Colonialism and Mercantilism
During early colonization, Brazil was under the system of mercantilism, which was basically a crude form of early capitalism where powerful empires would go into a land and force them to become unequal economic partners through military force. With Brazil, agricultural goods like the brasilwood it got its name from, sugarcane, and coffee were traded for Portuguese and British goods while being unable to have much development. For mother countries like Portugal mercantilism simply gave the means to engage in world trade to fill the coffers, or treasury, of the homeland. The main con for Brazil was that it would be reliant on an export driven economy which while at first glance may seem good that Brazil has many exports, the economy has a tough time diversifying underneath colonialism and soon became tired of enriching distant merchants,, bankers, and noblemen at their expense, and so the seeds of independence movements were established with mercantilism.
The second key con of mercantilism for Brazil was that it was forced into "boom-bust" cycles. These cycles were basically when a product sold well in Brazil that region boomed but when it no longer sold well, whether another country outproduced Brazil or had a better and cheaper variety (as with sugar) or it simply ran out (as with the gold mines), that region experienced an economic disaster and went into a steep contraction. This system of rises and falls was quite different from that about 4,000 miles away in what would become the United Sates of America; despite being among the least extensive empires in the Americas it had a rich, diverse, and populous economy with a cattle industry by the Appalachians, ironworks and shipbuilding in the North, and agriculture in the South which allowed it to become more self-sufficient and efficient. On top of that, the Treaty of Methuen of 1703 completely prevented Portugal from growing because the deal of trading Portuguese wine for English cloth when England was at war with France gave England growth potential in cotton which was higher than the Portuguese wine, and so as Portugal gave up the chance of industrializing as it fell more and more into debt it also gave up the chance to strengthen and diversify Brazil in more solid, stable industries like the Thirteen Colonies had.
Surprisingly, the boom-bust cycles happened throughout most of Brazil's history from brasilwood to sugar to coffee to rubber as it went even after Brazilian independence. However, while most of the boom-bust cycles related to agriculture there was also such a cycle in mining.
It started in the early 1700s, as the bust of the sugar cycle was dragging down the Northeast into bankruptcy, gold was discovered in the province of Minas Gerais, meaning General Mines, which can be seen in the map below. This gold rush started at the turn of the century, as from 1695 to 1709 the population shot up from a small number of natives to a huge 30,000. The main boost in this population was in the Portuguese migrants from around Brazil and their slaves, and the population boom was so big that the colonial government created two captaincies, one in Sao Paulo in 1710 and one in Minas Gerais in 1720. Just like in the American West many of these migrants going to Minas Gerais were men, and they came in the thousands.
Yet, like with the sugar industry, the government didn't give much technology, and Brazilian mining knowledge was so little that they didn't even have the basic understanding of how to pan for gold, what it looked like, and what to do once it was discovered. Even with this the Crown's main involvement was in collecting the "royal fifth," which was a one-fifth tax, not sending experts to teach mining techniques or create better technology. Because of this slaves were a key part of the industry, and such an occupation was more like a death sentence. In the mines they stood in water, panning for gold or diamonds all day, had little to eat, and suffered constant fevers resulting from mercury and other minerals used in the processing of gold and the metals. Because of the contaminated water, pollution, and threat of being crushed by rocks the life of a slave was many times quite short. But, if such a rare moment happened when a slave found a diamond or struck a gold vein that slave would be given freedom. Due to the one-fifth tax, many smuggled gold and diamonds out in order to achieve a higher profit, meaning that the mines were richer than Portuguese records have stated.
Soon mines started advancing, but all it did was take profits away from Brazilians and Portuguese miners, as the North Europeans, mainly British, provided the tools, chemicals, and expertise to run the mines, bought the diamonds, and gave a share to the Brazilian operators, turning the tables and sending profits to North Europe.This combination of advancing technology and a large migration caused the mineral economy to expand in the region from 1709 to its peak in 1760, and by that time Brazil supplied about 80% of the world's gold, which would be 2 million pounds of the metal. It is difficult to estimate how much was illegally smuggled out, but it is believed to be quite substantial. Just like in the sugar plantations the mining industry changed the region and dominated its economy as well as making it very wealthy, but this time it wasn't competition but the simple laws of nature that caused the cycle to bust, for in the late 1700s the mines started drying up, and the companies went to bankruptcy and unemployment went up. Surprisingly, just a few Brazilian entrepreneurs and mine owners became wealthy, for really most of the wealth went to Europe, unlike in the sugar industry where many plantation owners became wealthy and the GDP per capita was actually higher in the sugar sector than the mining was at its peak.
The second key con of mercantilism for Brazil was that it was forced into "boom-bust" cycles. These cycles were basically when a product sold well in Brazil that region boomed but when it no longer sold well, whether another country outproduced Brazil or had a better and cheaper variety (as with sugar) or it simply ran out (as with the gold mines), that region experienced an economic disaster and went into a steep contraction. This system of rises and falls was quite different from that about 4,000 miles away in what would become the United Sates of America; despite being among the least extensive empires in the Americas it had a rich, diverse, and populous economy with a cattle industry by the Appalachians, ironworks and shipbuilding in the North, and agriculture in the South which allowed it to become more self-sufficient and efficient. On top of that, the Treaty of Methuen of 1703 completely prevented Portugal from growing because the deal of trading Portuguese wine for English cloth when England was at war with France gave England growth potential in cotton which was higher than the Portuguese wine, and so as Portugal gave up the chance of industrializing as it fell more and more into debt it also gave up the chance to strengthen and diversify Brazil in more solid, stable industries like the Thirteen Colonies had.
Surprisingly, the boom-bust cycles happened throughout most of Brazil's history from brasilwood to sugar to coffee to rubber as it went even after Brazilian independence. However, while most of the boom-bust cycles related to agriculture there was also such a cycle in mining.
It started in the early 1700s, as the bust of the sugar cycle was dragging down the Northeast into bankruptcy, gold was discovered in the province of Minas Gerais, meaning General Mines, which can be seen in the map below. This gold rush started at the turn of the century, as from 1695 to 1709 the population shot up from a small number of natives to a huge 30,000. The main boost in this population was in the Portuguese migrants from around Brazil and their slaves, and the population boom was so big that the colonial government created two captaincies, one in Sao Paulo in 1710 and one in Minas Gerais in 1720. Just like in the American West many of these migrants going to Minas Gerais were men, and they came in the thousands.
Yet, like with the sugar industry, the government didn't give much technology, and Brazilian mining knowledge was so little that they didn't even have the basic understanding of how to pan for gold, what it looked like, and what to do once it was discovered. Even with this the Crown's main involvement was in collecting the "royal fifth," which was a one-fifth tax, not sending experts to teach mining techniques or create better technology. Because of this slaves were a key part of the industry, and such an occupation was more like a death sentence. In the mines they stood in water, panning for gold or diamonds all day, had little to eat, and suffered constant fevers resulting from mercury and other minerals used in the processing of gold and the metals. Because of the contaminated water, pollution, and threat of being crushed by rocks the life of a slave was many times quite short. But, if such a rare moment happened when a slave found a diamond or struck a gold vein that slave would be given freedom. Due to the one-fifth tax, many smuggled gold and diamonds out in order to achieve a higher profit, meaning that the mines were richer than Portuguese records have stated.
Soon mines started advancing, but all it did was take profits away from Brazilians and Portuguese miners, as the North Europeans, mainly British, provided the tools, chemicals, and expertise to run the mines, bought the diamonds, and gave a share to the Brazilian operators, turning the tables and sending profits to North Europe.This combination of advancing technology and a large migration caused the mineral economy to expand in the region from 1709 to its peak in 1760, and by that time Brazil supplied about 80% of the world's gold, which would be 2 million pounds of the metal. It is difficult to estimate how much was illegally smuggled out, but it is believed to be quite substantial. Just like in the sugar plantations the mining industry changed the region and dominated its economy as well as making it very wealthy, but this time it wasn't competition but the simple laws of nature that caused the cycle to bust, for in the late 1700s the mines started drying up, and the companies went to bankruptcy and unemployment went up. Surprisingly, just a few Brazilian entrepreneurs and mine owners became wealthy, for really most of the wealth went to Europe, unlike in the sugar industry where many plantation owners became wealthy and the GDP per capita was actually higher in the sugar sector than the mining was at its peak.
Economics under the Empire
Brazil was unique in South America because upon independence it remained one standing body, unlike Spanish America which became multiple states, and when the empire formed, the economy still had the declining sugar economy in the Northeast, but it used worn out soil, outdated machinery, and reliance on costly slave labor. despite attempts for paid laborers, stimulation to the domestic economy, and experimenting with modern mills, the Northeast was no match for the Cuban competitors. In the state of Rio de Janeiro mining, cattle raising, and the start of coffee cultivation created diversity and stimulation of the economy in other regions. Even with this diversification and these gains, the country was still dependent on Britain, both for finances and defense. Since the Royal Navy escorted Prince Regent Joao VI to Brazil during the Napoleonic Wars, Britain was able to extract considerable fees from the imperial government for the protection it provided. Such reliance, however, was not all that bad, for the government didn't need to have credit reserves large enough to bail out failing investors in the early stage of capitalist expansion. And so without having so much risk in entrepreneurship, Brazilian planter sand merchants could get rich fast by tying themselves firmly to the coattails of powerful British trading houses, investors, and the middlemen. And so, Brazil's industrial and financial elite simply served as intermediaries for foreign investors rather than developing on their own. The main problem, however, was that Brazil prevented itself from emerging as a world power, and the interests of the Brazilian people were rarely put into the priorities of the national government.
The Rise of Coffee
In the 1840s, coffee became the most important export item. The story of Brazil's preeminence as a coffee producer and exporter mainly unfolded after independence. Today the coffee sector bears some of the characteristics of the old plantation system, b ut also signs of modernization. First introduced in the northern state of Para with some seeds from French Guiana in 1727, the Amazonas was the location for coffee growth in the 1700s and it reached Rio de Janeiro by 1770 before moving west as the coastal hills lost fertility. In the states of Sao Paulo, Minas Gerais, and later Parana coffee came in the mid 1800s.
The effect of coffee on the nation's economy was tremendous. The production attracted foreign capital, and generated domestic profits that were poured into the manufacturing and commercial ventures in Sao Paulo. It also facilitated the introduction of new technologies, such as railroad construction, which opened up a new part of Brazil to the west and south of Sao Paulo state. the coffee planters in some ways resembled the tobacco planters in the Reconcavo than the large sugar estates. Some of the operators had vast estates, but others relied on a few slaves or a combination of wage and slave laborers and cultivated a modest amount of land.
Coffee production stimulated the large-scale use of immigrant labor on the plantations. Italy and Japan were where most of the immigrants came from. Like sugar planters of the Northeast, heavy slave labor was relied upon by the big coffee growers, though they also had a combination of slave and free labor. Unlike the sugar plantations, however, the planters were interested in advancing technology and going into fields like crop rotation, fertilizers, and innovative agronomy methods for increased production and productivity. They were adaptive with changing global situations while being receptive to foreign influence. In multiple ways coffee introduced far0reaching political, economic, and social changes in Brazil, such as industrial development, as planters invested profits into domestic manufacturing in the state of Sao Paulo.
Yet, while the coffee planters were doing new things that sugar planters wouldn't do which was boosting Brazil's economy, the coffee planters also had their shortcomings, such as production on large plantations, depending on one crop, relying on slave labor, and a plantation system governed by a sole patriarch whose influence over the family, community, and workforce was unquestionable. Some of the coffee plantations had more than 200 slaves working for them, far more than the sugar plantations of the Northeast. In fact, as late as the eve of abolition in 1888 northeastern planters were still selling slaves to the Southeast, showing the system was vital even then.
Because the coffee trees have a lifespan of 20 years but take four to six to mature, a plantation had to have trees at various stages, meaning that small-scale or medium-sized farmers couldn't get very rich. Because of the labor, trees, and extensive acreage, large-scale production for exports was a very expensive enterprise.
From 1875 to 1960 about 5 million Europeans went to Brazil mainly settling in Sao Paulo, Parana, Santa Catarina, and Rio Grande do Sul, four states in South Brazil. Also, Japanese immigrated as now the largest Japanese community outside Japan is outside Sao Paulo. This was also around the time when slavery was abolished, and soon Italian immigrants were working on coffee plantations near Sao Paulo.
A Professional Military is Made
After the War of the Triple Alliance, Brazil ended up creating a professional military. Up until that point for Brazil, mercenaries were the ones that fought, as seen in its battle to secure its border with Argentina in 1825. Yet a long military struggle over five years or more, such as the Paraguayan War, required more than simple mercenaries; it required an army. Such an army was underway at that time, and it was filled with Brazilians, mainly of the non-elite class. The military emerged as a force apart from the landholding elite, drew much of its strength from middle sectors not tied to the plutocracy, and gained respect from the civilian population by winning the long war against Paraguay. By the 1870s, the military was a true professional fighting force. When not in battle, the military began to exert its influence as an interest group within society.
On top of that, the members of the military created their own social force. Added to the other recruits of the middle=class, working-class, and urban sectors, the military constituted a distinctive force whose interests were not linked to the traditional ruling sectors. Supporting emerging ideologies calling for an end to slavery and against the empire, they eventually formed a key group in overthrowing the empire in 1889.
From an economic standpoint, the creation of a military increased the taxes and the size of the government, and so cut off money from economic investment. At the same time, it also gave a sort of power projection as Brazil now could fight against its neighbors and win, and that while being an export-driven economy which was mainly agrarian the nation could still defend itself. Since that point the Brazil military has greatly grown, and when looking back at the government overview you can see that Brazilian defense expenditures were about 31.5 billion dollars in 2011, which is among the Top 15 and almost in the Top 10 in defense spending.
The Rise of Coffee
In the 1840s, coffee became the most important export item. The story of Brazil's preeminence as a coffee producer and exporter mainly unfolded after independence. Today the coffee sector bears some of the characteristics of the old plantation system, b ut also signs of modernization. First introduced in the northern state of Para with some seeds from French Guiana in 1727, the Amazonas was the location for coffee growth in the 1700s and it reached Rio de Janeiro by 1770 before moving west as the coastal hills lost fertility. In the states of Sao Paulo, Minas Gerais, and later Parana coffee came in the mid 1800s.
The effect of coffee on the nation's economy was tremendous. The production attracted foreign capital, and generated domestic profits that were poured into the manufacturing and commercial ventures in Sao Paulo. It also facilitated the introduction of new technologies, such as railroad construction, which opened up a new part of Brazil to the west and south of Sao Paulo state. the coffee planters in some ways resembled the tobacco planters in the Reconcavo than the large sugar estates. Some of the operators had vast estates, but others relied on a few slaves or a combination of wage and slave laborers and cultivated a modest amount of land.
Coffee production stimulated the large-scale use of immigrant labor on the plantations. Italy and Japan were where most of the immigrants came from. Like sugar planters of the Northeast, heavy slave labor was relied upon by the big coffee growers, though they also had a combination of slave and free labor. Unlike the sugar plantations, however, the planters were interested in advancing technology and going into fields like crop rotation, fertilizers, and innovative agronomy methods for increased production and productivity. They were adaptive with changing global situations while being receptive to foreign influence. In multiple ways coffee introduced far0reaching political, economic, and social changes in Brazil, such as industrial development, as planters invested profits into domestic manufacturing in the state of Sao Paulo.
Yet, while the coffee planters were doing new things that sugar planters wouldn't do which was boosting Brazil's economy, the coffee planters also had their shortcomings, such as production on large plantations, depending on one crop, relying on slave labor, and a plantation system governed by a sole patriarch whose influence over the family, community, and workforce was unquestionable. Some of the coffee plantations had more than 200 slaves working for them, far more than the sugar plantations of the Northeast. In fact, as late as the eve of abolition in 1888 northeastern planters were still selling slaves to the Southeast, showing the system was vital even then.
Because the coffee trees have a lifespan of 20 years but take four to six to mature, a plantation had to have trees at various stages, meaning that small-scale or medium-sized farmers couldn't get very rich. Because of the labor, trees, and extensive acreage, large-scale production for exports was a very expensive enterprise.
From 1875 to 1960 about 5 million Europeans went to Brazil mainly settling in Sao Paulo, Parana, Santa Catarina, and Rio Grande do Sul, four states in South Brazil. Also, Japanese immigrated as now the largest Japanese community outside Japan is outside Sao Paulo. This was also around the time when slavery was abolished, and soon Italian immigrants were working on coffee plantations near Sao Paulo.
A Professional Military is Made
After the War of the Triple Alliance, Brazil ended up creating a professional military. Up until that point for Brazil, mercenaries were the ones that fought, as seen in its battle to secure its border with Argentina in 1825. Yet a long military struggle over five years or more, such as the Paraguayan War, required more than simple mercenaries; it required an army. Such an army was underway at that time, and it was filled with Brazilians, mainly of the non-elite class. The military emerged as a force apart from the landholding elite, drew much of its strength from middle sectors not tied to the plutocracy, and gained respect from the civilian population by winning the long war against Paraguay. By the 1870s, the military was a true professional fighting force. When not in battle, the military began to exert its influence as an interest group within society.
On top of that, the members of the military created their own social force. Added to the other recruits of the middle=class, working-class, and urban sectors, the military constituted a distinctive force whose interests were not linked to the traditional ruling sectors. Supporting emerging ideologies calling for an end to slavery and against the empire, they eventually formed a key group in overthrowing the empire in 1889.
From an economic standpoint, the creation of a military increased the taxes and the size of the government, and so cut off money from economic investment. At the same time, it also gave a sort of power projection as Brazil now could fight against its neighbors and win, and that while being an export-driven economy which was mainly agrarian the nation could still defend itself. Since that point the Brazil military has greatly grown, and when looking back at the government overview you can see that Brazilian defense expenditures were about 31.5 billion dollars in 2011, which is among the Top 15 and almost in the Top 10 in defense spending.
The Republic
After a military revolt led by Marshal Floriano Piexoto, Dom Pedro II left for exile in France and the empire was abolished on November 15, 1889. Despite being called a republic, the real power was still in the hands of the plater elite, concentrated in the coffee regions of Sao Paulo. In the south commercial and banking areas started to build up in Rio de Janeiro and Sao Paulo while those in the Northeast became poorer though entitled. With this republic, however, the power of the church was diminished, and civil marriage was established.
From the mid 1800s to teh collapse of the market, rubber gave Brazilians every reason to believe that their nation was destined for greatness. The enormous profits that rubber trade made attracted merchants and laborers from all over the world in the 1870s to the rubber-producing regions deep in the Amazon. This opened the Amazon to more foreigners than had any previous exploration. This rubber boom created instant millionaires, and the Amazonian port city of Manaus became an emblem of the boomtown phenomenon. Its population went from a scattering of settlers to about 100,000 people in 1910, and with great imported materials, it had magnificent opera house construction, in addition to get the first electric street lighting of Brazil, piped water and gas, and an elaborate floating dock system. Yet, like all Brazilian booms, this was not to last, for several decades before 1910, which was the year of the rubber decline in Brazil, the British Royal Botanical Garden in Kew had planted some rubber seeds it smuggled out of Brazil and started producing trees in London hothouses in limited quantities. These seeds were sent to British colonies in Ceylon and Malaya, which today are known as Sri Lanka and Malaysia respectively, and while the Amazon trees always had fungus and other leaf diseases, the Asian variety were resistant and produced a higher yield. In order to obtain a cheaper source of rubber, the Ford Motor Company tried to reproduce in Brazil the success of British plantations in Asia. It built its own plantations where domesticated plants were cultivated in near hothouse conditions at a place named Fordlandia in Santarem. However, the South American trees were never resistant to disease and production not as lucrative as the Asian variety.
Planters were now conflicting with the emerging urban forces, and they were turning to the government when they were failing. In the plan encilhamento, meaning saddling up, the printing of money which was supposed to stimulate the economy and replace reliance on imported manufactured goods ended up giving an inflation spiral. This inflation made consumer goods much higher and made any consumer savings next to worthless. This is the key danger of inflation and relates to modern economies and economic concepts.
From the mid 1800s to teh collapse of the market, rubber gave Brazilians every reason to believe that their nation was destined for greatness. The enormous profits that rubber trade made attracted merchants and laborers from all over the world in the 1870s to the rubber-producing regions deep in the Amazon. This opened the Amazon to more foreigners than had any previous exploration. This rubber boom created instant millionaires, and the Amazonian port city of Manaus became an emblem of the boomtown phenomenon. Its population went from a scattering of settlers to about 100,000 people in 1910, and with great imported materials, it had magnificent opera house construction, in addition to get the first electric street lighting of Brazil, piped water and gas, and an elaborate floating dock system. Yet, like all Brazilian booms, this was not to last, for several decades before 1910, which was the year of the rubber decline in Brazil, the British Royal Botanical Garden in Kew had planted some rubber seeds it smuggled out of Brazil and started producing trees in London hothouses in limited quantities. These seeds were sent to British colonies in Ceylon and Malaya, which today are known as Sri Lanka and Malaysia respectively, and while the Amazon trees always had fungus and other leaf diseases, the Asian variety were resistant and produced a higher yield. In order to obtain a cheaper source of rubber, the Ford Motor Company tried to reproduce in Brazil the success of British plantations in Asia. It built its own plantations where domesticated plants were cultivated in near hothouse conditions at a place named Fordlandia in Santarem. However, the South American trees were never resistant to disease and production not as lucrative as the Asian variety.
Planters were now conflicting with the emerging urban forces, and they were turning to the government when they were failing. In the plan encilhamento, meaning saddling up, the printing of money which was supposed to stimulate the economy and replace reliance on imported manufactured goods ended up giving an inflation spiral. This inflation made consumer goods much higher and made any consumer savings next to worthless. This is the key danger of inflation and relates to modern economies and economic concepts.
Relating to the Modern World
Theories and concepts for the most part stand the test of time, and can work in about any time, and even hundreds of years ago Brazil was experiencing expansion, peaks, and contractions, albeit very fast and on a larger scale which many times worked for the worse than the better. The fact that all the Northeast collapsed because of sugar decline shows cyclical unemployment, in which because sugar planters don't make as much money those in the transport and financing of the industry end up making less money and all that they used to pay for end up losing money and the entire region went into collapse.