Over at Equitable Growth: Twenty-Eight Theses Toward Understanding the Economic Past and Future of Latin America: Daily Focus
180 Doe Library :: U C Berkeley :: 12:00 noon - 1:15 pm :: Monday November 3, 2014
Situate it in its context: relative to the Anglo American economy, the Iberian economies, the pre-conquest era, and--recently--the Pacific Rim as an example of an economy that works well...
Before 1850, it was Latin America that was the prize: Mexico, Peru, the Silver Mountain, the Sugar Islands
It was Europe's most prosperous, civilized, and technologically progressive peoples that grasped that opportunity--Portuguese mariners, Aragonese merchants, backed by Castilian crusader steel.
Parliamentary liberties and freedom of speech considerably more advanced in the Castile of Isabella Trastamera and the Aragon of Ferdinand Trastamera than in the England of Henry Tudor.
Indeed, the Empire of Liberty had a better advocate in Simon Bolivar than in George Washington and his successors.
Simon Bolivar freed not just his slaves, but all the slaves of Venezuela.
George Washington freed his slaves--but only after his death. Thomas Jefferson freed his--if they were his descendants. James Madison and James Monroe did not free theirs. John Adams and John Quincy Adams had none, and the latter fought all his life for the petitions for freedom of the slaves in the United States to be heard in Congress. But Andrew Jackson spent his life trying to buy more slaves. Martin Van Buren's slave Tom ran away--and then, when he was found, Van Buren sold him for $50 to the slave-catcher. William Henry Harrison tried to turn Indian into slave territory when he was governor. John Tyler, James K. Polk, and Zachary Taylor--not until we get to Millard Filmore do we get another American President even close to as free-soil as the Adams's were: "God knows that I detest slavery, but it is an existing evil, for which we are not responsible, and we must endure it, and give it such protection as is guaranteed by the Constitution, till we can get rid of it without destroying the last hope of free government in the world..."
Indeed, look at U.S. politics in the first 20 years after the Constitutional Convention. Washington thought his own Secretary of State--Jefferson--was on the point of betraying the U.S, to France, and would gladly sacrifice liberty in America to advance the cause of the French Revolution. Jefferson was certain that John Adams was plotting to restore the British monarchy--and Adams would have, if the alternative was the coming to power of some American Robespierre--and that Alexander Hamilton was ready to become a military dictator. Hamilton was shot dead by Jefferson's running mate and vice president, Aaron Burr, whom Jefferson then tried for treason. Burr was not convicted solely because the Chief Justice, John Marshall, thought that if he set Burr free he might be able to cause Jefferson yet more trouble. A banana republic--the ideal type of a banana republic, in fact--save that they grew no bananas...
Living standards, natural resources, population densities, and rates of demographic expansion give Latin America an edge over Anglo America through the first quarter of the nineteenth century, at least.
The coming of the steam engine and then, a generation later, the telegraph ought to have brought the world together in terms of ironing out economic divergences.
The technologies of the Industrial Revolution? The first generation of industrial technologies circa 1780 were potentially profitable only in Britain, with its uniquely high real wages and uniquely low price of coal at the factory gate. But by 1850 steam engines, spinning jennies, power looms, and railroads were potentially profitable everywhere.
Yet the story of economic development is of a steadily-widening relative-income gap: a widening gap between Anglo America and the Southern Cone on the one hand and the rest of Latin America up until 1918 or so; then a widening gap between Anglo America and all of Latin America save Venezuela up to 1950 or so; and then relative stasis--average growth in Latin America at about the same pace as Anglo America, with on average neither widening nor closing of the relative gap (save Venezuela and, after 1958, the peculiar case of Cuba).
By 1950, down to perhaps a quarter of Anglo American levels...
No worse than rest of exNorth Atlantic world, but no better..:
Since 1950, relative parity is normal...
Theories of economic relative retardation and growth inevitably fall into two broad categories: "the rich are so good, and the poor are so bad" theories; and "the rich are so bad, and the poor are so good" theories.
International trade and the international economy in general as engines of extraction theories: comparative-advantage traps, debt traps, vulnerability to cyclical fluctuations traps. Escape from the trap via neo-mercantilist protection, inward focus on resource accumulation, and import-substitution industrialization--turn the global economy into your servant rather than your master through clever technocratic policies of one sort or another. Raul Prebisch. (Early) Fernando Henrique Cardoso. Immanuel Wallerstein.
Unorthodox Marxist class-structure-a-fetter-on-development theories: latifundia and neo-feudalism, but not just rural neofeudalism: the heyday of the PRI in Mexico as a "new class" bureaucracy variant of robber baronage and clientage, focused on extracting rents for political powerbroker and their clients from the most productive pressure points of the economy--natural resources, high-productivity export manufacturing, tourism. Hernando de Soto, The Other Path. Andrei Shleifer et al., "Legal Origins". Acemoglu, Johnson, and Robinson, "Comparative Origins". What makes these people unorthodox Marxists is that Karl Marx believed in progress, and so a "bourgeois revolution" as inevitable: superstructure could not indefinitely contain the pressures being generated by the economic changes of the base. In the end, all of the feudal and neo-feudal and aristocratic and caste and estate-based blockages to market capitalism--and thus prosperity--would be "steamed away". "All that is solid melts into air..." really does not do the German justice...
One-unfortunate-accident-after-another theories: The long nineteenth century required either fluency in English or an exceptionally-favorable geographic environment--which the Southern Code had--in order to successfully adapt and adopt the technologies of the Industrial Revolution. In the twentieth century bets on globalization crapped out with the coming of the Great Depression, Imperial Preference, and the Smooth-Hawley Tariff. Bets on import-substitution then missed the biggest expansion of world trade ever in the Thirty Glorious Years. The switch to "neoliberal" policies then got squashed by the oil shocks, the coming of monetarism, and more recently the rise of China. Plus collateral damage from the Cold War--the Cold War in Asia gave Japan and the rest of the Pacific Rim preferential access to Anglo-America's markets, the Cold War in Europe was fought on terrain where the propertied right that had bet on Naziism kept its head down, but the Cold War in Latin America was different...
But do we really have to choose? (17) can be evaded via clever technocrats pursuing state-led development--but, in Lant Pritchett's words, what can be worse than state-led development policies pursued by an anti-developmental state? The anti-developmental state that trapped Latin America in (17) and was the product of unfortunate early wealth concentration and frontier absence in history via (18) could have been surmounted except for the unfortunate accidents of (19)--which pre-dated the Cold War: it was FDR who said that while Somoza may be an SOB he is our SOB. And unfortunate accidents would not have had as large deleterious effects had the global economy of (17) been more genuinely open and stable.
From this perspective, Latin American relative retardation--even in the Southern Cone--from 1850-1950 looks overdetermined: it would have been a miracle had it not taken place.
Still, literacy, life expectancy, prosperity, etc. vastly better than in 1825--and, relatively, better than Africa, South Asia, non-coastal East Asia (for the moment?), and (perhaps?) Muscovy and its dependencies. Relative retardation is relative to the North Atlantic plus the Asian Pacific Rim only.
Nobody intelligent would say that they know the relative weight to be assigned to these different overdetermining factors. Only a strong desire to obtain tenure and to do so by publishing articles that establish or refute particular narrow theories could induce anybody sane to claim to do so.
Looking forward: But do the burdens of the past still lie on the future?
Chance of making the global economy your servant rather than your master? Here the news is bad: over the past two decades neither the North Atlantic nor the Pacific Rim has been able to master the global economy. Instead, episodes of policy disorder and macroeconomic stress that those of us who focused on the North Atlantic used to see as confined to Latin America are now global.
Class structure a fetter on development? As income inequality in the United States surpasses that of Brazil, and as rent-seeking in everything from Berkeley NIMBYism to the ability of a very narrow fossil fuel-complex interest group to block urgent action on global warming to the ability of the princes of Wall Street to extract their fortunes, it is not that Latin America has promise of attaining the kind of institutional successes seen in the post-WWII North Atlantic. Rather, the North Atlantic--plus Japan--appear to be copying institutional failure, or at least underperformance.
Could we pray for good luck? It is hard to see what else we can do.
God knows the North Atlantic broadly construed--extending to Tokyo and Moscow--has not been immune to history. But it was a history of grasping technological possibilities perhaps too well, and reactions to them. Now, perhaps, North Atlantic history is becoming more "normal"...