Tropic of Chaos_ Climate Change and the New Geography of Violence - Christian Parenti [78]
From ISI to IMF
Like many developing economies, Brazil had followed a model of state-directed import-substitution industrialization (ISI) from the 1930s onward. Arrived at as a reaction to the collapse of markets for traditional exports during the Great Depression, this state-led form of capitalist development involved an uneasy compact between business and labor brokered by an interventionist state. In exchange for discipline on the shop floor, the state created social security programs and allowed rising wages for the aristocracy of labor. Investment and finance were regulated, and banks were often state owned. Throughout the 1930s and 1940s, in response to the Great Depression and World War II, forms of corporatism took root in many places. Sometimes corporatist policies were enacted by democratic states; witness the American New Deal. More often the developmentalist pact between labor and capital was delivered by “relatively autonomous” and authoritarian states, such as mid-century Italy, Spain, Portugal, Japan, Bolivia, and Argentina.
Domestic industry and markets were heavily protected. For example, in 1960 Brazil’s tariffs on manufactured imports were almost ten times as high as those charged by the European Economic Community (EEC)—a 165 percent markup in Brazil versus 17 percent in the EEC.18 Both infant and well-established industries were heavily guarded against foreign competition. Under this regime, industry grew robustly but unevenly. Some sectors were dynamic, efficient, and innovative, “a group of leading firms gained a competitive edge in the manufacturing sector,” while others languished due to the artificial monopolies allowed by ISI. Overall—and contrary to the assertions of today’s economic orthodoxy—labor productivity, living standards, and the economy as a whole increased under ISI.19
David Harvey described the age of state-led development as follows: “This system had delivered high rates of growth in the advanced capitalist countries and generated some spillover benefits (most obviously to Japan but also unevenly across South America and to some other countries of South East Asia) during the ‘golden age’ of capitalism in the 1950s and early 1960s.”20 In the early 1970s, the model in its various iterations hit trouble—partly due to internal problems and partly due to a worldwide crisis of overproduction and overaccumulation.21
The so-called golden age of capitalism, roughly 1945 to 1973, was essentially the story of postwar reconstruction: the long boom was the big rebuild following the devastation of World War II. The war destroyed not only 59 million human lives but also vast amounts of existing capital: factories, cities, farms, docks, gas works, water mains, roads, rails, and communications systems. For six years the scientific genius and herculean industrial might of the major economies was fed wholesale in the maw of war. The overall costs are variously estimated as at $1.5 or $2 trillion, but we’ll never know the real total.
The post-1945 economic boom was essentially the big rebuild or big recovery. The war’s end meant there was pent up demand and plenty of investment, and industrial planning enjoyed broad legitimacy. During the big rebuild, wages, taxes, and profits all grew together. However, during the mid-1960s there started to be too much stuff and not enough demand.22 By 1970, 99 percent of American homes had refrigerators, electric irons, and radios. More than 90 percent had washing machines, vacuum cleaners, and toasters.
As one economist put it, “Saturation in one market led to saturation in others as producers looked abroad when the possibilities for domestic expansion were exhausted. The results were simultaneous export drives by companies in all advanced countries, with similar, technologically sophisticated products going into one another’s markets. . . . Increasing exports . . . from developing countries such as Taiwan, Korea, Mexico and Brazil further increased the