Dissenting Views on the State, Multinationals, and Developing Countries

Taking the Wheel: Auto Parts Firms and the Political Economy of Industrialization in Brazil, by Caren Addis. Pittsburg, PA: Pennsylvania State University Press, 1999. 266 pp. $18.95.

Capital Beyond Borders: States and Firms in the Auto Industry, 1960-94, by Kenneth Thomas. New York, NY: St. Martin's Press, 1997. 205 pp. $55.

In 1962, Alexander Gerschenkron published a landmark book discussing economic development in "backward" countries. ¹ He viewed "development" as an effort by "backward" countries to catch up with advanced nations by developing institutional maturity and acquiring technological control of innovative systems. He argued that governments played a crucial role in this process by encouraging large capital investments in order to form and consolidate heavy national industries. According to the author, the state should be the key element for inducing and controlling development, while large companies, because of their ability to dominate the latest-generation technological systems, should be the main actors of industrialization.

For many years, Gerschenkron's perspective on economic development has been a reference for scholars writing about Brazilian development--one of the most robust in the world following the Second World War. Gerschenkron's influence was evident in Peter Evans's insights ² on the "triple development alliance" (state, multinationals, and local business), as well as in Barbara Geddes's ³ analysis of the State's building capacity in Latin America. While Geschenkron's work has substantially influenced many who study Latin America, one of his fundamental theoretical pillars is now being challenged by Caren Addis in her book, Taking the Wheel: Auto Parts Firms and the Political Economy of Industrialization, and, in a different way, by Kenneth Thomas in Capital Beyond Borders: States and Firms in the Auto Industry.

Historically, scholars of Gerschenkron's school of thought have looked at Brazilian development as a sequence of chapters directed by the state with the assistance of large private capital. This is analogous with Brazil's economic revolution of 1930, when President Getúlio Vargas took power and began the construction of a modern and centralized state as a platform for development. This led to the growth of mass production and the expansion of state intervention, which furthered the country's overall import-substituting industrialization (ISI) drive. Juscelino Kubitschek's regime fully developed Brazil's ISI policy during the 1950s. At this time, the first major wave of trans-national automotive investments flocked not only to Brazil but also to Mexico and Argentina. In Brazil, the government's policy facilitated much more than the construction of factories and job-creation; it encompassed the whole industrialization process. Incidentally, multinational investment in the 1950s provided the first real impetus for the further sophistication of union movements within the industry. The expansion of the automobile industry in Latin America required significant commitments of capital and technology and triggered profound changes in the role of the state, which was charged with the challenging task of creating a new model of capital accumulation. The central-development-driven states negotiated directly with the multinationals and played the role of chief articulators of how the firms' investments would affect the economy. As the only actor capable of defining the nation's major policy agenda, the federal state was focused on promoting the overall development of its industrial market. The heyday of ISI eventually came to a conclusion with the decline of Brazil's military regime during the 1970s.

In Taking the Wheel, Addis looks at the subject from a different angle. She argues that certain trends in Brazilian industrialization were shaped by an incipient auto parts industry and that these nascent suppliers, while usually subservient to the automakers, were vital in shaping trends in the automobile industry. Addis identifies competing interests among small suppliers' coalitions and associations, the state and large companies. She proceeds to analyze how the interaction between these conflicting blocs brought about new strategic decisions and consequent changes in Brazil's industrialization.

After...