Determinants of Portuguese Iberian Capitalism

The purpose of this work is to explore varieties of capitalism (Hall & Soskice, 2009) by considering the existence of an Iberian capitalism in which the State plays a preponderant role in the economic activities of society. Our analysis aims at understanding the elements that shaped capitalism in Brazil. To meet this objective, it is necessary to understand the working logic of the economic system, in this case, capitalism, that built the institutional relationships in the country. The studied time period is the fifteenth century to the early nineteenth century. For this study, we utilized the capitalism variety (Hall & Soskice, 2009) and historical institutionalism approaches (Hamilton, 2018; Commons, 2018; North, 2018). The findings reveal the central role of the State as a catalyst for economic dynamics, characterizing what Oliveira (2015; 2018) called “State-centered” dynamics, as opposed to the “firm-centered” approach existing in western economies, especially those of Anglo-Saxon origin. Keywords— capitalism, institutions, Brazil. I. VARIETIES OF CAPITALISM AND INSTITUTIONALISM The discussion around varieties of capitalism gained important momentum from the works of Hall and Soskice (2009). The authors observed, in their analysis, that capitalism varieties follow distinct paths from their institutional framework. Clearly, the concept is very close to works developed by authors with an institutionalist approach, especially North (2018). Moreover, from the intersection of the works of Hall and Soskice (2009) and North (2018), the historical institutionalist approach becomes more pertinent to our analysis. It becomes evident that countries’ socioeconomic logic is determined by their institution building. Meanwhile, this institution building takes place throughout the history of countries and involves the institutional instruments created by countries during this period. Obviously, the path dependency concept must be considered. Thus, the resulting institutionalism is a summation (to some extent, selective) of the preceding institutions. In this sense, it is assumed that countries and, of course, the institutions that shape them are distinct. From a historical perspective, these differences can become quite significant, leading to distinct capitalist constructions among countries and regions. In this work, we examine the institutional dynamics that shaped what we call Iberian Capitalism, in its Portuguese variety, and its influence on Latin American economies, especially Brazil. II. THE IBERIAN PENINSULA AND THE CAPITALIST EXPANSION A characteristic of the Iberian States, since their establishment, is the relative distinction between the powers of the central State (denoted in the figure of the king) and the other institutional players comprising the Iberian societies (Yun-Casalilla, 2019). This characterization, in which royal power had a central role, was important for establishing a favorable environment for the maritime expansion process. Among the actions enabling this process, in the Portuguese case, we must highlight the School of Sagres, established in 1443, and the synergy of Portuguese commercial capitalism, especially the city of Lisbon and Genoese financial capitalism, both under the coordination of royal power. This arrangement between bourgeois capital (commercial and State), financial capital, and State power is the basis for the first major institutional pact that created favorable conditions for overseas expansion of the Portuguese domain. As stated by Yun-Casalilla (2019) and Garcia and De Sousa (2015), this expansion significantly modified the reality of the Iberian and, in general, Western societies. The new routes allowed a gradual change in Mediterranean trade flows toward routes through the Indian Ocean, along the African Coast, and, later, across the South Atlantic. A 1 The financing of navigations began in the fourteenth century by D. Afonso IV, and an important landmark of this maritime expansion process was the incorporation of the Canary Islands in 1341. International Journal of Advanced Engineering Research and Science (IJAERS) [Vol-7, Issue-2, Feb2020] https://dx.doi. org/10.22161/ijaers.72. 39 ISSN: 2349-6495(P) | 2456-1908(O) www.ijaers. com Page | 290 continuous rise in Western consumption patterns is observed from this overseas expansion; patterns already existing in the fourteenth and fifteenth centuries became more dynamic from the sixteenth century onward, which promoted a new institutional arrangement linked to modernity. The economic growth and development model and the institutional design of the Iberian countries, built over the centuries, prevented them from taking advantage of the first manufacturing wave preceding the First Industrial Revolution. The early sixteenth century was economically weak in Portugal. The country only experienced vigorous economic growth from 1550 onward, driven by the economic results of its overseas expansion and accompanied by demographic growth until the mid-eighteenth century (see Figure 1). This process started to decline from 1755 onward (Palma, Rosés & Santiago-Caballero, 2016). Fig.1 – Real skilled wage in Europe, 1500-1800 Source: Costa, Palma & Reis (2015) Traditionally, there are several explanations for Portugal's relative backwardness, which began as early as the sixteenth century. This is initially attributed to its semiperipheral role in the international division of labor after 1500, with implications arising from the overdependence on foreign capital and trade services, maritime transport, manufacturing imports, and the technically stagnant archaic agricultural sector (Wallerstein, 1974, 1980; Mauro, 1983, 1990; Rau, 1954; Sideri, 1970; Justino, 1981; Magalhães, 2010; Oliveira, 1980). However, new interpretations, based on another data set, lead us to four different factors that may partly explain the Portuguese case: 1) limitation of entrepreneurship and internal diversification; 2) loss of agriculture’s participation in the economy due to the attraction of opportunities in the empire and in port cities; 3) progressive accessibility of foreign foods, eliminating domestic production; and 4) a tertiary sector swelling due to colonial wealth, discouraging the national bourgeoisie from development (Costa, Palma & Reis, 2015). According to Costa, Palma, and Reis (2015), Portugal slowly became a leader among the colonial powers of the modern age, which can be seen in the per capita value of trade with its colonies (see Figure 2). It is noteworthy that the growth of the Portuguese economy was even more robust when considering the richness derived from mineral extraction. Figure 2 also shows that the turning point was the commencement of the First Industrial Revolution, when the English and Dutch economic expansions surpass the Portuguese economy. This overcoming arose from the advent of economic expansion structured from industrialization, which becomes the technical-productive paradigm of industrial capitalism from the Anglo-Saxon perspective. Overseas expansion also brought implications for socioeconomic factors related to the issue between capital and labor. Here, the Portuguese and Iberian institutional dynamics had a very different design from what developed later in most western countries, especially England. This forces consideration of an autochthonous interpretation of the institutional dynamics shaping the Iberian Capitalism, which were very different from the dynamics that shaped English industrial capitalism as described by Polanyi (2000). These differences between countries must be clear. After all, as stated by Wood (1991), the English capitalist system displays unique internal features, comprising variables related to agrarian, urban, and industrial issues and their respective consequences for the consolidation of an internal consumer market. International Journal of Advanced Engineering Research and Science (IJAERS) [Vol-7, Issue-2, Feb2020] https://dx.doi. org/10.22161/ijaers.72. 39 ISSN: 2349-6495(P) | 2456-1908(O) www.ijaers. com Page | 291 Ordinances and Portuguese institutionalism Another important point in the construction of Iberian Capitalism institutionalism in its Portuguese variety, concerns the creation of Ordinances; norms that start to organize Portuguese society, which by the early sixteenth century had a global reach. The basic idea was to standardize and regulate the socioeconomic relations within a continuously expanding kingdom, which had been growing since the fourteenth century. The first of these rules was the 1446 Afonsine Ordinances; later, in 1521, the Manueline Ordinances were created; and finally, in 1603, the Philippine Ordinances were enacted. As a whole, the Ordinances institutionalized a modus operandi of what characterized the Iberian Portuguese Capitalism, whose State-centric characteristic (Oliveira, 2015) is strongly present. Thus, we see the presence of the State in varied social and economic relations, from the rule of what is acceptable in the relations between Portuguese and native, both in the metropolis and in the new areas of the empire, to the monitoring of agriculture production, extractivism, and commercialization of economic activities. The most complex and influential Ordinances are the Manueline Ordinances. Initially divided into five books, these Ordinances aim at standardizing the socioeconomic relationships from the centrality of royal power. According to Azevedo (2000), “the first book takes care of the regiments, positions and responsibilities.or of the whole administrative and bureaucratic machine of the State” while the second book “deals with the privileges of the Church and ecclesiastical persons, rights and goods of the Crown, as well as their fundraising methods. ” The third book encompasses civil procedure, including the economic relationships between individuals and the State. The fourth book primarily covers civil law and succession law. Last, the fifth boo