Brazil’s Road to Serfdom
There are 200 million Brazilians. The land and geography are essentially the same as the U.S. Why does Brazil have such a significant population of economically disadvantaged people, while the U.S. economy continues to flourish? Dr. Bob Subrick and CoB Graduate Anna Faria research the history of coffee and economics in Brazil in the late 1800s and early 1900s.
How did two seemingly similar countries in the early 1800s end up economically worlds apart in the 21st century? Both Brazil and the United States of America were agrarian societies during that time, and both countries used slave labor on the plantations.
Brazil’s primary crop by the late 1800s was coffee, which had been introduced in 1727 by Francisco de Mello Palheta from Cayenne, French Guiana. Growing and harvesting coffee is an extremely labor-intensive job. The use of slaves in Brazil helped ensure that coffee was readily available and profitable.
Much like what occurred in the American South during the 1800s, Brazil plantation owners essentially took over the political system, and kept their slaves poor and uneducated.
Slavery was abolished in the United States in 1865, while it lingered on in Brazil until 1888; Brazil was the last country in the hemisphere to do away with slavery. With no slaves to run the coffee plantations, Brazil liberalized its immigration laws, and encouraged Eastern and Central Europeans, as well as Japanese, to relocate.
Thus a wave of immigrants flocked to Brazil in the years following the demise of slavery. The immigrants tended to be uneducated, like much of Brazil’s native population. Even after World War II, the literacy rate was below 50 percent.
Brazil continued to produce more and more coffee, eventually exceeding the demand for it. Plantation owners came to expect high prices for the coffee; with overproduction the prices plummeted.
At that time, plantation owners urged the government to provide price supports for the industry. Thus, the Coffee Defense Fund was established. The price supports resulted in a huge overproduction throughout the early twentieth century.
During this time, Brazil was exporting coffee beans to the world. In order to keep the prices low, the government devalued the currency, resulting in an increase in the price of other goods.
People began spending more money on basic necessities. The food prices for the military skyrocketed. All this resulted in a military coup, the Brazilian Revolution of 1930, marking the end of the Old Republic. The New State, or Estado Novo, was officially established in 1937.
The economy of Brazil has continued to decline since this time, with periods of astronomical inflation during the 1980s, while the economy of the U.S. has continued to improve.
Subrick says, “Brazil is an up and coming nation; they are becoming increasingly important for international competition. This is an economy with 200 million people with deep ties to Asia and Africa, and trade agreements with China. Brazil is also the home of the largest Japanese population outside of Japan. Brazil has become a bigger and bigger player on a global scale. It’s important to determine what went wrong, and understand how to fix it. Brazil’s GDP is stagnating; its inflation is increasing.”
He adds, “The United States followed a different path, which could not have been predicted 400 years ago.”
(Subrick and Faria are submitting their article exploring this topic, which covers the time period 1887 to 1930, to the journal Public Choice. The article will be part of their planned book on the economic history of Brazil, which they are currently writing. The team is also collaborating on an article exploring the Brazilian financial crisis, the Encilhamento.)