Abstract: The Political Economy of Foreign Direct Investment: Constructing Economic Interests and Policy Preferences in Post-War India and Brazil

Jason Jackson


This paper explores the tension between materialist and constructivist theories by contrasting the evolution of FDI policy preferences in India and Brazil. It argues that economic actors' policy preferences cannot be fully explained by rational calculation or structural position; "preference formation" is a contested process of social interaction between firms and the government. The paper examines post-World War II industrial development efforts to show that, despite having similar development goals and facing similar financial and technological challenges in promoting manufacturing industry, and confronting the same global economic environment (especially the aggressive post-war expansion of U.S. multinational firms), these countries adopted different approaches to regulating foreign capital. These differences emerged from variation in beliefs about the role of foreign versus domestic firms in development, where Indian policymakers and industrialists' skepticism toward FDI stands in contrast to the relative openness of their Brazilian counterparts. The implications are reflected in patterns of ownership and control in automobiles and pharmaceuticals, two industries that were heavily promoted as the foundation of post-war industrialization. Indian industry emerged largely controlled by domestic private capital and the state, while in Brazil multinational firms were dominant, a pattern that largely persists to this day. The paper highlights the social and political origins of preferences and the role of business politics in shaping policy and market outcomes.