Boom and Bust in Middle Powers: Polarization, Populism, and Development

• In Event: Poster Session: Comparative Politics in Developing Countries I

Abstract

Much has been written about the emergence of middle powers in the early years of this century. Along with Russia and China, Brazil and India seemed poised for a steady climb in international rankings. The investor-coined label, BRIC, summed up the exuberance, and all seemed confirmed when emerging powers successfully navigated the 2009 financial crisis. Yet, just as in previous moments of boom, a sudden and apparently surprising bust ensued. A view of development in large, emerging powers over recent decades suggests that periods of rapid growth rise only to be reversed in stunning falls. Brazil’s experience has been summed up by the well-known Charles de Gaulle swipe, “Brazil is the country of the future, and always will be.”
Such boom-bust patterns are too often viewed in isolation, producing explanations for boom or for bust, as though they were independent. The fact of repetition calls for conceptualizing the pattern as a cycle. Rather than focus on specific and short-term factors of one phase, the current article lays out an understanding rooted in factors that are long-term, macro-structural, and help make sense of both rise and fall. Further, by focusing on macro-structural factors characteristic of large developing countries, the article suggests a cyclical pattern that helps to explain late developer difficulties as well symptomatic patterns of late development - polarization and populism.
The two interrelated causal factors outlined here include the international system and domestic class structure. In short, an international system of competing states and rival national bourgeoisies penetrates late developers and alters the relative power of domestic factions of capital and their relation with lower classes. Booms represent periods in which dynamic domestic class factions bargain with international capital to secure control over critical aspects of production, investment, and especially technology, thereby inserting themselves more profitably in global patterns of accumulation. Busts represent periods in which international capital asserts its leverage more forcefully, reestablishing control of surplus, production, and investment.
The key mechanism swinging from boom to bust is the class composition of the state in developing countries. Compared to leading sectors of developed countries, dynamic factions of capital are weak in developing countries, and negotiating international relationships requires the power of the local state. Yet, states in developing countries are themselves relatively weak, only as capable as the accommodation they can strike between dynamic factions of local capital and social forces among rival elite and popular sectors. Periods of boom are characterized by an accommodation between dynamic factions and other actors to strengthen the local state. Of particular importance, dynamic factions of local capital are dominant over factions subservient to international capital, often requiring a coalition and political support from popular sectors. During periods of bust, those factions of capital subservient to international actors rise to prominence. They are uninterested in using the power of the state to bargain more effectively, uninterested therefore in preserving an alliance with popular forces, and ambivalent about their relationship with more dynamic factions of domestic capital when they get everything they need from international capital. The rise to dominance of subservient factions of national capital comes at the cost of sovereignty and autonomy in the international system and the squeezing of popular sectors.
To explore the cycle of boom and bust, the current project explores dynamic sectors in Brazil and India. In Brazil the dynamic sector is aerospace, a sector in which Brazilian producers, led by Embraer over five decades, carved out a leading position in a technologically-advanced, high value sector with military and civilian applications. Brazilian leadership appears to have been effectively ended with Boeing’s impending purchase of 80% of the company. In parallel fashion, India also enjoyed a dynamic sector that emerged over several decades in a technologically-advanced, high value sector with military and civilian applications – software technology. Yet, just as in Brazil, the extended run of Indian technology leadership appears to have ended with the Walmart purchase of the Indian version of Amazon, Flipkart, in 2018.
By exploring these two sectors, the current project engages with rival explanations of middle income traps, commodity supercycles, and declining terms of trade. In the process, the project develops an approach that draws from both international considerations of rival states as well as domestic considerations of class factions.

Author

• Aaron Schneider, University of Denver