Reinventing State Capitalism: Leviathan in Business, Brazil and Beyond by Aldo Musacchio and Sergio G. Lazzarini (review)

Musacchio and Lazzarini’s Reinventing State Capitalism embraces the nuances of state owned enterprises (SOEs) that have developed since the 1970s. Their approach breaks from much scholarship that both focuses on the merits of private ownership over SOEs and fails to address how dramatically SOEs have changed. Using firm-level data of Brazilian SOEs, the authors set out to understand why some succeed where others fail. Brazil should be a good case study because the development of state capitalism is similar to many other regions and because the Leviathan as an entrepreneur, as majority shareholder and as minority shareholder models were present between 1970 and 2009. However, beyond the introductory chapters, only chapters seven and nine make a clear extension beyond Brazil. As the authors admit, the Brazilian experience may be too idiosyncratic for the policy implications and recommendations outlined in the concluding chapter. The authors do succeed in making a convincing argument for future research to highlight the nuances and effectiveness of SOE models around the globe.

The book is divided into three sections, and the chapters progress chronologically as the authors study the efficiency and performance of Brazilian SOEs transitioning from the Leviathan as an entrepreneur model to the Leviathan as a majority shareholder and as a minority shareholder models. The book’s methodological approach varies from chapter to chapter and includes statistical analysis, case studies, and quantitative analysis. Fortunately, the authors present their questions and results for each chapter and subsection clearly, because the changing methodological approach can compromise continuity. For example, the case study of the Vale mining company in chapter nine suggests that prior to its privatization, the company was one of the most successful Brazilian SOEs. Extending this case study further back to examine why the company was so successful would have complemented the statistical analysis in chapters five and six.

The introductory chapters (one through four) highlight the changing structure of SOEs globally and in Brazil since the 1979 oil crisis and the Federal Reserve’s subsequent decision to raise interest rates. For Latin American historians, the post-1970 emphasis may seem unconventional given the political and social importance of populist politics, and nationalizations throughout the region in the 1950s and 1960s. Chapters five through eleven contain the book’s main contributions to existing scholarship. Each chapter tests very specific hypotheses related to the potential pitfalls and merits of the differing SOE models as outlined by traditional industrial policy, social, political, and path-dependence views. Chapters five and six examine the Leviathan as an entrepreneur model between 1973 and 1993 using a database of financial and employment data on 250 SOEs and 156 private companies. Both chapters use a statistical approach that lesstechnical readers may find a bit tedious. Chapter five tests the importance of “the CEO effect” and suggests that technical-military leaders and CEOs who attended an elite university improved SOE performance. Chapter six shows that SOEs were somewhat able to weather economic shocks better than private companies. The chapter also provides some evidence that “employment policy in Brazilian SOEs were indeed more independent during the dictatorship than under the democracy” (p. 162). One of chapter six’s most exciting contributions is its “proxy for patronage.” Patronage is an undercurrent in the book and a familiar problem to Brazilian social scientists. The measure examines CEO turnover during election or Cabinet appointment changes and has several advantages over the more traditional proxy, the number of civil employees. Scholars could adapt this proxy to a state and municipal level across regions and time periods.

Having examined several aspects of the entrepreneur model and its steady decline in Brazil, the authors turn their attention to SOEs where the government is the largest shareholder. Chapter seven compares corporate governance strategies of Brazil’s national oil company, Petrobras, with others, particularly Mexico’s Pemex and Norway’s Statoil. The results...