Crafting Coalitions for Reform: Business Preferences, Political Institutions, and Neoliberal Reform in Brazil

Journal of Interamerican Studies and World Affairs, Fall 2000 by Chaffee, Wilber A

Kingstone, Peter R. Crafting Coalitions for Reform: Business Preferences, Political Institutions, and Neoliberal Reform in Brazil. University Park: Pennsylvania State University Press, 1999. Tables, bibliography, index, 284 pp.; hardcover $60, paperback $22.50.

Peter Kingstone's book is timely. It arrives at a moment when the major political arguments in Brazil focus on economic strategies of growth: whether Brazil should return to Vargas-style military nationalism and try to build growth on an expanded autarky of MERCOSUR, or whether Brazilian industry can compete adequately in the international market to power national development. The book is also a welcome new aid to understanding the effects of corporatism. A number of significant works have been written on corporatism and labor, but little on corporatism and business. Yet the book is about industrialists' attitudes and industrial politics, and it is in this primary aspect that its greatest value lies. It focuses on the political economy and, in so doing, is of interest both to political scientists and economists.

In a greatly expanded and updated extension of what was originally dissertation research, Kingstone carried out more than a hundred interviews with business leaders during two periods, 1991-92 and 1996. One period was before the Real Plan, when inflation dominated the economy, and one after its successful stabilization of the economy. "Business," as used here, specifically means industry, and does not extend to banking or agribusiness. Business also means, in this case, business in Sao Paulo, a limitation justified by the dominance of that state in Brazil's industrial economy. "Coalitions" in the title also has a specific meaning. These are not legislative coalitions, but informal coalitions of support that the executive can then translate into reform policies.

In a text almost totally empirical, the author deliberately keeps theory to a minimum, specifically engaging in small-N, qualitative research as championed by David Collier. But Kingstone rightly points to the complementarity of formal deductive models and inductive, qualitative material. His work raises significant questions about propositions generated from Rosenkowski's work with Heckscher-Olin theory and Frieden's use of the Ricardo-Viner theorem. He also notes the conflicting ideas about the support Latin American business gives to liberal reforms, whether it supports a liberal economy or fears it, being noncompetitive in the international market.

The book offers an excellent description of industrialists' frustration with the problems created by the long-term strategy of import substitution, and their increasing advocacy of liberal reforms. Although the business community did not universally support reforms, it strongly demanded change and generally supported privatization and reduction of protectionism. It did so knowing the problems created for business by neoliberal reforms in Argentina and Chile. Smaller companies tended to be less enthusiastic about opening the economy, but most Brazilian industrialists believed that given time, they could be internationally competitive, and that state intervention was at the root of the economic problems in the 1980s. Kingstone found that business was flexible in accommodating itself to change and competition, but that once on a policy path, it did not shift easily when it had already invested in a strategy, for business requires long-term stability and policy.

The book covers essentially the period from the Collor administration (1990-92) and its neoliberal reforms to the end of 1997 in the Cardoso presidency. It begins with an introduction describing the almost universal opinion among the industrial leadership that the economic situation required a new strategy. Brazilian business therefore originally welcomed the reforms. Kingstone provides an excellent chronological table of government policies and their business responses, and a series of nine inductively generated hypotheses about industry-government relations.

Kingstone then sets out three working hypotheses about business attitudes, based on business interaction with the international market, with the state, and historical experience. He then "tests" these hypotheses by looking at evidence from three industrial sectors and finds them confirmed. As valuable as the hypotheses are, however, and as excellent the match of the evidence with them, you don't test hypotheses with the same evidence used to generate the hypotheses.

The three sectors-pulp and paper, auto parts, and machine tools and equipment-are examined specifically in terms of their response to the neoliberal opening that came with the Collor administration. The sectors represent different prereform conditions of competitiveness, state intervention and subsidization, international market experience, and modernization; as a result, they responded differently to the reforms. In many areas, state intervention created supply problems and inefficient verticalization of the industry. The state's presence as a customer also influenced the question of companies' viability.