The chapter deals with characteristics of the Brazilian colonial period (from 1500 to independence from Portugal in 1822) that have exercised a significant influence on later developments. Three aspects of the institutional framework of Portuguese colonization are emphasized: the relations between the colonial government and the private sector; the pattern of access to land by colonists; and the widespread use of slave labor. It is argued that colonial policies were detrimental to private initiative, hampering access to productivity gains from industrialization in the eighteenth century. Distribution of land, in large tracts, to privileged individuals was instrumental in establishing a pattern of inequality in wealth, power, and political influence; the landless majority helped to bring about an elastic supply of labor in later periods. Slavery, which dominated the labor market from the sixteenth century to the nineteenth, was an element of the inequality in income distribution that persists to the present.
At the end of the nineteenth century, Ethiopia had a traditional economy dependent on ox-plough agriculture and crafts. Goods and services were exchanged through the barter system. This changed from the 1890s onwards with modern innovations such as the railway, telephone and telegraph, banking, and a national currency. In the first four decades of the twentieth century, import/export trade expanded, elementary education spread, new towns emerged, and manufacturing enterprises were born. Italian occupation of the country (1936–41) helped push forward the monetization of the economy. In the three decades after liberation (1940s–1960s), advances were made in the development of the services, manufacturing, and financial sectors. Basic education was expanded, and the government adopted a series of development plans to guide the process of economic and social development. The principle of disciplined state planning to transform the economy has continued under the EPRDF although the task remains incomplete.
Gustavo S. Cortes and Renato L. Marcondes
This chapter analyzes the origins and development of the Brazilian banking system from colonial times to the present day. It begins with a description of the first credit relationships before the existence of banks in colonial Brazil, followed by a discussion of the difficulties faced by the first banks established in the imperial period. It then presents a detailed discussion of domestic and foreign banks during the First Republican, and the key institutional changes that occurred during the Great Depression of the 1930s and the military regime after 1964. Later, it covers banking activities in the hyperinflation period up to the country’s stabilization in 1994. The chapter concludes with an analysis of the recent period and how the banking system endured the Great Recession of 2008–2010 and the recent Brazilian fiscal crisis that began in 2014.
Fernando de Holanda Barbosa
This chapter analyzes the Brazilian inflation and stabilization experiences during a period spanning three decades, from 1960 to 1990. It focuses on five stabilization plans. The first is the PAEG Plan, a neo-orthodox stabilization plan, which did not eliminate inflation but reduced its trend rate. The PAEG Stabilization Plan started as a fully orthodox plan, but later, as the social cost imposed by the inertial component of inflation became apparent, an indexation mechanism was devised with a forward component in wages readjustment, decreasing the backward component. This mechanism, which intended to preserve the average real worker’s wage, became a standard tool of stabilization plans in Brazil, despite the criticism it received at that time. The other four are heterodox plans, Cruzado, Bresser, Summer, and Collor, implemented during the so-called lost decade.
Keeping Up In an Era of Global Specialization: Semi-Public Goods and the Competitiveness of Integrated Manufacturing Districts
Giulio Buciuni and Dan Breznitz
With the spread of globalization and internationally fragmented production, many scholars have declared the demise of the old Marshallian industrial districts. This chapter argues that spatial agglomeration of activities across all stages of production and local interfirm cooperation can still enhance firms’ competitive advantage and support innovation. The chapter analyzes the evolution of the newly formed uninterruptable power supply manufacturing cluster in Dongguan, China, and the long-established Alto Livenza furniture district in northeast Italy. The chapter develops two sets of arguments. First, it argues that we need to go back to a Schumpeterian understanding of innovation as occurring across the complete chain of actions from ideas to the constant delivery of better products and services. Second, there are four semipublic goods that industrial clusters must be able to continuously supply if they are to prosper: (1) shared assets, (2) effective innovation network structures, (3) flexible business models, and (4) specialized financial institutions.
For most of the nineteenth century the Brazilian economy grew roughly in line with population expansion. As a result, increases in per capita incomes were modest at best and, even then, were visible mostly in the second half of the century. As the empire came to a close and the republic was ushered in, several obstacles that had previously stood in the way of faster growth were gradually overcome and modern economic growth set in. This chapter discusses the main factors accounting for this story of no/low economic growth, followed by faster per capita income increases from the turn of the nineteenth century onward. Inevitably, in such a complex story as that of economic growth over such a long period, social, political, and demographic factors will be combined with those more strictly “economic” to provide a more comprehensive account of the historical developments under examination.
Giovanni Iuzzolino, Guido Pellegrini, and Gianfranco Viesti
In 150 years, the trends in regional disparities in economic development within Italy have differed depending on whether they are gauged by longitude or by latitude. The disparities between western and eastern regions first widened and then closed; the North-South gap, by contrast, remains the main open problem in the national history of Italy. This chapter focuses on the underlying causes of the turning points in regional disparities since national unification in 1861. The first came in the late nineteenth and early twentieth century, with the industrialization of the so-called "industrial triangle". This was followed by the "failed new turn" during the interwar years: not only were the beginnings of convergence blocked, but the North-South gap, until then still natural, inevitably, was transformed into a fracture of exceptional dimensions. The second turning point, in the twenty years after the World War, produced the first substantial, lasting convergence between southern and northern Italy, powered by rising productivity and structural change in the South. The last turning point was in the mid-1970s, when convergence was abruptly halted and a protracted period of immobility in the disparity began.
Simão Davi Silber
This chapter analyzes Brazilian trade policies over the course of nearly a century and their effects on trade performance, competitiveness, and growth. Historically, Brazilian trade and investment policies have been characterized as highly protectionist to foster inward industrialization growth. At an aggregate level, Brazil lost ground in world markets for most of the products categories, except commodities. In particular, in agriculture trade and iron ore, the country became a “large player.” The chapter analyzes the links between the current account balance, capital flows, and the real exchange rate. Developed countries agreements with Latin American countries eroded the Brazilian position in developed countries’ markets. This is one of the challenges facing Brazil in the near future: how to increase market access in a world that is segmented by regional agreements, new competitive players, and laggard multilateral trade negotiation to open agricultural markets.