Jopinions

Latin America is an area of the world that has and does continue to undergo tremendous change. It is by no means the most developed area, however many of its states are breaking through into becoming very successful nations. For example, in 2017, Brazil ranked 8th in GDP according to the World Bank (worldometers, 2017). This essay will compare the state-led development of Brazil and Bolivia during the mid-20th century, using economic indicators such as GDP and social indicators such as rankings in security and health. The countries that this essay will focus on are Brazil and Chile. These countries make for an interesting comparison as Brazil ranks highest amongst all Latin American countries in GDP, while Chile ranks highest on the Human Development Index (HDI). 

It is arguable that Brazil has such a large GDP due to its high population, however other countries such as, Indonesia, Nigeria and Pakistan have comparable populations and not nearly as healthy a GDP. One of the driving factors that has helped Brazil achieve this remarkable economy is the Industrialisation period in the mid-20th century. In the early 20th century, Brazil was not industrial to any degree, which hindered its economic strength and growth. However, in the 1930s, “Brazil successfully enacted an import substitution policy, a trade strategy in which a nation reduces its dependence on foreign goods, as a means of spurring industrial growth and manufactures” (Brown University Library). “Additionally, this period of rapid industrial growth coincided (or caused) the rapid urbanization of these countries and led manufacturing to surpass agriculture as the most important employer”. After the 1930s in Brazil, their industries developed to become more complex and profitable. For example industries “such as mechanical industries, electrical and telecommunications equipment, and transportation equipment (automobiles & airplanes), gain momentum after the 1950s and reach 24 percent of total manufactures by 1980” (Paolera G.D, Amorocho X.H.D, Musacchio A, 2018). This growth and development in industry, which accelerated tremendously in the latter half of the mid-20th century, was much to the credit of the Brazilian ‘Military’ Government and their state-led intervention. An example of this state intervention is the creation of the Brazilian National Bank of Economic Development (BNDE). The BNDE “assumed a key role in the long-term credit for infrastructure projects such as energy, steel and transportation”. It “started out as a vehicle to provide long-term financing for the renewal of large infrastructure projects” and the steel industry. Then under the military government (1964-1985), the bank “changed its focus from lending to public projects to financing private companies” (Aldo Musacchio, Sergio G. Lazzarini, 2014). These developments helped Brazil’s annual GDP growth rates to hit 6.8 between 1951-80, which is more than the 5.2 Latin American average and the world average of 4.5 (Maddison, 1995). Clearly, as this evidence denotes, the state-led industrial development has been extremely significant in Brazil’s economic successes. 

Chile adopted a very similar Import Substitution Policy (ISI) to Brazil; however, the nation was not able to see as much rapid growth. Paolera G.D, Amorocho X.H.D and Musacchio A state that “the literature on Chile argues there was not a smooth ISI strategy with stellar results in Chile”. There are many theories as to why Chile was not as successful as Brazil, including the presumption that political instability massively hindered private investment. “Throughout the period of state-led industrialization, private investment in Chile was weak, and this can be traced to the inability of successive political leaders to overcome business-class distrust of the progressive left wing. Despite healthy reforms, the country was caught between strong conservative forces and radicalizing tendencies, which ended up in the Unidad Popular (Political Party who gained power in 1970) failure” (Ffrench-Davis R, Muñoz O, Benavente J.M Crespi G, 2000). The political turmoil didn’t allow for a long-term economic plan to take place like in Brazil where the military government was active for 21 years. 

It may be argued that Chile fell short of Brazil in terms of economic growth in the mid-20th century, however, state-led development in Chile at this time brought many benefits to social prosperity. It is not always the case that the wealthier a country is, the better standards of living are. One of the best indicators that can point to a well-developed nation is life expectancy. “Population health is affected by policies and actions in and beyond health care systems that act on the social determinants of health such as alleviating poverty and hunger; providing education, access to safe water, housing, sanitation and labour rights; and action on climate change” (Freeman, Gesesew, Bambra, 2020). These authors describe just a few of the factors that determine how healthy a population is, and ultimately how long people will typically live within a population. Because the fact that life expectancy is determined by so many factors that often keep citizens happy and increase their standard of living, it is a great indicator of a successful nation. Chile ranked above Brazil in life expectancy every year from 1930 to 1980, with citizens living an average of 6 years more in Chile in 1980 (Astorga P, Berges A.R, Fitzgerald V, 2005). From this, an argument can be made that while Brazil performed better in economic indicators, this may not have benefited its citizens. State-led development in Chile during the mid-20th century appears to have increased standards of living which is an extremely important aspect of a successful nation.

Chile’s contrast between economic and social success is described by Felipe Larrain and Patricio Meller who write, “During the 1950-70 period, Chilean economic performance was characterized by chronic and high inflation, moderate growth, and frequent balance of payments crises … On the other hand, Chile had for a long time a very stable democratic political system that constituted a hallmark among Latin American countries” (1991). Democracy and all its freedoms can be argued to be key components in the standard of living in a nation. “In 2019, the countries with a Liberal Democracy Index of at least 0.7 also enjoyed life expectancy of at least 70 years; and conversely, all countries whose life expectancy was less than 60 years had a Liberal Democracy Index under 0.50”. This evidence confirms that there is a link between democracy and standard of living. The trend is also not a recent phenomenon, shown in a “paper published in The Lancet, a group of researchers looked at data covering 170 countries over the period 1970 to 2015, and they concluded that democracies were better than autocracies at reducing mortality” (Esteban Ortiz-Ospina, 2019). Further confirmation of Chile’s social development is explained by Marcus Taylor who describes how the state “sought to organise the articulation of demand of previously marginalised groups and to provide channels of access to state institutions for these groups” (2006). Inclusiveness and tolerance as demonstrated by Chile helped to maintain a good democracy. Indeed, there were still social tensions in Chile however through constant development, for most of the mid-20th century, Chile remained a peaceful and democratic nation due to these state-led policies. Therefore, from this logic, it can be said that the state-led development in Chile throughout the mid-20th century was mostly defined by improvements in infrastructure, quality of life/standard of living and the commitment to democracy. 

Another exceptionally important factor to consider when assessing the development of a state is the reduction of inequality, both economically and socially. Income inequality can mean the differences in income from individual to individual, or it can be the differences in income between regions and cities. During the mid-20th century in Brazil, as mentioned previously, the state developed its industries to a great extent, which in turn led to increased urbanisation and areas where wealth was concentrated. For example, “São Paulo state accounts for over 35% of national GDP since 1949, reaching a peak of 40.2% in 1975 … an impressive proportion considering the state’s 2.9% share of national territory” (Azzoni C.R, 2000). If an area within a state that only makes up 2.9% of national territory accounts for 40% of GDP, this is clear evidence of regional income inequality. For rural citizens in Brazil during the mid-20th century, state-led development appears to have forgotten them. Many argue that Brazil’s main obstacle in achieving more regional equality in this period was poor transportation routes, especially due to the scale and terrain of the nation. Long distances and harsh landscape resulted in less spread development. This problem was a difficult hurdle for the state, with many attempts to combat it failing. “During the sixties … the federal government starts to implement regional development policies, combining investments in infrastructure, fiscal and credit incentives. The priority given to highways in detriment of railways was inadequate for the transportation requirements of the agricultural exports from flatlands of the Cerrado areas in the Center-West and North regions of the country. As consequence, the growth of agricultural productivity and output in these areas were retarded” (Eustáquio Reis, 2014). Attempts to increase regional equality often ended only in more inequality, with the improvement of the highway network only reducing the cost for citizens to move into the more economically powerful areas, which was only to the detriment of rural or poorer areas. For Brazil, the mid-20th century was defined by state-led economic development, however, this didn’t necessarily translate into a beneficial situation for the majority of the population. Much of the economic gain was for the profit of the state rather than the people. 

It can be said that the Chilean state was far more proactive in the inclusion of rural and poorer citizens. The state, especially in the 1960s and 1970s, rolled out many reforms that aimed to support rural workers and the working class. “The reforms took shape progressively between 1965 and 1973, and were based on increasing the economic, political and social integration of the poorest working-class sectors in both agricultural and urban areas”. Furthermore, the state “oversaw legislation for the unionization of rural workers, which contributed to bringing the rural sector – whose social and political rights had been long deferred– into the country’s political life”. The Chilean state clearly had a passion for developing the whole country, rather than simply focusing on a few main areas as Brazil did. This meant that Chile didn’t necessarily grow its economic size to the proportions that Brazil did, however, the economy was better optimised for the well-being of the population. “Governments (whether of the right, centre or left) maintained protectionist measures for industry, subsidized economic agents (e.g., via low interest rates), and redistributed income systematically and progressively” (Manuel A, Garretón M, 2007). The combination of wealth redistribution and protection of rural industries ensured that the development plan of the state during the mid-20th century created an equality driven nation.

Brazil and Chile had similar state-led development in the mid-20th century in certain ways. Both adopted a form of import substitution policy which definitely had differing results. Brazil’s economic growth was far more reliable and significant in this time period. It can be argued that the state-development model in Brazil was certainly more focused on the self-serving of the military government than the development of the nation as a whole. It appeared to be a case of economic tunnel vision, where the motivation was profits first, people later. On the other hand, Chile served its population far better, with state investments in important institutions and services such as healthcare, education and its large rural community. It was also the case that Chile upheld democracy and freedoms, whereas Brazil failed in this regard. Overall, the state-led development in the mid-20th century was positive for both nations. Both nations improved economically, and by the end of the period, both nations had created a better standard of living for their populations.

References

• Aldo Musacchio, Sergio G. Lazzarini, 2014, STATE-OWNED ENTERPRISES IN BRAZIL: HISTORY AND LESSONS, Workshop on State-Owned Enterprises in the Development Process, OECD
• Azzoni, C.R., 2001. Economic growth and regional income inequality in Brazil. The annals of regional science, 35(1), pp.133-152.
• Della Paolera, G., Amorocho, X.H.D. and Musacchio, A., 2018. The Industrialization of South America Revisited: Evidence from Argentina, Brazil, Chile and Colombia, 1890-2010 (No. w24345). National Bureau of Economic Research.
• Eustáquio Reis, 2014, Spatial income inequality in Brazil, 1872–2000, Economia, Volume 15, Issue 2, Pages 119-140,
• Felipe Larrain, Patricio Meller, 1991, The Socialist-Populist Chilean Experience, 1970-1973, University of Chicago Press, http://www.nber.org/books/dorn91-1
• Ffrench-Davis, R., Muñoz, O., Benavente, J.M. and Crespi, G., 2000. The Industrialization of Chile during Protectionism, 1940–82. In An Economic History of Twentieth-Century Latin America (pp. 114-153). Palgrave Macmillan, London.
• Freeman, T., Gesesew, H.A., Bambra, C. , 2020 et al. Why do some countries do better or worse in life expectancy relative to income? An analysis of Brazil, Ethiopia, and the United States of America. Int J Equity Health 19, 202 https://doi.org/10.1186/s12939-020-01315-z
• Library.brown.edu. 2022. Brazil as a Global Economic Player | Brazil: Five Centuries of Change. [online] Available at: <https://library.brown.edu/create/fivecenturiesofchange/chapters/chapter-9/brazil-as-a-global-economic-player/&gt;.
• Maddison, A. 1995. Monitoring the World Economy: 1820–1992 . OECD Development Centre Study, Paris.
• Manuel, G., 2007. The socio-political matrix and economic development in Chile.
• Ortiz-Ospina, E., 2019. Does democracy lead to better health?. [online] Our World in Data. Available at: <https://ourworldindata.org/democracy-health&gt;.
• PABLO ASTORGA, AME R. BERGES, VALPY FITZGERALD, 2005, The standard of living in Latin America during the twentieth century, The Economic History Review, Vol 58 Issue 4
• Taylor, M., 2006. From national development to ‘growth with equity’: Nation-building in Chile, 1950–2000. Third World Quarterly, 27(1), pp.69-84.
• The Lancet, 2019, | VOLUME 393, ISSUE 10181, P1628-1640 DOI:https://doi.org/10.1016/S0140-6736(19)30235-1
• Worldometers.info. 2017. GDP by Country – Worldometer. [online] Available at: <https://www.worldometers.info/gdp/gdp-by-country/&gt;.

Written in 2022