¹ For an excellent summary of the literature, see Latin America in the 1930s: The Role of the Periphery in World Crisis, ed. Thorp, Rosemary (New York, 1984).CrossRefGoogle Scholar

² For a discussion of the Mexican case during the Great Depression, see Haber, Stephen, Industry and Underdevelopment: The Industrialization of Mexico, 1890–1940 (Stanford, Calif., 1989), chaps. 9 and 10Google Scholar.

³ Fishlow, Albert, “Origins and Consequences of Import Substitution in Brazil,” in International Economics and Development: Essays in Honor of Raul Prebisch, ed. Di Marco, Luis Eugenio (New York, 1972), 323Google Scholar.

⁴ The excise tax on industrial production dates back to the early 1890s. This tax was paid by the producers, who were then obligated to affix stamps to their products demonstrating that the correct tax had been paid. The federal government began to publish the receipts from the excise tax, disaggregated by product, in 1912.

⁵ Stein, Stanley, The Brazilian Cotton Manufacturers: Textile Enterprise in an Underdeveloped Area, 1850–1950 (Cambridge, Mass., 1957), 187CrossRefGoogle Scholar; Fishlow, “Origins and Consequences,” 339.

⁶ Some of these annual reports were located in the Biblioteca Nacional in Rio de Janeiro, filed under the periodicals section. These sets of reports, however, were incomplete and provided extremely irregular and inconsistent coverage. Fortunately, Brazilian law required that publicly held companies publish their financial statements in public documents, so I was able to locate many of the missing reports in the Sociedades Anónimas section of the Diario Official. The disadvantage of this approach was that the Diario Official did not publish a particular company's reports on the same date (or even in the same month) every year, and the Diarios are not indexed. It was therefore necessary to review them page by page for the months of January, February, March, April, July, and August (reports were almost never reprinted in other months) for each year. Researchers wanting to repeat this operation for other companies should be aware that this is not a costless operation, as it involves covering roughly 12,000 pages of Diarios for each year examined.

⁷ See Centro Industrial de Fiaçāo e Tecelagem de Algodão, Estatísticas da lndustria, Comerco e Lavoura do Algodāo Relativos ao Anno de 1927 (Rio de Janeiro, 1928Google Scholar) [hereafter cited as CIFTA, 1928]. Also see Centro Industrial de Fiaçā;o e Tecelagem de Algodāo do Rio de Janeiro, Fiação e Tecelagem: Censo Organizado pelo Centro Industrial de Fiaçāo e Tecelagem de Algodāo do Rio de Janeiro e Revisto pela Seccao de Collecta do Departamento de Estatística e Publicidade (Rio de Janeiro, 1935Google Scholar) [hereafter cited as CIFTA, 1935].

⁸ The Distrito Federal is Brazil's Federal District, equivalent to the District of Columbia in the United States. During the period under study, it comprised the city of Rio de Janeiro and its immediate environs.

⁹ During the period under study, there were approximately six milreis to the U.S. dollar.

¹⁰ Calculated from data in CIFTA, 1928.

¹¹ Calculated from Centra Industrial do Brasil, O Brazil: Suas riquezas naturaes, suas industrias, vol. 3: Industria de transportes, industria fabril (Rio de Janeiro, 1909Google Scholar), section on textiles.

¹² Biblioteca de Associaçāo Industrial, Archivo da exposiçāo da industria national de 1881 (Rio de Janeiro, 1882)Google Scholar; Stein, Brazilian Cotton Manufacture, 191.

¹³ Calculated from CIFTA, 1928.

¹⁴ See, for example, McGouldrick, Paul F., New England Textiles in the Nineteenth Century: Profits and Investment (Cambridge, Mass., 1968)Google Scholar; Layer, Robert G., Earnings of Cotton Mill Operatives, 1825–1914 (Cambridge, Mass., 1955)Google Scholar. Also see the following articles by Davis, Lance E.: “Sources of Industrial Finance: The American Textile Industry, A Case Study,” Explorations in Entrepreneurial History 9 (April 1957): 189–203Google Scholar; “Stock Ownership in the Early New England Textile Industry,” Business History Review 32 (Summer 1958): 204–22CrossRefGoogle Scholar; “The New England Textile Mills and the Capital Markets: A Study of Industrial Borrowing, 1840–1860,” Journal of Economic History 20 (March 1960): 1–30CrossRefGoogle Scholar.

¹⁵ There is a third way to conceive of profits: the rate of return on capital's replacement cost. This concept of capital focuses on the present. It conceives of capital stock as the value of the inputs necessary to reproduce it at current factor prices. Lacking detailed data about the exact composition and vintage of the machinery and buildings for the firms in question, and lacking data on the value of used machinery, I was unable to estimate the value of the capital stock of the firms under study here at replacement cost. What effect valuing capital this way would have on the rate-of-retum figures is hard to know, though it is likely that this method of valuing capital would have produced higher capital stock figures and therefore lower rates of return. Since this article advances an argument for a stronger effect of the Great Depression than is generally acknowledged, this method of capital valuation would most probably work in favor of the interpretation advanced here. For a detailed discussion of the different methods of valuing capital stock, see Callman, Robert E., “The United States Capital Stock in the Nineteenth Century,” in Long-Term Factors in American Economic Growth, ed. Engerman, Stanley L. and Gallman, Robert E. (Chicago, Ill., 1986), 167–74Google Scholar.

¹⁶ This ratio is based on and is similar to Tobin's q. It differs from Tobin's q in that it measures book value at acquisition cost, not at replacement value, which for historical data is not generally possible, since firms almost never (if ever) valued their assets at replacement cost in their financial statements. Indeed, most measures of Tobin's q by historians have measured book value in the way that I have here.

¹⁷ Regressions of the undepreciated series of the rate of return on capital stock against the depreciated series produced a correlation coefficient of .627. A regression of the undepreciated capital stock series against the market rate-of-return series produced a slightly higher coefficient of .636. Neither would be strong enough to use in fitting missing observations in the undepreciated series, but they are strong enough to produce confidence in the statement that the three series follow roughly similar trajectories.

¹⁸ Directors’ fees of 10 percent of dividend earnings were customary among Brazilian companies during the 1920s and 1930s. The firms for which we have profit and loss statements distributed profits to their directors at this rate.

¹⁹ Capital stock differs from total assets in three respects. First, debts owed to a company are not included. Carried forward from year to year in the calculation of assets, a sizable part of the debt may not in fact be collectable. This may produce highly inflated asset figures. Second, the value of securities or bonds held in other companies is not included in capital stock. If subsidiary investments are included in capital stock and dividend earnings are included in profits, serious distortions in the rate of return on capital stock figures could result. Suppose, for example, that a firm lost money on its own operations but made money on its subsidiary investments. Estimates of the rate of return on capital stock that fail to make the appropriate adjustments would not reflect the firm's actual profitability. Third, other types of assets, the values of which are extremely difficult to determine, such as insurance policies, are not included in capital stock.

²⁰ These depreciation schedules were chosen for the following reasons. First, when Brazilian firms depreciated the value of animals and vehicles, they did so at 10 percent per semester. This would have been an excessive rate to depreciate machinery, so I depreciated machinery at half of this rate, and buildings at 25 percent of it. Second, I consulted a CPA from a Big Eight accounting firm who verified that depreciation schedules of 5 and 2.5 percent are consistent with depreciation schedules employed in the contemporary United States for large-scale manufacturers. Third, the depreciation rates employed here are roughly consistent with those used by Robert Gallman in computing the capital stock of the United States during the nineteenth century. See Gallman, Robert, “Investment Flows and Capital Stocks: U.S. Experience in the Nineteenth Century,” in Quantity and Quiddity: Essays in U.S. Economic History, ed. Kilby, Peter (Middletown, Conn., 1987), 214–54.Google Scholar Gallman used a straight-line depreciation of thirteen and seventeen years for producer durables and forty and fifty years for improvements. Over a seventeen-year period, the schedule employed here would have reduced the value of machinery to 17 percent of its acquisition cost, effectively depreciating it almost completely. Over a forty-year period, the schedule employed here to depreciate buildings and other improvements would have reduced the value of these items to 14 percent of their acquisition costs. Since the schedules employed here are flat rates, they decelerate over time (5 percent in the first semester, 4.75 percent in the second, 4.5 in the third, etc.). Although a depreciation schedule such as this mathematically cannot depreciate all the way to zero, it has several advantages. First, it means that it is not necessary to calculate separate depreciation schedules for equipment placed into service in different years. Second, the deceleration in the rate of capital consumption allows us to account for the fact that equipment tends to lose most of its value in the first few years after being placed in service.

²¹ Paid-in capital is the value of all shares outstanding valued at par—that is, it is the book value of stockholders' claims against the firm.

²² This series was originally published in Anuário Estatístico do Brasil—Ano V, 1939/1940, 1329. It was republished in Fundaçāo Instituto Brasileiro de Geografia e Estatística—IBGE, Séries Estatísticas Retrospectivas, vol. 1: Repertório Estatístico do Brasil, Quadros Retrospectivos (Separata do Anuário Estatístico do Brasil—Ano V—1939/1940) (Rio de Janeiro, 1986), 39Google Scholar, and in IBGE, Estatísticas Históricas do Brasil: Series Economicas, Demográficas, e Sociais, 1550 a 1988 (Rio de Janeiro, 1990), 364–65Google Scholar. With few exceptions, virtually all of the scholars who have worked on early Brazilian industrialization have used this series. For examples, see Suzigan, Wilson, Industria Brasileira: Origetn e Desenvolvimento (Sāo Paulo, 1986)Google Scholar; Versiani, Flávio Rabelo and Versiani, Maria Teresa R. O., “A Industria Brasileira antes de 1930: Uma Contribuiçāo,” in Formaçāo Economica do Brasil: A Experienda da Industrializaçāo, ed. Versiani, Flávio and Mendonça, José Roberto (So Paulo, 1977)Google Scholar; Villela, Annibal Villanova and Suzigan, Wilson, Político do Governo e Crescimento da Economia Brasileira, 1889–1945 (Rio de Janeiro, 1975)Google Scholar; Fishlow, “Origins and Consequences”; and Stein, Brazilian Cotton Manufacture.

²³ Suzigan, Industria Brasileira, 153.

²⁴ Ibid.

²⁵ Nozoe, Nelson Hideiki, Sāo Paulo: Economia Cafeeira e Urbanização (Sã;o Paulo, 1984), 74–75Google Scholar.

²⁶ Stein, Brazilian Cotton Manufacture, 143.

²⁷ Villela and Suzigan, Político do Governo, 349–51.

²⁸ Ibid., 348.

²⁹ IBGE, Estatísticas Históricas do Brasil, 364–65. For detailed discussions of problems with the consumption tax series, see Versiani, Flávio Rabelo, “Indices de produçāo industrial para a década de 1920: um reexame,” Estudos Economicos 14 (1984): 43–55Google Scholar; Versiani, Flávio Rabelo, A década de 20 na industrializaçāo brasileira (Rio de Janeiro, 1987), 18–25Google Scholar.

³⁰ Fishlow, “Origins and Consequences,” 327.

³¹ Ibid.

³² Flávio Versiani, “Before the Depression: Brazilian Industry in the 1920s,” in Thorp, ed., Latin America in the 1930s, 175.

³³ Ibid., 173–76.

³⁴ For a discussion of the effects of the Depression on Mexican cotton goods produc ers, see Haber, Industry and Underdevelopment, chap. 9.

³⁵ Calculated from CIFTA, 1928.

³⁶ Since the natural tendency in an inflationary economy such as Brazil's is for market values to rise with increases in the general price level, the market value to book value ratio should be gradually biased upward over time. The estimates presented here, therefore, overestimate the recovery of investor confidence. Since this article argues that the Depression had a significant negative effect on investor confidence, this bias in the data strengthens the interpretation advanced here.

³⁷ For a discussion of state intervention in early Brazilian industrialization, see Topik, Steven, The Political Economy of the Brazilian State, 1889–1930 (Austin, Texas, 1987), chap. 5.Google Scholar

³⁸ For a detailed discussion of this legislation and the debates surrounding it, see Stein, Brazilian Cotton Manufacture, 139–41.

³⁹ Ibid., 148–49.

⁴⁰ Calculated from data in Filho, Guilherme da Silveira, Memoria sobre a situaçāo da industria textil brasileira (Rio de Janeiro, 1947), 23Google Scholar; Ministerio do Trabalho, Industria, e Comercio, Comissāo Executiva Textil, Industria textil algodeira (Rio de Janeiro, 1946), 39Google Scholar.

⁴¹ Stein, Brazilian Cotton Manufacture, 187.

⁴² Topik, Political Economy of the Brazilian State, chap. 5.

⁴³ Fishlow, “Origins and Consequences,” 339.

⁴⁴ Haber, Industry and Underdevelopment, chaps. 9 and 10.