Crafting Coalitions for Reform


Business Preferences, Political Institutions and Neoliberal Reform in Brazil.

PETER KINGSTONE: University Park, Pa.: Pennsylvania State University Press, 1999.

If you want to know the truth about a fighter, don't interview him, don't ask what he thinks about life; look at him, instead, when waging combat. I once read something like this in a piece by Norman Mailer. Now, mutatis mutandi, this maxim applies to the analysis of business politics as well. In fact, be he a financier, a trader, or an industrialist, the job of the businessman is to make money through the performance of an activity useful to someone else. His station in life depends on this particular kind of activity and the circumstances surrounding it. So, when a businessman speak his mind in the public sphere about political or economic subjects, he always has an eye on the micro-scene where, from his point of view, the decisive battles are being fought.

Crafting Coalitions for Reform. Business Preferences, Political Institutions and Neoliberal Reform in Brazil -the great merit of Peter Kingstone is having set for himself a similar interpretative principle, and having stuck to it all through the book he has just offered to us.

I must acknowledge this fact. The author had the unique chance of being in the field at the precise moment when things really started changing for the Brazilian business community; that is to say, in the early 1990s, during Collor's short-lived mandate. In this way, the author was able to observe neoliberal reform in Brazil from its inception, and see how business people reacted to it.

The above does not diminish in the least the merit of the work he has done. A number of others have conducted research on the same subject, in the same place and at the same time, but few have seen what Kingstone now shows us. What makes the difference is the analytical point of view that guided his study.

At first sight, business response to neoliberal politics in Brazil (but not only in Brazil...) confronts us with a puzzle. It is currently recognized that, by exposing domestic production to the competition of imports, economic openness would badly hurt large segments of industry. In that case, it would be reasonable to expect a significant degree of resistance to these policies from those who are doomed to lose. However, instead of entrenched opposition, Brazilian industrialists lend support to neoliberal reforms. How do we solve the conundrum? How can we explain the apparent paradox?

Clearly, at stake here is the problem of how to conceive the formation of business preferences in the changing context of an economy which is in a state of permanent convulsion. And that is where the originality of this book lies. For the sake of brevity, allow me to quote the author:

1) Business preferences are not static or mechanical reflections of the market or of business people's class position. Business people ... can and do look both backwards in time and afterwards, towards the future;

2) markets allow more room for adjustment than the literature on economic reform typically assumes;

3) given the room to adjust, the decision to pursue commercial liberalization may not have sharp distributional consequences as trade theory often assumes. Thus, one important explanation for limited business resistance to neoliberalism is that the "losers" from open trade may not lose.

In accordance with these views (and to test them), the author selected three important sectors -Pulp and Paper, Auto Parts, and Machine Tools and Equipment- in order to conduct an intensive study of the various adjustment strategies that were employed in the Brazilian industrial economy throughout the last decade. These comparative case studies constitute the kernel of Kingstone's book, and supply him with the fresh information that feeds his overall interpretation.

 

In the space of this short review, I am unable to present his argument in any detail. Therefore, I will limit myself to pointing out two results which will surely convey a sense of the richness of the book. First, he demonstrates that, although industrialists' responses to neoliberal reform do reflect the reality of the firms and the sectors in which they operate, the perception they have of the situation and of the choices open to them at this level is fundamentally determined by the content of government policies and the credibility of its commitments. Second, he shows that, beyond a given threshold, neoliberal reform benefits from business support ultimately generated by the process of reform itself: once firms choose a strategy and incur the sink costs implied in it, to some extent they "lock" themselves into a particular adjustment course and thus become dependent on the continuation of the existing policy.

For these and other reasons, this is an illuminating book. However, this does not mean that it is exempt from criticism. Leaving aside minor details, I should mention the following ones: 1) there is an important absence in the description of the institutional changes already in place under Collor's government -namely, financial openness, without which the success of Cardoso's stabilization plan is not understandable. 2) In many places the author reasons as if the only way to eliminate the "artificial" anchors of the real (an overvalued currency and a policy of high interest rates) were to fulfil the entire agenda of major constitutional reforms. In so doing, he overlooks the arguments which, from the very beginning, many independent analysts have raised against these policies, both inside and outside the country (indeed, even within the core of Cardoso's group). As we know, there was a significant shift in the exchange rate policy in February, 1999, without any of the disastrous consequences that its advocates predicted. 3) On the whole, the author's account of the general context of Brazilian politics leaves no room for the expression of contradictory perspectives; it is too dependent on business and/or official views. These problems notwithstanding, this is a most important book which should be read by all those who have an interest in business politics, in the politics of neoliberal reform, and in the political economy of contemporary Brazil.

Sebastião C. Velasco e Cruz State University of Campinas (UNICAMP)




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