This paper analyzes puzzling contrasts in policy approaches to regulating foreign investment in post-war India and Brazil (1945-1973), the ‘Golden Age’ of development when the industrial foundation of both countries was established. It provides a novel explanation for variation in foreign investment policies within and across these countries cases. Conventional approaches often cite India’s leftist ‘socialism’ and Brazil’s right wing authoritarianism to explain general observations that India resisted FDI while Brazil welcomed foreign firms. However, this broad pattern ignores puzzling industry-level variation as India restricted foreign firms in manufacturing industries like automobiles but allowed multinationals to dominate natural resource sectors like petroleum, while Brazil welcomed foreign companies into its automobile industry but prohibited FDI in oil. I argue that policy preferences were shaped by contrasting beliefs in economic nationalism. Indian nationalism was rooted in the idea that British free trade policies destroyed pre-colonial manufacturing skills, derailing India from its ‘natural’ industrialization course. Nationalist goals were thus oriented towards regaining this lost manufacturing prowess. Brazilians had no such memory of lost manufacturing glory. Instead, economic nationalism was rooted in national security objectives of protecting natural resource wealth from neo-imperial powers. Thus India sought to protect manufacturing industry while Brazil protected natural resource sectors, even despite similar hopes, albeit with little evidence, that both had oil reserves. The analysis shows how cultural, material and organizational factors interact to produce distinct and enduring patterns of market structure.
An extended abstract with further details on the paper’s argument is available here.
Presented at the American Political Science Association (APSA) annual meeting, August 2016; Conference on the Business History of India and South Asia, Harvard Business School, October 2015; American Sociological Association (ASA) annual meeting, August 2015; Sociology of Development Conference, Brown University, March 2015.