Marshall C. Eakin, Tropical Capitalism: The Industrialization of Belo Horizonte, Brazil. New York: Palgrave, 2001. xvi + 269 pp. $55.00 (cloth), ISBN: 0-312-22306-4.

Reviewed for EH.NET by Gail D. Triner, Department of History, Rutgers University.

At the beginning of the twenty-first century, Belo Horizonte is the second largest economic center of Brazil (second to São Paulo, and ahead of Rio de Janeiro), and it is one of the fastest growing industrial regions in Latin America. In 1897, when the city was inaugurated as the capital of the state of Minas Gerais, it was barely more than a backwater village with an ambitious set of plans. The transition was no accident; it required a century of concentrated effort and resources, as Tropical Capitalism: The Industrialization of Belo Horizonte, Brazil makes clear. According to Marshall Eakin's business history, a tiny group of local leaders commandeered state economic policy to engineer this transition. State-owned enterprise and foreign multinationals led the way with large-scale heavy industry. Local entrepreneurs simply went along for the ride. Eakin identifies two findings in this book. The first is that the extensive industrial base came about without accompanying social and political change. Secondly, the regional economy did not develop self-sustaining local technological innovation. Mineiros (people from the state of Minas Gerais) continued to import technology long after their industrial base was in place. These features are very different than scholars with knowledge of the historical process in now-industrialized economies would expect. Could industrialization among current third world economies be substantively different from earlier successful efforts? This is one of the few case studies that can help us to consider that question.

This book falls within the discipline of business history. Eakin, a professor of history at Vanderbilt University, with long experience in Minas Gerais, accurately describes his methodology and sources as "interdisciplinary and eclectic" (p. 4.) For the most part, the methodology falls within the scope of the social and political history of business and the personal histories of the public figures who engineered the transition of Belo Horizonte. The book draws upon a wide range of sources, and the author uses them resourcefully. The text and footnotes direct the interested reader to the available macroeconomic histories of industrial growth.

For most of Brazilian history, Minas Gerais seemed a remote province (then, state). Landlocked and with rugged terrain, the province enjoyed a short-lived burst of fame and wealth with the discovery of gold and precious stones in the first half of the eighteenth century. However, by the nineteenth century, mineiros were not core participants in the export economy, centered in Rio de Janeiro and São Paulo. Nevertheless, the area maintained a robust, diverse local economy and a strong national political presence. Shortly after the introduction of the Brazilian Republic in 1889, state politicians converged on a plan to move the capital from Ouro Preto -- a remote colonial town that had served as the administrative capital during the colonial mining boom -- to Belo Horizonte. The new location was more accessible geographically, and not coincidentally, close to the hometowns of the prevailing political elite. The emergence of a commercial and industrial center to rival the larger coastal cities of Rio de Janeiro and São Paulo was central to the plans and hopes of the original planners. However, for the first fifty years, progress was slow.

Concentrating on the region's core industries of textiles, food processing, iron and steel and electric power, Eakin traces the gradual consolidation of a commercial community in Belo Horizonte and its close environs. At the beginning of the twentieth century, new companies remained small; they relied on traditional technologies and their owner/managers came from a small inter-related (often by family) pool of the commercial and political elite. Technologies remained simple and financing methods did not support capital accumulation. As the author recognizes, this pattern paralleled the early industrialization of many current first-world economies. Belo Horizonte was different from the first industrializers in that self-sustaining growth, based on local factors, did not develop.

Large-scale heavy industry became increasingly important from the 1940s. Eakin finds that this change required marshalling public policy, at both the state and federal levels, and the recruitment of non-Brazilian multinational firms. Many of the companies ultimately became state-owned enterprises. Iron mining and steel production were at the core of this transition. The cement and construction industries took advantage of their business environment and participated in building infrastructure in the Belo Horizonte area. To accommodate the heavy demands from other industrialization, the electric power industry grew; and, through the 1950s and early 1960s, the state of Minas Gerais became both its owner and regulator. A growing public-sector technocracy coordinated the ownership, management, engineering and construction requirements, state and federal policies, and the entrance of multinationals during these years. A development bank within the state (among other public and private associations supporting local business) in addition to the active federal development bank, generated an incremental layer of "state capitalism" in Minas Gerais. In a sense, state technocrats became the entrepreneurial force directing growth.

The result was the presence of heavy, infrastructural industry that created the foundation supporting subsequent manufacturing. Mineiros benefited from this foundation during (approximately) the last quarter of the twentieth century. Industrial growth took off in the 1970s. Indisputably, Belo Horizonte had become a locally dominant pole of industrial growth. Continuing development of basic infrastructure in state-owned electricity and telecommunications companies supported the introduction of new industrial firms. The 1973 arrival, and subsequent expansion, of Fiat provided the strongest experience of state government combining with a multinational firm to produce exceptional growth. At least in the business realm, mineiros were not nationalistic; German, Belgian, Italian, and Japanese firms were among those attracted by the market opportunities, subsidies and supportive policies in Belo Horizonte.

Mineiros participated in the local management of multinationals and they created a state-level bureaucracy that strategized further development and managed the state-owned businesses. However, key individuals, drawn from a close-knit and small pool, continued to provide industrial, commercial, bureaucratic and political leadership, as they had in the nineteenth century. These individuals moved fluidly between public and private sector and between professional activities during their careers. Traditional family-oriented business groups teamed with new actors, foreign multinationals, to advance their mutual interests. Industry in Belo Horizonte developed successfully without the concomitant broadening of social structure.

As something of an epilogue, Eakin suggests that the recent tide of privatizations of important Belo Horizonte firms, such as iron mining, electric and telecommunications firms -- again, with important participation of multinationals -- will consolidate the presence of foreign technology and capital, while diminishing the role of the state as entrepreneur. Extrapolating the future from the present is always courageous.

Like all good scholarship that addresses useful questions, the findings of this book raise even more interesting avenues for research.

Foreign multinationals played a central role in this story. They arrived in Belo Horizonte at crucial times and received important support in the forms of equity partnerships, land subsidies, supply and pricing preferences. Rather than relying on ideas from dependency theory, this interpretation follows Gershenkronian logic. Multinationals introduced incremental capital, technology and management resources into the region. Local economic agents invoked the state and outsiders to induce an advanced industrialization process that did not occur indigenously. In this effort, Eakin asserts that foreign multinationals introduced their own technologies into their Belo Horizonte plants, without change or adaptation to local circumstances. Without expanding and changing the book substantially to explore the actual production processes in these plants, we need to accept the author's word on this important point.

By focusing on political/business elites and multinationals, Eakin identifies the sources motoring industrial growth. Especially when considering the regional effects of Fiat's presence in Belo Horizonte, he recognizes the opportunity created for local supplying and supporting business and the service sector. However, one cannot help but wonder if the exceptional effects of a few companies might have overshadowed dynamic, innovative and prosperous -- if less spectacular -- activities by smaller-scale local entrepreneurs. A parallel study of regional small businesses and their owners could be an interesting supplement to this study.

Eakin does not position his findings as only a specific case study. Throughout the book, he insists that, even if the extent of Belo Horizonte's experience was exceptional, its nature has been replicated elsewhere throughout Brazil and Latin America. Historians have begun to expand their attention from the "megacephalic pattern" (p. 167) of highly concentrated urban growth to understand important "secondary" cities. Eakin extends this scholarship to understand how the local business community engineered the emergence of one of the most important secondary cities of Latin America. Doing so demonstrates the desirability of additional regional studies (or at least of making regional studies accessible to an international readership.) Additionally, this regional study also begs the serious question of the integration of multiple centers of industrialization into a national whole. Belo Horizonte's history demonstrates the multiple tensions of the local competing with, supporting, and providing a model for national ambitions in various circumstances.

In the final analysis, Eakin characterizes the industrialization of Belo Horizonte as successful but "flawed" (p. 178) because it did not generate widespread local social development. He also aptly demonstrates that the successful recent privatization of state-owned companies rests upon the prior decades of dynamic "state capitalism." This finding raises an interesting question about the underpinnings of current "neo-liberal globalization:" Could current participants in market capitalism be realizing the benefits of earlier state-directed economic development?

Economic historians who regret this book's lack of traditional cliometric methods for analyzing output, productivity and finance will miss important insights that re-animate the study of industrialization in innovative directions.

Gail D. Triner is Associate Professor of History at Rutgers University. Her publications include Banking and Economic Development: Brazil 1889-1930 (Palgrave Press, 2000).