In this volume, Nathaniel H. Leff has provided a good summary of Brazilian economic policy and its sectoral impact during the postwar period. However, he does not do what he sets out as his objective, namely, to study “the effects of politics on economic policy and economic development” (p. 1). Part I is a survey of economic policy in the key areas of coffee, industrialization, foreign investment, and exportation. Throughout the period the guiding principle was to encourage import substitution and industrialization and to assign low probability to a successful export promotion. There appears to have been little debate regarding the wisdom of this choice. The result was a policy at once harmful to coffee growers and beneficial to industry.
Ironically the industrialization policy did not favor private Brazilian firms. For the allocation of foreign exchange and credit discriminated in favor of foreign and government firms and resulted in the creation of public enterprises in power, petroleum, steel, and chemicals. Leff’s observation that neither coffee growers nor domestic industrialists were particularly benefited by the policies adopted leads him to conclude that “the Brazilian government has had a substantial degree of autonomy from interest groups or socioeconomic class pressures in the making of economic policy” (p. 4).
Part II of the book is a partial explanation of the government’s apparent freedom from organized political pressure. Fundamentally this freedom “resulted largely from [a] system of patronage politics which weakened ‘objective’ political forces and transferred power to the politicians and the bureaucracy” (p. 4). Industry as a political force was fragmented by lack of cohesion, lack of ties with other economic classes, and governmental control of import licenses and the credit machinery. Only the military has been able to operate within the system as a class. ‘‘Shielded from outside pressure, [the bureaucracy] has been oriented largely by doctrine and by ‘public opinion’—mainly the views and information circulating among the elite itself” (p. 4). The book concludes with several superficial and misplaced chapters on the relationship between the government deficit and inflation, the causes of the economic slowdown in 1963, and the poor quality of Brazilian economic training.
While I agree with most of Leff’s observations about Brazil, I found them almost wholly unsupported by evidence. For example, his claim that the coffee sector was not influential is based on the behavior of relative prices. But a finding that relative prices fell indicates only that the situation could have been better. The government’s willingness to buy excess stocks also suggests that it could have been worse. The same methodological criticism applies to Leff’s analysis of industry. True, most official bank credit went to government firms, and foreigners were allowed to import capital equipment under favorable conditions. One can imagine a policy more beneficial to domestic industry. But there were also very high tariffs. The point is that the final result both in coffee and in industry reflects the pressures and counterpressures of all competing groups. The fact that more political pressure would have produced a better result does not mean that no pressure was used to get the actual outcome.
The big shortcoming in this sometimes perceptive book is its failure to do what the author promised at the outset, namely, to investigate the way political pressure was translated into economic policy. There is no analysis of parties and their support, no analysis of voting on major issues, such as the creation of Petrobras, no mention of the various elections and their significance for economic policy. A particularly glaring omission is any reference to the labor party (PTB) and its part in the industrialization strategy.
Also Leff limited himself unduly when he confined his attention to the Congress as a channel of political influence. Given the political background of the Vargas regime, it would be surprising if Congress had been the only channel of influence on government decision-making, or even if it had much power. An analysis of other ways by which the Brazilian public might have shaped policy would be interesting from a historic point of view and timely in the present circumstances.
