Volume 45 Number 179,
October - December 2014
Economic Development and Historical Trajectories:
An Approach to Brazil and Mexico
Miguel Ángel Rivera Ríos*
Date received: December 26, 2013. Date accepted: April 30, 2014
Abstract

To analyze economic development as a process subject to a historical context, this work begins with a brief overview of the contributions and limitations of development economics, the pioneering school of thought in this sub-discipline. It then differentiates modern economic growth (based on continuous innovation) from delayed development and economic underdevelopment. Based on this, the study proposes a theoretical framework to unify aspects of development theory, specifically, institutional theory and some elements of complex processes, primarily path dependence. This theoretical framework is then applied in two countries, Brazil and Mexico, to define their historical development trajectories and propose an explanation for the divergent economic performance seen in these two nations.

Keywords: Economic development, economic growth, development theory, development economics, historical trajectory.

INTRODUCTION

The rules, methodology and prescriptive orientation of development theory have undergone fundamental changes. Until recently, a linear approach of simple causality, limited by the “economicist” perspective, prevailed in this sub-discipline (the political as the exogenous). Traditional development theory has followed the approach taken by growth theories, consistently underestimating the remote or underlying catalysts of growth to focus on direct and immediate causes, such as capital accumulation or technological changes (see Maddison, 2007, the justification for this approach). By prioritizing the so-called immediate causes, they become embroiled in a sort of tautology, as North and Thomas (1978) wrote, because capital accumulation or technological changes are growth itself in an intensive form. Early development theories did not pay enough mind to the political-institutional "preconditions” that might unleash development and rather focused on immediate causes. This is linked to a conceptual transposition. 1

Development economics emerged as an expression of this methodology and analysis. However, from 1950-1960 there was some resistance, which sparked a debate. Specifically, Myrdal and Hirschman proposed another approach, the precursor to a new theory. Myrdal (1979) set forth the concept of the underdevelopment trap to underline the forces of cumulative causation that make some countries fall behind in what would later be called an inefficient equilibrium. The concept of failed coordination was born of the debate on development strategies that aimed to achieve the so-called big push (Rosenstein-Rodan, 1960). Hirschman proposed the concept of unbalanced growth (1963). Unfortunately, the complex events of the 1960s, which adversely affected the majority of Latin American countries (Hirschman, 1985), threw doubt on the validity of the principles sustaining industrial modernization, the essence of the prescriptive direction of development economics. The debate came to an end and orthodoxy emerged once again. Starting in the 1980s, heterodox schools of thought related to development economics began to recover (Rivera, 2010). Wade (1999) and Amsden (1989) played key roles in this recovery, which showed a growing disregard for what were considered “failed” cases of development (basically the Latin American examples) and a preference for the "successful" cases of Asia. In this shift, general explanatory approaches were exchanged for specific theoretical treatments. The concept of socioeconomic underdevelopment disappeared and was replaced by delayed development. Without rejecting the merits of Amsden’s (2001) work, an observer, from the perspective of development economics, would find unanswered questions. Why is it that, despite the global advance of capitalism, the majority of humanity lives in underdeveloped conditions and delayed development is an exception? A book by North and Thomas (1978) begins by acknowledging this state of affairs, underlining the failure of social sciences in the search for a theoretical response to this problem.

In the 1990s, theses by North and coauthors influenced the approaches to studying so-called developing economies (Rivera, 2009). The leitmotif was that development is possible, but not inevitable. One of the most promising lines of research in this rebirth was the new theory of development (Hoff and Stiglitz, 2002). Although this proposal is still in progress, it enjoys two key features: a) it proposes a break with the disciplinary obstacles that undermined development economics and b) it is a field in which methodological tools that recognize the complexity of social phenomena, such as path dependence, social ecology, etc. have been applied.

The path dependency approach brings us once again to the concept of socioeconomic development. 2 It is not only true that various late-developing countries display different GDP per capita growth rates, but also that many of them are stuck in the "trap of underdevelopment." Currently, a little over one billion people, mainly in Africa, live in degrading economic and political conditions. In Latin America (with the exception of Brazil and, to a lesser extent, Argentina), as well as in Asia (especially Indonesia and the Philippines, Pakistan, etc.), economic growth, in its modern sense, as defined by Kuznets (1973), is present, but limited. Although the majority of these countries experience regular cyclical booms associated with rising international land income, at least one-third of the population lives in poverty, state power has a predatory connotation and social learning is inhibited or limited (we will call these Type B late-developing countries). Another group consists of late-developing countries that have experienced continuous growth, reducing high percentages of poverty and closing international gaps. Although there are few in this group, some of the most populated countries in the world are among them, including India and China.

MODERN ECONOMIC GROWTH, THE SECOND DELAYED DEVELOPMENT
AND ECONOMIC UNDERDEVELOPMENT: THE POLITICAL ECONOMY OF POWER

The concept set forth by Kuznets (op. cit.) of modern economic growth aims to establish the organizational specifics and dynamics of industrialized or developed countries. This handful of nations has managed to sustain their progress for nearly two centuries, without regressing, thanks to a historical transformation, of which the pinnacle is the integration of science, technology and industry. The Germans were, so to speak, the first to arrive (Mowery and Rosenberg, 1998). The United States recognized the superiority of that system and adopted its fundamentals starting in the twentieth century (ibid.).

We should look to Barnes now, (1990: Chapter 3), who defines power as the social capacity for action (op. cit.: 87). This capacity exists in society but, due to the logic of historical processes, it is concentrated at a certain pole, limiting the capacity of the vast majority to act and conferring to certain individuals or groups the monopoly over that capacity (Johnson and Earle, 2000). Obviously, power, and therefore the social action capacity, exists to control the production and reproduction of wealth. Power is concentrated among a coalition of the elite that is hierarchically structured in accordance with their access to assets and wealth (North et al., 2009: Chapter 1).

North et al. (op. cit.) distinguishes between two stages in constituting the social order and installing power. The first, which is dominant and only has been overcome in exceptional cases throughout history, is known as restricted access or the natural state. Its objective is to ensure privileged access to the most profitable assets and resources for the elite (op. cit.: 13-15). The open social order sustains the relative prosperity and economic superiority of the Western world (ibid.). Transitioning to an open order is made difficult by the predatory tendencies of the elite (Evans, 1995). Likewise, there are three natural states: fragile, basic and mature (North et al., op. cit.). In contemporary fragile countries, such as Haiti, Somalia and Iraq, the stability of the coalition is precarious and it could break apart in light of certain changes, such as an unseated leader, leading to violence and the formation of new coalitions. By contrast, the basic natural state constitutes more stable organization, primarily in terms of public institutions, their internal relations and overcoming open violence in transitions of power, which gives relative stability to the dominant coalition. The mature natural state is made unique by its capacity to support elite organizations beyond the sphere of the State; there are private laws that give these members the capacity to extend their arrangements or agreements, legitimizing the central authority that represents them as a coalition.

In the historical context of late development, there is a specific source of instability, at least in the Latin American social order, for dominant coalitions in the basic natural state. This source is a demand among intermediate and lower elites to move up the ladder, associated with, for example, productive advances, because it would be problematic if a change in wealth status were to produce a hierarchical reorganization accepted by all. This is because there is no structure of rights, but rather a structure of privileges, and there is no third-party arbitration (North et al., op. cit.: 32-34), institutional attributes that we might call "superior."

This begins with the hypothesis, to later move to late development, that underdevelopment prevails when the power of the elite is not restrained. Based on Barnes (op. cit.) the concept of spaces of social mobilization emerges: delimiting the power of the elite implies, to a certain extent, restoring power to the base of society. Social spaces proliferate primarily through education and work training, which is the foundation of progress in social productive capacities, or, economic development.

DELAYED DEVELOPMENT AND THE UNDERDEVELOPMENT TRAP:
HISTORICAL AND FACTUAL EVIDENCE

We start with the observable fact that currently, in our world, socioeconomic underdevelopment coexists with the extraordinary advance of global capitalism, supported by a technology revolution. However, current relationships between countries are different than they were in the mid-twentieth century, when industrialization was confined to a small group of nations that generated nearly 65% of global GDP (Hikino and Amsden, 1998: 4). The central-peripheral country model was a good reflection of the enormous international gap between Western powers and the periphery around 1950. The drastic changes that took place two decades later when a small group of peripheral countries began to develop rapidly quickly closed the international gap. That is, the relative underdevelopment of this small group fell, while the majority of peripheral economies lagged behind even more.

In the late-developing Group B, there are three sub-groups: a) failed states, b) nations with no future from the perspective of late development (small economies with limited industrial progress and a weak strategic position) and c) "paradoxical" cases because, although they could belong to Group A, they have not crossed the fundamental institutional barrier (transition to the mature natural state) and collective learning is limited. In general, they have ample territory and abundant natural resources, as well as significant industrial progress, evidence of inhibited potential. Their growth is predominantly extensive. Table 1 shows how the international gap has behaved for both groups. In Group B countries, the margins of social exclusion are high (poverty affects at least one-third of the population). All Latin American countries, except Brazil, are in this group, as well as African and Southeast Asian countries (World Bank, 2011-2013, CEPAL, 2014).



To better define the paradoxical case, we would have to take into account economic development as defined by classic and modern authors. In the latter group we have Meier (1995: 7-9). Development is growth plus the structural change of the economy and society. Given this relationship, production must grow in the long term faster than the population and long-term real GDP per capita growth must be above 1.5% annually to reduce the international gap. In keeping with this, the proportion of the population living in poverty must also fall (ibid.).3

Studies by Alice Amsden (1989 and 2001) solidly established the basis of the theory and experience of delayed development. These studies explain the factors that made it possible for the Asian Tiger economies to close the international gap (based on accelerated technology learning). Table 1 shows the behavior of the international gap for some late-developing countries. The gap closes for Group A and expands for Group B.

PROPOSAL TO STUDY DELAYED DEVELOPMENT PATHS

The underdevelopment trap does not necessarily mean stagnation, but rather a tendency to fail to overcome critical development barriers, which, as this work has insisted, are primarily institutional. Persistent underdevelopment can be compared with what is known in physics as positive feedback (Arthur, 1988). This approach leads to the framework of complex systems, and not to adaptable complex systems, such as those analyzed by Holland or the Santa Fe school, but rather to those associated with social and historical processes as captured by the path dependence approach.4

What we propose here, starting with the idea described below, are some tentative guidelines to turn our attention to the important convergence between development theory and the historical complexity approach as applied to late development and its relationship to modern growth, as well as, of course, persistent economic underdevelopment.

Following the proposal by North (1993) and David (2001), there are two types of paths. One is a lock-in, basically an adverse trajectory, equivalent to a less than optimal equilibrium. The second is based on the first, as it breaks the lock-in and there is branching or structuring of alternatives, which may result in definitively improved economic performance. In this last case, there is also path dependence, because the decisions that these actors make are limited by their past history, that is, innovations have a certain connection to the past (David, 2001: 89).


There is a point of departure for the trajectory, that is, some initial event that sets up the self-reinforcing process. In the formulation by David (op. cit.) and Arthur et al. (op. cit.), these may be accidental events that give rise to a self-reinforcing institutional pattern. Unlike the dominant technological design in David, in society, the originating event for the path may be a traumatic event whose effects do not fade over time but rather persist institutionally (David, op. cit.: 270).

The hypothesis that the delayed development path began with colonial domination has been adopted. This would be the traumatic event that constitutes the point of departure for these trajectories. However, the process is not entirely deterministic, as Acemoglu et al. (2001) explains, because the domination pattern and the scope of disruption are not the same in all cases. There are two limiting factors: a) territories with significant and easily accessible natural resources whose societies are likely to suffer greater disruption and b) territories with fewer and less accessible natural resources whose exploitation requires the colonizers to make restrictions on the population more flexible (op. cit.: 27). Latin American countries are the best example of the societies described in (a). The mitigating factor in Brazil is that its natural wealth was not discovered all at once. For this reason, mainly, Mexico and Brazil followed different trajectories, which illustrates the importance of the relationship between determinants (the point of departure) and factors that are less deterministic (like the political process). But this is not the only important aspect. The need to defend territorial integrity may mean the beginning of the expansion of spaces for social mobilization (a basic difference between the two countries, because in one case, the campaign has been successful, and in the other, it has failed). From there, the path branches out. Based only on this second order originating factor, we cannot a priori determine how it will bifurcate, because there is a set of indeterminate factors, like in any complex system. Determination by path means that actors have frameworks for action (although limited), even when the relative influence of the first originating force persists, that is, the "extractive" state and then later on territorial integration or partitioning (Acemoglu et al., op. cit.: 33).

There is a second problem with path switching. The expansion of spaces for social mobilization is merely a prerequisite to spark development. To effectively catalyze development, the global conditions must be favorable, and this becomes a sufficient condition. As a rule, a path switch will only be consolidated if a late-developing country has the consent of the nearest dominant power (Japan for the Asian Tigers and India and the United States for Mexico) or is an exceptional case (China).

PATH SWITCHING AND BRANCHING

As a general rule, late-developing countries in Group A on an adverse path experienced path breaking, putting them in a better position for social learning (such is the case of the Asian Tigers). This path switch will be consolidated when collective learning has acquired the critical mass and matches the prevailing global paradigm. This can be seen in greater detail in Model II in Table 1: originating restrictions are mitigated, which opens the possibility for the path to branch off if the dynamics of the dominant coalition change. To the extent that this last factor is not deterministic, there are basically two possibilities: a) an expansion, generally rather fast, of spaces for social mobilization and b) a return to the earlier dynamics that put the system on its previous path or lead to a parallel path. An intermediate case might be that spaces for social mobilization expand intermittently and affect the path gradually. We will see that Brazil appears to fit in this last category.

As catalysts, severe crises seem to compromise the stability of the dominant coalition and open the door to favorable path switching (a case discussed by Hoff and Stiglitz, op. cit.: 425). To stabilize itself, the dominant coalition may implement an expansion of spaces for social mobilization, but whether the path switches or not will depend on the continuity of this expansion process (op. cit.: 419).

THE NATIONAL EXPERIENCES OF TWO LATE-DEVELOPING NATIONS:
MEXICO AND BRAZIL

A drastic reduction in the international gap and a decrease in poverty are signs of successful paths: the East Asian Pacific region (South Korea, Taiwan, Singapore and recently China). Brazil and India also belong to this group, although somewhat more controversially, primarily because they did not experience the drastic break seen in the Asian group. India overcame its collapse at the beginning of the twentieth century and since 1990, it has managed to close the international gap to some extent, while Brazil has been on a unique trajectory, given its stability, with modest progress made since the mid-twentieth century (see Table 1). The percentage of poverty has decreased substantially in both cases. Throughout its history, Mexico has had partial cessation of the adverse path that began in the nineteenth century, but since the end of the twentieth, it has regressed, leading to failed attempts to break the lock-in.

In the brief comparative analysis that follows, this work will characterize the development paths of Brazil and Mexico. Brazil is classified as a country that branched early to a positive trajectory, in contrast with Mexico, which, despite its potential, persists in a state of lock-in. The section below does not offer a historical description or narrative, although it does, necessarily, make reference to central events. Rather, it is an analysis that revolves around the three principle factors described in the above section: a) the historical beginning of the process, differentiating between mitigated vs. exacerbated disadvantages, b) cohesion of the coalition, low or high, depending on how it responds to endogenous-exogenous shocks and c) opening/closure of spaces for social mobilization, principally expressed in access to and quality of education for the people.5 The expansion of space as a social vehicle for social learning is also an important technological component.

What is the effect of foreign forces or the global power regime on the national historical trajectory? Unlike what dependentism or third-worldism might say, there is a relationship between adverse factors and facilitators. On the adverse side, we have what Amsden (2001) would call crowding out, that is, when foreign companies monopolize the market at the expense of national companies (a point underlined by the dependentist school of thought). On the positive side, we have the growing international spread of technological knowledge, although taking advantage of this knowledge depends on the social capacity for absorption, which brings us to factor (c). Moreover, when a late-developing country achieves a certain level of industrialization, regardless of whether its domestic market is larger or smaller, it requires access to global markets (one explanation found in Dabat et al., 2010). This is the critical factor, because access depends on a policy decision made by leading powers, whose elite may not have any reason to offer preferential access, because that would mean admitting a competitor. Countries on a successful path have enjoyed what we might call the "benefaction" of the powers or leading markets. As is known, rarely has this status been granted in the twentieth and twenty-first centuries. This concession, which is essentially "making space for a guest to get comfortable," comes at a social cost to the global power or powers, who give up market share. There is generally a strong strategic interest behind this benefaction, such as in the case of South Korea (to contain communism during the Cold War) or India (to contain the power of China). China and Brazil, as countries that are almost like their own continent, also achieve a substantial margin of generosity at a certain point. Other nations, such as Mexico, are denied this benefaction, not explicitly, but rather tacitly, through a combination of distrust, domestic instability, failed economic processes and geographic proximity that is difficult in and of itself to manage.

Brazil: Early and Gradual Endogenous Change Under Mitigated Coercion6

Unlike South Korea, Brazil did not experience some abrupt path switch, but has rather seen gradual progress since the end of the nineteenth century. What sets Brazil apart is the cohesion of its dominant coalition, although its spaces for social mobilization grew relatively slowly, but with an impressive record of economic growth, interrupted only by global crises.7 Except for normal cyclical ups and downs, there were no external factors that would negatively affect the trajectory such as, for example, the foreign invasions Mexico suffered in the nineteenth century. Rather, Brazil was a threat and aggressor to its neighbors (Roett, op. cit.: 36). It faced a series of secessionist rebellions quelled around 1850, when the elite began to understand that it was in their best interest to find ways to negotiate and become more moderate.

This adverse point of departure, like any colony, the sui generis of weak Portuguese colonialism (Schwartz, 1990), plus the gradual discovery of its natural wealth,8 all meant that the degree of social disruption was less profound than in two other Pre-Colombian empires, Peru and Mexico (Schwarts, op. cit.; Levine and Crocitti, 1999). The extermination of the native population was immediate, and black slaves were the victims of exploitation, while the “white poor” became an intermediate group, although they did not face ethnic restrictions on social mobility.

In light of the above, for this "continent" country, the initial force that formed its historical path was an early effort by the elite to expand the territory and later prevent it from breaking up, which required institution building that Hayes (1989: Introduction) referred to as the mystique of the armed nation. The importance of stability was recognized early on under the rule of Dom Pedro II (Levine and Crocitti, 1999: 59). The common interest of maintaining territorial integrity fostered cohesion among the upper echelons, originally through a two-party system that developed a good capacity for reconciliation early on. The Conservative and Liberal parties emerged with Dom Pedro II (Roett, op. cit.: 46). The second institution that made it possible for the elites to unify was the army (Hayes, op. cit.: 122). This was a slow process that began in 1850 when the National Guard joined the imperial order (Hayes, op. cit.: 99). The principal ideologues of the end of the nineteenth century, Oliveira Vienna and Honorio Rodríguez, proposed the need to strengthen certain national features to maintain the unity of Brazilian society (Hayes, op. cit.: 81).

Although Brazil was the quintessential extractive society (Acemoglu et al., 2001), built on the foundation of hereditary captaincies decreed by Dom Joao III (Roett, op. cit.: 39); Kohli, 2004: 89), astute ideological control of slaves (the image of benign slavery and the cosmic race) (Levine and Crocitti, op. cit.: 143 and ff.) and early obstacles that European immigrants faced in acquiring land (Abreu and Verner, 1997: 8) gave rise to a rather powerful dominant coalition that put in place rigorous restrictions on access, but was not opposed to some degree of social mobility.

The outbreak of violence, and with that, social and political instability, came about with the coffee boom at the end of the nineteenth century, with the potential for confrontation between the new elite and the powerful sugar oligarchs (Abreu and Verner, op. cit.). In light of the conciliatory culture inherited from Dom Pedro II, the two factions avoided confrontation and agreed to overcome territorial fragmentation, which helped consolidate Brazil's path branching. This was decisive to usher in Brazilian industrialization, because the primary export boom translated into early industrialization fed by railroad construction (Abreu and Verner, op. cit.).

The deliberate industrialization project began with Getulio Vargas, politically inspired by the tenente movement (Levine and Crocitti, op. cit.: 158-159). In a favorable environment, the old international division of labor came to an end and the industrialist ideology was born. During the military dictatorship (1964-1985), progress in industrialization was consolidated through import substitution, under the direction of a nascent technocracy, which quickly dominated, although unequally, governmental management of industrial growth (Hayes, op. cit.). Up through the 1950s, industrial progress tested the cohesion of the coalition, which grew with the addition of "new businessmen." The problem was a repeat of the end of the nineteenth century. The first industrialists (non-durable consumer goods) tended to oppose the concession of privileges to "second generation" industrialists, undermining the process. The political agreement was to give Kubitschek enough space to push substitution for industrial inputs and durable consumer goods through "subsequent connections" (see the discussion in Hirschman, 1996: 489). The dominant coalition was once again about to split apart because they could not respond to the failed attempt to establish a controlled democracy, or a legalist formula, at the beginning of the 1960s (Hayes, op. cit.: 208), which was associated with a shift to the left (ibid.). The agreement from on high was to combine the military coup with development and deliver power once the danger of possible subversion had been eclipsed (Polanco, 2012: Chapter 4).

The consolidation of Brazilian industrialization, as Hirschman wrote (1996: 195-200), and in keeping with Antonio Barros de Castro, was expressed in the Second National Development Plan (1973-1979), after Medici turned over the reins of the government to Geisel (Polanco, 2012: 125). Rather than applying restrictive monetary policy in response to the oil shock, short

[…] President Geisel and his economic advisers decided to push industrial investments away from the automobiles and consumer durables of the “miracle” years (1968-1973) and into the sectors that represent the ultimate stage of import-substituting industrialization and that had remained the hardest to crack for Latin America’s industrializers: intermediate inputs, especially in chemical and metallurgical industries, and capital goods (Hirschman, 1996a: 197-198). The above interpretation opposes the “structuralist” view, which proposes the failure or “exhaustion” of import substitution industrialization in Brazil at the beginning of the 1960s, as maintained by Tavares (1972), Furtado (1968) and O'Donnell (1978). Hirschman, who critiques this interpretation, calls it the acceleration of industrial growth by increasing the inequality of income distribution. The myth of the failure of Brazilian industrialization was born of that interpretation.9 Ironically, the failure affected Argentina and Mexico, but for other reasons. In Brazil, commitment to industrialization was political and it survived factional struggles, achieving something similar to what was so decisive in South Korean industrialization: flexibility to correct its path by subordinating breakaway interests. The best example of Brazilian success is how it went from an overvalued exchange rate to a nearly balanced exchange rate, which was necessary so as not to interfere with the growth of manufacturing exports and to avoid discouraging the national capital goods sector (Maddison, 2008).

The civil governments, starting with Sarney and beyond, but especially Cardoso, were able, with the support of the IMF, to deal with the imbalances they inherited derived from accelerated industrialization, but with a considerable margin to maneuver that Mexico lacked (Polanco, op. cit.; Fishlow, 2011: 33 and ff.). Although in debt, Brazil made use of its situation productively. The growth of spaces for social mobilization accelerated starting at the end of the 1990s, made evident in rapidly decreasing poverty (World Bank, op. cit.: Table 2.7; Keck, 1992: 20 and ff.). The reforms implemented by Cardoso with the approval of the coalition were the start of the transition to an open order. The elite agreed not only to limit their de facto powers, but also their formal powers. As a result, the State acquired autonomy to act and no longer required neither the tacit nor explicit consent of the coalition. The extraordinary significance of this historical event has been overshadowed by antithetic interpretations, as well as the tendency (and this applies to events after 2007) to confuse cyclical economic behavior with behavioral trends.

Mexico: The Discontinuity of Industrialization as a Result of Conflict among the Elite.10

The conquest and colonization of the territory now known as Mexico was a devastating process that systematically decimated the native population (Maddison, 2007: 87). As a result, colonial dominance may be considered Mexico's highly adverse point of departure, with lasting repercussions, and therefore the origin of the path Mexico is currently on. The drastic restriction on spaces for social mobilization in both colonial and recently independent Mexico was a solid element of Pre-Colombian empires, especially the Aztec empire. However, following independence, there were other factors with the potential to modify the original path.

Since the times of colonization, the elite in New Spain, the peninsular and criollo classes, entered into conflict, establishing a historical pattern of confrontation far different from what happened in Brazil.11 After independence, this conflict led to a civil war. The period between 1810 when Porfirio Díaz arrived to power was one of economic stagnation, as the war for independence practically destroyed the mining industry and the political system was left leaderless (Hansen, 1971: 20). The conflict among the elites was a determining factor in Mexico’s defeat to the United States in 1846-1848. It was a devastating hit and another adverse point of departure, making evident again the abyss between the elites and the people, the ultimate cause of the defeat. The social commotion that resulted from this defeat can explain the Juarist reforms, which opened up the chance for a path switch. The laissez faire program that Juárez undertook was contrary to the reality of the country, except in one aspect; the Constitution of 1857 was entirely valid by providing for a centralized government, the only antidote to overcome national fragmentation (Cosío Villegas, 1957). Unfortunately, because there was this legal loophole essential to the conflict among the elites, the demarcation of territory was a disaster for indigenous communities and led to the appearance of large non-productive land owners. Farmers certainly gained strength, principally in the North, as crucial figures in the revolutionary conflict (Womack, 1992: 78-81).

Facing opposing social forces, the country could have fallen apart, but instead, it took the only viable exit: a dictatorship and the emergence of the messianic figure of Porfirio Díaz (Katz, 1992). This dictatorship might be considered a factor to rectify the path, as it did achieve national integration thanks to railroads and the subordination of local factions (ibid.). From there, the key was to unify the elite class through a concession policy that would involve expanding spaces for power. This strategy would be eased by exceptionally favorable international conditions. During the Porfirian term, new classes joined the dominant coalition through two routes: a) new European and American immigrants invested in new industries and b) the growth of the agricultural and mining export economy benefited small farmers in the North, whose cultural profile was rather different than that of ancestral Mexico. This reorganization, in principle, was detrimental to the descendants of the “conquerors,” who controlled the State apparatus. It became clear then that the political task of reunifying the dominant coalition would not be simple. As Vernon (op. cit.: 49) explains, the exclusivity of privileges made it difficult to sustain an economy made up domestically of powerful agents that competed amongst each other for labor, credit, water, etc. (Vernon, op. cit.: 70). Moreover, the change was so sudden that it left the poorest unprotected, especially in rural areas, as corn was replaced by crops for export (Solís, 1970: 69). The armed uprising was the result of the failure of the elites to unify and deal with the effects of the shock of sudden economic progress. Although the national historiography presents the Mexican Revolution as a source of pride, in reality it was, like all social conflicts, the outcome of an incapacity to achieve natural leadership. In any event, the nucleus of the Porfirian coalition fell apart and although some of its most important members survived, they were unified in the twentieth century in a different way and with new influences.

In the period between 1917, when the Constitutional Convention was held, and the implementation of the Cardenas reforms, the State became far less fragile, and power was transferred in a relatively legitimate manner.

With the Porfirian oligarchy leaderless, the commanders of the North stepped in (Schryer, 1986). Supplied with the organizational basis for development and the Cardenas reforms, they undoubtedly produced what we will call here a fork in the road, which reached its peak in the "Mexican miracle," or the industrial revolution (Reynolds, 1973: 222 and ff.; Mosk, 1950). What is hard to explain is, starting at that time, to use a concept from Hoff and Stiglitz (op. cit.), lower institutions began to block higher institutions that emerged with the Cardenas reforms. We can find a fundamental clue in the conflicts brought on by the formation of a business class or the “industrial bourgeoisie” at the end of the Second World War, problems similar to what happened in Brazil. Multiple generations of businessmen born of the import substitution process led a political struggle to accumulate the benefits of protectionism and subsidies (Hirschman, 1996). That conflict, part of substitution industrialization, opened the door to negotiations, or impositions, replicating what happened before Porfirio. The solution to the conflict resulting from the end of the "easy" stage of substitution industrialization depended on, similar to in Brazil, a change in strategy (start of the rationalization of protection along with the end of currency overvaluation). This agreement was not achieved. On the contrary, protectionism increased (Wallace and Ten Kate, 1979; Fajnzylber, 1983), as well as the dependence on imported capital goods (Balassa, 1988: 36-38; Hirschman, 1996a: 195 and ff.). This is the cornerstone of the explanation as to why the Mexican economy gradually lost the strength gained from the Cardenas reforms and finally reached a stage of strong imbalances. Significantly, both Brazil and Mexico faced similar problems and had within their reach similar political options, but the results were very different. So, it could be said that the difference lies not in the tools available but rather in how they are used, and the way in which they are used responds to the interests of the dominant coalition (Chapman, 2011). Why the social conformism then? The key would appear to lie in the mythical peace of the PRI (Institutional Revolutionary Party), known ironically as the pax priista. Hansen (1971) wondered whether institutional factors contributed to this passiveness. He found extremely high conformism along with very limited demands from most of the population, which supported the regime in exchange for practically nothing, minimizing the efforts to strive for social change. He points out what we already know: in reality, nearly one-third of the population saw both an absolute and relative decrease in their standard of living by the end of the 1960s. Hansen cites three possible causes for this passiveness, but the most interesting is that one of the rules of the PRI system, and therefore of the highest class, the “revolutionary family,” was that the elite should not look for solutions to conflicts outside of the internal system. If this rule had been broken, certain factions would have looked for support in critical moments from the excluded population.12

The excluded groups, as Hansen explains, were of three types: localists, subordinates and participants. The first, he explains, expected nothing from the government, largely as a result of ignorance of what a government means or does. The second is aware that there is a government and is also linked to it emotionally in some way, but these relationships are abstract or general. The second group may even accept that there is an extension of the government that affects it but adopts a passive attitude. Finally, the participant:

[…] supports the revolution and the political institutions that have emerged since the 1930s and, on the other hand, is quite cynical about Mexican politics and political leaders. His cynicism and distrust with regard to the operations of the present system generally lead him to avoid political activities and expect little or nothing for himself from the government (op. cit.: 242).

It will be crucial to keep in mind these ideas to understand the processes that characterize Mexico starting in 1980.

The crisis that began in 1982 weakened the dominant coalition, which had little negotiation capacity to face the International Monetary Fund. Even in these conditions, the possibility that the dominant coalition would reunify and agree on rules to implement the decisive neoliberal reform – privatization – was not entirely ruled out. The transfer of state assets was so significant that it effectively required a reorganization of the coalition. Polanco (2012: 106 and ff.) distinguishes between two privatization models: a) privatization based on an agreement among the elites, or a "deal" (open tender with free access and clearly defined rights and obligations) and b) privatization with no agreement among the elites under the control of the upper bureaucratic-governmental echelons with space to maneuver and gain the upper hand; there is no prior pact and if there is it is distorted in such a way that the beneficiaries are already selected and the tender would merely be a farce (ibid.). Because there is no consensus among the elite, they become divided, made worse when the beneficiaries obtain monopolistic privileges and concessions (Polanco, op. cit. and Hernández, 2011). This process, which happened during the Salinas administration, was part of a broader reform strategy inspired by the South Korean experience: powerful consortiums spearheaded nationalist interests in response to economic opening and the signing of NAFTA (Rivera, 2009a). If that hypothesis were indeed true, what happened afterwards in the 1994 crisis revealed that the project collapsed, although the reorganization of the coalition was irreversible, and there was a new hierarchy. The result was that the elite class divided up further into factions, and there was regression in the social order (rights succumbed to privileges and illegality prevailed among the powerful), as governance deteriorated and deeply nullified the policies on which restructuring depended (Hoff and Stiglitz, op. cit.).


CONCLUSION

The historical trajectory approach applied to Brazil and Mexico, which faced similar economic situations, demonstrated that they are on different paths, determined largely by their initial conditions and political dynamics. We have seen that how cohesive the coalition is can determine decision-making. In this way, Brazil is a case of high cohesion and moderate capacity to rectify its path while Mexico had low cohesion, with a strong tendency towards fragmentation. Although the results were not predetermined, there is a propensity to reproduce original performance patterns. Mexico made it clear that structural crises or moments of opportunity (after Independence, the start of the Porfirian term, in the 1930s, during the 1980s decline and then privatization) offered new options, but with less flexible conditions and a greater tendency to reproduce previous patterns of response to crises. It is notable that, precisely because of this, policy formation is the vehicle for change, even though policies alone contribute little if there is no coalition of force to give them strength.


BIBLIOGRAPHY

Abreau, M., and D. Verner (1997), Long-Term Brazilian Economic Growth 1930- 94, Paris, Development Center, OECD.

Acemoglu, D.; S. Johnson, and A. Robinson (2001), “The colonial origins of comparative development: An empirical investigation”, American Econo¬mic Review, vol. 91, no.5, December, pp.1369-1401.

Allen, P. M. (1988), “Evolution, Innovation and Economics”, in Giovanni Dosi, Christopher Freeman, Richard Nelson, Gerald Silverberg (eds.), Technical Change and Economic Theory, Pinter Publisher, Londres.

Amsden, A. (1989), Asia´s next giant: South Korea and late industrialization, Oxford University Press, Oxford.

______ (1998), Asia´s next giant: South Korea and late industrialization, Oxford, Oxford University Press.

______ (2001), The rise of the rest. Challenges to the west from late-industriali¬zing economies, Oxford, Oxford University Press.

Angus Maddison (1988), Dos crisis: América Latina y Asia, 1929-1938 y 1973- 1983, Fondo de Cultura Económica, Mexico.

Arthur, W.B. (1988), “Competing Technologies: an Overview”, in G. Dosi et al. (eds.), Technical Change and Economic Theory, Pinter Publishers, Lon¬don.

Balassa, B. (1988), Los países de industrialización reciente en la economía mun-dial, Mexico, Fondo de Cultura Económica.

Barnes, B. (1990), La naturaleza del poder, Barcelona, Ediciones Pomares- Corredor.

Celso Furtado (1968), Desarrollo y subdesarrollo, editorial Universitaria de Buenos Aires, Buenos Aires.

CEPAL [ ] (2014), Pactos hacia la igualdad. Hacia un futuro sostenible, Santiago de Chile.

Chapman, M. G. (2011), Inserción de países latinoamericanos en el nuevo para-digma tecno-económico e institucional (1970-2005). México, Brasil y Corea del Sur, Doctoral Thesis, Postgraduate Program in Economics, UNAM.

Cosío, Villegas D. (1957), La Constitución de 1857 y sus críticos, Mexico, Her¬mes.

Dabat, A.; M. Á. Rivera R., and S. Sztulwark (2007), “Rentas económicas en el marco de la globalización: desarrollo y aprendizaje. Implicaciones para América Latina”, Problemas del Desarrollo, vol. 38, no. 151, October-December.

______ (2010), “Rentas económicas en el marco de la globalización: desa¬rrollo y aprendizaje. Implicaciones para América Latina”, in María de los Ángeles Pozas, Miguel Ángel Rivera Ríos and Alejandro Dabat (coords.) Re¬des globales de producción, rentas económicas y estrategias de desarrollo: la situación de América Latina, El Colegio de México, Mexico

David, P. (2001), “Path dependence, its critics and the quest for ‘historical economics’ ”, in P. Garrouste, and S. Ioannides (eds.) Evolution and Path Dependence in Economic Ideas, Edward Elgar, Cheltenham.

Ebbinghause, B. (2009), “Can Path Dependence Explain Institutional Chan¬ge? Approaches Applied to Welfare State Reform”, in Magnusson, Lars and Jan Ottoson (eds.), The Evolution of Path Dependence, Edward Elgar, Cheltenham.

Evans, P. (1995), Embedded autonomy. State and industrial transformation, Princeton University Press, Princeton.

Fajnzylber, F. (1983), La industrialización trunca de América Latina, Nueva Imagen, Mexico.

Fishlow, A. (2011), Starting over. Brazil since 1985, Brookings Institution Press, Washington, D. C.

Hansen, R. (1971), La política del desarrollo mexicano, Mexico, Siglo XXI Edi¬tores.

Hayes, R. (1989), The armed nation: The brazilian corporate mystique, Arizona State University, Temple, Center for Latin America Studies.

Hernández López, M. (2011), La transnacionalización del gran capital en Mé¬xico: implicaciones para el desarrollo capitalista en el marco de la globaliza¬ción, tesis Doctoral Thesis, Postgraduate Program in Economics, UNAM.

Hikino, T., and A. Amsden (1998), “La industrialización tardía en perspectiva histórica”, Desarrollo Económico, April-June 1995.

Hirschman, A. (1996), “La economía política de la industrialización a través de la sustitución de importaciones en América Latina”, El Trimestre Econó¬mico, vol. 35, no.140, April-June, pp. 489-524,

______ (1996a), Tendencias autosubversivas, Mexico, Fondo de Cultura Eco-nómica.

______ (1985), “Auge y decadencia de la economía del desarrollo”, in M. Gersovitz; C. F. Días-Alejandro; G. Ranis, and M. R. Rosenzweig (comps.), Teoría y experiencia del desarrollo económico, Mexico, Fondo de Cultura Económica, pp. 448-469.

______ (1963), La estrategia del desarrollo económico, Mexico, Fondo de Cul¬tura Económica.

Hoff, K., and J. Stiglitz (2002), “La teoría económica moderna y el desarrollo”, in G. Meier, and J. Stiglitz (eds.), Fronteras de la economía del desarrollo. El futuro en perspectiva, Bogotá, Banco Mundial-Alfaomega, pp. 389-461.

Holland, John D. (2004), El orden oculto. De cómo la adaptación crea la com-plejidad, Fondo de Cultura Económica, Mexico.

Johnson, A., and T. Earle (2000), The evolution of human societies, Stanford Uni¬versity Press, Stanford.

Katz, F. (1992), “La restauración de la república y el Porfiriato”, in Leslie B. (ed.), Historia de América Latina, 9. México, América Central y el Caribe, c. 1870-1930, Cambridge University Press, Editorial Crítica, Barcelona.

Keck, M. (1992), The worker party and democratization in Brazil, New Haven, Yale University Press.

Kohli, A. (2004), State-directed development. Political power and industrializa¬tion in the global periphery, New York, Cambridge University Press.

Kuznets, S. (1973), Crecimiento económico moderno, Madrid, Aguilar.

Levine, R., and J. Crocietti (1999), The Brazil reader: History, culture, politics, Duke, Duke University Press.

Lynch, J. (2010), Las revoluciones hispanoamericanas. 1808-1826, Ariel His-toria, Barcelona.

Maddison, A. (1997), La economía mundial 1820-1992, Paris, OECD.

______ (2007), Contours of the world economy, I-2030 AD, Oxford University Press, Oxford.

______ (2008), Data Base. Historical Statistics of the World Economy, http:// www.ggdc.net/maddison/Maddison.htm.

Madrazo, C. A. (1971), Voz postrera de la revolución: discursos y comentarios, B. Costa Amic, Mexico.

Meier, G. (1995), Leading issues in economic development, Oxford, Oxford University Press.

Mosk, S. (1950), “La revolución industrial en México”, in Problemas agríco¬las e industriales de México, vol. 3, no. 2.

Mowery, David and Nathan Rosenberg (1998), Paths of Innovation. Technological Change in 20th-Century America, Cambridge University Press, Cambridge.

Myrdal, Gunnar (1979), Teoría económica y regiones subdesarrolladas, Fondo de Cultura Económica, Mexico.

North, D. (2005), Understanding the process of economic change, Princeton, Princeton University Press.

______ (1993), Instituciones, cambio institucional y desempeño económico, Me¬xico, Fondo de Cultura Económica.

______ (1984), Estructura y cambio en la historia económica, Madrid, Alianza.

______; J. Wallis, and B. Weingast (2009), Violence and social orders. A concep¬tual framework for interpreting recorded human history, Cambridge, Cam¬bridge University Press.

North, D., and R. Thomas (1978), El nacimiento del mundo occidental, Mexico, Siglo XXI Editores.

O´Donnell, Guillermo (1978), “Reflections on the Patterns of Change in the Bureaucratic-Authoritarian State”, Latin American Research Review, Vol. XIII, no. 1. Palma, Itzel (2014), Los factores institucionales en el desarrollo económico de Mé¬xico a partir de la segunda mitad del siglo XX, Degree Thesis, Faculty of Economic, UNAM.

Polanco Piñeros, R. (2012), Aplicación de la teoría institucionalista de North al estudio del desarrollo en América Latina: comparación entre México y Brasil a partir de la segunda mitad del siglo XX, Doctoral Thesis, Posgraduate in Eco¬nomics, UNAM.

Reynolds, C. (1973), La economía mexicana. Su estructura y crecimiento en el siglo XX, Mexico, Fondo de Cultura Económica.

Rivera Ríos, M. A. (2010), “Teoría del desarrollo, cambio histórico y conoci¬miento”, Umbrales, no. 21, pp. 199-226.

Rivera Ríos, M. A. (2009), Desarrollo económico y cambio institucional. Una aproximación al estudio del atraso económico y el desarrollo tardío desde pers¬pectiva sistémica, México, UNAM-Casa Editorial Juan Pablos.

______ (2009a), “Las grandes empresas en México y la estrategia de desarro¬llo actual”, Este País, Mexico, April 2007, pp. 30-41.

______ (1986), Crisis y reorganización del capitalismo mexicano, Mexico, Edi¬torial Era.

______; V. Robert, and G. Yoguel (2009), “Cambio tecnológico, complejidad e instituciones. El caso de Argentina y México”, Problemas del Desarrollo, vol. 40, no. 157, Mexico.

Roett, R. (2010), The new Brazil, Washington, D. C., Brookings Institution Press.

Rosenstein-Rodan, P. N. (1960), “Notas sobre la teoría del gran impulso”, H. S. Ellis (ed.), El desarrollo económico y América Latina, Fondo de Cultura Económica, Mexico.

Russel-Wood, A. J. (1990), “El Brasil colonial: el ciclo del oro, c. 1690-1750”, in L. Bethell (ed.), Historia de América Latina. 3. América Latina colonial, Crítica, Barcelona.

Schryer, F. (1986), Una burguesía campesina en la revolución. Los rancheros de Pisaflores, Mexico, Editorial Era.

Schwartz, S. (1990), “Brasil colonial: plantaciones y periferias, 1580-1750”, in L. Bethell (ed.), Historia de América Latina, 3. América Latina colonial, Crítica, Barcelona.

Solís, L. (1970), La realidad económica mexicana, México, Siglo XXI Editores.

Tavares, M. da Conceição (1972), Da substituição de importações ao capitalis¬mo financiero, Zahar, Río de Janeiro.

Vernon, R. (1967), El dilema del desarrollo económico de México, Mexico, Diana. Wade, R. (1999), El mercado dirigido. La teoría económica y la función del go¬bierno en la industrialización del este de Asia, Fondo de Cultura Económica, Mexico.

Wallace, B., and A. Ten Kate (1979), “La protección nominal y efectiva a nivel sectorial”, in B. Wallace; A. Ten Kate; A. Waarts, and D. Ramírez (eds.), La política de protección en el desarrollo económico de México, Fondo de Cultura Económica, Mexico.

Womack, J. Jr. (1992), “La revolución mexicana, 1910-1920”, in L. Bethell (ed.), Historia de América Latina, 9. México, América Central y el Caribe, 1870-1930, Crítica, Barcelona.

World Bank (2011-2013), World Development Indicators 2011, Washington.

______ (2012), World Development Indicators 2012, Washington.

*Faculty of Economics, UNAM, Mexico. mriver@unam.mx

1 Theoretical transposition is the propensity to transfer the analytical structure of an advanced country to a more economically underdeveloped country, as is the case for the central role of technological change, progressive organizations, the knowledge economy, etc.

2 Few “peripheral” countries currently meet the conditions to say that they are developing, mainly because their annual GDP per capita growth rates are below 1.5% and their underdevelopment is therefore aggravated or maintained.

3 The real annual GDP per capita growth rate of developed countries between 1820 and 1992 was 1.5%. As such, to reduce the international gap, late-developing countries must grow at even higher rates. In fact, the most dynamic economies in Asia have annual GDP per capita growth rates of above 4% (for 1820-1992 data, see Maddison, 1997: 87; for data on the dynamic Asian countries, see World Bank, 2011: Chapter 4).

4 The conceptual proposal of John Holland (2004) that systems are self-adapting will not be adopted, because structures in dissipation and processes dominated by the thermodynamics of evolutionary theory (Allen, 1988) replicate the traits of economies with capacity for continuous innovation and not late-developing economies, whose complexity brings us back to historical inertia in which social options are limited by a path break.

5 When spaces for social mobilization expand, we can be sure that the dominant coalition is explicitly organized around developmental objectives, mitigating social deprivation (Wade, op. cit.).

6 The historical review of Brazil goes up to the end of the Cardoso government, because the reforms implemented in the name of the coalition ensured the start of the transition to an open order (Roett, 2010).

7 Between 1900 and 1973, Brazil had the highest annual real GDP growth rate in the world, surpassed only by Japan and Finland (Abreu and Verner, 1977).

8 The “gold rush” began more than a century after colonization (Russell Wood, 1990).

9 Hirschman (1963) summarizes the concentration and exclusion argument. When a Latin American country reaches the phase of producing durable goods such as automobiles, its policies tend to become authoritarian and repressive. Income becomes deliberately concentrated in the middle and upper classes at the expense of the people, whose wages remain low and repressed.

10 The study of the Mexican path goes up to the beginning of privatization, whose backbone was the sale of Telmex, which reopened the internal struggle among the elite, a factor of institutional regression.

11 Lynch (2010: 292-300) explains that the status of peninsulars was superior to that of criollos. Both acted in fear of the impoverished masses, which they disdained and did not understand. This social abyss continued to grow for another 300 years and was replicated in the nineteenth century, reaching such a point that the conservatives made an alliance with Maximilian. It was repeated in the second half of the twentieth century as well, making the bifurcation more difficult.

12 The political debates of the 1960s discussed whether the pax priista had achieved its role (leaving behind an agrarian and semi-illiterate society and reducing violence) and whether political dynamics should settle into a more flexible framework (see Madrazo, 1971, which contains his political ideology).

Published in Mexico, 2012-2017 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 48, Number 191, October-December 2017 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
CP 04510, México, D.F. Tel (52 55) 56 23 01 05 and (52 55) 56 24 23 39, fax (52 55) 56 23 00 97, www.probdes.iiec.unam.mx, revprode@unam.mx. Journal Editor: Alicia Girón González. Reservation of rights to exclusive use of the title: 04-2012-070613560300-203, ISSN: pending. Person responsible for the latest update of this issue: Minerva García, Circuito Maestro Mario de la Cueva s/n, Ciudad Universitaria, Coyoacán, CP 04510, México D.F., latest update: Nov 13th, 2017.
The opinions expressed by authors do not necessarily reflect those of the editor of the publication.
Permission to reproduce all or part of the published texts is granted provided the source is cited in full including the web address.
Credits | Contact

The online journal Problemas del Desarrollo. Revista Latinoamericana de Economía corresponds to the printed edition of the same title with ISSN 0301-7036