The Financial Crisis of Abolition

John Schulz’s study of the financial upheaval taking place during the final months of the Brazilian Empire and the early years of the republic has been published in English after considerable delay. As the title suggests, the author’s principal argument is that the crisis known as the Encilhamento was caused by ill-advised government reactions to the abolition of Brazilian slavery in 1888. It is argued that by expanding monetary circulation in reckless fashion and thus fueling diverse forms of speculation, successive financial authorities were almost exclusively concerned with appeasing powerful planter groups, most especially coffee growers from the southeast, who had been denied indemnification for their loss of slave property. Schulz also insists that the Encilhamento period represents a sharp break with the long-standing tradition of financial responsibility and caution that characterized the Empire and would resume as republican administrations implemented largely orthodox policies of stabilization. The implication here is that Brazilian authorities were generally knowledgeable about the workings of both the international and domestic financial systems and therefore cannot be considered as mere lackeys of foreign banking and investment interests, as proponents of dependency theory would have it.Overall, The Financial Crisis of Abolition is a lively and well-structured narrative of Brazilian financial history during the Empire and the first decade of the republican regime. It should be of interest to general readers and students and, thanks to its detailed sequencing of events, will serve as a reference for those more familiar with Brazilian history. The study is based on solid research of a traditional nature. Official ministerial records, correspondence, and published documents are examined, along with the writings of politicians and entrepreneurs involved in the Encilhamento, and newspapers from Rio de Janeiro and São Paulo. Schulz did fieldwork at the Rothschild Archive where he turned up little-known sources of importance for his theme and for the development of Brazilian financial history in general. He also quotes extensively from the Rio News, an English-language newspaper edited by a U.S. citizen who often voiced the views of the city’s merchant community and was an outspoken reformist. These latter sources have seldom been used by historians in Brazil, and the fact that Schulz showcases them is commendable.The author is perhaps at his best when giving a blow-by-blow account of events leading up to and comprising the crisis and carefully examining the complex, decade-long process which would finally restore stability. In focusing on the Encilhamento itself, which lasted from June of 1889 to November of 1891, the policies and actions of three successive finance ministers are fully recounted. Their tripling of the money supply, stimulation of stock market speculation, and attempts at otherwise purchasing the support of planters fueled the bubble and left the financial system in ruins. Moreover, these ministers — in particular the abolitionist Rui Barbosa, a revered figure in Brazilian history — did not hesitate to favor banker friends, thus creating an atmosphere in which corruption was rife. It would take ten years of orthodox policies tempered by occasional state intervention to restore financial order.It is when looking at the larger picture that Schulz sometimes misses the mark and fails to engage in meaningful historiographical debate. Although recent contributions of U.S. scholars of Brazilian economic history are listed in the bibliography, their findings are hardly discussed. It has been suggested that the Encilhamento must be seen in light of an unfavorable international conjuncture in which crisis was contagious. The implication is that Brazilian authorities were unable to control certain aspects of the crisis, which the author steadfastly insists was a purely domestic affair. Furthermore, the arguments of nearly two decades of historical and economic studies produced in Brazil have not been incorporated. The so-called Rio school has challenged interpretations based on the colonial system, affecting how historians approach nineteenth-century economic history. It is clear that as of the mid-eighteenth century the slave trade to Brazil was controlled by merchants established in Rio and Salvador. The long-held notion that the ending of that trade somehow liberated capital for more useful purposes now rings rather hollow. In the same vein, recent scholarship has built upon Robert Conrad’s pioneering work to demonstrate that the abolitionist movement enjoyed broad popular support and was not nearly as peaceful or orderly as previously imagined. Indeed, the growing participation of slaves in the emancipation process made life extremely difficult for slaveholders, and by 1886 the institution of slavery began its inevitable collapse. That inevitability, together with the widespread conditional freeing of slaves, rendered formal abolition a mere admission of the fait accompli. Why were authorities not better prepared to deal with the aftermath

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