Matthew Taylor’s Decadent Developmentalism: The Political Economy of Democratic Brazil aptly features on its cover an image of the oil tanker Celso Furtado. It is an emblem of the argument he develops in this fascinating new book. Paying homage to the famous Brazilian development economist, the tanker was built in Brazil and set sail in 2011 to great political fanfare. It was part of an ambitious industrial policy that relied on subsidized credit from a development bank (BNDES) and the purchasing power of a major state-owned enterprise (Petrobras) to boost local manufacturing capabilities. The policy was designed by government technocrats and headed by Sérgio Machado, a politician from the Brazilian Democratic Movement Party (PMDB), appointed by former president Luiz Inácio Lula da Silva (of the Workers’ Party; PT) to cement congressional support for his fragmented ruling coalition. It later would prove to be an economic disappointment, with the program suspended because of multiple factors including contractual underperformance, and many of its leaders were arrested after being caught in a massive corruption scandal that involved government procurement by Petrobras.

The shipbuilding policy in Brazil had failed to meet its economic objective. However, it was good politics while it lasted. It is just one case of many that helps explain why developmentalism has enormous staying power in Brazil. It remains part of the policy toolbox even as the country has cycled through presidents of different ideological inclinations and despite the country’s tragic track record in terms of growth since re-democratization in the mid-1980s. Taylor argues that Brazil’s political economy is characterized by a perverse equilibrium that traps the state in an ineffective type of developmentalism. The book is theoretically grounded in a system analysis of institutional complementarities of different domains, as used by the varieties of capitalism (VoC) literature. Institutions are sticky (despite poor overall country performance, in this case), because complementarities across the political and economic spheres generate incentives that drive actors toward a stable but suboptimal political and economic equilibrium. In short, developmentalism as practiced in Brazil, by sustaining political and economic structures that constrain growth, is at the core of the problem, not part of the solution.

With per capita growth of just 1.2% from 1985 to 2017 (lower than most peer groups), declining total factor productivity, low rates of domestic savings, slow progress toward reducing inequality, and a deeply divided political system troubled by frequent corruption scandals, the Brazilian democracy and economy are failing its people. “Something is not working, and Brazilians know it” (p. 8), asserts Taylor.

To illustrate the negative feedback loops in place, take, for instance, sector-specific compensatory policies. To different degrees, all presidents since re-democratization had at their disposal (and made use of) instruments inherited from the military regime—–such as tax breaks, subsidized loans, local content requirements, and cross-shareholding—that can target specific economic sectors With few exceptions, such as the agroindustry, the Brazilian economy has not been internationally competitive or export driven. Most sectors continuously demand policies that benefit their own members (such as protectionist tariffs) in the face of the high cost of doing business in the country, the so-called custo Brasil. In exchange for benefits, sectoral lobbies handsomely compensate politicians who can deliver parochial favors, instead of collective goods that would benefit the whole country. Such policies result in even higher costs of doing business by increasing the regulatory burden and cost of raw materials and fomenting a market for the exchange of particularistic favors (not always through legal means) between firms and politicians. As Taylor puts it, “The consequence is inertia that keeps the equilibrium in place, simultaneously increasing the custo Brasil through these policies, on the one hand, while seeking to compensate for it, on the other” (p. 185). These continuous cycles of compensatory policies have been ineffective in making the Brazilian economy globally competitive while having high fiscal costs, yet they remain politically appealing and therefore hard to alter.

There is a clear Olsonian logic in this vicious cycle. What makes Taylor’s analysis of the Brazilian case particularly insightful, and one of the book’s key contributions, is how it sheds light on the complementarities that exist across the five domains that together push firms, consumers, and taxpayers to tolerate the system and behave in a way that reinforces the underlying rules of the game. The first domain is developmentalism—a resilient idea with its policy instruments that affect capital allocation and macroeconomic variables, despite producing continuously dismal results. The second is what Taylor calls a “developmental hierarchical market economy” (DHME). Building on Ben Schneider’s work on the varieties of capitalism in Latin America, Taylor argues that Brazil shares many characteristics of its neighbors but is a unique type, in part because of the abundance of public credit and strong state investment guidance. The third domain is one of the country’s long-standing issues: a political system (including the use of open-list proportional representation) that pushes toward an extremely fragmented party system, driving presidents to build heterogeneous coalitions through inducements such as patronage appointments. This has weakened checks and balances while acting as a roadblock to more forceful reforms of the system (weak control mechanisms make up the fourth domain). Finally, there is the autonomy of Brazil’s bureaucracy, known for its meritocratic recruitment, high salaries and benefits, and strong tenure protection. The country’s bureaucracy has not only been a source of positive incremental change in certain policy domains—vignettes discuss fiscal responsibility, health care, and anticorruption) but also a force that maintains the status quo. Chapter 7, which focuses on the country’s strong bureaucracy amidst weak state capabilities, highlights the ambivalence of the role of Brazil’s civil service and is a must-read.

The book is from beginning to end focused on Brazil, one of the world’s largest democracies and economies and frequently featured in comparative studies of developmentalism and social policy. The detailed knowledge shown by the author is remarkable, and a single-case study allows for a level of depth that comparative studies would likely be unable to reach. However, some of the issues found in Brazil, such as weak accountability and the use of fiscally opaque tools, are far from unique to that country. Thus, a comparative lens or international benchmark would have been welcomed alongside the chapters to put matters in a wider context. A broader audience will find particularly relevant the author’s discussion of institutional complementarities and the developmental state (in Chapters 1 and 6), as well as of the role of ideas in sustaining developmental policy and institutions in Brazil in comparison to Chile and Argentina (Chapter 3). These chapters offer a theoretically rich argument that can certainly influence scholars who are less attuned to the particulars of Brazil.

System dynamics analysis has been a valuable tool for many disciplines: the idea of institutional complementarities and feedback loops can be firmly grounded in that tradition. However, not all feedback loops are the same: some reinforce system behavior (and cannot be sustained indefinitely), and others have a stabilizing effect (see Donella H. Meadow’s Thinking in Systems, 2009). Useful additions to the book would be an upfront causal modeling diagram and a more thorough discussion of the leverage points to intervene in the system to change the current suboptimal equilibrium.

Overall, Taylor’s book is very well researched, thoughtful, and comprehensive. Because of these qualities, one cannot help but be more pessimistic about the Brazilian democracy and its capacity to deliver economic development after reading this book. At the same time, a positive interpretation is that the author’s work pinpoints domestic factors as impediments to growth rather than external constraints. Change can occur from within, and reforms in one domain can alter the incentives for actors to push for changes in the rest of the system.

Practitioners may ask how and where to start this process of change. Taylor, in his concluding chapter, makes a forceful case that reforms in the economic domain alone are not enough. It is essential to make the political system more strategically coherent and accountable if the country is to move away from its decadent developmental equilibrium. It is not surprising that observers of Brazilian politics call political reform proposals “the mother of all reforms,” and this rich book provides more evidence to support this diagnosis.