John H. Coatsworth

Inequality, Institutions and Economic Growth in Latin America

This essay examines three recent historical approaches to the political economy of Latin Americas relative economic backwardness. All three locate the origins of contemporary underdevelopment in defective colonial institutions linked to inequality. The contrasting view offered here affirms the significance of institutional constraints, but argues that they did not arise from colonial inequalities, but from the adaptation of Iberian practices to the American colonies under conditions of imperial weakness. Colonial inequality varied across the Americas; while it was not correlated with colonial economic performance, it mattered because it determined the extent of elite resistance to institutional modernisation after independence. The onset of economic growth in the mid to late nineteenth century brought economic elites to political power, but excluding majorities as inequality increased restrained the regions twentieth-century growth rates and prevented convergence.

Always Protectionist? Latin American Tariffs from Independence to Great Depression

This article reports a fact that has not been well appreciated: tariffs in Latin America were the worlds highest long before the Great Depression. This is a surprising fact, given that Latin America is believed to have exploited globalisation forces better than most regions before the 1920s, and given that the 1930s have always been viewed as the critical decade when Latin American policy became so anti-global. The explanation does not lie with imagined output gains from protection in these young republics, but rather with state revenue needs, strategic responses to trading partner tariffs and a need to compensate globalisations losers.

THE ROOTS OF LATIN AMERICAN PROTECTIONISM: LOOKING BEFORE THE GREAT DEPRESSION

This paper uncovers a fact that has not been well appreciated: tariffs in Latin America were far higher than anywhere else in the century before the Great Depression. This is a surprising fact given that this region has been said to have exploited globalization forces better than most during the pre-1914 belle epoque and for which the Great Depression has always been viewed as a critical policy turning point towards protection and de-linking from the world economy. This paper shows that the explanation cannot lie with output gains from protection, since, while such gains were present in Europe and its non-Latin offshoots, they were not present in Latin America. The paper then explores Latin American tariffs as a revenue source, as a protective device for special interests, and as the result of other political economy struggles. We conclude by asking whether the same pro-protection conditions exist today as those which existed more than a century ago.

Lost Decades: Postindependence Performance in Latin America and Africa

Africa and Latin America secured independence from European colonial rule a century and half apart: most of Latin America by the 1820s and most of Africa by 1960. Despite the distance in time and space, they share important similarities. In each case independence was followed by political instability, violent conflict, and economic stagnation lasting for about a half-century. The parallels suggest that Africa might be exiting from a period of postimperial collapse and entering one of relative political stability and economic growth, as did Latin America almost two centuries ago.

Indispensable Railroads in a Backward Economy: The Case of Mexico

The contribution of railroads to economic growth in the nineteenth century depended on two critical variables: unit savings in transport costs the railroads made possible and the quantity of passengers and freight the railroads attracted. Unit savings depended mainly on geography; either cheap water transport existed before the railroads or it did not. Unit savings depended secondarily on the value of the time the railroads saved and on the flexibility in selection of routes made possible by the new technology. The quantities of passengers and freight actually transported depended on two interrelated factors: the prior development of the economy and its responsiveness to cheaper transport.

The Demographic Impact of Colonization

The arrival of Europeans in the Americas resulted in what was perhaps the greatest demographic collapse in history. In 1492 the native population is estimated to have been between fifty and sixty million; by the mid-seventeenth century it had fallen to between five and six million. Subsequently, it recovered slowly. But even today the indigenous population is only about half of its pre-Columbian size. However, not all groups declined equally or have shared in the recovery; many have become extinct, and others have been transformed through cultural change and racial mixing. For many Indians, biological survival has been achieved at the expense of cultural change. The decline in the native population and the expansion of other social groups was a consequence of the introduction of Old World diseases and the arrival of immigrants who set in motion economic, social, and political changes that fundamentally altered the character and distribution of the population. According to Alexander von Humboldt, by the beginning of the nineteenth century Indians accounted for only about 37 percent of Latin America’s total population of twenty-one million, whereas the mixed races accounted for about 30 percent. However, these overall proportions varied widely according to the extent of the native population’s decline, the intensity of Iberian and African immigration, and the types of institutions and enterprises used to control, “civilize,” and exploit native peoples. These interactive processes reflected not only colonial objectives, but also the nature of the societies that Europeans encountered. Demographic trends were a barometer of economic and social change as well as a formative influence upon it. The relationship was reciprocal and complex.

Poverty and Inequality

INTRODUCTION Poverty and inequality have been deeply rooted in Latin American societies since the early colonial era. With the arrival of Spanish and Portuguese conquerors, the diverse resources of the region in terms of land and other factor endowments were carved up in ways that favored the few at the expense of the many. Later, the intensification of colonization brought the development of economic structures that cemented these inequalities in place. Both the diversity of factor endowments in the region and the way in which they have been distributed have therefore played a heavy hand in predisposing Latin America toward certain paths of development – paths characterized by wide-ranging degrees of inequality in wealth, human capital, and political power. The severity of inequality has varied across the continent, depending on many factors. Generally speaking, however, patterns of production, land distribution, and schooling that Latin America has followed have consistently fostered high degrees of inequality. Many of these patterns were formed in the early colonial era, when indigenous populations were denied rights while a select number of elites of European descent were given the lion’s share of wealth, land, and power to administer their conquered territories. The early differences in the extent of inequality persisted and were reproduced in the way economic and social institutions evolved over time; these institutions, in turn, exerted their own influence on the path of economic development. In cases of extreme inequality, institutions favored elites and limited the access of much of the population to economic opportunities. Having attained high socioeconomic status, elites were thus in an advantageous position to maintain that status over time, with the rest of society paying the price of underdevelopment.

Lost Decades: Lessons from Post-Independence Latin America for Today's Africa

Africa and Latin America secured their independence from European colonial rule a century and half apart: most of Latin America after 1820 and most of Africa after 1960. Despite the distance in time and space, they share important similarities. In each case independence was followed by political instability, violent conflict and economic stagnation lasting for about a half-century (lost decades). The parallels suggest that Africa might be exiting from a period of post-imperial collapse and entering a period of relative political stability and economic growth, as did Latin America a century and a half earlier.

Political Economy and Economic Organization

INTRODUCTION Institutions are rules, procedures, and patterns of collective behavior that persist over time. Formal institutions are embodied in organizations with the authority and power to coerce, that is, the capacity to impede, punish, halt, or reverse actions deemed contrary to acceptable norms. Informal institutions are those that persist without the organized capacity to compel compliance and punish violators. Formal institutions are not necessarily powerful nor informal ones weak. Imprecise or contradictory rules and lax enforcement can undermine formal institutions, just as voluntary adherence to unwritten rules can be powerfully reinforced by the uncoerced but self-interested behavior of individuals in a market place. The ensemble of institutions that most directly affect economic activity make up the economic organization of a society. Agencies, policies, and practices that reduce the private costs of economically productive activity, encourage the use of markets, and protect the human and property rights of economic actors make economic growth easier to achieve. Those that raise costs, impose risks, exclude, or discriminate make productivity advances more difficult to achieve. This chapter focuses on those aspects of the political economy of the Spanish and Portuguese empires that help to explain both the initial success and subsequent longevity of colonial rule, as well as the long-term stagnation of the colonial economies. It argues that the Iberian empires persisted because of a rough equilibrium that developed between the interests of the two premodern imperial states, the relatively weak settler elites in each of the colonies, and the divided subject populations of indigenous and African descent. This colonial equilibrium was achieved by transferring Iberian institutions to the Americas and then modifying them to fit New World conditions.

The Cold War in Central America, 1975–1991

The strategic stalemate that prevented a direct military conflict between the United States and the Soviet Union displaced violent superpower competition to areas of the Third World where the two blocs could invest in local and regional wars without risking direct confrontation. The Soviet Union tended to approach such conflicts cautiously even when they involved other Communist states. The United States, by contrast, adapted its security policies to a containment doctrine that defined the political complexion of every non-Communist government in the world as a matter of potential strategic interest. Local opposition to foreign rule in the US and European colonial empires, and social movements aiming to displace traditional elites elsewhere, confronted a strong US preference for reliably anti-Communist (and thus conservative to right-wing) regimes. Even moderate to conservative regimes that sought to advance national interests by constraining US influence came under assault from Washington. Governments that collaborated closely with the United States often had to ignore or suppress local interests opposed to US policies. In its prosecution of the Cold War in the Third World, the United States enjoyed formidable advantages over its Soviet rival. Economic strength gave US leaders a decided financial and material advantage over the Soviets. Military bases projected US power into regions bordering on Communist states throughout the world. US ideological and cultural assets also helped. Alliances with local elites eager to reduce domestic challenges proved especially helpful. The United States deployed all of these resources in response to perceived affronts to its regime and policy preferences wherever they occurred.