominal conversion — to Christianity, the object of growing hostility from the rest of the population.11 Suffice it to say that during the sixteenth century the Crown, yielding partly to popular animosity against the Jews and partly to pressure from Castile, at length adopted many of the measures already employed by the neighboring kingdom against the New Christians and permitted the Inquisition to take action against them. Although persecution of the New Christians never matched the anti-Jewish activity in Spain — having been imposed by the overriding political and diplomatic circumstances rather than undertaken on any voluntary initiative of the Crown — the fact remains that the Jewish bourgeoisie was relegated to marginal political and legal status within the nation, exploited economically, and exposed to physical violence at the hands of the Inquisition. Persecution of the Jews and New Christians who — their ranks swollen by refugees from Spain — accounted at the time of the Discoveries for 190,000 of the kingdom's inhabitants, or twenty per cent of the total population, decisively affected the later history of Portugal and her colonies. The Portuguese bourgeoisie — basically made up of genie da ηαςάο (people of the nation), as the Jews were then referred to — was virtually wiped out. The consequence of the liquidation of the Portuguese bourgeoisie at a time when Portugal was engaged on her great enterprise of discovery and colonization — in itself simply the culmination overseas of the commercial and bourgeois revolution of the fifteenth and sixteenth centuries — was the Crown's takeover of the maritime commitment. In this manner a true form of state capitalism was implanted in Portugal during the sixteenth century. The second consequence of the elimination of its bourgeoisie was that Portugal, like Spain, condemned herself to a sterile mercantilism, which was to take on the fiscal characteristics indicated above when, with the close " S e e Alexandra Herculano, Histöria da Origem e Estabelecimento da In· quisisäo em Portugal, 3 vols. 12th ed. (Rio de Janeiro: Paulo de Azevedo Ltd.) and Arnold Wiznizer, Jews in Colonial Brazil (New York: Columbia University Press, 1 9 6 0 ) .

112 Economic and Political Development of the Golden Age of the India trade and the dwindling of opportunities for speculative profit from the Brazilian sugar trade, Portugal found herself in an age of intensive trading. The country no longer had the entrepreneurs who could embark on vigorous trade enterprises. For the same reason, Portugal was unable to develop its manufacturing activities on any appreciable scale, whereas the Low Countries, where most of the Portuguese Jews had sought refuge, forged ahead in the production of finished goods. Thus Flemish and Dutch, and later English, manufactured goods had to be bought by Portugal to supply Brazil's needs, and the gold from Brazil provided the kingdom's foreign exchange credits, merely passing through Portugal — who kept only the fiscal dues — to fill the coffers of Holland and Britain.

9/DOM 10Ä0 VI AND THE FOUNDATION OF THE EMPIRE

The New Outlook Dom Joäo's arrival in Brazil in 1808 was one of the most significant events in the country's history, not only on account of the far-reaching changes rapidly introduced into the colony — with the transformation of the vice-royalty into the seat of the kingdom, and the establishment of the Portuguese Empire of Brazil — but also because Brazil's entire subsequent evolution, particularly during the hundred years which followed, was conditioned by this event. It is true that, after the creation of the viceroyalty and the capital's move in 1763 from Salvador (Bahia) to Rio de Janeiro, the colonial administration, while still pursuing the traditional fiscal policy, had undertaken a number of important works. But the fillip to progress given to the colony by an almost uninterrupted succession of good administrators, from the Count of Cunha to the Count of Arcos, was nonetheless hampered by the persistence of fiscalism as the principal basis and final aim of colonial policy. Symptomatic in this respect, for reasons analyzed in the previous chapter, was the Royal Decree of 1785, which restricted all efforts to develop the colony's manufacturing capacity and techniques. What made the effects of Dom Joäo's stay in Brazil from 18081821 so far-reaching was the fact that his government was not simply a confirmation, on a grand scale, of all that was best in the viceregal administration. Nor was it the purely formal aspect of the seat of government's transference to Brazil, with the later elevation of the

114 Economic and Political Development country to the dignity of a kingdom by the Edict of 1815, that distinguished the government of Dom Joäo. More significant than all the important works carried out and the new enterprises launched by Dom Joäo was the changed outlook of the Portuguese Crown. With his transplantation to Brazil, Dom Joäo came to regard the colony with new eyes, and dedicated himself to the pursuit of a policy which would express his wholehearted commitment to this change of outlook. It was this new approach that gave his government its lasting importance. The traditional fiscalism of the Portuguese Crown was abandoned, to be replaced by a policy of consolidation and expansion of the Portuguese Empire of Brazil. Circumstances outside Dom Joäo's control, but which he clearly foresaw, made it impossible for the Empire he had founded to remain Portuguese, except in the broad sense of its cultural traditions and predominant ethnic traits. Meanwhile the most far-reaching outcome of the Portuguese Crown's new attitude was unaffected by Brazil's independence, or even by the eventual overthrow of monarchical institutions. The profound and lasting consequence which so distinguished Dom Joäo's government was the fact that the new outlook he adopted gave the Brazilian process, at a stage when it had become capable of assuming its proper form, a political center of gravity, a machinery of government and administration, and an economic and social orientation. The difference between the unity of the Brazilian Empire and the fragmentary destiny which mutilated Spanish America, the contrast between the institutional stability of Brazil and the sterile chain of upheavals which plagued the other Latin American countries right up to a recent phase of their history, leading them to oscillate between anarchy and Caudillismo, are some of the more relevant consequences stemming directly from the coming to Brazil of the Royal Court. The Portuguese Crown's altered outlook after its transplantation to Brazil did not spring from any new insight into the needs of the colony or the kingdom in general, although the new liberal ideas of the time, typical of the early Industrial Revolution, were evidently by no means irrelevant. However, more significant than any other factor influencing this new approach and policy was the complete transformation brought about in the relations between Crown and kingdom by Napoleon's invasion of Portugal, and the removal of the Portuguese Court to Brazil. For all the changes in Portugal's social structure occurring between

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the sixteenth and the early nineteenth century — the rise of the middle class, and the spread of its political influence being among the most significant of these — the traditional power structure established during the age of the Discoveries and leading to the implantation of state capitalism by the Portuguese Crown continued to prevail. The Crown, supported by the bureaucratic and military aristocracy — its ranks continually swollen by the need to provide parasitic jobs and sinecures for the rising middle class — directed the kingdom's affairs in a fiscalist spirit, using the prerogatives of sovereignty to amass profit, and gearing its administration to the maximizing of the fiscal possibilities offered by the mother country's position as compulsory intermediary between the colonies and the European market. Experiments like those of the Marquis of Pombal had proved beyond dispute that a more dynamic use could be made of the resources of the kingdom and its colonies, that they could be exploited in a more autonomous way that would create a greater capacity for expansion. But such experiments were opposed, in the short run at least, to the Crown's immediate consumption needs and the demands of the kingdom's administrative and military bureaucracy. As we have seen, the creation of commercial and industrial enterprises in Pombal's time, which could be regarded not as a source of future taxes but as a means of increasing national income and wealth, implied both a reduction in the dues to be collected and an outlay of money by the Royal Treasury to provide the investment capital needed for these enterprises. Once removed to Brazil, the Portuguese Crown was forced to abandon its traditional fiscalist line as a result of the Napoleonic occupation of the mother country, which had brought Portuguese trade to an abrupt halt and ousted Portugal from her favored position as compulsory entrepot between the European markets and the colonies which had enabled her to levy duties on merchandise passing through her customhouses. As an intermediary she was shunted aside, no longer able to manipulate customs tariffs by imposing trade monopolies that obliged the colonies to send their goods to Portugal for exchange against European commodities. England by this time was already providing the lion's share in this unnecessarily triangular exchange between the colonies and Europe. The disappearance of this customs manipulation brought about a complete change in the relations between Crown and kingdom. It became evident that the Portuguese colonial system functioned

116 Economic and Political Development merely as a mechanism for appropriating customs duties; that the mother country was little more than a giant customhouse, exploitatively intervening in the exchange of goods between Brazil and England; that the Crown and its military-bureaucratic apparatus were nothing but a vast and sumptuous customs inspection department. On the other side of the coin, this discovery brought a positive revelation, and Dom Joäo VI's great merit was that he grasped, and consistently sought to exploit, the consequences of this revelation to the full. Indeed, if occupation of the metropolitan territory by Napoleon's troops laid bare the parasitic nature of the Portuguese colonial system, it also revealed Brazil's immense possibilities as producer and exporter, as a territory and a people, and so as a feasible Portuguese empire of the New World. As this possibility came into view there also emerged another, complementary circumstance which greatly favored both the Portuguese Crown and Brazil. This was the fact that the Crown had become an instrument of government and administration bereft of a kingdom, while Brazil, which had become a kingdom and could become a great empire, wanted a government and an administration. It clearly fell to Dom Joäo V I not only fully to grasp Brazil's possibilities, but also to realize that the Portuguese Crown could set itself up as the government the nascent empire lacked, that this empire could become the adopted land of the government apparatus already in existence. Inherent in the Crown's new policy — a policy of founding and expanding the Portuguese Empire of Brazil — was the understanding that there would be the mutual co-option of a government by a country, and of a country by a government. This mutual co-option became something of an unspoken basic pact between the Portuguese Crown and Brazil, a constitution reciprocally granted and agreed to. In describing this as an implicit and unwritten constitutional pact, I am clearly not seeking to impose a substantialist view on the historical process, still less indulging in an animistic attempt to translate objective situations into human decisions. W h a t I do seek to stress is the profound convergence of interests arising from a situation in which a government machine, deprived of its original significance and obliged to find a new and genuinely functional meaning in order to survive as such, found itself in a country in the process of formation, which was still a collective system of private interests rather than a nation and could not hope to survive unscathed any conflicts arising

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from an internal power struggle, whereas it had everything to gain by taking over a complete administrative machine and the ready-forged instruments of government to which it had grown accustomed. It was by Dom Joäo VI, as many contemporaries on both sides of the Atlantic were quick to realize, that Brazil's true independence was achieved. What Portugal lost in forcing him to return to Lisb o n — which she would probably have had to lose, in one way or another, at some future date — was not just a colony, which had already been transformed into a nascent empire, but the possibility of playing her part for a longer period or in greater measure in the expansive destiny of the empire she had founded. Another significant effect of the founding of the Portuguese Empire of Brazil by Dom Joäo VI, and the unspoken constitutional pact which brought it into being, was the validity with which the authority of the Portuguese Crown came to be invested. It was as Dom Joäo's legitimate heir that Dom Pedro was proclaimed emperor of independent Brazil. And it was as the legitimate holder of governmental authority that the emperor, when he came to pit himself against the Constituent Assembly, was able to count on the backing of the armed forces and public opinion to dissolve this assembly, despite liberal opposition, in 1823. With full public approval he granted the country its Constitutional Charter of 1824, a charter which in some ways embodied the implicit, unwritten constitutional pact of Dom Joäo VI.

The Achievement

of Dom Joäo

VI

With all the deficiencies of the Portuguese administration, long since left behind and inexperienced by comparison with those countries which had moved with the times, and in sharp contrast to Dom Joäo VI's personal weakness and indecisiveness, his achievements in Brazil were considerable, in both the legislative and the political spheres. His impact was greatest on the economic level, where he strove from the outset to give the country its own economic structure, thereby creating conditions for future prosperity by encouraging expansion of trade and agriculture and establishing industries. His first act on arrival in Bahia was to decree that the Brazilian ports should be thrown open to trade with all friendly nations (Royal Decree, January 28, 1808), the import duties being fixed at 24 per cent. That same year, by the Royal Decree of September 1, he lifted the restric-

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tions on manufacturing and industry imposed by the famous Decree of 1785. Still in 1808, he established the Bank of Brazil and drew up its statutes. Later legislation and administrative provisions followed the same lines. An admirer of the Viscount of Cairu — Brazil's first systematically trained economist, for whom the Chair of Political Economy had been created at Rio de Janeiro — Dom Joäo yet sought to imitate England, then at the height of her maritime and trading power, insofar as that country would allow. He espoused an unorthodox, pragmatic liberalism designed to take full advantage of the prospects offered by the principles of free trade and free enterprise, but ceased to apply this liberal outlook when it came into conflict with the national interest. Thus, cloth and yarn produced in Brazil were exempted from duty, as were any raw materials required for industries already established in Brazil. TTius, too, the resources of the Royal Treasury were used to subsidize the iron and steel foundry established at Ipanema in the hope of providing a base for the country's industrial development. This policy of fostering economic growth was accompanied by appropriate measures in related sectors. In the cultural and educational sector, economic studies were encouraged and centers of technical education were established, such as the Royal School of Sciences, Arts and Crafts, and the Academy of Drawing, Painting, Sculpture and Civil Architecture. In the immigration sector, the first attempt at organized immigration was made with the colonization of "New Friburg" by Swiss settlers. On the administrative level, producttesting laboratories were founded, and a regular postal service between the provinces was instituted. The dependency into which Portugal had fallen in relation to England — whose aid had enabled the Court to escape to Brazil, and on whom she now pinned her hopes of Napoleon's final defeat and the consequent liberation of the metropolitan territory — forced Dom Joäo to accept the inequitable terms of the 1810 Treaty. This treaty was to some extent in line with the Anglo-Portuguese treaties which English expansion from the seventeenth century onward had imposed on the weakness of the Portuguese Crown. With an eye to securing English support against Spain at the time of the Restoration, Portugal concluded a series of treaties with England, culminating in the Methuen Treaty of 1703. Her dependence on English assistance against Napoleonic France led to the Treaty of 1810.

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Essentially, the 1810 Treaty, under the pretext of facilitating the navigation and trade of both countries, gave the English merchant navy a virtual monopoly of the carrying trade between Europe and Brazil, granted British goods the privileged tariff of 15 per cent ad valorem, in effect discriminating against Portuguese goods (which, until the 1818 amendment paid one per cent more), and instituted in Brazil, to Britain's advantage, the privilege of the special "JudgeConservator," who functioned outside the ordinary courts of law. In the conditions then obtaining, the practical effects of the 1810 Treaty harmed Portugal more than Brazil, since increased trade with Britain meant that Brazil could find a ready market for its exports and pay less for its imports. Even so, the consequent drop in customs revenue, at that time the Treasury's principal source of income, had far-reaching detrimental consequences in Brazil, being one of the factors responsible for the chronic budgetary deficits which the country was to suffer. In the long run, however, since Great Britain, pursuing her policy of exchanging diplomatic or military aid for economic favors, managed to extend the treaty for another fifteen years, in 1827, and for one more year in 1843, thus keeping it in force up to November 9, 1844, the commercial agreement of 1810 came to exert an increasingly inhibiting influence on Brazil's economic development. There is, however, nothing to suggest that economic developments in Brazil would have taken an entirely different turn if the treaty in question had never been concluded. As with the southern states of North America, Brazil's condition as an exporter of primary products precluded — even had a protectionist policy been feasible — development in any other direction. She was to remain an exporter of such products and an importer of finished goods. Nevertheless, properly planned protectionist tariffs along the lines of the North American experience could have safeguarded the country's export capacity while at the same time creating favorable conditions for industrialization.

10/THE PROCESS OF DEVELOPMENT

The Imperial State The convergence of interests which led the Portuguese Crown, deprived of its kingdom, to adopt Brazil as its chosen land, and the nascent country, lacking a political center of its own, to adopt the Portuguese Crown as its chosen government, gave the Imperial State a somewhat peculiar character. In fact, the state set up in Brazil with the coming of Dom Joäo V I and consolidated during his reign, to be handed down in direct dynastic line to Pedro II, was neither a traditional state of the type to which the Portuguese state from which Dom Joäo had emerged clearly belonged, nor a consensual state like that of a modern country, nor like the North American state founded from the outset of colonization on the concept of government by consent. The Imperial State, the outcome of that reciprocal co-option suggested in this study, could better be described as a kind of "plebiscitary state," like those of the two French Empires. The difference — one of type rather than of genre — between the Brazilian Imperial State and the two French Empires lies in the fact that in the French case (where, moreover, the plebiscite was overt rather than implicit as in the case of Brazil), the plebiscitary constitution of the state resulted from the broad unity to which the French people were led, in order to preserve their external integrity or their economic and administrative viability without basically altering the existing class relations. By contrast, in the case of the Brazilian Imperial State, its plebiscitary constitution derived from the

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need felt by the society to reconcile, within a reasonable moral framework, the country's unity, integrity, and stability with the diversity, lack of cohesion, and instability which characterized this society after the colonial phase, when it was establishing itself an an autonomous and independent Brazilian society. In France the two Empires (and the Fifth Republic) were attempts to provide a respite in the class struggle which sought to freeze or anesthetize the conflicting social forces, so that, without basically altering their relative positions, the country's integrity could be preserved, or its development, jeopardized by the class struggles which had been unleashed, could safely be resumed and fostered. Conversely, the Brazilian Imperial State was designed to enable the conflicting social forces to develop their potentialities, pursuing their ends according to certain rules of the game in principle considered fair to all. At the same time, it prevented regional antagonisms (which in the short term could not be alleviated at the level on which they had arisen) from affecting, on a higher level, the country's unity; the struggles between parties and factions competing for power (which in the short term could not be reconciled at the level on which they occurred) from affecting, on a higher level, the country's integrity; and finally, the social unrest caused by the struggle between the urban middle class and the rural patriciate (which in the short term could not be dealt with at the level on which it was being waged) from upsetting, on a higher level, the country's stability. The Brazilian Imperial State was thus a politico-bureaucratic-military apparatus for keeping Brazilian society within bounds and controlling it while preserving its common interests — which lay principally in safeguarding its future possibilities — in such a way as to allow the underlying social forces to pursue their individual ends, within the framework of a set of norms which would favor none of these forces in particular but secure respect for the rules of the game identified with the Imperial State itself. The cornerstone of the Brazilian Imperial State was inevitably the figure of the emperor, not in his sovereign character as a traditional king, nor even in his character of head of state, as in the constitutional monarchies. The true function of the emperor was that of arbiter and warrantor of the Imperial State. The raison d'etre of that state — the preservation of the permanent and common interests of a society in the process of formation, handicapped by its own diversity, heterogeneity, and instability and thus incapable of self-adjust-

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ment •— became identified with the special power delegated to the supreme head of the nation in performing his arbitral function, and which was to be responsible for its success. This was the instrument designated in the 1824 Constitution as the "moderative power" of the emperor. This bold innovation in the imperial constitutional charter, with its apt designation, provided the Brazilian Imperial State with an extremely functional form of organization. The special function of the moderative power, as distinct from the three traditional powers, was regularly accepted by the writers of the time, with the exception of the liberals, or at least of the Liberal party's radical wing, which considered the moderative power to be part and parcel of the executive power, abusively handed over to the personal discretion of the emperor. This interpretation was undoubtedly a mistaken one. In his thorough and interesting study on the political theory of the Brazilian Empire, Joäo Camilo de Oliveira Törres1 observes, with approval, that the best writers of the time on imperial institutions, such as the Viscount of Uruguay, Pimenta Bueno, and Bras Florentino,2 unhesitatingly understood the moderative power to be distinct from the other powers, representing the nation as a whole in a nonpartisan way. However, although both of the early commentators on the Imperial Constitution and Oliveira Törres rightly emphasize the clearcut nature of the moderative power's functions — which was, incidentally, to be more clearly defined in the course of the historical process than in the original constitutional formulation — they wrongly consider the source of the authority vested in this power to have been royalty. A thorough discussion of the subject would exceed the limits of this study. And since such exposition is out of the question, I shall confine my comments to the highly significant primary distinction between the sources of validity for the function of arbiter and warrantor of the state which the Brazilian Imperial Constitution designated as the moderative power and delegated to the emperor. 1 J o ä o Camilo de Oliveira Torres, A Democracia Caroada (Teoria Politica do Ιπιρέπο do Brasil), Rio de Janeiro: Livraria Jos6 Olympio, 1957, pp. 137 et seq. ' C i t e d by J. C . de Oliveira Törres, Visconde de Uruguai (Paulino Jos6 Soares de Sousa), Ensaio söbre ο Direito Administrative), Rio de Janeiro, 1862; Pimenta Bueno (Marquis of S. Vincente), Direito Publico Brasileiro e Andlise da Constituigäo do Impdrio, Rio de Janeiro, 1857; Bris Florentino Henriques de Sousa, D o Poder Moderador — Ensaio de Direito Constitucional contendo a andlise do titulo V , capitulo I, da Constituisäo Politica do Brasil, Recife, 1 8 6 2 .

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From the point of view of its effectiveness, this arbitral function must be regarded as a socially necessary function when a lack of social integration provokes regional antagonisms or class struggles which threaten the country's unity, integrity, or stability. As I had occasion to point out in Part I of this study, 3 the possibility of exercising consensual forms of authority depends on the margin of prior consensus achieved by the community which, in its turn, depends on how far the common interests based on the development already achieved make it possible for the society's current interests to be compatible with one another. W h e n a community's degree of social integration does not permit the exercise of authority to be based on consensual forms, authority must be exercised either in an authoritarian manner, representing the ruling social forces and interests, or in an arbitral form, by whoever manages to place himself above the conflicting interests. From the point of view of validity, no individual will ever be accorded positive recognition and acceptance as the legitimate holder of arbitral authority by reason of his inheritance of traditional authority, or by reason of any choice hallmarked by the original preference of one of the social forces in conflict. Traditional authority, such as that vested in European royalty, will retain its validity only so long as the traditional society which conditioned this authority remains effective. Constitutional monarchies — which, by formal analogy, have been wrongly considered the model for the Brazilian Imperial State — are a compromise effected during the transition from a traditional to a contractual society between the waning forces of the older order and the rising forces of the bourgeoisie. This compromise manages to survive beyond the transition stage which gives rise to it when the constitutional monarch is deprived of any real power, even that of moderator, and becomes the symbolic figurehead of the nation. In societies lacking in integration and hence standing in need of a moderative power, such power cannot be constituted by election or nomination, since these processes will be marked by the social conflicts which are to come under its arbitration. Arbitral authority is thus always accorded by a plebiscite, whether expressed or implicit. Furthermore, this authority is sanctioned not so much by the constituent and definitive plebiscite which may have originally established it as by a continuing plebiscite; it will 5

Chapters 2 - 6 .

124 Economic and Political Development lose its validity and hence its possibility of continuing to be exercised when it no longer enjoys the plebiscitary delegation of confidence which had tacitly been continually renewed. W e witness this very process in the case of the Brazilian Imperial State. Dom Joäo V I , traditional King (officially Regent) of Portugal, still a traditional society, was co-opted by Brazil to exercise government just when the country was ceasing to be a colonial society, that is, a heteronomous traditional society, and was becoming a transitional society, tending more to national self-government than to becoming a fully integrated society. The latter process was still to take more than a century. Dom Joäo expressed the possibility of autonomy, and it was in this sense that he was accorded tacit plebiscitary sanction as arbiter and warrantor of Brazil's autonomy. From the moment of his solemn acclamation on arrival in Bahia and Rio, popular support was never lacking. Sanctioned implicitly and tacitly by the incipient society, this arbitral function — of which Dom Joäo was to have an inarticulate, but nevertheless profound and intuitive grasp — overlaid his attributes as traditional king. Furthermore, this development took place, not simply by chance or in spite of such attributes, but, on the contrary, by reason of the very fact that, in the circumstances, Dom Joäo's traditional office of king provided him with the means necessary to exercise the other function which Brazilian society required him to perform — the establishment of self-government and the founding of the Empire. W e may observe the same process in the case of Dom Pedro I. He was proclaimed "Emperor and Perpetual Defender of Brazil," a title which explicitly designated the function implicitly performed by Dom Joäo, not because he was legitimate heir of the legitimate king, but because in this capacity he could impose acceptance of Brazil's independence on the mother country and on other nations, and because he was openly prepared to use the means at his disposal to champion the objectives desired by Brazilian society. The function entrusted to Dom Pedro was essentially that of safeguarding both the country's independence and its autonomy. Furthermore, the social forces beginning to emerge in Brazil, and still at the initial centrifugal stage of delineating their own interests, needed a state which, being above and beyond their conflicts, would safeguard the country's unity, integrity, and stability. The new arbitral function, unlike the earlier one, which had been directed exclusively outward, was to be exercised over domestic affairs, and was

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thus exposed to the threat of abuse and corruption which could render it an obstacle to the country's self-determination. Dom Pedro counted on the loyalty of the state's military-bureaucratic apparatus, and on the support of the Brazilian social forces — except for the radical liberal wing — when he dissolved the Constituent Assembly to safeguard imperial authority and the country's unity, threatened by the irresponsible radicalism which had come to dominate the Assembly. He promised to frame a constitution even more liberal than that drafted by the Constituent Assembly. In carrying out this promise, Dom Pedro confirmed the confidence reposed in him by the majority of the social forces. But he subsequently lost this confidence through his attempts to govern arbitrarily by appointing ministers who did not enjoy popular confidence. T h e 1831 revolt was in effect a negative plebiscite, forcing Dom Pedro to abdicate and confirming yet again that the Emperor's attributions were his moderative power and not the personal exercise of government and that this moderative power had been his not for legitimist reasons but through the continued sanction of popular opinion. The agitations and revolts of the Regency period, 4 by seriously threatening the country's unity, weakening its capacity for defence and constantly undermining its stability, served to make clear to all social forces alike, whether those which had opposed Pedro I (the nucleus of the future Liberal party) or those which had supported him (the origin of the future Conservative party), that the moderative power was an undeniable necessity for the normal and proper functioning of the regime. The disturbances of this difficult period also made it clear to all that the dynastic fiction was still the best expedient for choosing the holder of the moderative power, since this was something outside the struggle of factions. The anticipation of Pedro II's majority in 1840 was, as has been indicated by all writers on the subject, a virtual revolution. 5 W h a t has not yet received the attention it merits, however, is the fact that the proclamation of the prince's coming of age, and the popular acclamation this received — voiced anew during the coronation cele4 1831—1840. W h e n Pedro I abdicated, his son was only five years old. A succession of regents was appointed until the prince took over the reins of government in his fifteenth year. — Tr. β T h e declaration that Pedro II had attained his majority was accepted by both houses of Congress in spite of a constitutional provision that the heir to the throne must be considered a minor until he had completed his eighteenth year. — Tr.

126 Economic and Political

Development

brations a year later — was in the nature of a tacit plebiscite, along the lines described in this study. Like Pedro I, Pedro II was given plebiscitary sanction to exercise the moderative power, not because of his status as the former emperor's legitimate heir, entitling him, by the simple force of the legitimist principle, to automatic accession to the Brazilian throne, but because, being singled out for the Brazilian people and safeguarded from partisan conflicts by the dynastic fiction, he was incontrovertibly better qualified for this high office than any other citizen who might be nominated by the Assembly. As previously mentioned in this study, albeit in passing, the arbitral functions of the moderative power in the Brazilian Imperial State were more clearly interpreted in their historical performance by Pedro II than in the actual constitutional text. This was because the constitutional charter, betraying vestiges of European influence, had defined the emperor as both holder of the moderative power and head of the executive power. The fusion or confusion of these attributions tends to be necessary in societies where the arbitral office of the moderative power is designed to freeze class struggles so as to allow the country to deal efficiently with its defense problems, or proceed with its economic development. This applies to France both in the past and during the Fifth Republic. The Brazilian case, as has already been pointed out, was a different one. There was no question of anesthetizing class struggles in a country where the classes had hardly begun to emerge. W h a t was envisaged in the first place was the preservation and consolidation of the country's autonomy, setting the unity of Brazilian society above regional differences despite the lack of economic ties between the provinces. For this it was necessary to impose appropriate limits on political and social conflicts, rather than to suppress them altogether. Hence the convenience of distinguishing, as clearly and completely as possible, the moderative and executive powers. As the Ministry's responsibility to Congress gradually took shape, this distinction became more clearly defined and grew even clearer after a law passed in 1848 created the office of President of the Council of Ministers, who became the real head of the executive power. The parliamentarianism which developed toward the end of Pedro II's reign, after the electoral reforms introduced by Saraiva in 1881 ended the practice of unanimous Chambers and made the Cabinet genuinely responsible to Congress, reduced the emperor's functions practically to the exercise of simple supervisory control over Parlia-

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mentary procedure, to ensure that the formalities of the Constitution were duly observed. The Imperial State thus managed to safeguard the country's unity, integrity, and stability to an extent which Brazilian society, at that formative stage of its development, could not have achieved without such an institutional structure, as can be seen from what happened in the rest of America. However, in fulfilling this historical function, it exhausted its social significance. During the 1880's the Imperial State increasingly lost its political coherence and its capacity to control the direction of developments within the country. Founded on the premise of the emperor's power to hold the balance between conflicting social forces, the state found itself confronting a society which, although still far from having attained that degree of integration and development which would make it a genuinely consensual society, had nevertheless become capable of making the necessary self-adjustment. The arbitral and mediatory function of a moderative power external to the social process which, on the basis of tacit plebiscitary sanction, had hitherto regulated its development, was henceforth to be exercised by Brazilian society through the medium of two organs, shaped and conditioned by the social process itself and thus inherent in this process: the Army and public opinion. At the same time, it was becoming apparent that there was a widening gap between the political parties and the real social situation. Until Saraiva's reforms were introduced, the empire's electoral system provided for two sets of elections: at the first election, an electoral college was chosen by qualified voters, and at the second, the electors chose the members of the Chamber of Deputies and drew up three lists of candidates for membership of the Senate. This system meant that political debates which could affect the composition of Congress were confined to a small circle of electors, strictly controlled by the provincial presidents, who in their turn were nominated by the Ministry. Although the form of direct election introduced by Saraiva's amendment widened the circle considerably, the belated advent of a new electoral process did not suffice to alter the basic mechanisms of the imperial party system. Thus, although the Empire parties had strengthened themselves formally and technically, they gradually lost contact with the social forces at work in the country. The Empire's last parliaments were constituted in a climate of freedom which the country was not to know again until after the 1946 Constitution, and they functioned

128 Economic and Political

Development

with an authority and sovereignty which has never been equalled, since the presidentialism of the Republic made it impossible for Congress to be given power to form or dismiss the government. Despite these considerations, however, the last sessions of the Imperial Parliament had a dreamlike quality. It was not in Parliament but in the press, in the clubs and in the barracks, that politics were discussed and political campaigns conducted. The Conservative party had lost the support of the rural patriciate when it became abolitionist, and the Liberal party that of the urban middle class, because this class, predominantly represented by its military sector, had become republican. If the immediate origin of the republic was a seditious military coup — which, as such, would have lacked any significance — it was the Imperial State's own loss of true meaning, as indicated above, that led radical public opinion to mobilize the armed forces in favor of the republic, and the rural patriciate — which would long remain the ruling class — to lose interest in the regime, and even aspire to its overthrow. From a Colonial

to a Semi-Colonial

Economy

Contemporary writers have agreed that the socioeconomic history of Brazil falls into three distinct periods of unequal duration: the colonial period, lasting up to 1850; the semicolonial period, from 1850-1930, and the period of transition, from 1930 to the present day. The last period should be subdivided, to distinguish the period of transition, in which the Rostowian prerequisites of economic "take-off" were established, from the "take-off" phase proper, which began after the Second World War and took form with the Kubitschek government after 1955, although it did not acquire a selfsustained and irreversible character. In this section we will attempt to detach the most relevant aspects, on the factual and theoretical levels, of the structural transformation of the Brazilian economy from a colonial to a semicolonial form. While the theoretical problems involved in the concepts of colonial and semicolonial economic structures, like those relating to the process of structural transformation, lie outside the scope of this study, it may be as well to point out for the sake of methodological clarity that, in the present study, an economic structure will be regarded as "colonial" when it is characterized by dependence on outside demand and decisions (heteronomy) for its export products, and when it fails to generate any internal circulation of wealth, its economic growth

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resulting from aggregation from abroad and export proceeds (exogeny). A "semicolonial" structure is one which, although still heteronomous, has begun to achieve a fair rate of endogenous growth and displays a long-term propensity to maintain or increase its capacity for self-generating growth. In the case of Brazil, as has been pointed out by, among others, Celso Furtado, 6 the determining factor in the formation and increase of the capacity for self-generating growth was the rise and expansion of a wage-earning labor market. The gradual replacement of slave labor by paid work after the ban on the slave trade — and from then on until 1850, when the Conservative government of Eusebio de Queiroz passed its Act of September 4 7 — created a growing population of wage-earners who, as consumers of goods, stimulated the expansion of domestic demand which permitted the investable surpluses in the national income to be applied to the production of goods for the home market. This meant that economic growth could be generated by increasing domestic demand. The gradual substitution of the wage system for the slave system was accompanied by two important modifications in national production. The first was the development, during the second half of the nineteenth century, of coffee cultivation, which compensated for the decline in sugar exports, seriously affected since the end of the seventeenth century by the fact that world sugar output outstripped demand, and aggravated, since the early nineteenth century, by the growing competition from beet sugar, generally produced in countries which had hitherto imported cane sugar. The wholesale price index for Brazilian sugar exports, which rose from 1.50 (£ sterling) per arroba in 1580 to £1.87 in 1600, fell back to £1.79 in 1650 and, during the eighteenth century, from £1.07 in 1700 to £0.95 in 1760. By contrast, coffee, grown in Brazil since 1727 to meet the limited local demand, became increasingly popular during the nine6

Celso Furtado, Formacäo Econömica do Brasil, and A Economia Brasileira (Rio de Janeiro: A. Noite, 1 9 5 4 ) . ' B y the 1826 Convention with Britain, Brazil had undertaken to ensure the abolition of the slave trade within a period of three years. Britain, in line with her abolitionist policy, passed the Aberdeen Act of 1845, declaring her intention of seizing and treating as pirates all Brazilian slavers found at sea, but Brazil's own attempts to suppress the slave trade proved ineffectual. Eusibio de Queiroz's Act of 1850 finally made it illegal to trade in or import slaves, but did not change the status of those slaves already in Brazil. Slavery was not formally abolished in Brazil until 1888. — T r .

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Development

teenth century. According to Caio Prado, Jr.,8 Brazilian coffee exports after 1821 took an upward leap (see Table 4).

Table 4 Brazilian Coffee Exports after

1821

Decade

No of 60 kg (132 lb) bags exported (in 1000's)

1821-30 1831-40 1841-50 1851-60 1861-70 1871-80 1881-90

3,178 10,430 18,367 27,339 29,103 32,509 51,631

The second important modification in national production after the mid-nineteenth century was the development of the manufacturing industry and the means of transport. Efforts to stimulate manufacturing in Brazil were by no means new, but hitherto had yielded little result. If we discount various early attempts, some not without isolated success (such as the production of iron in Catalan forges initiated by Afonso Sardinha toward the end of the sixteenth century, and continued up to 1629), the first systematic efforts undertaken in viceregal times, after the transference of the capital to Rio de Janeiro, were sharply curtailed by the famous Decree of 1785, which prohibited manufacturing in Brazil. As we have seen in the last chapter, Dom Joäo VI lifted the ban on industry and strongly encouraged manufacturing activities, attempting to establish an iron and steel industry as the base for other industries. According to Roberto Simonsen9 between 1815 and 1821 the Ipanema factory produced 16,085 arrobas of bar iron, 12,589 arrobas of cast iron, and 18,087 arrobas of pig iron. Baron Eschwege's Fäbrica Patriota produced 8,000 arrobas of iron from 1813-20, and, still in Dom Joäo's time, Engineer Francisco de Monlevade, in ase Caio Prado Junior, Histdria Econdmica liense Ltd., 1953), p. 164. 8 Roberto Simonsen, Histdria Econdmica

do Brasil, 3rd ed. (Säo Paulo: Brasido Brasil, p. 448.

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sociation with Captain Luis Soares de Gouveia, established a blast furnace at Caet6, where the Companhia Belgo-Mineira was to carry on its operations a century later. Dom Joäo's industrial enterprises achieved no lasting success. This was partly due to the fact that, since the number of people with money to spend was extremely limited, as can be seen from Table 5,

Table 5 Population of Brazil, 1576-1900 Year 1576 1770 1800 1823 1850 1872 1887 1890 1900 Source:

Free

Slave

—

2,000,000 2,813,351 5,520,000 8,601,255 —

—

1,000,000 1,147,515 2,500,000 1,510,806 723,419

—

—

—

—

Caio Prado Junior, Histöria

Econdmica

Total 57,000 1,900,000 3,000,000 3,960,866 8,020,000 10,112,061 —

14,333,915 17,318,556 do Brasil, 3rd ed., App. 2 .

based on the figures provided by Caio Prado Junior the size of the domestic market was far too small for industrial expansion to take place. The failure of these industrial undertakings was also due in part to the free trade bias of Brazilian theorists, from the Viscount of Cairu to Bernardo Pereira de Vasconcelos,10 which meant that a free trade policy was pursued, from ideological conviction in the case of these theorists, but also under pressure from Britain. The provisions of the 1810 Treaty, extended, as we have seen, for an additional fifteen years in 1827 and for one more year in 1843, precluded Brazil from adopting the protective tariffs which could have provided the support the infant industries needed, compensating for the smallness of the domestic market by imposing heavier duties on competing foreign goods. Another factor which should be mentioned is that, as a result of the liberal free trade policy, the most attractive field for invest10 A bias which has lasted to the present time and of which Professor Eugenio Gudin is today the most conspicuous representative.

132

Economic

and Political

Development

ment was the export sector which offered a far greater profit potential than any other. Toward the middle of the nineteenth century, however, the situation was altered by the emergence of a number of favorable circumstances. The Conservative Cabinet of 1843, with Francisco Joaquim Viana as Minister of the Treasury, reacted against the economic liberalism of Cairu and Vasconcelos, which had contributed toward acceptance of the 1820 Treaty, and its prolongation in 1827, and adopted a protectionist and industrialist policy in accordance with the theories of List.11 British pressure was resisted, and the 1810 Treaty was allowed to remain in force for only one more year. Viana's successors followed his lead. On September 10, 1844, Manuel Alves Branco, Viscount of Caravelas, the moderate Liberal who had taken over Viana's portfolio, solemnly declared that the treaty had expired on the previous day. In that same year, Alves Branco published a new customs tariff, which had been agreed to the year before, raising import duties on foreign manufactured goods from 15 per cent to 30-60 per cent ad valorem, according to the possibility and desirability of stimulating local production. As was only to be expected, the British government retaliated by carrying out the threat employed, during Dom Joäo's reign, to enforce acceptance of the treaty: total cessation of the slave traffic. The Aberdeen Act of August 1845 empowered British ships to seize and treat as pirates all Brazilian slavers encountered at sea. The practical effects of Britain's new policy on the slave trade itself were negligible. Without decreeing effective suppression of the traffic, Brazil had already passed a law declaring the slave trade illegal in 1831, so that although importation of slaves was in fact tolerated, it bore a clandestine guise, and imports of slaves were not declared openly like those of legal merchandise. Under these conditions, as Calogeras has shown,12 whereas the number of contraband slaves imported at the beginning of the 1840's had averaged about 20,000 Negroes per annum, the increase in prices provoked by the Aberdeen Act so stimulated the traffic that, despite the losses incurred through the redoubling of British vigilance, the number of slaves landed clandestinely in Brazil grew as follows: u Friedrich List was a nineteenth-century German economist and one of the earliest advocates of high tariffs to protect nascent industries. — Tr. 12 J. Pandiä Calögeras, Formagao Historien do Brasil, 4th ed. (Säo Paulo: Cia. Editora Nacional, S6rie Brasiliana, 1 9 4 5 ) , p. 2 3 4 .

The Process of Development 1845 1846 1847 1848 1849

133

19,453 50,325 56,172 60,000 54,000

Meanwhile the Brazilian government reacted to the Aberdeen Act by assuming responsibility for suppressing the slave trade, which was formally and effectively prohibited in 1850. This policy, besides being the only one possible in view of British intervention, was adopted by the Eusebio de Queiroz Cabinet in the same protectionist and industrialist spirit which had dictated the Alves Branco customs tariff. The abolition of the slave trade was designed to channel into industry the considerable capital hitherto invested in the importation of slaves. As for the rural labor supply, the growing gap between the dwindling slave force and the demand for labor was steadily bridged by European immigrants who, according to Calögeras, flowed in at the rate of 15,000 a year, as compared with the 19,000 immigrants entering the country prior to 1850. 13 According to F. de Sousa Löbo, cited by Pedro Calmon 14 in only ten years — 1 8 4 7 - 1 8 5 7 — in Säo Paulo alone, over sixty colonies were founded by private enterprise, with more than 60,000 immigrants. Once the institutional conditions indispensable for industrial expansion had been created, Brazilian private enterprise responded with extraordinary energy. According to Caio Prado Junior, 15 in the decade following 1850 Brazil witnessed the creation of sixty-two industrial undertakings, fourteen banks, three savings banks, twenty shipping companies, twenty-three insurance companies, four colonization companies, eight mining companies, three urban transport companies, two gas companies, and eight railroads. T h e chief promoter of this tremendous economic expansion was Irineu Evangelista de Sousa (1813-89), Baron and later Viscount of Maua. He was connected, in one way or another, with all the important Brazilian enterprises of his time, as entrepreneur or financier or, often, as a disinterested but decisive sponsor. In a study of Ibid., p. 2 4 3 . " P e d r o Calmon, Hist6ria do Brasil (Rio de Janeiro: Jos6 Olympio, 1 9 5 9 ) , V , 1692. Calmon cites F . de Sousa Löbo, Säo Paulo na Federacäo (Säo Paulo, 1 9 2 4 ) , p. 118. 13

16

Caio Prado Junior, Historie Economica,

p. 197.

134 Economic and Political Development this size we cannot hope to analyze Maua's signal achievement, which laid the foundations of Brazil's industrial development and can be considered one of the most brilliant individual entrepreneurial feats in any country in the nineteenth century — par excellence the century of the entrepreneur. Suffice it to say that Maua, revealing a grasp of Brazil's economic needs — which were to be systematically stated only a century later, in the Programa de Reaparelhamento Economico (Economic Re-equipment Program), and the Programa de Metas (Target Program) —strove to foster development in four different sectors: the basic industries, transport and communications, power, and, as a means of mobilizing all these, finance. Maua's first venture, revealing the remarkable logic with which he embarked on his various projects, based as they were on a lucid overall grasp of the situation, was the creation of basic industries. A self-made man, by the time he was thirty-two, Maua had already served a lengthy apprenticeship in commerce and, starting from scratch, had amassed an appreciable fortune. In 1845 he acquired the preliminary plant for the Ponta da Areia factory, where he established a large-scale foundry, a forge, factories for manufacturing steel tubes, machinery and equipment, and a naval yard. By 1851, when Brazil's budget was 27,200 contos, the capital of the Ponta da Areia factory was 1,250 contos. In its busiest period it employed as many as a thousand workers, and the value of its annual output was about 1,000 contos (equivalent, at that time, to £1,350 thousand). At the outbreak of the Paraguayan War 1 6 (1864) almost a third of the Brazilian Navy, comprising thirty-two steamships and twelve sailing vessels, had been built by Maua. In the transport sector Maua was tireless in his efforts to promote the development of railroads in Brazil, inaugurating a nine-mile stretch of the Maua Railroad in 1854. Other lines followed: the Santos-Jundiai (Säo Paulo Railway) and the Minas-Rio Railway; he also played an active part in building the Dom Pedro II, the Recife and Säo Francisco, and the Bahia and Säo Francisco railways. An enterprise equally farsighted was his promotion of the " T h e W a r of the Triple Alliance (Brazil, Uruguay, and Argentina) erupted when the Paraguayan dictator. Solano Lopez, sent an army across the Argentine province of Corrientes to force the Brazilian troops supporting the ruling faction in Uruguay to evacuate that country. The combined forces of Brazil, Uruguay, and Argentina defeated Paraguay in 1870. — Tr.

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navigation of the Amazon. He opened three regular steamer services between Belem and the interior in 1852: Belem-Manaus, BelemTabatinga and Belem-Cametä, the river steamers which plied between these ports being the finest of their type. In the communications sector, Maua was responsible for laying a submarine cable between Brazil and Europe, operated by the Western and Brazilian Telegraph Company, which transmitted its first cablegram in 1847. For this outstanding achievement Maua earned the title of viscount, conferred on him by the grateful emperor. In the power sector Maui's most significant contribution — and the one which most impressed his contemporaries — was the introduction of gas lighting to Rio de Janeiro. He himself bore the entire cost of the initial outlay, estimated at the vast sum, for the time, of £120,000, bringing to Rio's main streets on March 25, 1854, that "fairy-like illumination" referred to in the newspapers of the day. In the financial sector, Maua's activities showed the same extraordinary foresight which gave his achievements such a modern ring even a century later. His central idea was the organization of a banking system, in conjunction with the London banks, to be centered in Rio with branches in other Brazilian cities and in the capitals of the River Plate countries, Montevideo and Buenos Aires. He foresaw that such a system would produce a number of desirable effects: the mobilization of savings, particularly British savings, for medium and longterm investment in Brazil and the River Plate countries; support for Brazilian business interests in the La Plata region; inflow of working capital for the Maua industrial empire; the provision of banking services for the areas concerned. The limitations of Brazilian legislation and the pressures brought to bear by those groups inimical to Maua's plans who had a stake in the second Bank of Brazil — founded by Maua but taken over by the government — made it impossible to realize this far-reaching financial project. Even so, Maua founded the banking corporation of Maua, MacGregor and Co. in 1854, with a capital of 20,000 contos, headquarters in Rio and an agency in London. And in 1859, with a capital of 1,200,000 pesos, he opened the Banco Maua e Compania in Montevideo. The remarkable burst of industrial activity which followed publication of the Alves Branco tariff, continuing unabated until 1861 and slowing down in the following decade, to come to a virtual halt with Maud's bankruptcy in 1875, might well have led — indeed, seemed to

136

Economic

and Political

Development

17

be leading — to the "take-off" process in Brazilian development a century before this process actually began. The limits of this study again preclude full analysis of the reasons for the failure, in the second half of the nineteenth century, of the industrial development of Brazil — unlike that of the United States — to lead to sustained growth. The main factors in this failure should, however, be briefly outlined. These factors can be grouped under two heads: the underlying general factors, which created unfavorable conditions for Brazilian industrialization during the Empire period, and the specific factors which were the immediate cause of its failure. Under the first head we can distinguish three principal factors: the smallness of the market, the unfavorable characteristics of the existing social structure, and the special privileges protecting export agriculture, which made investment in any other sector far less attractive. T h e market structure made it impossible, in view of the limited domestic demand, for nascent Brazilian industry sufficiently to expand its output volume to keep down production costs in relation to those of its foreign competitors; it also made it difficult to diversify production lines sufficiently for the different branches of industry to complement one another and build up a proper industrial complex. As we have seen, the total free Brazilian population in 1850 was about 5,520,000, and by 1872 it had risen to 8,601,255. A high proportion of this free population consisted of persons with a very small consumer capacity for manufactured goods, either because their earnings were too low or because they were tied, in one way or another, to the natural economy of the estate. Brazil's industrialization during the Empire period was hampered even more by the social than by the market structure. Unlike postRenaissance Europe, Brazil had never witnessed the emergence of a powerful merchant class which, with the advent of democracy, could influence the development of private or public enterprise. Nor had the country shared the pattern of experience of the American settlements, where a yeoman farmer class ensured a demand for manufactured goods and provided a steady stream of migrants to the urban centers to form a middle class of technicians and administrators. In Imperial Brazil there were only three social groups: the rural patricia t e — sugar planters (senhores de engenho) in the Northeast; coffee 17

For the "take-off" phase in development, see W . W . Rostow, Stages of Economic Growth (Cambridge University Press, 1960)

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planters (fazendeiros) in the Central South, and ranchers (estancieiros) in the extreme South; the urban middle class, recruited mainly from the rural patriciate, which formed the backbone of the political system and the government bureaucracy; and the servile class. A native mercantile community had not yet developed. Brazilian-born entrepreneurs like the Viscount of Maua were lost in a sea of Portuguese and a few English and French businessmen. They saw themselves not as representing the entrepreneurial bourgeoisie which had not yet emerged as a social group, but merely as figures connected to the rural patriciate or the bureaucratic middle class. Maua himself did not escape this psychological gravitational pull, behaving more as an entrepreneur of bureaucratic middle-class Brazil than as a simple Brazilian entrepreneur. While in no way belittling his remarkable public spirit, or the social importance of such a sentiment, it must nevertheless be pointed out that it was to his extreme public-spiritedness that Maua owed the immediate blame for his bankruptcy; it was this that encompassed his ruin, although more profound and remote causes, bound up with that set of circumstances adverse to industrialization, which we are now in process of considering, doubtless played their part. Imbued with public spirit, Maua made informal loans to the government which were later to go unrecognized, embarked on projects while knowing them to be very poor business risks, in simple response to urgent government appeals, and generously helped finance less risky ventures — such as the Santos-Jundiai Railway — which he felt to be in the public interest. Indeed, Maua's financial support for this latter project was so liberal that, when he found himself obliged to recover his outlay, the Säo Paulo Railway (the company formed to operate the Santos-Jundiai Line), was able to take dishonest advantage of him by invoking prescription of its debt. The simple payment of interest on this loan would have prevented Maua's bankruptcy. A third brake on industrial development was the steady rise in coffee cultivation throughout the second half of the nineteenth century. After the sugar crisis and the instability of cotton, the chances of profit held out by coffee diminished the attractions of other sectors for investment. Apart from these general factors, two of the factors which had an immediately inhibiting effect on industrialization call for comment: doctrinaire economic liberalism, and the narrowly conventional outlook of public men which, largely influenced by these liberal doc-

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trines, governed their actions and those of the state. The industrial protectionism of the Viscount of Caravelas, who was largely responsible for the Empire's industrial expansion, and later the developmental approach — not, however, altogether free of inflationism — of Bernardo de Souza Franco, as Minister of the Treasury, from April 4, 1857, to December 12, 1858, were exceptions to the general trend of ideas in Brazil up to the 1930's. Brazilian economic thought, deriving from the ingenuous liberalism of the Viscount of Cairu, stayed faithful to laissez-faire doctrines, applied with doctrinaire sectarianism. The logic of economic liberalism — which postulates that free trade and free competition inevitably ensure the best products at the fairest prices and so benefit the consumer (a thesis which only later came under critical examination with the exposure of the artificiality or idealism involved in the basic principle of perfect competition, and the catastrophic import of the natural adjustments it implied) — not only carried conviction in itself, but also corresponded to the pragmatic interests of Brazilian exporters of primary goods. These were favored by the nonprotectionist tariffs on imports of foreign manufactures, whereas they would have been penalized by any price rise in these which could not be offset by a corresponding rise in the price of their own products, had they been obliged to buy domestically manufactured articles or higher-priced imported goods. This naive and homespun form of liberalism was propagated by the press and parliamentary backbenchers. Since it implied for Brazil an economy geared to the importation of all that the country needed in exchange for a few tropical agricultural commodities, this doctrine made a mystique of a high rate of exchange, and this became the touchstone of government. If it rose to the rate of 1,000 Reis to the pound sterling, all was well and the future looked rosy; if it fell, all was lost and the outlook black. Not surprisingly, the influence of doctrinaire economic liberalism on the parliaments and cabinets of the Empire was gravely detrimental to industrial progress. The Alves Branco tariff raised the issue of the prices of Brazilian manufactured goods, regarded as "exorbitant" and the outcome of an "artificial industry." Public interest was better served by buying foreign goods at lower prices. The only home industries worthy of survival were the genuinely competitive ones which stood in no need of shelter from scandalous tariffs. This argument led inevitably to successive tariff adjustments, and under the

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administration of Angelo Muniz da Silva Ferraz, future Baron of Uruguayana, the import duties on ships, machinery, and iron manufactures were abolished. The antiprotectionist bias became so entrenched in public opinion that, up to the middle of the twentieth century, men of the older generation who had been raised to this view — even such eminent economists as Professor Gudin — opposed the new industrialist-protectionist approach which emerged after the Second World War. For the nascent industry of the Empire period, at a time when the country, backed by the rapid expansion of coffee, had foreignexchange credits enough to import all the consumer goods it needed, the re-establishment of a Cairu-type liberalism after the 1860's was nothing less than fatal. The Viscount of Maua, who pioneered industrialization and developed his business and industrial concerns on a scale unequaled by any other Brazilian entrepreneur, succeeded in holding out for some years, only to succumb in the end to the adverse combination of circumstances, entering into composition with his creditors in 1875 and bankrupt by 1878. It was a singular bankruptcy, for the scrupulous Viscount redeemed all his debts. But it spelt the ruin of a great entrepreneur, and marked the abortive ending of Brazil's first industrial upsurge. Despite the failure of industrialization — which, to succeed, would clearly have necessitated the most profound changes in the Empire's social structure — the nineteenth century marked the transition of the Brazilian economy from colonialism to semicolonialism. Once an endogenous process of economic growth became possible with the growing domestic demand, the contradictions inherent in the semicolonial phase were revealed in the course of the century that followed, and it became necessary to resolve these contradictions in order to make the economy capable of self-generating growth. The "Take-off"

to

Development

The expansion of coffee production after the middle of the nineteenth century and the abortive end to the industrial upsurge of the Maua cycle led the Brazilian economy into overspecialization. Coffee attracted all capital investment, and, with the foreign-exchange credits it provided, the country imported all that it needed. By the beginning of the twentieth century it was already apparent that such a system could not last for ever. Growing domestic demand forced Brazil continually to increase her exports, thus tending to raise

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coffee production to a point at which it exceeded world demand. T h e Convention of Taubate (February 26, 1906) fixed a hold-back quota, binding on the Brazilian coffee-producing states, to regularize coffee prices. Holding of the unmarketable stocks was to be financed by the government by means of an export tax on coffee. The valorization of coffee prices thus introduced — one of the first acts of intervention by the state in a period still profoundly influenced by liberal ideas — had marked international repercussions and put new life into the Brazilian economy for several more years. It was impossible to pursue this policy indefinitely, however; coffee production expanded steadily, other countries came into the international market as coffee producers, and supply increasingly exceeded world demand. T h e New York Stock Exchange crash of 1929 and the ensuing world-wide depression merely precipitated in a disastrous fashion a crisis implicit in the Brazilian economic system, in which rising consumer demand at home outpaced world demand for the single export staple which Brazil made use of to meet it. W h e n the bottom fell out of the coffee market, the political crisis, which had been brewing alongside the economic one, culminated in the revolutionary outcome of 1930. (There is some analogy between the crisis of imperial institutions after the 1880's and the crisis of the "Old Republic" after the 1920's. In both cases the gap between the existing political parties — representing an electoral minority, politically manipulated — and the new social realities had become so wide that the parties could no longer express and channel the country's true political forces. In both cases, too, the changes in the economic and social structure called for a corresponding change in the political and administrative system.) The middle class, almost nonexistent during the reign of Pedro I, had few opportunities under the Empire. Its younger generations, growing steadily in number during the reign of Pedro II, found their only outlet, after the failure of the industrialization of the Maua cycle, in the Army. The Army, its ranks swollen after 1864 to cope with the Paraguayan W a r , was to go on being overstaffed after the successful conclusion of the war, in order to provide the necessary employment for an economically idle middle class. This middle-class army, in some ways a foreign body in the organism of the imperial state, was ultimately to bring about its overthrow. The resentment felt against the Empire by the rural patriciate, disgruntled by the abolition of slavery, was mobilized in favor of the Republic. But the Republic, born of the military uprising led by

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Army officers who championed positivist principles and represented a middle class seeking a place in the sun, under the presidency of Deodoro 18 soon turned against the Constituent Assembly, dominated, not surprisingly, by men who represented the interests and the mentality of the traditional ruling class, the rural bourgeoisie. T h e "legalist" reaction, led by Floriano 19 — who, after Congress had been dissolved by an arbitrary decree issued by Deodoro, forced the latter to resign and convoked an extraordinary session of Congress — was really, under the banner of Republican legalism, a much more radically Jacobin and revolutionary movement. W i t h Floriano the middle class, by way of its military and professional elite, made its first attempt to radicalize the petty bourgeois revolution, establishing a revolutionary government strongly influenced by class ideologies, in which middle-class leaders held power. Although Republican Jacobinism proved victorious on the political and military level, after several counterrevolutionary movements and insurrections had been put down, it lacked the conditions for survival once it failed to rise above this level. In a country laboring under a semicolonial economy, virtually dependent on a single export staple — coffee — and dominated by its rural bourgeoisie, the middle class could hope to attain supremacy only by radically altering the country's economic and social structure. An agrarian reform program was needed, under which the fazendas would either be divided among the immigrant tenant farmers (colonos) and the former slaves, thus bringing a new rural middle class into being, or expropriated by the state — a more feasible measure — and administered along the lines of the kolkhozes. But this possibility was undreamed of by even the most radical Republicans, who were as unlike the primitive peasant forces who sparked off Mexico's Revolution a few years later as they were different from the disciplined and indoctrinated groups who led the Russian Revolution. T h e petty bourgeois Jacobins of Brazil were radical only in their politico-juridical expectations. For them it was a question of establishing certain precepts — Republicanism or Federalism — which seemed to them to be providential in themselves, and, by invoking 18 Marshal Deodoro da Fonseca, leader of the military uprising against the E m pire, became the Republic's first president in 1891. Brazilian political leaders are often referred to by their first names. — Tr. M Marshal Floriano Peixoto who, as vice-president, was Deodoro's constitutional successor, and occupied the presidency from 1891 to 1894. — T r .

142 Economic and Political Development such precepts, to keep themselves in power for as long as possible. For the rest, the Republican middle class clung to the traditional attitude toward private property and liberal economic doctrines. The inevitable outcome was the recovery of political control by the rural bourgeoisie, which won back its former power by using the very politico-juridical apparatus set up by Jacobinism. Thus, after Prudente de Morais became president (1894), the rural oligarchy returned to power, and once more played the major role in the political and economic life of the Old Republic. This turn of events left the middle class in a state of chronic discontent which from time to time erupted in political crises. "Florianismo" outlasted Floriano. While the rural bourgeoisie, which during the Empire period had been chiefly represented by the Conservative party, once again took over the affairs of state through the new Republican party, manipulating electoral results through the governors of the states, the radical middle class, with the Army as its chief avenue of advancement, principal organ of representation, and instrument for direct action, occasionally menaced existing institutions with the threat of military uprising. The estrangement between the middle class and the Army which resulted from the election of Marshal Hermes20 (1910), who was supported by the rural bourgeoisie, led the middle class to back Ruy Barbosa and his "civilianism," for a time depriving it of the direct alliance with the Army which had been the key to its revolutionary hopes. Federalism, an old aspiration of petty bourgeois radicalism, provided an outlet for the discontented middle class by offering economic opportunity in the shape of local government jobs, but politically it functioned as a mechanism for concentrating and reinforcing the power of the rural bourgeoisie. Just as the provincial presidents had once been the real manipulators of elections, now the state governors effectively controlled the electoral process; and, since electoral results had to be confirmed by Congress and were subject to manipulation, elections were robbed of true representativeness. The 1930 Revolution, preceded by the abortive revolutionary attempts which punctuated the 1920's, and precipitated by the economic crisis, was a second take-over of power by the middle class. 20 Marshal Hermes de Fonseca, the military candidate of the Conservative Republican party, won the 1910 election against Ruy Barbosa, the Liberal candidate with an antimilitaristic platform. T h e political center of gravity of the middle class was thus temporarily displaced. — T r .

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As in 1889, a few political slogans — then "Republic and Federalism," now "Secret Ballot" — contained the emotional appeal needed to mobilize the petty bourgeoisie. The lack of ideological orientation was, however, even greater than in 1889 when Positivism had provided a framework for petty bourgeois ideas, and Republicanism, in its naive phase, had held up as an end in itself the establishment of a Republic. On the other hand, the middle class had become more pragmatic and realized that it needed power not only to guarantee itself employment, by increasing the number of official posts, but also to make use of governmental apparatus to maintain its control of the state. It fell to the lot of Getulio Vargas, as it had to Floriano in relation to the Jacobins of the Republic, to direct the "Lieutenant" movement of 1930.21 In the execution of this task Vargas revealed his incomparable political insight. He gave to the 1930 Revolution the social connotations of the period by promoting labor legislation. His policy's characteristic laborism was, however, tempered after 1935 by a proto-fascist trade unionism more to middle-class taste, the political fruit of which was the Estado Νόνο. 22 The middle class of the 1930's showed itself, as it had in 1889, neither inclined nor able to use the apparatus of government to bring about a complete transformation of the country's economic and social structure. But, whereas at the time of the Republican Revolution the existing social and economic system was in full vigor and capable of expanding, since the coffee interests on which it was based could still count on a fairly rosy future, by 1930 the country's economic and social structure was on the verge of collapse. The country was encumbered with vast stocks of unsold coffee, no longer able to finance the consumer imports it needed out of its coffee export earnings. Thus a structural change in the country's economic and social system was not only politically expedient for the middle class; it was inevitable, since the system had been driven by the former regime to reveal its ultimate contradictions. Yet again, however — and this time in an even more significant way — the middle class declined to extend the revolution to the econ

Many of the Army officers who placed Getulio Vargas, Governor of Rio Grande do Sul, in the Presidential Palace, were young lieutenants who had led garrison revolts and fighting columns during the uneasy 1920's. — Tr. 22 The Estado Νόνο (New State), set up in 1937, established Vargas as dictator.— Tr.

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nomic and social levels. The revolution, despite the socialist and fascist leanings of its left and right wings, stayed firmly on the political level, with its judicial and administrative correlatives. T h e Estado Novo, with certain concessions to trade unionism and bourgeois nationalism, faithfully adhered in its general course of action to the principles of economic liberalism. T h e state failed to solve the problem of middle-class unemployment, as it could have done by embarking on a program of industrialization to meet the demand for manufactured goods which it was no longer able to finance out of export earnings. Nor did the administration try to challenge the predominance of the rural patriciate by carrying out an agrarian reform policy. It resolved middle-class unemployment by increasing the number of posts in the public service, overstaffing the federal, local, and military bureaucracy after reorganizing the administration on the pretext of modernizing the state administrative machine and the armed forces. These reforms, although apparently carried out in good faith, really served to pack the public service and the Army with an extraordinary number of sinecures. Administrative bodies and civil servants multiplied, and the only practical result of it all was that the apparatus of government was used to maintain and control the state. This was the Estado CaHorial,23 a system whereby the state exercised a policy of patronage, securing political support in return for government employment. T h e Estado Cartorial survived the downfall of the Estado Novo in 1945, since the clientelistic demand for government employment continued unabated after the re-establishment of an electoral democracy. T h e bargain on which the Estado Novo had been founded — patronage in return for the promise of support — later served as a buttress to the political parties of the Second Republic, votes being exchanged for political posts. However, if the "cartorialism" of the Estado Novo provided a solution for the unemployment of the middle class — a solution to which this class was led by its conservative spirit— it failed to offer any solution for the economic crisis of the 1930's. As we have seen, the 23 The term is derived from the old colonial notaries (cartorio is a civil registry or notary's office), whose function and status have remained almost unchanged to the present day, and whose legal and sociological importance goes far beyond that of their Anglo-Saxon counterparts. For a further analysis, see Jaguaribe, Ο nacionalismo na atualidade Brasileira (Rio, ISEB, 1 9 5 8 ) , pp. 40ff, and "Politica de clientela e politica ideologica," in Ensaios (Rio de Janeiro: C N T , 1 9 5 1 ) .

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country depended on imports to meet its consumer needs, and such scanty foreign credits as existed could no longer finance these imports. In view of the inertia of the state, which during the fifteen years of the first Vargas administration, had only undertaken construction of the Volta Redonda iron and steel plant, private enterprise stepped in and, with no settled plan or help from the state, adopted empirical methods to cope with the country's economic crisis, and developed an import-substitution industry. After the abortive industrial upsurge of the Maua cycle, the country's manufacturing capacity had increased somewhat during the expansion which occurred in the Old Republic, under the administrations of Rodrigues Alves (1902-6) and Venceslau Bras (1914-18), and after the First World War under the administration of Epitäcio Pessoa (1919-22). During this intermediate cycle, falling between the unsuccessful industrial expansion of the Empire and the industrial advance which, after the Second World War, was to lead to a self-sustaining process of industrial growth, import substitution was almost exclusively directed toward the light processing industries: consumer-goods production, food-processing and textiles (the most notable exception being the Belgo-Mineira iron and steel plant). The situation had changed considerably since Empire days: the domestic market was now big enough to make consumer-goods production for the home market an attractive proposition, and the export sector no longer offered the most profitable field for investment. The Second World War, which, by practically cutting off supplies of plant and equipment, had adverse repercussions on Brazilian industrialization, nevertheless did much to stimulate home production, the shortages created by the war underscoring the need for a domestic supply of manufactured goods. After the war, the government — still guided by the principles of free trade, and obstinately clinging to the liberal tradition — recklessly allowed the foreign exchange reserves accumulated during the war to be squandered on the importation of less essential goods. This ill-considered move, although it was later to make national recovery more arduous, nevertheless had unexpected beneficial effects: on the one hand, it forced the government to jettison its traditional liberal free trade principles and introduce a system of import restrictions which had a stronger protectionist effect than the raising of tariffs would have had at that stage. On the other hand, with the exhaustion of the available foreign exchange to pay

146 Economic and Political Development for nonessential imports, the problems of the 1930's were resuscitated in even starker terms. Challenged by its incapacity to import the manufactured consumer goods it needed, the country embarked on a new industrialization effort, directed by private enterprise with no support from the state, expanding its industrial capacity during the 1930's and 1940's by developing the import-substitution industries. The new and even graver balance-of-payments crisis which followed the war, hampering the country's imports of the consumer goods it still needed to buy from abroad and the equipment required for existing industry, spurred the country to take a step forward, and begin manufacturing its own equipment. The period following the Second World War, up to and including the second Vargas government (1951-54), can be regarded as the final phase in the transition to the "take-off" stage of Brazil's development. Once the wartime foreign credit reserves had been — in the main wastefully — exhausted during the Dutra administration (194651), the second Vargas administration found itself facing the task of reshaping the country's economy. This task was tackled with a completely new deliberation, and in terms utterly different from those hitherto employed. The old statesman, whose first period in power (1930-45) had been sterile from the point of view of the national economy, because, as we have seen, he had led the 1930 Revolution into the desert of bureaucratism, supported by an implicit economic liberalism, revealed once again his remarkable capacity for leadership. Now constitutionally returned to power by a massive popular vote, Vargas could afford to ignore purely political issues, and he sought to transform the country's economic and social structure by means of systematic economic planning, using the state as both programing agent and investor-cum-entrepreneur. Under the able administration of Minister Horäcio Lifer, the Treasury set up a Joint U.S.-Brazil Economic Commission which brought together an outstanding group of Brazilian and North American economists. The United States, under Truman's Democratic administration and with H. Mervin Bohan as the chairman of the American group, strongly supported this venture, agreeing to finance any project approved by the Joint Commission up to a limit of U.S. $500 million. The Commission's Brazilian group, under the enlightened chairmanship of Ary Torres and with the collaboration of such men as economist Roberto Campos, geologist Glycon de

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Paiva and engineer Lucas Lopes, formulated a sound development program, designed to eliminate bottlenecks in the key sectors of the national economy: the infrastructure and the basic industries. At the same time, under the intelligent leadership of Römulo Almeida, the Presidency set up an Economic Advisory Committee which, although lacking the administrative machinery placed at the service of the Joint Commission, produced a no less far-reaching program for the country's economic development. With the collaboration of another outstanding group of technicians, notably J. Soares Pereira and Mario Pinto, the Committee prepared the "petroleum plan" which gave birth to Petrobrds, the national coal plan which led to the formation of the National Coal Board, and the hydroelectric power plan which led to the creation of the Federal Hydroelectric Power Development Fund, although the proposed executive body, Eletrobrds, was not founded at the time. The Vargas government was not, however, to succeed in carrying out the development it had planned. It managed to set up a few of the undertakings envisaged, such as Petrobräs and the Säo Francisco Hydroelectric Company, but it was unable to supervise their operation. Two political accidents, one foreign, one domestic, robbed Vargas of his opportunity to usher in the full "take-off" phase of Brazilian development. The first of these was the defeat of the Democrats and the election of Eisenhower; the second, the military coup of August 24, 1954, which was the immediate cause of Vargas's tragic suicide. The end of the Truman Administration, harried by Republican reaction, was already a compromise with Republican trends which nevertheless failed to save it from electoral defeat. Eisenhower's election (1953) caught the Joint Commission in the final stages of its work, when most of the projects it had approved had already been forwarded to Washington to secure the agreed financial backing, being subjected to endless delays before they could be put into operation. But if at the end the Truman Administration tried to evade the financial obligations it had undertaken by postponing final commitment, being already under pressure from the mounting tide of opposition to such undertakings, the Republican Administration flatly refused to acknowledge any obligation on the part of the United States to recognize the agreement between the former American Secretary of State, the U.S. Treasury, and the Brazilian Ministry of Finance.

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The Brazilian government, in its turn, failed to rise to the occasion. At home, developments were already moving toward the crisis which preceded the coup of 24th August. Vargas was being betrayed by his Minister of Foreign Affairs, Joäo Neves da Fontoura, who was conspiring with the forces of the Right to keep the President within bounds and, if need be, engineer his downfall. For this he needed United States support, and the Republican party was a natural ally. Aware that his administration had become the target for conservative hostility and suspicion, Vargas for his part dared not react strongly against the nonfulfillment of the agreement for fear of arousing even stronger opposition among the forces of the Right. The August coup was a desperate panic reaction by the more conservative middle-class elements, led by Carlos Lacerda, against what they mistakenly took to be Vargas's gradual imposition of a socialist-syndicalist regime. Facts and images of the past lent some credibility to such assumptions and helped his current policies to be misinterpreted. Had not Vargas, since the 1930 Revolution and the creation of the Estado Novo, been the unchallenged leader of the proletariat: "o pai dos pobres" (father of the poor)? Had he not tried, with the collaboration of the Communists, to convert the Estado Novo, in its later days, into a sort of Syndicalist Republic? In reality, Vargas wanted no more than to lay the foundations of a progressive policy, directed toward reconciling economic development with raised standards of living for the working classes and therefore based on an alliance between the industrial bourgeoisie and the proletariat. In the panic created by these trends in the Vargas government — construed as a deliberate design for promoting the speedy advent of syndicalist socialism — a broad coalition was formed between the country's most retrograde forces: the latifundian bourgeoisie, the urban bourgeoisie's mercantile sector, and the radical petty bourgeoisie whose ranks were, as usual, recruited mainly from the armed forces. The war of nerves financed by the latifundian-mercantile forces, and the rumors given currency by the reactionary press, finally aligned the Army against Vargas. When he saw that all was lost, rather than face the demoralization of authority and the humiliation of being forced to resign, Vargas chose suicide. The emotional impact of this tragic gesture had far-reaching historical consequences. The suicide of President Vargas aroused na-

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tional indignation against the protagonists of the August coup, who suddenly found themselves no longer in control of the situation. Lacerda, hounded by the popular outcry, had to take refuge in the United States. Vice-President Cafe Filho, who was preparing to head a specifically anti-Vargas administration, was obliged to moderate his position. The candidate who proposed to carry on the work of Vargas, Juscelino Kubitschek, won the presidential elections, and immediately afterward, when the political and military forces behind the August coup tried to prevent the elected candidates from taking office, the Army, led by General Lott, Cafe Filho's Minister of Defense, took immediate counteraction and, with congressional backing, ensured the preservation of legality by securing the transference of power to the President-elect. The tragic events preceding his election proved extremely favorable to President Kubitschek's administration. They contributed decisively to the consolidation of the alliance between the Partido Social Democratico and the Partido Trabalhista Brasileiro, and, what was more difficult, helped iron out the differences between the heterogeneous social forces supporting these parties. Backed by these social forces and their parties, Kubitschek proceeded to carry out a comprehensive economic development plan, the so-called "Target Program" (Programa de Metas), in spite of the troubled political atmosphere which followed his early successes. Like the development plans of the Vargas government which it took over and brought up to date, the Programa de Metas was a systematic effort to program the country's development, directed toward the creation or expansion of the supply of goods and services in the infrastructure and in the basic industries: transport, power, and heavy industry. The original formulation envisaged the setting up of precise targets for the quantitative minimum supply of goods and services, to be attained within a given period; hence the name "Target Program." In order to fix the targets, the recent trends in supply and demand curves were studied and used to forecast by extrapolation the probable composition of demand for the next five-year period, so that supply could be appropriately adjusted. The finances and resources needed to carry out the program were estimated and budgeted for, counting as much as possible on the support of private enterprise and complementing this with public investment. The establishment of

150 Economic and Political Development quantitative economic objectives enabled the programers to go on to the projecting of individual undertakings and work out all the details for implementation of the separate projects. T o carry out these tasks a Development Council was set up and closely integrated with the National Bank for Economic Development created by the Vargas government. Lucas Lopes, Chief Advisory Consultant to the Kubitschek administration, and former Member of the Joint Commission, was appointed President of the National Bank of Economic Development and Secretary-General of the Planning Commission, and Roberto Campos, another former Joint Commission Member, was made Supervisory Director of the Bank. While the individual projects were being elaborated, the target program was revised, so as to adjust it to the national investment capacity in national and foreign currency, and to coordinate the separate projects. The Kubitschek government failed to obtain financial assistance from the international finance organizations supposedly committed to the promotion of economic development in underdeveloped countries. Thus the most comprehensive effort to foster economic development embarked on by any underdeveloped country in the Western world since the creation of the World Bank, the International Monetary Fund, the International Finance Corporation, and so on, was carried out not only without the help of any of these bodies, but in the face of their systematic opposition. They alleged that the Brazilian government, having failed to adopt orthodox monetary and balance of payment policies, could not hope to achieve healthy development. In fact, although Brazilian methods were indeed heterodox — largely because the government was denied the credits which would have made orthodox measures feasible — the country achieved extraordinary success in its development effort, attaining and even surpassing nearly every target aimed at. T h e country seemed to have succeeded in surmounting the hurdle of underdevelopment and to have launched itself into self-sustaining growth.

11 /THE DEVELOPMENT TARGETS AND THEIR ATTAINMENT

Programed

Development

The spontaneous import-substitution process prompted by the 1930 crisis, after effecting considerable changes in the country's economic structure, had run into an impasse during the late 1940's. Brazilian exports, although they had recovered since the depression, had not surpassed the pre-1929 level. National income had risen by 50 per cent, and the import structure had been changed by industrialization. Rapid exhaustion of the foreign credits accumulated during the Second World War on nonpriority applications had left the country facing a serious imbalance between export capacity and import needs. However, the demand for those imported intermediate products needed for the newly developed industrial complex could not be reduced. To restrict imports of fuel, raw materials, plant and equipment, would have meant lowering the level of employment in existing industries, and curtailing supplies of domestically manufactured consumer goods. The government therefore introduced a system of selective quantitative import control, maintaining the official rate of exchange of the cruzeiro, but giving import priority to the capital goods, plant and equipment required for home production. The rationing of scanty foreign exchange credits had a twofold effect. On the one hand it provided a new and powerful stimulus to industry, by subsidizing, at first implicitly and later explicitly, the import of raw materials and equipment for industrial expansion. On the other, the measures taken to cope with the balance of payments crisis led to overall economic

152 Economic and Political Development planning. The formal introduction of government by planning corresponded to public expectation of such government. The country embarked on a fresh program of import substitution under a deliberate policy of industrialization, aimed this time at the manufacture of capital goods. During the second Vargas Administration, as we have seen, the emphasis was firstly on the modernization and expansion of railways and shipping facilities (Horacio Lifer's re-equipment plan), together with the founding of the Banco Nacional do Desenvolvimento Economico (BNDE — National Development Bank) to ensure continued expansion of priority sectors; and secondly, on the development of the infrastructure (Römulo Almeida's plans). The creation and expansion of the supply of goods and services in the infrastucture involved the founding of Petrobräs, a publicly owned corporation responsible for all prospecting, drilling, production, refining, and distribution of oil; the national coal plan; the Eletrobras project, a public company formed to develop hydroelectric power resources which was approved by Congress only at a much later date due to the opposition of vested interests with a stake in existing foreign-controlled power companies. During the Kubitschek Administration (1955-61), whose campaign slogan had been "Fifty years of progress in five years of government," the Target Program, incorporating existing plans in a broader and more systematic framework, set up thirty-one targets grouped under six broad heads: energy, transport, food, basic industries, education, and the construction of the country's new capital, Brasilia.1 The Target Program was based on the assumption that, to eliminate the bottlenecks impeding the economy and give it the "big push" toward self-sustaining growth, the economy's key sectors must attain the minimum levels of production required to satisfy probable future demand, calculated by extrapolating known past demand (in absolute GNP, per capita and per unit terms), with the correction of the repressed demand, and of the additional demand to be generated by the Target Program itself. The Program was thus mainly concerned with the attainment of certain quantitative objectives within the framework of a financial forecast, compatible with the limits of the economy and the existing institutional framework. To attain these 1 Where other sources are not mentioned, the source for all Target Program data subsequently referred to is: ECLA's study, "Fifteen Years of Economic Policy in Brazil," Economic Bulletin for Latin America, vol. IV, no. 2, November 1964.

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