Nathaniel Leff Explains Brazil (And Maybe Nigeria)

I was minding my business on the internet, as usual, when I came across an article about a Jewish-American Professor who suddenly went missing. Professor Nathaniel Leff spent a year of his life in Brazil before moving back to America to work as an academic. But his interest in Brazil continued and he offered some innovative explanations of the problems that Brazil faced.

The article is very long and much of it is about the author’s quest to find Professor Leff. But the bits that really caught my eye were Professor Leff’s insight into Brazil given in his 1982 book — Underdevelopment and Development in Brazil. He also published a lot of journal articles about Brazil over many years.

Start here:

In his essays, the American researcher had put forth hypotheses that were both rigorous and imaginative in an attempt to tackle the two main problems in Brazilian economic history: why we wound up as a relatively poor country, with low per capita income, and why our society is so unequal.

One of Leff’s ideas was that Brazil, over the course of nearly five centuries of history, had become a machine for producing “cheap” people: an abundance of under-qualified, low-cost laborers. These laborers had been imported from Africa against their will, for the most part. But that wasn’t the whole story. Important political and institutional frameworks — such as restrictions on access to land, in the 19thcentury, and incentives towards the immigration of little-educated European laborers — were put forth so that the mechanism could keep running smoothly even after the end of slavery. Unable to easily buy a small lot of land to cultivate, workers arriving in Brazil — or those who were already there — had few alternatives beyond selling their labor on the cheap. This was radically different from the American experience, which had produced the inverse: abundant, cheap land available for recent immigrants, and thus workers who were relatively “expensive.” In order to retain laborers, those who owned industries or land had to offer a wage at least equal to what those laborers could earn on their own small farms. Compared to the country’s abundance of capital (in lands and machinery), labor was scarce in the United States, and salaries were high.

The part about ‘cheap people’ really caught my eye. Ignore the part about slaves for a minute as the direction was the other way in Nigeria i.e slaves were taken out not brought into the country.

It goes on

In his texts, Leff argues that the key to understanding why Brazil became a relatively poor country, with per capita income far below the levels reached by Europe and the United States, was to be found in the 19th century — no earlier, no later. But traditional historiography, which had produced the (still-dominant) narrative about the reasons for the country’s “backwardness,” tended to identify the colonial period and the relationships between Portuguese America and the capitals of Europe as the source of the country’s sluggish pace towards industrialization and development.

It so happens that up until the Industrial Revolution at the end of the 18th century, economic development rates weren’t very different across the globe. The continuous gains in productivity that followed the adoption of the factory model were what allowed some countries to jump ahead and start growing at a much faster rate than others. It’s been estimated that the United States’ per capita income was similar to Brazil’s around the turn of the 18th century. By 1820, after industrialization had begun in the former British colonies, each American could boast twice as much income as a Brazilian. And in 1890, just 70 years later, per capita income in the United States was more than quadruple the figure in Brazil.

Think of it that in a matter of just under 100 years, America had managed to ‘cantab’ Brazil economically 4 times. As Donald Trump might say — that’s yuuuge.

How did this manage to happen?

Unlike the United States, Brazil lacked a good network of navigable rivers along which to move its products. Nor had the nation built canals or solid highways that might facilitate the circulation of goods. Road conditions were so poor, Leff writes, that “wheeled vehicles could seldom be used in the interior.” Geography didn’t help, either. Nearly everything sold in the Southeast, for example, was transported on the backs of mules over the arduous mountain ranges of Minas, São Paulo, and Rio. It was extremely expensive to move cargo and products around the country, which stifled the growth of domestic production and the economic gains to be had by the small farmers and ranchers who made their living that way.

The same difficulties faced those who had to take their products to the ports in order to sell them outside the country. “Transport costs were so high that they absorbed a third of the value of coffee shipments during the prerailroad era,” Leff wrote.

Finally, and no less importantly, the limits on market integration and farmers’ profits imposed by challenging transportation also made it nearly impossible for the country to industrialize. “Low income levels and high costs for transporting goods to the hinterland limited the size of the market for manufactured goods in Brazil,” in Leff’s analysis. In this sort of situation, not even protective tariffs meant to shore up demand for domestic products could help. “Industrialization based on the internal market clearly required the prior emergence of a domestic market,” Leff added, not without some irony.

This is all very familiar. But what is interesting is that some of these problems were actually solved to an extent in the recent past. Meaning that one could test how right Professor Leff was.

When the railways finally began to be constructed in the mid-1850s, everything changed: the internal market swelled, as did agricultural production, and the country finally industrialized. Much of the railway network was implemented to meet the needs of major exporters, of coffee in particular, in São Paulo. Even so, the effects of introducing train transportation for domestic goods were striking. Data used by Leff and William Summerhill show that along the three main “coffee railways” in São Paulo, the share of cargo taken up by products other than coffee — mainly manufactured goods and foodstuffs — kept on growing from the late 19th century to the turn of the 20th. This reached such a peak that these products went from making up a minority of transported goods to reaching 60–90% of total cargo on those three lines by 1910.

All signs seemed to indicate that Leff was right, and one of the key reasons for Brazil’s “backwardness” in the 19th century was the lack of economic integration caused by the high costs of transportation. Moreover, flying in the face of the classic historical narrative, there seemed to be no competition between the advance of exports and the development of the domestic market and industrialization. It was precisely a push from the products headed for the ports — coffee, above all — that made it possible to overcome obstacles to the growth of the economy as a whole.

As railway networks spread across the country, going from around 1,000 km of track in the early 1870s to 26,000 in 1914, and with the subsequent fall in transport costs, they “reduced the prices that consumers paid for merchandise, increased the prices that producers received, improved the mobility of labor, boosted output and income, and laid the groundwork for pivotal structural shifts that came about in the first half of the twentieth century”

All of this made me tie together a lot of random thoughts that have been playing in my head lately.

• Between 1870 and 1900, America added an average of 20 miles of railways per day — or Lagos to Ibadan in about 4 days. The gangmasters for the railways companies used to wait outside immigration at Ellis Island and then bundle up the new immigrants off to railway construction sites to work on laying tracks. Today, it is taken as normal that a company can deduct cost of borrowing (interest payments) in its accounts before paying taxes on what is left. But this convention came about because railway companies in America (and Britain) at the time had borrowed so much to build railways that laws were changed to give them some relief.
• What was the effect of having all those railway lines on the domestic American market? By 1900, the retailer Sears Roebuck was processing 100,000 customer orders per day. It’s worth emphasizing that — more than a hundred years ago when there was no such thing as the internet, a company was taking 100,000 orders every day through its catalogue. At the time, America’s population was just over 70 million people. Can Jumia and Konga, combined, process 100,000 orders per day in Nigeria of today with more than double the population America had at the time?
• To be fair, America won the geography lottery with its amazing rivers, excellent soil and the Great Plains (although the nature of plains also means they are a big factor in why America gets far more tornadoes than any other country). But what this simply means is that other countries not similarly geographically endowed have to work a bit harder to catch up. As we saw above, merely having good geography is only half the story; you still need to go out and build those railways as Brazil and lately China has done.

It is impossible to overstate how foolish this idea of #BuyNaijaToGrowTheNaira is. Not just the hashtag itself but the idea behind it which is really pervasive in Nigeria — that Nigeria can dodge all this hard work and take a shortcut of just buying locally made stuff.

Yet, a nation faced with so many challenges is bogged down with problems of its own making regarding the ‘correct’ exchange rate of forex, the ‘correct’ price of petrol and the ‘correct’ amount of tomatoes and toothpicks to import every year. Unless oil prices rise and soon, it feels like the country is trapped in this economic formation. The leadership is unable to offer anything more substantive than platitudes and diversion. They too run on oil.

I am honoured to be sharing a panel with Professor Charles Soludo next week at the Royal Africa Society’s How To Fix Nigeria’s Economy event moderated by Funmi Iyanda. I hope to share some of these thoughts if I have the microphone for long enough.

On any given day, I run through a smorgasbord of emotions about Nigeria taking in anger, frustration, incandescent rage, helplessness, hopelessness, fear, despair and a type of cynicism that seems beyond repair.

But sometimes, I allow myself ‘indulge’ in some hope. You know, like someone who has managed to stay off sugar and sweets for health reasons but then decides to damn the consequences and have just a packet of haribos. This usually happens when I come across the story of a country or a people who have managed to overcome (even if only to a small degree) similar struggles to Nigeria’s.

If you’re in London and have some time to kill, do come through (details at the link above or book tickets here). At the very least we can talk about these things.

FF