Inglorious Revolution contributes importantly to economic history from several perspectives. It is a very well-researched, readable, and comprehensive financial history of Brazil during the nineteenth century, and an interesting case study in the linkages between public and private sector finance. The book argues two related hypotheses: (1) the Brazilian state was a successful sovereign borrower in foreign (London) and domestic markets through the nineteenth century; and (2) success with sovereign debt did not translate into success in private sector financial markets. William Summerhill contextualizes this argument within the influential work of Douglass North and Barry Weingast (“Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England.” this Journal 49 [1989]: 803–32), which postulates that institutions protecting sovereign debt obligations are also central to the development of private financial markets. Inglorious Revolution finds that success for a sovereign borrower, defined as the Brazilian state not having completely defaulted on its debt throughout the Imperial regime (1824–1889), is not a sufficient condition for private-sector success. The comparative perspectives of the book are with “successful” (mostly Anglo-American) financial systems and with the abject failures of sovereign debt among the newly independent Spanish American colonies.
Strong governance institutions, embedded in the Constitution, established the foundations necessary for success as a sovereign borrower. These institutions denied the executive branch the unilateral ability to default on either domestic or foreign debt. Summerhill argues that legislators were also purchasers of domestic bonds, and therefore, protected their investment in Imperial debt with constitutional constraints. When turning attention to structuring the institutions of private financial markets, policy-making legislators did not enable company formation and capital accumulation. These arguments unfold in successive chapters that explain his theoretical models, and explore each of the major financial markets germane to the story: foreign and then domestic sovereign debt markets, corporate capital accumulation and banking. The concluding chapter proposes that the end of Imperial governance and financial reform (resulting in sovereign and private market crises) occurred together. Appendices explicate the theoretical structure of the hypotheses, the piecing together of very difficult time-series data, and the methodology of determining borrowing costs. Inglorious Revolution analyzes each form of financing with an impressive array of data that includes debt and loan volumes, bond yields, interest rates, rate of corporate formation, close readings of laws and debates. As a result, a fuller understanding of nineteenth-century Brazilian finance emerges than has been previously available. For economic historians of Brazil, this is an important accomplishment. For scholars interested in the interaction between political institutions and economy, this history offers insight on the contingency of institutional development.
As with every work of financial historiography and theory, scholars will debate many of the theoretical and methodological specifications of the study. These debates will include the strength of and methodology for determining the structural breaks in assessing domestic and foreign debt analysis. Do completely different timing of and explanations for breaks in the different markets really make sense, if domestic buyers of sovereign debt successfully united their interests with those of foreign purchasers? Applying structural break analysis to corporate charter issuance over the course of 90 years, with n=93 and five breaks, will also raise methodological questions. Further, why does the anecdotal history of cronyism in commercial banking (in Rio de Janeiro only) not extend to the other financial markets under examination?
This review raises three interpretive questions that merit future research. First, Inglorious Revolution heavily focuses on the years 1853–1889, a period when the state could freely borrow in domestic and international markets and when efforts to reform private finance encountered serious constraints. In the earlier period of the Empire (1824–1853) the state neither defaulted on its debt interest payments nor completely complied with the terms of London loans, and borrowing conditions were not similar to those encountered later. Summerhill recognizes the differences between these sub-periods. But a historian can conclude that the successful period of sovereign finance lasted about four decades and question whether that is a sufficient time span for assessing a financial revolution. Second, while Summerhill correctly identifies the enormous difference between the experience of Spanish- and Portuguese-American sovereign borrowing, the reader may wonder why, if Brazilians could identify and protect their financial interests while forming their first independent government, Spanish Americans could not also do so. Were the differences institutional or path dependent? A third overarching question is why, if decisions with respect to constraining sovereign borrowing protected private investors, the same category of decision makers would not bring a similarly constructive attitude to specifying the rules for constructing private financial markets? Summerhill implies that later in the century, legislators were committed to the economic structure of commercial export agriculture (especially the interests of coffee export.) That explanation fits with traditional interpretations of Brazilian economic history. However, it does not address why decision makers could incorporate new variables (investing in sovereign debt and financial credibility) in the first years after independence, but not do so in the second period under analysis, when the potential gains from financial and economic change were arguably greater.
None of these questions suggest that the book is wrong in its analyses; rather they provide the foundation for the large research agenda that Summerhill has opened. Inglorious Revolution is indispensible for all historians of Brazil and for all financial historians. The bibliography and footnotes alone justify the book. The addition of a deeply considered study of Brazilian finance is important for both historical and current studies of financial fragility. Taking up the questions that the book raises can also make important contributions to understanding long-term growth and inequality in locations where “development” did not happen or was delayed.
