World War II and Industrialization Policies in Latin America: The Cases of Argentina and Brazil

Abstract

Raúl Prebisch and Celso Furtado were two important contributors to development economics and to the theories and policies defended by the United Nations Economic Commission for Latin America (ECLAC). In this article, we argue that understanding their ideas, and how industrialization became a key concern, requires paying closer attention to the geopolitical changes brought by World War II. We discuss how Argentina and Brazil, their home countries, navigated the troubled waters brought by the war and the international trade disruptions and turned state-led industrialization into a key development strategy. After the war, the United States became the new hegemonic power and adopted a universalist foreign policy, based on the newly created international agencies. At home, the internationalist businessmen promoted the partnership capitalism that became central to the foreign policy during the Truman administration and onward, making industrialization a key interest. Internationalism was also what Latin American countries used to counteract the US hegemony even before the war, which culminated in the creation of ECLAC after the war. The intellectual paths of Prebisch and Furtado toward industrialization policies were shaped by the changing international order and by local developments in their countries including the building of a more scientific statistical system that would better help the state to design development policies.

1. Introduction

World War II involved more than the destruction in conflict areas. It blocked international trade that severely affected primary-exporting economies such as those in Latin America and significantly reshaped the international order, requiring countries around the world to navigate those troubled waters. The war was fought not only with technical innovations by leading countries but also through new geopolitical alliances and foreign policies. The United States tried to strengthen the hemispheric solidarity through a Pan-Americanism that would bring Latin America to side with the Allies and move it away from the earlier dominant European influence. Central to this geopolitical movement by the United States was the “mobilization of technical and scientific knowledge as a political resource” (Lourdes Sola, in Moura [1982] 2013: 298n647; see also Dezalay and Garth 2002: chaps. 2–3; and Offner 2019). Technical missions from the United States to Latin American countries became a way of learning about the countries’ economic and political conditions and to devise ways of promoting their development in order to either help the US war effort by supplying the necessary raw materials or to cut off trading relations with the Axis.

The war also brought fast economic growth to major countries involved in it. Even with very modest direct involvement with the war, Latin American countries also experienced fast growth and accelerated industrialization in the immediate postwar period, leading Carlos Díaz-Alejandro (1982: 719) to call the period 1945–52 the golden age of industrialization in Latin America. Accelerated, state-led industrialization became the strategy of several Latin American countries to find their place in the new configuration of global capitalism, reclaiming US support to it and at the same time using the hemispheric relations and the new international organizations to counterbalance US influence. But different countries had different paths to this accelerated industrialization.

Our goal in this article is to discuss two cases, Argentina and Brazil, and how the support to industrialization changed over time culminating with the creation of the United Nations Economic Commission for Latin America (ECLAC), which became a strong advocate of industrialization after the war. Those two countries are important because of the leading roles that two of their economists played in the founding and dissemination of ECLAC's theory: Raúl Prebisch and Celso Furtado. However, this analysis ought to be placed in the context of the inter-American international relations that changed particularly due to World War II, as we explore in section 2. We then discuss the cases of Argentina and Brazil and highlight the rationalization of statistics that came with the countries’ changing needs since the 1930s, to finally come to ECLAC's championing of industrialization after the war.

2. World War II, Geopolitical Dislocation in the Americas, and Industrialization Policies

While World War II marked the ascendancy of the United States as the hegemonic political power, it also brought important turns to the history of US international policies toward Latin America. Earlier, in 1933, President Franklin D. Roosevelt proclaimed a new diplomatic stance with Latin American countries known as “good neighbor” policy. With it, he sought to maintain hemispheric stability not through military force but through cooperation and international trade. As Jacobs (2019) argued, the New Deal instituted a new statecraft that rested on mobilizing social segments to implement new policies. This state-building from the bottom up would then reach its apex during World War II and would be central to the new international order that the United States tried to establish with Latin America. Moreover, World War II inaugurated an international stance by the United States, centered on productivity and economic growth (Maier 1977: 609).

In the late 1930s and early 1940s, the Roosevelt administration “set a series of key precedents for US policy toward the underdeveloped world” (Macekura 2013: 127–28) out of concerns of overseeing the extraction of raw materials in Latin America, raising the economic standards in cooperating nations, and combating the Nazi presence in those countries (see also Erb 1985). The first coherent international economic development policy in the United States came with the creation, in 1939, of the Office of Inter-American Affairs (OIAA).¹ This idea came from the philanthropist Nelson Rockefeller who had traveled to Latin America through the 1930s (Cobbs 1989: 93). Working with the New Dealer Beardsley Ruml and other advisers, and with the war looming in Europe, in 1940 Rockefeller presented to Roosevelt a proposal entitled “Hemispheric Economic Policy,” which was well received. Roosevelt, in turn, asked Rockefeller to head up the new OIAA (Cobbs 1989; Macekura 2013), which then sent out diplomatic missions to find locations in Latin America to host Rockefeller's assistance programs. During World War II, the Roosevelt administration expanded the OIAA to help the production of materials necessary for the war effort (Macekura 2013: 128). The US government promised Latin American countries supplying primary goods that it would develop their economies in return (Hutcheson 1949: 66). In December 1944, Roosevelt appointed Rockefeller to be an assistant secretary of state, who envisioned integrating and expanding the different international programs of the United States. Rockefeller wrote a memorandum proposing long-term cooperation with Latin America, something that pleased Roosevelt. However, Roosevelt died a few months later, and Harry S. Truman's overhaul of the State Department expelled Rockefeller from it (Erb 1985: 266–67).

In 1944, the US government created an interdepartmental committee to promote industrialization of underdeveloped countries: the Executive Committee on Economic Foreign Policy (Maxfield and Nolt 1990: 57). With the end of the war, the United States shifted priorities in international policy, moving away from the “regionalism of the Good Neighbor policy in favor of a universalism based on a United States-led voting majority in the United Nations” (Cobbs 1989: 94). Moreover, the European reconstruction drew most of the US attention in the global setting and its resources (Hutcheson 1949: 66). The resulting low position that Latin America occupied in the US agenda immediately after World War II was made explicit in the eighth Inter-American Conference in Chapultepec, México, in the last months of the war, where economic issues were virtually ignored (Cárdenas, Ocampo, and Thorp 2000: 5).

The disappointment of Latin American countries with the US reneging on its promises to the region was also channeled through the United Nations. During the meetings in 1947 of the UN Economic and Social Council that concluded with the creation of two new organizations, the United Nations Economic Commission for Europe and the United Nations Economic Commission for Asia and the Far East, Latin American delegates complained about the neglect of the region in reconstruction and development plans. The Chilean delegate Hernán Santa Cruz claimed that even though Latin America had not seen battles in its territory, it had been affected by the war and contributed to the Allied victory by providing essential goods such as “petrol, copper, minerals, wheat, sugar, coffee, cotton, wool, nitrates, etc. at low, frozen prices, whereas manufactures—including the capital goods which it had not been possible to acquire during the war—were now costing high prices that rose higher every day” (cited in Calcagno 2021: 186). This impaired the industrialization process of Latin American countries, he argued. For him the UN charter “engaged [the institution] to face the problem of economic development of economically weak and backward regions,” and Latin American industrialization would benefit the world at large, something supported by the Cuban, Peruvian, and Venezuelan delegates (Calcagno 2021: 186).

In 1948 Truman enacted the Marshall Plan and included in the reconstruction plans the underdeveloped nations and colonies. But Latin American leaders realized that nothing substantial would come south and demanded a Marshall Plan for the region (Bielschowsky 1998; Thorp 2000: 22). At the 1948 inter-American conference in Bogotá, the US assistant secretary of state acknowledged the need for economic development in Latin America but also claimed that instead of a Marshall Plan the region needed “extensive capital investment, modern machinery, and engineering services for its recovery” (Macekura 2013: 138).

Rockefeller also saw a neglect of Latin America and understood that his reformed capitalism—or what Eric Johnston, former president of the US Chamber of Commerce, called “partnership capitalism” (Hutcheson 1949: 69)—required a symbiosis among private groups and the government both in the United States and in Latin America. Therefore, in July 1946 he created the privately financed, nonprofit philanthropic organization, the American International Association for Economic and Social Development, in charge mainly of public health and agriculture projects. In January 1947, with his brothers and sister, he also created a for-profit business, the International Basic Economy Corporation, which aimed to promote economic development through joint investments to make businesses profitable and sustainable. These two organizations started in Brazil and Venezuela (Hutcheson 1949; Cobbs 1989, 1992).

However, changes were on the way with the new administration of Truman. The OIAA was transformed “into a government-owned corporation, the Institute of Inter-American Affairs [under the Department of State], to coordinate all assistance programs to Latin American nations under Rockefeller's supervision” (Macekura 2013: 135; see also Hutcheson 1949; Cobbs 1992: 102; Erb 1985). The administration and Rockefeller nurtured the ethos of “self-help” in host countries, which reached an apex with Truman's Point Four Policy (1949): the US government did not undertake development projects but instead offered technical expertise to help countries to pursue such projects with partnerships with US companies and sometimes also local businesses.

The ethos of “self-help” and the symbiosis among the private and public sectors was very much in line with the business interests in the United States, as Maxfield and Nolt (1990) argued. Since the late 1930s, internationalist businessmen in the United States had been advocating industrialization policies to Third World countries, securing favorable conditions for US foreign direct investment (Kazin 2019). A host of business organizations, some of which were only recently created, started advocating import-substitution industrialization policies: the Committee for Economic Development (a nonprofit think tank created in 1942), the Council on Foreign Relations (founded in 1921 by John D. Rockefeller, Herbert Hoover, Walter Lippmann, and others), the National Foreign Trade Council (founded in 1914 and concerned with international tax and trade policies), and the National Planning Association (established in 1934). What Maxfield and Nolt (1990) showed is that import-substitution industrialization in Latin America was not merely a nationalist development strategy of Third World countries. In addition to country-specific factors, industrialization resulted also from the US promotion of partnership capitalism, sending technical missions to those countries to help them design and implement import-substitution development plans.

Therefore, World War II was crucial for the sedimentation of partnership capitalism within the US government and private sector. To Latin American countries it brought a period of accelerated industrialization, with continuities with the 1930s. What Cárdenas, Ocampo, and Thorp (2000) argued is that it is misleading to call this “import-substitution industrialization,” because “it is as much about a new and expanded role of the state as it is about import substitution” (2). Thus, it is better to understand it “as ‘state-led industrialization’ or ‘accelerated industrialization,’ a process accompanied by a thorough transformation of the particular economies and societies” (3). Although industrialization started in Argentina and Brazil before the 1940s and without much state support, the government in those countries eventually became partners of industrialization policies supported by an American network, and they were responsible for creating profitable conditions for industrialization through fiscal, trade, and exchange rate policies (that were not new, as some had already been adopted during the Great Depression). With the abandonment of the gold standard, Latin American states gained new policy instruments, such as monetary discretion and exchange rate policies. The states also took the responsibility of enlarging economic infrastructure and “establishing state enterprises, either for defense purposes as in Argentina under Perón or to assure domestic supplies of certain ‘strategic’ inputs, as in Brazil [steel, mining, and petroleum]” (Cárdenas, Ocampo, and Thorp 2000: 11).

3. The Argentinean Case: The Example of Prebisch

As already established in the existing historiography, Prebisch's economic thinking changed drastically within a ten-year span, first with the Great Depression and then with the Second World War. The evolution of his thinking was shaped by the economic and political evolution of Argentina in the first half of the twentieth century notably because he was a policymaker: he was undersecretary of finance (1930–32), counsellor to the Ministry of Finance and the Ministry of Agriculture (1933), and the first general manager of the Central Bank (1935–43). While the Great Depression brought changes to the economic structure of the country by fostering industrialization, it was World War II that deepened these changes and imposed industrialization as the new development strategy for Argentina.

In the beginning of the twentieth century, Argentina greatly relied on its agriculture, and, until the Great Depression, the export of primary commodities was the main driver of growth. At that time, Prebisch considered that the primary sector was sufficient for the economic growth of the country. He also adhered to the quantity theory of money and believed in market self-regulation. With the Great Depression, the Argentine socioeconomic structure and Prebisch's thinking started changing. Initially Prebisch expected the 1929 crisis to be just a transient cycle, but he soon realized that global recovery was not happening and the state should intervene to foster economic recovery. The first time in which he highlighted the importance of national industries for economic growth was in an economic recovery plan he wrote in 1934 when he was an adviser at the Ministry of Finance and Agriculture. However, when Prebisch became the general manager of the Argentinean Central Bank in 1935, his focus changed from the industrial sector to countercyclical monetary policies geared toward reducing the currency problems that came from the primary-export orientation of the Argentinean economy. Indeed, Prebisch already considered that a main problem of the cycles in Argentina was one of foreign exchange and not so much of effective demand. He asserted that the ascending phase of the cycle, caused by an increase of exports and/or higher inflow of foreign capital, increased demand, which in turn increased imports (Prebisch [1939] 1991: 647–50).² This “tends to create a disequilibrium in the balance of payments, which is accentuated when [the cycle reverts]” (655). This analysis prefigured the structuralist approach to the balance of payments, but at this point Prebisch thought about constituting currency reserves instead of changing the productive structure of the country. Furthermore, he opposed long-term credits, even if those were directed to productive activities. This shows that Prebisch had not abandoned yet the old development scheme of primary export-led growth (Calcagno 2023).

Nonetheless, during the 1930s the industrial sector increased by 35 percent, and in 1939 it represented 22.5 percent of total production (Gerchunoff and Llach 2018: 166–67). However, Argentinean industrialization before World War II was not a result of any deliberate state policy but instead an unintended effect of the short-term recovery policies (189). As the country industrialized and the society changed, the state needed new tools to measure this new reality and new needs. Lanata Briones (2021) showed the great role played first by Alejandro Bunge and then by José Francisco Figuerola in developing these tools.³ Bunge inaugurated “a national income estimate, foreign trade indexes, cost of living and wholesale price indexes, as well as working-class family budget surveys” (Lanata Briones 2021: 10). These new measures were essential to capture the industrialization of the country and the creation of a new social class, and it shows Bunge's “embryonic macroeconomic vision” directed toward the domestic market and that wished to promote industrialization. This increased the demand of measurement of socioeconomic phenomena, which “reinforced the power of the statistical institutions” (González Bollo 2007: 30–31). Unemployment was measured for the first time in the National Census of Unemployed of 1932, when the National Department of Labor worked to construct a cost of living index, and the first detailed industrial census took place in 1935. Statistics had a main role in the interventionist and conservative state that characterized the “Infamous Decade” from 1930 to 1943, as it was particularly important to have more data on the growing working class and its living conditions in order to make fitting policies (González Bollo 2007: 256; Lanata Briones 2021: 17).

When the Second World War started, Prebisch's ideas evolved in a decisive way. The war negatively affected international trade, and Argentina was no exception. Prebisch noticed that compared to prewar levels, in 1940 Argentina's imports were 33 percent more expensive whereas its exports were 4 percent cheaper (Prebisch [1940] 1991; Calcagno 2023: 10). Prebisch now also focused on international economics and foreign relations, giving industrialization a central role in changing the structure of the Argentine economy. Having a bigger and diversified industrial sector would reduce the country's dependence on international trade, give access to new markets, and satisfy domestic demand. Prebisch was not alone in his views on industrialization and structural changes: the idea of changing the development strategy to not rely on cereal production anymore was widely discussed (Gerchunoff and Llach 2018: 179).

The difference with the industrialization that started in the Great Depression was that, now, the country possessed new institutions like the Central Bank and normalized the use of policies such as exchange control. The industrial basis was also more robust and diversified, with better technology (Dorfman 1983: 51). Import-substitution was easier to implement in these conditions. A telling example of this general change was the Program to Reactivate the National Economy, better known as the Plan Pinedo,⁴ to which Prebisch was the main contributor (Llach 1984: 518; Rapoport 2010: 126). Although it was directed toward light industry and was never implemented, this program was the first state document that sought a change in the country's productive structure and development strategy (Llach 1984: 517–19). Unlike Prebisch's 1934 recovery plan, the Plan Pinedo considered favorably the use of long-term credit to finance industrial investments in an import-substituting strategy that would increase employment and demand, with the latter met by internal production, thus creating a virtuous cycle (Prebisch [1940] 1991: 678). The goal was not to stop international trade: Argentina should “import as long as it's possible to export” (686). However, the war blocked the imports of essential factors like fuel and capital goods that were not yet domestically produced. This led to overutilization of existing (and obsolete) machinery, resulting in low productivity levels and decapitalization (Dorfman 1983: 51; Rapoport 2010: 129–30).

With the war, Prebisch worried about the generalization of bilateral trade agreements and its impact on the international transfer of foreign currency. For him, Argentina's agrarian export-led growth model depended on the fluidity of international trade that would be disturbed by generalizing bilateral trade agreements. Thus, Prebisch started considering inward-looking growth strategies and rethought Argentina's insertion in world trade. The changes in international trade meant that Argentina had to diversify its production and markets, substituting some of the products imported from Europe and producing new goods that could be exported to nontraditional trading partners such as other Latin American countries and the United States (Calcagno 2023). Indeed, Prebisch wanted further trade integration in Latin America, and as ECLAC's executive secretary he developed the project for a Latin American regional market. In parallel, the United States had become Argentina's largest supplier in 1925, representing 23 percent of its total imports (O'Connell 2001: 60); but in 1939 and 1940, Argentina lacked dollars, and Argentinean products were blocked by US protectionist policies. Prebisch contributed in securing loans from the United States and in negotiating trade agreements to increase Argentinean exports to the United States (Dosman 2008: chap. 6). Overall, the Argentinean exports of manufactured goods greatly increased with the war: it went from 2.9 percent of total exports in 1939 to 19.4 percent in 1943, declining afterward (Gerchunoff and Llach 2018: 186).

Argentina had sufficient dollars by 1942, but the US shift to a war economy hindered Argentina's imports. At first, the United States favored strengthening commercial relations in order to change Argentina's neutral position to entering the war. But its reluctance to abandon neutrality led to severe US sanctions against Argentina, including freezing its financial assets in 1943 and 1944 and prohibiting or greatly restricting exports destined to its industry and oil production (Rapoport and Spiguel 2009: 44–45). Even though Argentina cut off diplomatic relations with Germany and Japan in January 1944 and declared war against the Axis in March 1945, the United States gradually lifted these penalties only in 1946.

Prebisch's work as the general manager of the Central Bank made him well-known throughout Latin America. After his dismissal from the Central Bank in 1943 by the new government of Pedro Pablo Ramírez, he was invited to several Latin American countries to give seminars and provide monetary policy advice (Dosman 2008: chap. 8). These experiences made Prebisch aware that Latin America shared common problems related to their primary export-led growth model and external dependency (Dosman 2008: chaps. 8–9), and he started talking about the “periphery” in 1944 (Prebisch [1944] 1991b: 320). Prebisch also adapted his thinking to the whole region and thought in terms of a common cycle to Latin America (instead of thinking about specific cycles for each country), which was affected by the cycle at the “center.” Because of this, in his monetary advice to other Latin American countries, he would emphasize the importance of monetary countercyclical tools and other economic policies to lessen the impact of the cycles. Prebisch feared that the new international order discussed at Bretton Woods would result in restrictions to national monetary policies and that Central Banks would lose “prestige and authority” (Calcagno 2023). The industrialization process needed the support of a dedicated monetary policy and, for that, independence from the center was necessary:

This preoccupation with ensuring independency from countries and institutions of the center would become a main raison d’être for ECLAC since its creation (as we discuss in sec. 5). And the main way Latin American countries could fight external vulnerability and dependency was through an industrialization process: “The more these industries develop and the higher is the proportion of national inputs used to produce, the less vulnerable we will be to external influences” (Prebisch [1944] 1991a: 240).

This also meant having heavier industries, particularly to produce “the expensive inputs, machinery and expensive durable goods” instead of importing them (Prebisch [1944] 1991a: 241). Carrying out these changes required a state-led industrialization plan.

In parallel with these changes in Prebisch's thinking, the new military government in Argentina since 1943 marked the beginning of a deeper state-led industrialization. As early as September 1943, the new government carried out a large program of industrial credit (Gerchunoff and Llach 2018: 192) and created in 1944 the Bank of Industrial Credit (Rapoport 2010: 133). Development planning was key, notably because of the uncertainties related to the world conflict. The creation in 1944 of the Postwar National Council, presided over by General Juan Domingo Perón, shows this preoccupation (130). The council was a planning institution that designed policies for the postwar period with a strong focus on industrialization because it feared that the industrial activity would decrease with the end of the war and cause unemployment. For Perón, maintaining industrial employment was important not only economically but also politically, as he counted on the support of workers for his rise to power. In 1944, there was an administrative centralization of public statistics. As such, the National Council of Statistics and Censuses (1944–46), located in the Ministry of Interior, was the first centralized statistics institution. The Peronist government used statistics to evaluate the needs for furthering the process. Notably, it carried out the Fourth Nacional Census in 1947, thirty-three years after the last one (González Bollo 2007: 295). The objective of Perón, in power since 1946, was to collect enough data to elaborate a five-year plan geared toward industrialization.

Prebisch's thinking kept evolving and in 1949 he went further and theorized the tendency toward the deterioration in the terms of trade. This meant that, even with free trade, Latin American countries tended to lose in their trade with industrialized countries. This did not mean that Latin American countries should either stop exporting and importing or had to abandon their primary sector. Instead, they should change their productive structure and have a diversified production. It was within ECLAC that Prebisch matured these ideas for Latin America. It also appeared to be a platform that could be used to strengthen Latin American cooperation and start modernizing the statistical tools of the states.

4. Institutions and Ideas on Industrialization in Brazil

The consolidation of state-led, or accelerated industrialization in Brazil that happened after World War II was made possible by a combination of different factors, some internal and some external to the country. Among the internal developments, one key factor was the centralization of power that came in the 1930s, mixed with a discourse of promoting a scientific and rational statistical system that would better serve the Brazilian federation—this was the background for important debates on industrialization in the 1940s and 1950s. This consolidation happened in the interregnum of 1919–39 that was “characterized by a decline in British influence and a growth of German and North American influence” (Moura [1982] 2013: 47). To properly appraise this, it is necessary to highlight some key developments in the Brazilian history focused on the twentieth century.

In 1889, Brazil abandoned a monarchic system and became an independent presidential republic inspired by the US model. With the first constitution of the independent country promulgated in 1891, the constitutional system generated a highly decentralized political system. As a result, in the first decade of the twentieth century there was a discussion within the Brazilian bureaucracy on the need to rationalize the statistical services among the different entities of the federation: municipalities, states, and the federal government. As Pessoa (1940: 89) put it, the Brazilian situation was similar to that of the German Confederation (1815–66; an alliance of thirty-nine sovereign states in Central Europe), the United States (which started to build a more centralized statistical system after World War I although never completed), and the British Empire. In 1907, the Brazilian sanitary doctor and demographer José Luiz Sayão de Bulhões Carvalho became the director of the General Directorate of Statistics, the official statistical office created in 1871. Bulhões Carvalho tried to forge cooperation between state governors and the federal government in order to build an integrated and rational statistical system (Penha 1993: 67). In 1907, he led efforts to reformulate that directorate and to create a federal, central office (Conselho Superior de Estatística) that would coordinate the statistical services to be performed by federal, state, and municipal agencies. But Bulhões Carvalho's rationalization project failed. The federative system gave local authorities the freedom and right to provide statistical services autonomously. National statistical agencies and services came into being only after 1930, when a military coup ended the Republic sustained by local oligarchies and started a new phase with more centralized power and a discourse about modernizing the Brazilian economy, with special emphasis on industrialization. Getúlio Vargas occupied the presidency from 1930 to 1945, with a dictatorship in place from 1937 to 1945.

In 1930, the first national statistical conference was prevented from happening due to the military coup. But it would have been the forum for appreciating a proposal by Mário Teixeira de Freitas (director of the statistical office of the Minas Gerais state) to reduce the autonomy of the states and empower national offices to offer a more standardized and rational statistical collection (Penha 1993: 68). His proposal included the creation of the Brazilian Statistical Society, in the country's capital, in charge of a dedicated journal, the Brazilian Statistical Review. While all this was postponed, in 1930 the National Statistical Department was created, and in 1934 it was reorganized by a federal decree that created the National Statistical Institute to systematize and organize all statistical services. The institute would operate under the National Statistical Council that reported directly to the Brazilian president. The institute was charged with supporting the Brazilian Statistical Society and its journal, as well as to offer statistical training to bureaucrats.⁵ But it was only in 1936 that the National Statistical Council became operative and the National Statistical Conference effectively started. In 1938, the National Statistical Institute merged with the Brazilian Council of Geography to become the Brazilian Institute of Geography and Statistics (IBGE), the federal agency in charge of the official statistics of the country.

While this centralized statistical system would oversee demographic and economic data collection, it was not responsible for developing the national accounting system. The efforts to produce the first estimate of Brazilian national income and its components have roots in a fierce debate that occurred within the Economic Planning Committee created by President Vargas in 1944. This committee conducted studies about the Brazilian economy, with a particular military interest. In that year, the Brazilian industrialist Roberto Simonsen proposed a state-led industrialization policy for Brazil after the war. This proposal was harshly criticized by the Brazilian economist Eugênio Gudin (see Rodrigues 2018). This debate made clear the paucity and precariousness of economic data for planning discussions. In that same year, President Vargas established the creation of an institute devoted to qualifying workers of both the public and private sectors and to promote studies on the rational organization of labor.⁶ By the end of 1944, the Getúlio Vargas Foundation (FGV) was born, and it organized an economics group led by Gudin with three objectives: (1) organize the balance of payment data (with support of the International Monetary Fund); (2) produce national price indexes in collaboration with IBGE; (3) estimate national income and its components (Lopes 1951). In 1947, FGV started publishing the first economics journal in Brazil (and the second in Latin America), Revista Brasileira de economia (Brazilian Economics Journal). The economics group at FGV was then reorganized to become the Brazilian Institute of Economics at FGV, under which a national account group became responsible for the first estimates of the Brazilian national income, an effort that started in the second half of 1947. It started small and understaffed, under the guidance of the engineer-turned-economist Antonio Dias Leite Jr. and was properly staffed and with a satisfactory budget in 1949–50 (Leite and Santos 1951: 9–12).⁷ The national account group faced the lack of consensus abroad on how to measure national income and the need to adapt the existing foreign ideas to the characteristics of the Brazilian economy. Its first attempt received advice from Gottfried Harberler, then at Harvard, who visited Brazil in June–September 1947. After the initial estimates produced in November of 1949, the economics group at FGV made a deal with the chief of the National Income Statistics and Research section of the United Nations, J. B. D. (Dick) Derksen, to come to Brazil for a technical visit. This visit occurred in the spring of 1950 (Lopes and Santos 1951: 10–11). The UN released its first system of national accounts in 1952, and the group at FGV published new estimates in 1956 based on this methodology.⁸

After the United States entered the Second World War in 1941, technical missions arrived in Brazil as part of the US policies toward Latin America and the partnership capitalism of US businessmen. The first “Joint Brazilian-United States Technical Mission” was the “Cooke Mission,” in 1942 (the year in which Brazil declared war against Italy and Germany), which studied the conditions of the Brazilian industry and ways of improving it “according to instructions from the Board of Economic Warfare” (Moura [1982] 2013: 138). The second was the “Abbink Mission” in 1948, headed by the chairman of McGraw-Hill International for the United States and prominent member of the National Foreign Trade Council (one of those US business organizations advocating industrialization), John Abbink. Its task was to analyze the factors tending to stimulate or hinder Brazilian economic development. On the Brazilian side, it was headed by Otávio Gouvêa de Bulhões, of the economic division of the Brazilian Ministry of Finance, who was a delegate of the Brazilian mission in Bretton Woods.

The 1950s was not only the heyday of development economics but a critical moment in the economic debates in Brazil. Economists at FGV, led by Gudin and Octávio Bulhões, reacted to the nationalist industrialization ideas that had been put into practice and some quantitative assessments that they involved. On the other hand, Celso Furtado became a leader behind new theories and policies to underdeveloped countries that ECLAC had started to formulate.⁹ He graduated in law at Universidade do Brasil in 1944 (as economics degrees did not exist yet) and, after fighting the war in the Brazilian army, started his doctorate in economics at the Sorbonne, which he completed in 1948. In this year, Prebisch invited Furtado to join ECLAC, which he accepted, becoming the head of its development division from 1950 to 1957 (Boianovsky 2008).

Furtado translated into Portuguese Prebisch's 1949 Havana “Manifesto” that inaugurated the center-periphery theory of ECLAC. This was planned to be done quickly, which resulted in the publication of the Portuguese version in Revista Brasileira de economia a few months after the Spanish original version (that appeared in the Mexican journal El trimestre económico; Fajardo 2022: 38–41). This allowed the text to circulate widely in Brazil reaching also businessmen and business associations at the Brazilian capital and at São Paulo. Brazilian industrialists soon adopted concepts and arguments from ECLAC that they used in their ongoing debates and disputes, in particular for the economic and social reforms that came with the end of Vargas's dictatorship and of World War II (Colistete 2006). The São Paulo Industry Center even brought Prebisch to Brazil in 1951 and maintained an interest in ECLAC's ideas for the whole of the 1950s (Colistete 2006).¹⁰

While Furtado and ECLAC could be featured in FGV's Revista Brasileira de economia up to the early 1950s, things quickly deteriorated with Gudin's efforts to counteract ECLAC's ideas, a plan that included also the tour in Brazil of renowned international scholars with opposing views, with their articles published in that same journal (the first being Jacob Viner; Andrada, Boianovsky, and Cabello 2018). Furtado returned to live briefly in Rio de Janeiro in 1953 and started organizing a nationalist economics association (Economists’ Club) that would publish a new journal, Econômica Brasileira, and would be the local counterpoint to the liberal FGV (Andrada, Boianovsky, and Cabello 2018).¹¹

In contrast to Prebisch, Furtado started his academic career understanding that Brazil was a primary-exporting economy in which growth was not accompanied by higher productivity and an enlargement of the domestic market (Furtado 1950). Instead, Brazilian growth benefited few groups and the domestic market was not a dynamic center of the economy. Brazil stagnated for most of the nineteenth century, and the nascent industries in the twentieth century expanded with low (and diminishing) productivity. Things started to change with the Great Depression and industrialization intensified, particularly after World War II. At the dawn of the 1950s, after creating the Economists’ Club to oppose the economists at FGV, Furtado (1957), in a Festschrift to Gudin, condemned the use of neoclassical economics in the analysis of underdeveloped countries.

5. Development Planning at the United Nations Economic Commission for Latin America

The history about the creation of ECLAC has been scrutinized by many historians but in particular by Margarita Fajardo in her excellent 2022 book. She clearly placed ECLAC within the different efforts “to make the world anew after the end of the Second World War” when “multiple projects with global aspirations emerged” (Fajardo 2002: 3). For Latin Americans, as she explained, this was achieved through internationalism. In the early twentieth century, this meant strengthening the position of Latin American countries through the League of Nations and the Pan-American organization to counterbalance the European influence in the Americas. At the end of World War II, internationalism was a way to counter the United States as the new hegemonic power. That came from an active participation in the debates at Bretton Woods in 1944, leading to the creation of the International Monetary Fund and the International Bank for Reconstruction and Development (the World Bank).¹² Not only this, but also at the 1947–48 UN conference on trade and employment, held in Havana, which passed a charter for the International Trade Organization (but the lack of approval by the US Congress delayed the creation of this organization by more than four decades; see Toye and Toye 2004). The UN and its many specialized agencies were instrumental for the Latin American activism in the reshaped global capitalism—which went well with the United States’ own shifts in international policies from regionalism to universalism based on international organizations. As Fajardo (2022: 4) summarized, “Even if old and new global powers held the upper hand, Latin Americans capitalized on these international organizations to upend existing power structures, resulting in the creation of [ECLAC], a new institution whose very existence symbolized this vision.”

That same 1947 session of the United Nations Economic and Social Council that created the agencies for Europe and Asia also witnessed a discussion about establishing an agency for Latin America. As a result, ECLAC was established in 1948 in Santiago, Chile, to (1) “address urgent economic problems arising from the war and from the imbalance of the world economy”; (2) “achieve global economic recovery and stability, as well as to raise the level of economic activity in Latin America and maintain and strengthen the economic relations of Latin American countries, both among themselves and with other countries in the world”; and (3) “[provide] research and studies on economic and technical problems and on economic and technical development; as well as the compilation, evaluation and dissemination of economic, technical and statistical information” (CEPAL 1948).¹³ The overall goal of the new commission was to show that Latin American countries are in the periphery of global capitalism as producers of raw materials and primary goods, trading with the center of industrialized countries. While ECLAC advocated more international trade, they wanted to transform that center-periphery relationship through state-led industrialization (Fajardo 2022: chap. 2)—but remaining vague, in the 1950s, about what kind of industrialization would end economic backwardness, which in turn made the theory more general and appealing to policymakers and the public at large (Colistete 2001). Prebisch was key in this project of transforming global capitalism.

Prebisch became the commission's new executive secretary in 1950 and focused initially on developing an alternative economic theory that legitimized the ongoing industrialization of several Latin American countries.¹⁴ In addition to this, he also wanted to get technical missions to help countries address their socioeconomic problems. This was particularly important because the region was late in the professionalization of economics (compared to the United States, for instance) and lacked economists and technical experts in numbers, and Prebisch deplored this situation. But the challenges of building a new institution were significant: gathering like-minded economists to develop a new theory and build credibility of the institution to be influential in the cooperation with member countries to provide technical analysis and training.

Although we have cited earlier the views of Santa Cruz, the Chilean UN delegate, that WWII disturbed the industrialization process of Latin American countries, some contemporary scholars argue that the war did the opposite: it accelerated an ongoing industrialization process that typically had started during the Great Depression (Ocampo 2018). Others emphasize that the war hindered the imports of capital goods and fuel, so the new industrial base was fragile: industries were uncompetitive and their technology obsolete (Bulmer-Thomas 2003: 233; Rapoport 2010). Nevertheless, the storytelling around ECLAC's creation in 1948 played with the negative impact of the war in Latin America. The war surely brought a lack of hard currency to Latin American countries, which sought greater economic independence in a new development strategy centered on protectionist policies to accelerate industrialization.

This development strategy also implied the modernization of national accounting: countries needed to modernize their institutions, to train their public servants in statistical methods, to measure the needs and performance of the dynamic sectors (see also Kenessey 1994 and Vanoli 2005). Hence, one of ECLAC's missions at its inception was precisely to provide technical assistance to its member countries and to provide training for public servants and economists. In this vein, ECLAC collaborated with national institutions as was the case of the mission it carried out with the Brazilian National Bank for Economic Development (BNDE) in 1953. The joint ECLAC-BNDE mission allowed for the gathering of more data, a better statistical analysis, and a more in-depth knowledge of the socioeconomic problems of Brazil (United Nations 1956).

6. Conclusion

The impacts of World War II on economics goes beyond the technical innovations and new scientific management that happened in the countries directly involved in it. The US declaration of war in the end of 1941 became a critical step in a process of changing international relations in the Americas in the twentieth century. The United States became the new hegemonic power, which, after the war, adopted a universalist position based on the newly created international agencies. At home, internationalist businessmen promoted the partnership capitalism that became central to the foreign policy during the Truman administration and onward, making industrialization a key interest.

Internationalism was also the way that Latin American countries counteracted the US hegemony even before the war, which culminated in the creation of ECLAC after the war. ECLAC avoided being a Pan-American agency and “formulated a development agenda to transform Latin America, and through it, the global economy” (Fajardo 2022: 4). The promotion of state-led industrialization was key to changing the reality of peripheral countries, but different countries followed particular paths to it.

We focused on Argentina and Brazil as case studies because of the importance that Prebisch and Furtado had in the creation and in the early years of ECLAC. In the case of Prebisch, his thinking was greatly influenced by World War II. While the Great Depression was a first indication on the need for Argentina to lessen its external vulnerability, Prebisch did not consider it necessary to radically change the growth strategy of the country. This changed completely with the war, when industrialization became the only way for primary exporting countries to reduce their imports and diversify their markets, a theory he brought to ECLAC. The case of Furtado is different because he started his professional career at ECLAC and already understood the importance of industrialization for changing the Brazilian economy. But his defense of industrialization became part of an academic and policy-oriented fight that had started in the 1940s thanks to the political centralization promoted by the Brazilian president, Getúlio Vargas, and his discourse of grounding policies on scientific and technical knowledge. Vargas promoted a statistical centralization and navigated the changing US policies toward Latin America, which included receiving technical missions from the United States. His economic planning debate centered on industrialization brought to the fore the need of further improvements in data collection, including national accounting and in the training of civil servants—ideas also promoted by ECLAC later on.

The Latin American chapter of the World War II story in changing economics shows that economic ideas and practices in the region were shaped by the changing international order more broadly, and the changing inter-American relations in particular, forged by the war. And sometimes this international relations aspect is not brought to the fore in the history of development economics as it should be.

Duarte gratefully acknowledges the financial support from Conselho Nacional de Desenvolvimento Científico e Tecnológico (CNPq, Brazil; grant 306408/2022-8) and INSPER (2023/300207).

Notes

References