Native Capital: Financial Institutions and Economic Development in São Paulo, Brazil, 1850-1920 (review)

Anne Hanley, a practitioner of what is often called "the new economic history," relies on quantitative methods and economic theory to shed light on broader questions of Brazilian economic development in the financial sector. She has chosen an excellent subject for research, the growth of banking in the Brazilian state of São Paulo. The most economically successful area of Latin America, and one of the most successful of the entire "third world," São Paulo has attracted considerable scholarly attention. In particular, researchers question how this under-populated, slaveocratic, frontier area with a wildly successful coffee export economy could become one of the leading industrial/financial centers of the world. This issue loomed large in the debates over "dependency theory" in the 1970s and 1980s which posited that agricultural exporters could not become industrial giants because the nature of the world economy and the power of the industrial core countries worked against them. Also at question was planters' entrepreneurship. They have been seen as precapitalist, tradition-bound clannish rentiers rather than agro-industrialists.

São Paulo's ability to escape such a commodity trap led to a Brazilian school of Paulista exceptionalism that suggested that Paulistas worked particularly hard, were more capitalistically inclined, and more modern than the populace of other exporting areas. Professor Hanley's research is directed precisely at the period when São Paulo's coffee came to dominate Brazil's exports, leading the state to expand demographically, to urbanize and to dominate the national government. In a double movement, slavery at first intensified and then, in 1888, was abolished. Southern European immigrants came to work the fields and later populate the cities. São Paulo made the transition from a patriarchal, personalistic, rural pre-capitalist society to a modern, monetized, capitalist one. The how and why of this transformation are the core of Hanley's inquiry.

The economic historians who have concentrated on this evolution have agreed that coffee profits explain Paulista development. However, the alchemy by which caffeine turned to gold has been given insufficient attention. Hanley's study addresses this. Rather than simply arguing that development derived from superior resource endowment, cultural or genetic superiority, foreign investment and know-how, or inherent entrepreneurial ability, Hanley focuses on financial institutions such as banks and the stock market. Hanley makes a major contribution to Brazilian historiography by incorporating business history methods with extensive ground breaking research in financial data and collective biography she has culled from numerous sources, particularly the periodical press of the time.

The development process was neither smooth nor uninterrupted. This points to the equivocal role of the state in building the financial system. Hanley underscores the importance of native Paulista investors in the local banking system and in the stock market. Although São Paulo had a tremendous infusion of European immigrants and capital, many of the banks were developed by local entrepreneurs. They were not especially gifted, however. Hanley shows that São Paulo underwent many of the same problems as Rio de Janeiro. She does not attribute the success of the Paulista financial system to foreigners' dominance. She sees European bankers acting in fairly similar ways to their Brazilian competitors, though more conservatively and less developmentally. To the extent that foreign capital sustained Paulista financial growth, it was not the result of greater European entrepreneurship or business acumen. The main cause of foreign domination of the Paulista financial market was their easier access to European funds.

My criticism of this major contribution to Brazilian economic history is that it is not quite daring enough. While the sophistication of her work reveals that she has thought about many of the central issues in the literature, she is not willing to make larger claims for her work. She could have made more out of the extensive research she has done by...