Assessing_the_economic_effects_of_Latin

Assessing_the_economic_effects_of_Latin - THE CAMBRIDGE...

Info icon This preview shows pages 1–22. Sign up to view the full content.

View Full Document Right Arrow Icon
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 4
Image of page 5

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 6
Image of page 7

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 8
Image of page 9

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 10
Image of page 11

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 12
Image of page 13

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 14
Image of page 15

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 16
Image of page 17

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 18
Image of page 19

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 20
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: THE CAMBRIDGE ECONOMIC HISTORY OF LATIN AMERICA VOLUME I The Colonial Era and the Short Nineteenth Editea’hy Century VICTOR BULMER-THOMAS Royal Institute of International Aflairr JOHN H. COATSWORTH Harvard University ROBERTO CORTES CONDE Universidad de San Andre: CAMBRIDGE 7‘ UNIVERSITY PRESS ( MM ymc 2009) pp. 465’ 507 13 THE ECONOMIC CONSEQUENCES OF INDEPENDENCE IN LATIN AMERICA LEANDRO PRADOS DE LA ESCOSURA In his classic work on Latin America, Victor Bulmer-Thomas concludes, “The economic development of Latin America since independence is a story of unfulfilled promise,” and stresses that “the gap between living standards in Latin America and those in the developed countries has steadily widened since the early nineteenth century.”I This view has been qualified by Stephen Haber, who pointed out that the income gap between Latin America and Anglo—Saxon America “is not a product of the twentieth century.”2 John Coatsworth, in turn, added that today’s Latin American underdevelopment arose during the colonial era and in the aftermath of independence.3 Evidence on levels of per capita income supports the view that Latin America as a whole did not worsen its position relative to the . United States during the twentieth century (Table 13.1). Independence, achieved in most of Latin America between 1808 and 1825, and the resulting insertion into the international economy (a long process that gathered momentum between 1850 and 1873) appear as the ‘ Victor Bulmer-Thomas, The Economic History of Latin America since Independence, and ed. (Cambridge, 2003), 392. This essay focuses exclusively on the effects of independence on economic performance and does not address the background to struggles for independence. A comprehensive coverage of the process of independence and its aftermath an be found in Leslie Bethell, ed., The Cambridge History ofLan'n America (Cambridge, 1985), vol. 3. I have received useful advice from the editors. I would also like to acknowledge Jeremy Adelman, Bob Allen, Stan Engerman, Alejandra Irigoin, Hector Linda-Fuentes, Carlos Marichal, Alfonso Quiroz, Joan Roses, and especially Patrick O’Brien for their comments. I am solely responsible for any remaining errors. ‘ Stephen Haber, ed., How Latin America Fell Behind Etta}: on the Economic Histories of Brazil and Mexico, 1800-1914 (Stanford, CA, 1997), 1. 3 My italics. John H. Coatsworth, “Notes on the Comparative Economic History of Iatin America and the United States,” in Walther L. Bernecker and Hans Werner Tobler, eds., Development and Underdevelopment in America: Contrartr in Economic Growth in North America and [min America in Hirtorical Perspective (New York, 1993). 464 Leana’ro Prado: ole la Escorura Table 13.1. Relative GDP per head in Latin America, 1900—5 Latin America (1970 $ PPP) Latin America (USA .= I00) Six countries All Six countries All 1900 185 12.5 1910 228 13.3 1920 235 12.4 1930 277 12.9 1940 320 12.9 1950 413 394 12-5 1L9 1960 521 487 13.6 12.7 1970 707 649 13.7 12.6 1980 973 884 15.4 14.0 1990 938 837 12.7 11.3 I99S 99° 879 12.8 11.4 Source: Pablo Astorga and Valpy Fitzgerald, “Statistical Appendix,” in Rosemary Thorp, Progress, Poverty and Exclusion. An Economic History of Latin America in the 20th Century (\Washington, DC, 1998), 353. two most important events in assessments of economic performance nineteenth-century Latin America.4 _ However, no consensus exists on how independence came about. Was 1 7. the result of an external shock, such as the Napoleonic Wars and the Fren 4’, invasion of the Iberian peninsula? Was it a consequence of institutio ' inefficiency or, conversely, a reaction against reforms and modernizati I associated with the introduction of new liberal ideas and institutions _‘ the metropolis and, hence, an endogenous phenomenon? Was it, perhaps ‘ the outcome of the struggle against liberal reform and modernization central colonies (Mexico and Peru), whereas in peripheral colonies (N Granada and the Rio de la Plata), it resulted from militaristic opportunism: stimulated by smuggling interests, at the time of the Napoleonic invasio’ a: of the Iberian peninsula? In David Landes’s view, it was not the outcome of colonial initiative? “but of the weaknesses and misfortunes of Spain and Portugal at home, im a: . . . . g the context of European rivalries and wars.” Samuel Amaral, writing on; a 4 See, for example, Bulmer—Thomas, Economic History ofLatin America, and Haber, How LatinA Fell Behind. _ 5 David S. Landes, The Walt/J and Poverty of Nations: Some Are So Rich and Some 50 Poor (New York, 1998), 313. .. The Economic Consequences of Independence 465 Argentina, argues that independence was a consequence of local pressure on institutions that could not provide for the needs of trade and production.6 And Stanley and Barbara Stein have written that “perhaps it would be more accurate to argue that many of the colonial elite hoped to maintain allegiance to embattled Spain while enjoying the right to trade directly with Europe and the United States.”7 Fewer research monographs than grand interpretations make assessments of independence unpersuasive. Still, while no consensus of the causes of independence exists, it is evident that the consequences were the fragmen— tation of political power, the militarization of society, and the mobilization of resources and men for war.8 Political turmoil did not end with indepen— dence. Disputes over national borders and civil wars continued for decades. In Landes’s words: “New World strongmen exploited the vacuum and seized the power . . . anarchic negativism invited macho warlordism.”9 A widely held View among historians is that independence was followed by a marked decline in economic activity in which per capita income did not return to colonial levels until the mid—nineteenth century.10 Moreover, the break with Spain and Portugal did not bring with it any immediate changes in the existing social and economic structures.II The land tenure system and factor markets, it has been argued, did not suffer drastic changes after independence. For example, slavery lasted until the mid-nineteenth century, and until the 18805 in Brazil and Cuba. The fiscal system remained in part: mita ended but tributo often returned. Debt peonage and forms of rcpartimiento persisted in some regions until the late nineteenth century. Finally, openness to trade and factor inflows was reduced. Change, never— theless, was brought about by independence. Among its positive effects on 6 Samuel Amaral, “Del mercantilismo a la libertad: Las consecuencias econémicas de la independencia argentina,” in Leandro Prados de la Escosura and Samuel Amaral, eds., La independencia americana: Comemencia: econo’rnica: (Madrid, 1993), 202—3. 7 Stanley J. Stein and Barbara H. Stein, The Colonial Heritage of Latin America. Ersay: on Economic Dependence in Perspective (New York, 1970), 131. 8 Tulio Halperin Donghi, “Economy and Society,” in The Cambridge History of Latin America, vol. 3. 9 Landes, Wealth and Poverty szatiom, 313. ’° Coatsworth, “Notes on the Comparative Economic History.” In the case of the United States, con- jectural estimates show that per capita income stagnated in the quarter century after independence, whereas it grew below 0.3 percent yearly in the opening decades of the nineteenth century. Cf. Peter C. Mancall and Thomas Weiss, “Was Economic Growth Likely in Colonial British North America?" journal of Economic History 59, 1 (1999): 17—40. 1‘ Bill Albert, South America and tire World Economy from Independence to 1930 (London, 1983), 25. Neither did they take place in the former metropolis. It can be conjectured that GDP per head in the 17905 was not surpassed in Spain until the 18403. Cf. Leandro Prados de la Escosura, De imperio a nacio’n. Crecimimto y atmo economico en Eypafia, 1780—1930 (Madrid, 1988), chap. 1. 466 Leandra Prado: de [a Escosura of the defizcto customs union, capital flight, and the collapse of the colo I'» fiscal system are stressed among its negative effects.12 The costs and benefits of independence have been assessed , . Coatsworth, who concluded that in the short run the direct and indir economic benefits of independence were small, as were the measurable c é' of colonialism: the limited net benefits of independence were overcome .3: new costs, such as prolonged wars, civil strife, and economic instabili V' In the long run, however, there were economic benefits from the des tion of the colonial institutional order: independence led to institutio modernization.I3 Should the costs of colonialism include not only what was extract, but what was not produced due to wrong incentives created by colo ’ ; institutions and path dependency? And why did the elimination of tax an 3 tariff restrictions fail to promote self-sustained growth? These are recurren, yet unanswered, questions among historians of Latin America. ‘L To provide an answer to all these crucial questions is well beyond scope of this chapter and its author’s ability. Thus, for the remainder of paper, I will assess grand interpretations or meta—narratives, centered on , theme of Latin America in the US. mirror. Then the alternative approaclg of evaluating postindependence Latin American performance in the Afri ' and Asian mirr'ors will be proposed. Finally, I will examine the empirig evidence on the main consequences of independence, resulting from removal of the colonial burden and the opening up to the internatio "i T economy. Some concluding reflections complete the chapter. mg GRAND INTERPRETATIONS: LATIN AMERICA ; IN THE US. MIRROR In the three decades after World War II, the Dependency School provided? the dominant grand theory about Latin America’s underdevelopment. ley and Barbara Stein, in their Widely read book The Colonial Heritage: of Latin America, developed an interpretive framework for understandng r 5mmjkfit¥ 1" Bulmer—Thomas, Economic Hirtmy of Latin America, 28—31. ’3 John H. Coatsworth, “La independencia latinoamericana: Hipétesis sobre los costes y beneficios, in La independencia amm'eana: Camecuencia: economicar, 19. an The Economic Conrequences of Independence 467 . Latin American independence. Why did British America and Latin America , develop so differently after independence? Why did Latin America remain ia primary producer while the United States industrialized? According to the Steins, the core of Iberian colonialism in Latin America was “the orga— rnization and maintenance of economies profitable to overseas metropolises f and. . . through them to the key economies of western Europe: Holland, England, and France.”14 The colonial economic background (with the large estate as its key feature) was reinforced by local conditions (lack of politi- cal unity, conflict of economic interests, highly concentrated income, and . poverty) and, in particular, by the economic pressure of Great Britain. “The English,” they conclude, “had been the major factor in the destruction of Iberian imperialism; on its ruins they erected the informal imperialism of free trade and investment.”15 The Steins’ main contention was that the fail- ure to achieve sustained and balanced growth over the nineteenth century was a result of the persistence of the colonial heritage in the new republics. Perhaps it was Christopher Platt who most firmly opposed the Steins’ views. In Platt’s assessment, independence had a very limited impact, and only after 1860 did a lagged effect become apparent. Independence brought a redirection of trade from Iberia to northern Europe and the United States, but the volume of Latin American trade did not change significantly. Independence did not make Latin America into a major primary product exporter or into a large market for foreign industrial goods. In addition, modern economic growth was constrained by lack of human and physical capital, shortage of industrial fuels, poor infrastructure, and small markets. . The break with Spain, Platt argued, “far from confirming the integration ‘ of Latin America as a dependent partner in the world economy, reintro— duced an unwelcome half century of ‘independence’ from foreign trade and finance,” leading to the conclusion that nineteenth-century Latin America was “shaped by domestic circumstances rather than by the planned require- ments of distant metropolis?" Platt’s views could be perhaps rephrased by saying that Latin America became prematurely independent before the onset of the first wave of globalization with its powerful stimulus for growth. The halcyon days of the Dependency School are long past. Empirical research within national boundaries is the way historians deal nowadays ‘4 Stanley]. Stein and Barbara H. Stein, “D. C. M. Platt: The Anatomy of ‘Autonomy,’” LatinAmerican Research Review Is (1980): 134. ‘3 Stein and Stein, Colonial Heritage, 155. '6 D. C. M. Platt, “Dependency in Nineteenth-Century Latin America: An Historian Objects,” Latin American Research Review Is (1980): I30. 468 Leandra Prado: de la Escosum with the question of what the economic consequences of independen were. The development of the new institutional economic history in . America has renewed, though, the grand interpretations tradition and N striking differences between British North American and Iberian Am v can colonies. They provide, according to Douglass North, “the best co u? political and economic performance.”‘7 Their radically different evol tion reflected the imposition of distinct metropolitan institutions on a». 7' colony.“ North’s main proposition is that different initial conditions, : particular the religious and political diversity in the English colonies as opposed to the religious uniformity and bureaucratic administration of existing agricultural society in the Spanish colonies (Mexico and Alto in particular) are responsible for differences in performance over time. , s, North’s interpretation has been opposed by scholars who do not accept: the claim that institutions are exogenous.” For example, for Spanish Amer-fl ica, Engerman and Sokoloff posit that the initial inequality of wealth? human capital, and political power conditioned institutional design thus, performance. Large-scale estates, built on preconquest social organi—Qf zation and extensive supplies of native labor, established the initial levels of; inequality. Elites (by 1800 less than 20% of the population was white) man-l aged to design institutions protecting their privileges. Government policies; and institutions reproduced initial conditions leading to the restriction 0E; competition and selective policies in offering opportunities.” For exam-j ple, in Mexico and Peru, a large native population, coupled with Spain’s'i acceptance of preexisting native practices of awarding claims on labor and; natural resources to the elite, fostered highly concentrated landholdings and, consequently, social and economic inequality.2x All this was in sharp: contrast with the white population’s demographic predominance, more ‘7 Douglas C. North, “Institutions and Economic Growth: An Historical Introduction,” lVorldDmI- opment r7, 9 (1989): 1330. ’8 Douglas C. North, Institutions, Institutional Change and Economic Performance (Cambridge, 1990), 102. - '9 For a recent assessment, see Dani Rodrik, Arvind Subramanian, and Francesco Trebbi, “Institutions : Rule: The Primacy of Institutions over Integration and Geography in Economic Development’ (IMF Working Paper 02/189, November 2002). "° Kenneth Sokolofi' and Stanley L. Engerman, “Institutions, Factor Endowments, and Paths of Devel- , opment in the New World,” journal of Economic Perspective: 14, 3 (2000): 217—32. ' "‘ Stanley L. Engerman, Stephen H. Haber, and Kenneth L. Sokolofl’, “Inequality, Institutions, and Dififerential Paths of Growth among New World Economies," in Claude Menard, ed. Institutions, Contram‘, and Organization: (Cheltenham, 2000), 108—34. The Economic Consequences of Independence 469 evenly distributed wealth, and high endowment of human capital per head in British North America.22 Institutional historians have reacted to these factor endowment and " wealth distribution arguments by emphasizing the relative independence of institutions, policies, and events from any given distribution of wealth i and income. Although acknowledging that the legal system represented . an obstacle to growth because the caste system constrained factor mobil— ity, John Coatsworth and Gabriel Tortella deny the links between Iberian institutions transferred to America and the initial unequal distribution of income and wealth, stressing that “the caste system of the New World deliberately weakened the grip of local conquerors and magnates on the underlying indigenous population and placed sharp limits on the growth of inequality in the distribution of wealth by recognizing indigenous property rights and guaranteeing the majority of the indigenous population access to land independent of the colonial elite.”23 North, Summerhill, and Weingast concede, in turn, that factor endow— ments were the driving force of European colonization, but are not suffi- r cient to explain postindependence behavior, as the discrepancies between the US path to world leadership and Spanish America’s violence and retardation confirm. If factor endowments determined political outcomes, they argue, “Argentina would be as rich as the United States.”24 North and his associates stress the sharp institutional contrast between the inde— ' pendent United States (with a constitution and a stable and well—specified system of economic and political rights) and Latin America (under polit- ical instability and warfare). In their view, the absence of institutional arrangements capable of establishing cooperation between rival groups led to destructive conflict that diverted capital and labor from production and consigned the new republics to poor performance relative to the United States. ‘1 It should be noted that inequality in Latin America was probably comparable to that in the slave states of North America, where per capita income was, however, surely much higher. 2’ John H. Coatsworth and Gabriel Tortella, “Institutions and Long—Run Economic Performance in Mexico and Spain, 1800—2000” (“Working Papers on Latin America, no. 02103.1, David Rockefeller Center for Latin American Studies, Harvard University, 2002). ’4 Douglass C. North, William R. Summerhill, and Barry R. Weingast, “Order, Disorder, and Economic Change: Latin America versus North America," in Bruce Bueno de Mesquita and Hilton L. Root, eds., Governing for Progzm'ty (New Haven, CT, 2000), 19. It should be borne in mind, however, that by 1913 Argentina was the sixth country in the world in terms of per capita income, and in comparison to Europe second only to Great Britain. See Leandro Prados de la Escosura, “International Comparisons of Real Product, 1820—1990: An Alternative Data Set,” Exploration: in Economic History 37, r (2000): 1—40. 47o Leandra Prado: a’e la Escosura So far, all the views surveyed take the United States as the yardstick _ l. which to measure Latin American achievements in the nineteenth ~- tury. Is such an approach the appropriate strategy to disentangle the 7‘ of Latin America’s poor economic performance? In fact, overemphas' the contrast with North America leads to a negative assessment of dence. The income gap between colonial British and Latin America . ‘ ’ widening in the half century after independence. According to Mad ' the United States doubled Latin American product per head by 1820 . more than trebled it by 1870.25 7 However, stressing over and over again that a large gap existed has p lyzing effects on research on nineteenth-century Latin American econo u history. Actually, it confuses the initial conditions in the new republics wit their postindependence performance. Moreover, it diverts attention fr the real issue: the extent to which Latin America underperformed in t hypothesized that B...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern