Modernization, Dependencia , and Import Substitution Industrialization

1. Modernization, Dependencia, and Import Substitution Industrialization Brazil

2. 100 Years of History • Latin American independence movements (1808-1824) relied on a new sense of nativism • The revolts were started by the Creole elite • Elites appealed to the masses’ identity based on birthplace: American • Continuing social, economic, and political inequality would continue unchanged • The "Progress" movement, popular in the industrializing West, reached Latin America in the 1850s • Liberals use promises of political and social reforms as well as economic progress to come to power; largely unfulfilled • The ignored middle and lower classes turn to nationalism • “That everybody belonged, that the benefits of Progress should be shared, and that industrial development should be the priority”

3. Theory and Policy: Overlapping Concepts • Economic Theory: Modernization v. Dependency • Economic Policy: Export-led Growth v. Import Substitution Industrialization

4. Modernization Theory • Modernization is a revolutionary process • Modernization is a complex process • Modernization is a systemic process • Modernization is a global process • Modernization is a lengthy process • Modernization is a phased process • Modernization is a homogenizing process • Modernization is a irreversible process • Modernization is a progressive process Samuel Huntington. "The Change to Change: Modernization, Development, and Politics" (1971)

5. Modernization in Brazil • Economic modernization led to mass urban migration in the early 1900s and, in turn, destabilized the rural political oligarchy • President Getúlio Vargas (1930-1945, Liberal Alliance): Vargas overcame a coup attempt by coffee elites, marking Brazil’s transition away from a traditional, rural economy established the modernizing – and Fascist - Estado Novo dictatorship • JuscelinoKubitschek (1956-61): populist president who promises Brazilians 'fifty years of progress in five‘; industrialization progressed quickly, but so did inflation and debt

6. Modernization in Brazil From 1900 to 1980 the average annual rate of GDP growth was 5.7%, while industry grew by about 7.1% per year • 1930: Vargas Elected • 1932: Coffee coup defeated • 1934: Fascist constitution adopted • 1937: Estado Novo established, Vargas assumes dictatorial powers • 1942: Vargas sides with Allied forces in WWII • 1945: Military coup overthrows Vargas • 1951: Vargas elected to the presidency, again • 1954: Facing a military coup, Vargas commits suicide • 1956: Kubitschek elected to the presidency • 1956: work on Brasília begins • 1960: Brasília becomes the national capital • 1964: Military coup

7. Brasília: the High-Modernist City • Brasília was to be the city of the future, of a modern Brazil • Planned and developed in 1956, Brasília became the capital in 1960 • “Brasília made no reference to the habits, traditions, and practices of Brazil's past or of its great cities” • functionalist principles: dispersion and functional segregation • “The death of the street”

8. Brasília: the High-Modernist City • By1980, 75% of the population of Brasília lived in settlements that had never been anticipated, while the planned city had reached less than half its projected population of 557,000 • Estrutural, a slum near Brasília, is home to over 20,000 people • The pattern of urban modernization pushing the poor to the edge of the city is common

9. Dependency Theory • Underdevelopment in less developed countries is the result of development in the West • International capitalism has set up a global economic system with a division of labor that maintains the periphery in a subservient position relative to the core • Dependent nations develop dual economies • Modern sector is entirely dependent on the international economic system – for resources (capital, technology, and materials) and markets; a “collaborating class” forms • Traditional sector is not, but it is eroded by the activities of the modern sector • Dependent nations are adversely affected by unequal terms of trade: they export cheap raw materials and import expensive, finished, manufactured products; the core relies on this imbalance for its prosperity, the core must break it if it is to develop

10. Import Substitution Industrialization • ISI policies may be consistent with several types of economic theories, though it is most closely associated with Dependency Theory • Domestic production of substitutes for imported commodities • Protectionist barriers to international trade in order to encourage a domestic market • Government financing for new industrial projects • State-led economic policy

11. Dependency in Brazil • Fernando Henrique Cardoso • After the 1964 military coup Cardoso went into exile; he returned in the 1980s • In the 1970s Cardoso was addressing the weaknesses of Dependency Theory: limited development is possible despite significant dependence; poor nations must develop as much as possible within the global economy. • President of Brazil, 1995-2000 • While president, Cardoso followed standard neoliberal economic policies

12. ISI in Brazil • Timeline • 1945-1962 period characterized by intense ISI • 1950-1961: GDP growth averages over 7%, industry growth averages over 9% • Imports (esp. fuels and machinery) increased more than exports • Large foreign debt • 1962-1967: the industrial sector stagnated as a result of adverse macroeconomic conditions • 1968-1973: rapid industrial expansion and modernization

13. ISI in Brazil • Nationalism: Vargas gained support for ISI policies in the working and middle classes through the explicit use of nationalist rhetoric • Development: • gains in industrial work are offset by massive rural to urban migration and thus un/underemployment and the resulting lowering of the standard of living in urban areas despite increasing labor regulations • political conditions deteriorate into Fascism and military dictatorship in which the working class is included but subordinated through populist structures • Rural poverty and landlessness increase as farming is mechanized and the Amazon is opened to industrial development; demands for land redistribution grow

14. Dependency Theory • What role do political forces play in economic development? To what extent do/can domestic political circumstances influence the national economy? • Does dependency theory put too much emphasis on the power of capitalism to shape the circumstances of underdeveloped countries?