Vedoveli on Luna and Klein, 'An Economic and Demographic History of São Paulo, 1850-1950'

Author: 
Francisco Vidal Luna, Herbert S. Klein
Reviewer: 
Paula Vedoveli

Francisco Vidal Luna, Herbert S. Klein. An Economic and Demographic History of São Paulo, 1850-1950. Stanford: Stanford University Press, 2018. xxv + 448 pp. $75.00 (cloth), ISBN 978-1-5036-0200-7.

Reviewed by Paula Vedoveli (Princeton University) Published on H-LatAm (December, 2019) Commissioned by Casey M. Lurtz (Johns Hopkins University)

Printable Version: http://www.h-net.org/reviews/showpdf.php?id=53444

Francisco Vidal Luna and Herbert S. Klein’s An Economic and Demographic History of São Paulo, 1850-1950 offers an in-depth descriptive analysis of the spectacular growth experienced by the state of São Paulo from the mid-nineteenth century to the mid-twentieth century. São Paulo’s current importance in the Brazilian economy is hard to ignore: with a population of over forty-four million and the highest GDP in the country, the state is Brazil’s most industrialized and most populous, while also the country’s primary agricultural producer and industrial exporter. As the authors point out, the state’s transformation into an economic powerhouse was not foreshadowed in 1850, when São Paulo was a relatively marginal province in the Brazilian Empire. In An Economic and Demographic History of São Paulo, Vidal Luna and Klein survey the development of the “basic institutions” created in this one-hundred-year period that underpinned the emergence of the state of São Paulo as a world metropolis (p. xxii).

The one hundred years covered by the book was “the century of coffee” (p. 300). According to Vidal Luna and Klein, the expansion of coffee plantations into the state of São Paulo from the 1870s until the first decades of the twentieth century is “the single most important factor in explaining the extraordinary growth of São Paulo” (p. 1). Even though coffee allowed São Paulo to lay the basis of its emergence as Brazil’s most important state, however, its rise to prominence was not complete by 1950. By the end of the century of coffee, Paulista banking and financial institutions had only begun challenging those in the capital. São Paulo had also not fully emerged as the world’s leader in the production of oranges and sugar. In fact, even though signs of agricultural diversification were apparent since 1920, by 1950 coffee still dominated the Paulista economy. Nonetheless, some of the basic indicators that would later guarantee the state’s national standing were already in place: by 1950 São Paulo was a national leader in education, health, and basic transport infrastructure.

A detailed analysis of the social and economic transformations and the administrative and fiscal structures behind São Paulo’s outstanding growth is at the center of this book. Across the book’s nine chapters, the authors discuss the development of Paulista agriculture (chapters 1 and 4), the instruments and institutions of government and public finances (chapters 2 and 3), the rise of the textile and food-processing industries and later industrial diversification (chapter 7), the loss of hegemony of the Paulista elite in national politics at the end of the Old Republic (chapter 4), the state economy in national and international commerce (chapter 6), the growth of regional infrastructure and urbanization (chapter 8), and finally, the demographic evolution of the state of São Paulo (chapter 9). It is the authors’ expectation that scholars interested in the history of São Paulo will use the framework they produced in this book to explore further avenues of enquiry. 

In chapter 1, Vidal Luna and Klein examine the factors that allowed São Paulo to emerge as the most important coffee-producing region in Brazil by the late nineteenth century. They note that coffee expansion in São Paulo had initially been restricted by two fundamental obstacles: shortage of labor and the existence of a precarious system of transportation that still relied, in the early 1850s, on poorly maintained roads and mule trains to ship goods produced in São Paulo’s hinterlands to the coast of the state. Thus, while difficulties in accessing the local port of Santos and the traditional port of Rio de Janeiro led coffee planters to defer expansion into lands too far from the coast, labor shortage and the planters’ dependence on interprovincial slave trade made the extension of current farms a risky operation. As the authors show throughout this chapter, the twofold solution to these constraints, the construction of a rail network and the attraction of European immigrants, emerged slowly during the second half of the nineteenth century and underpinned the growth of the coffee sector, setting the stage for the impressive development of São Paulo during the first decades of the following century. More importantly, the provincial government was one of the key actors behind these crucial transformations, alongside the emerging coffee planter class, the latter also providing the local capital that financed many of the railroad enterprise during the nineteenth century. As Vidal Luna and Klein duly remark, the Paulista provincial government helped attract capital toward railroad construction by offering guaranteed dividends—which the authors consider a fundamental factor in the development of the region’s future transport infrastructure—and was one of the main sponsors of international immigration, fully funding the cost of passage from Europe to Brazil by the end of the century.

Coffee production in São Paulo grew by a factor of ten during the second half of the nineteenth century, and in 1900 62 percent of the coffee consumed in the world was produced in that region (p. 12). The crucial role played by the Paulista government in promoting and financing policies that allowed the emergence of São Paulo as the world’s most important coffee-producing region by the turn of the century leads Vidal Luna and Klein to analyze in the next two chapters the administrative and fiscal structures that underpinned such protagonism. In chapter 2, the authors examine the factors behind the Paulista provincial government’s capacity for economic activism under a highly centralized political system during the empire. Once again, coffee is at the center of the stage. Taxes on agriculture, and particularly on coffee exports, were the main sources of revenue, allowing the government to borrow at home and abroad to finance railroad construction and immigration projects. They argue, moreover, that the coffee-planter class sought to create a highly centralized provincial government capable of addressing the issues of labor shortage, transportation costs, and health and security challenges. Despite the vibrancy of the coffee sector, however, Vidal Luna and Klein note that the provincial government’s fiscal base was constrained by its limited tax administrative capacity and reduced control over revenue from international exports. These two limitations, however, did not halt the provincial government’s involvement in promoting railway construction and sponsoring immigration projects. Coupled with the fact that export revenues fluctuated following changes in international prices, the government’s tendency to overspend meant that provincial budgets faced constant deficits. Instead of refraining from financing capital-intensive projects to balance the budget and reduce the provincial debt, however, members of the Paulista elite sought to challenge Rio de Janeiro’s prerogative over the province’s export revenues supporting the republican movement in a successful attempt to provide the São Paulo government with greater fiscal and administrative autonomy.

In chapter 3, Vidal Luna and Klein detail the transformations that the Paulista elite implemented after the installation of a republican regime. Following the fall of the monarchy in 1889, the reorganization of former provinces into state members of a federal unit fulfilled some of the main demands put forward by the coffee-planter elite: complete control over the state’s export revenues, the right to take loans without the authorization of the federal government at international capital markets, and the government’s capacity to act as an economic and social entrepreneur. The regime change brought tangible benefits to the Paulista elite even in the short run. Vidal Luna and Klein remark that even though the state ran fiscal deficits on many occasions as a result of overspending, control over export revenues and the right to negotiate foreign loans gave the Paulista government continuous access to international markets during the first decades of the twentieth century.

The development of the Paulista agriculture during the Old Republic (1889-1930) is the subject of chapter 4. Vidal Luna and Klein argue in this chapter that Paulista planters had difficulty responding to market signals, which eventually led São Paulo to face an overproduction crisis in the first decade of the twentieth century. Given the coffee-planter elite’s previous successful efforts at aligning the preferences of the local government with their own, one may wonder why they would have felt bound to respond to a decline in international coffee prices with a reduction in output and not with state-led initiatives like the coffee valorization scheme. The issue of coffee productivity in the face of a crisis of overproduction is a subject of high interest in this chapter. Vidal Luna and Klein show that even though agricultural productivity per area was low and use of mechanization and fertilizers sparse during the first half of the twentieth century, “the top 20 percent of farms in size … controlled 80 percent of the land … and accounted for three-quarters of coffee produced” in the region (p. 103). More importantly still, the authors remark how this high concentration of land is reflected today in income inequality in São Paulo (p. 104). This not only suggests that high aggregate output was a result of gains of scale, but also shows that in the long term structural inequality was the price paid for the maintenance of this model of growth. Therefore, the data introduced by the authors show that there are further political economic consequences to this model of state-business relations, a point on which I will elaborate below.

Chapter 5 follows the crisis of the state of São Paulo, a process compounded by the effects of the 1930s economic crisis and the loss of hegemony of the Paulista elite in national politics. São Paulo had been at the center of the coalition of regional oligarchies that had ruled the nation during the Old Republic. While the world economic depression promoted a decline of the agro-export economy and increased the importance of the domestic market for national growth, the arrival of the Southern military officer and politician Getulio Vargas to the presidency of the country in 1930 marked the beginning of the Paulista elite’s displacement. Vidal Luna and Klein show how the Paulista elite’s loss of hegemony was furthered by the emergence of an urban middle class—in itself a consequence of urbanization, a process the authors analyze in chapter 8—which felt that the current regime was unresponsive to its particular demands. At the level of party politics, this schism was embodied in the creation of the Democratic Party in 1926, which opposed the traditional Paulista Republican Party and supported Vargas’s candidacy. As the authors show, however, the regime inaugurated by Vargas removed the coffee elite’s control over the central government but did not completely marginalize the interests of the coffee-planter class due to the importance of the coffee sector to the national economy. The authors thus examine in detail the new social contract developed by members of the coffee elite and a central government empowered by the support of urban low and middle classes and its impact on São Paulo’s administrative and fiscal structures and policy priorities.

In chapter 6, Vidal Luna and Klein shift their focus from local and national politics to São Paulo’s participation in international and national commerce. The expansion of the coffee sector was the driving force behind São Paulo’s integration into the world economy, a process facilitated by the development of the port of Santos and the rail network and the transition from sail to steamships throughout the second half of the nineteenth century. As the coffee economy grew, so did imports of basic goods (sugar, raw cotton, and lard) from other Brazilian provinces and of sophisticated products from Europe. During the first half of the twentieth century, as the authors show, manufactured goods became São Paulo’s main exports to the national market. By 1950 these exports were carried on trucks through an expanding network of interstate roads, a shift from rail to highway that the authors further examine in chapter 8. The authors also analyze in great detail the composition of Paulista regional and international imports and exports, the development of the main shipping lines and actors in international trade, and São Paulo’s main commercial partners as well as the most important markets for Paulista coffee. They also trace the transformations brought about by the two world wars, in particular the Unites States’ rise as the primary importer into the state of São Paulo and the main supplier of the Paulista market.

Vidal Luna and Klein examine the factors behind industrial growth in São Paulo in chapter 7. Local abundance of capital, the emergence of an expanded market, and comparative costs were, according to the authors, behind the emergence of industry in São Paulo. Vidal Luna and Klein also demonstrate how industrial development in São Paulo was deeply dependent on the prosperity of the coffee sector. They show how local coffee capital financed industrial growth and how the coffee sector helped expand the internal market and establish backward links to the manufacturing and services industry. Coffee, however, was not solely responsible for São Paulo’s industrial takeoff in the twentieth century. As the authors show, strategic investments by local governments and private actors played an important role. The incipient industrial growth was also fostered by the shift to electric power in São Paulo post 1900, when the state promoted a major dam-building program. Investments in primary and professional education (a subject further discussed in chapter 8) were also important in providing skilled labor. Finally, the existence of entrepreneurial groups—identified by the authors as importers, coffee planters, and immigrants—willing to assume the risks associated with early industrial growth gave São Paulo an advantage over other Brazilian states. By 1950, however, Paulista industries were still producing mainly consumer goods; the inclusion of capital goods and machine-tool industries would have to wait a few decades.

Infrastructure and urbanization are the focus of chapter 8. Vidal Luna and Klein highlight the role played by railroads, arguing that they had an “important modernizing social, as well as economic, impact” on the development of São Paulo (p. 227). Even though the authors recognize that Brazilian railroads were largely deficit enterprises which operated ahead of demand and were subject to political pressure, they note their importance in stimulating the expansion of more-integrated regional markets and the emergence of an incipient industrial sector in São Paulo. Moreover, they argue that railroads played an essential role in the transport of passengers. They note how in 1898 Paulista railroads carried 5.4 million passengers, even though only 17 percent of railway income that same year came from passenger services. The authors also note that the relationship between the rail sector and industrial development cannot be extended to capital-goods industries since backward linkages in Brazil were reduced compared to those experienced by countries that implemented a rail network “at more advanced stages of their industrialization” (p. 228). As the authors show, dependence on international markets for replacement parts partly explains the transition from rails to highways that began in earnest in the 1920s and 1930s.

Vidal Luna and Klein also show that São Paulo’s development was intertwined with its rising urban identity in the twentieth century, one yet marked by inequalities. While investments in primary and professional education allowed for the emergence of a well-educated technical elite, low attendance in primary day schools could be partly explained by the fact that child labor was still a reality in São Paulo in the early twentieth century (p. 240). In chapter 9, the authors present two other relevant indicators about the character of urban areas in São Paulo: cities tended to be “whiter than most of the rural areas” (the slave population in São Paulo was concentrated in the coffee plantations) and they led the decline in mortality rates due to the Paulista government’s investment in public health and sanitation during the first half of the twentieth century (p. 261).

The authors’ greatest contribution lies in supporting their examination of the development of these institutions with a wealth of data and indicators compiled from censuses, government publications, and yearbooks, among other data-rich primary sources presented to the reader in the many figures and tables available throughout the book. These figures and indicators tell us, for example, that the Paulista provincial government invested more in education and police as a share of the budget than Rio de Janeiro, even though the proposed expenditure at the imperial capital was two or three times higher than São Paulo’s (p. 49). Another important indicator, literacy, also shows that while São Paulo by 1950 had the highest rate of male literacy of any Brazilian state, “Brazil still had overall the lowest literacy rate of any South American country” (p. 296). We also learn that even as mortality rates declined in São Paulo in the late 1940s, they remained above those of many South American societies, highlighting Brazil’s poverty vis-à-vis its neighbors (p. 279).

While a compelling narrative based on extensive research, the book may leave the reader with some unanswered questions, in particular regarding the political economy behind São Paulo's impressive growth. One such open question concerns the distributive impact of a regional economy built upon the vibrancy of the coffee sector, including the opportunity cost of sustaining this sector through domestic and international crises. Although the authors argue that it was the coffee economy that provided the capital for the state to finance infrastructure projects, subsidize immigration programs, and support the emerging manufacturing industry, one may wonder how these benefits fared in the face of the costs imposed by the coffee-valorization scheme implemented in the first decade of the twentieth century. If the scheme allowed the coffee sector to survive a period of high output and low international prices, this was financed by new issuing of currency backed by loans denominated in foreign currency. These loans became part of the state and the national governments’ public debt, which amounted to a transfer of income from society to coffee planters in a country that had virtually no income redistribution system that benefited the poor.

The expansion of the railway network in Brazil poses similar questions. In his analysis of the involvement of the Brazilian government in the promotion of railways from 1854 to 1913, William Summerhill shows that savings on transport costs produced by the railroads were one of the main reasons behind economic growth before 1900. However, he also makes two observations that may apply to a cost-benefit analysis of the Paulista government’s intervention on behalf of the coffee sector in the early twentieth century. First, Summerhill shows that government involvement was necessary for attracting foreign capital to the first railroad projects while recognizing that such intervention strengthened the state’s capacity to control the distributional outcome of that involvement and increased incentives for lobbying. Second, he acknowledges how state “policies that channeled capital into railroads that generated low benefits pulled resources from areas where they likely would have created large gains, such as education.”[1] Scholars may therefore wonder whether the redistribution of income from the state to the coffee planters discussed in Vidal Luna and Klein's book generated a social rate of return that justified the existence of the program in the first place, or whether this was the result of an economic distortion produced by predatory politics.

The contours, strategies, and goals of the state and federal governments’ intervention in the market since the 1850s is another element that may invite further research. Vidal Luna and Klein acknowledge that coffee planters lobbied the state and federal governments to “ever-greater intervention in the state economy.” They argue, moreover, that “however conservative and neoliberal the elite in its political ideology, in the end it was as committed to state action to control the market as later Keynesian economists would be” (p. 90). It is doubtful whether such characterization explains rather than compounds our understanding of the intricate political economy of the period, one that does not easily conform to precepts defined in later schools of economic thought.

Historians of calculation and quantification could also raise the question of the use of censuses, yearbooks, and government publications without a deeper discussion of the social practices involved in the production of the numbers these documents present. Vidal Luna and Klein highlight São Paulo state’s promotion of the professionalization of the civil service after the demise of the monarchy, when provinces-turned-federal-units acquired the capacity to retain revenue from export taxes. According to the authors, “state development policies [during the Old Republic] were based on very well-developed plans resting on accumulated statistical data of the highest order” (p. 154). How these numbers were compiled and translated into statistical data to support state policies—and what guaranteed they were indeed of the highest order, be that according to our standards or those of the people who produced these numbers—remains a topic of interest.

An Economic and Demographic History of São Paulo, 1850-1950 is an important accomplishment and a welcome addition to the literature on the history of São Paulo. Besides a comprehensive survey of the factors behind São Paulo’s impressive growth, the book is also a successful attempt at historical and historiographical synthesis, one that covers many decades of literature and establishes a serious dialogue with Brazilian historiography and social science literature. Scholars of Brazilian history, economic historians, and readers of H-LatAm will find much of interest concerning the development of the institutions behind São Paulo’s spectacular growth, but will also be able to identify new research agendas and avenues of inquiry.

Note

[1]. William Summerhill, Order against Progress: Government, Foreign Investment, and Railroads in Brazil, 1854-1913 (Stanford, CA: Stanford University Press, 2003), 197.

 

Citation: Paula Vedoveli. Review of Luna, Francisco Vidal; Klein, Herbert S., An Economic and Demographic History of São Paulo, 1850-1950. H-LatAm, H-Net Reviews. December, 2019. URL: http://www.h-net.org/reviews/showrev.php?id=53444

This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.