It has been well over a year of the presentation of “The Economic Development of Latin America Since Independence,” held at Columbia University in the City of New York, with the participation of José Antonio Ocampo (co-author, SIPA/Columbia), Alan Dye (Barnard College) and John H. Coatsworth (Columbia University), moderated by Pablo Piccato in Columbia University in the City of New York, on January 31, 2013.
I am biased to believe the contents of the book presentation are still relevant. I post this transcript to pay a debt to my Uruguayan friend and colleague Sebastián Fleitas (University of Arizona), who aided Luis Bértola and José Antonio Ocampo as a research assistant for this book. The transcript would certainly benefit from (even) more editing. But as it happens most frequently in grad school, I lack the time to do that. Without further ado, here’s the baby whose birth took 15 months (!).
Presentation of Luis Bértola and José Antonio Ocampo. The Economic Development of Latin America Since Independence. Oxford: Oxford University Press, 2012.
Participants: José Antonio Ocampo (School of International and Public Affairs, Columbia University), Alan Dye (Economics Department, Barnard College of Columbia University), John H. Coatsworth (Provost, Columbia University).
Moderated by Pablo Piccato (History Department, Columbia University).
Place and date: room IAB 1502, Columbia University in the City of New York, New York, NY, January 31, 2012
Transcript by Manuel A. Bautista González (History Department, Columbia University).
José Antonio Ocampo (JAO):
In the book we offer the following typology for the study of nineteenth century Latin American economies.
Some debates where the book attempts to make a contribution to are:
– Real commodity prices are very volatile. Commodity specialization has given rise to different opportunities. Late 19th century was a good period to be a commodity exporter; from the 20th century onwards it is not good to be a commodity exporter.
– There is a high number of countries undergoing a financial crisis from 1820 to 2006. After independence, war debts; 1873; 1930s; 1980s. Highly cyclical external financing and recurrent crises.
– Four major historical phases: post-independence, export age, c. 1870-1929, state-led industrialization (not import substitution industrialization, because it is inappropriate, it does not capture the essence of what happened during the period, where the state took the lead on the economy), market reforms (1970s, 1980s after debt crisis).
– When did Latin America fall behind? Latin America’s per capital GDP as % of world average. Latin America fell behind in the early period, caught up and performed better in the end of the 19th century, kept high levels and then collapsed.
– GDP decennial growth Rates. The state-led industrialization was the fastest period of economic growth in Latin America history. Despite the fact that during the export age Latin America grew quickly, the twentieth century was good, and even better.
With regards to inequality and human development, there are several things we want to say:
– Inequality trends: colonial legacy and republican policies, development patterns and crises.
– Significant lags in human development, relative to industrial countries, even in the leading countries in the region (Argentina, Uruguay, Costa Rica, Cuba, most dynamic export economy prior to Argentina until the Ten Year War of 1868-1878), as measured by health and education, in the 1910s Latin America had ¼ of the standards of health and education, life expectancy. Catching up in health, not so much in education. Flattening by the end of the period. Latin America has always fallen behind in education relative to income at all levels in education (according to Ewout Frankema).
– Major advance during state-led industrialization. Catching up during the state-led industrialization.
– Major advances in poverty reduction in post-WWII state-led industrialization and 2003-2008 boom.
– Major reversal: the lost quarter century that starts with the debt crisis of the 1980s.
– Negative shocks on income distribution. Latin America has a worse income distribution now than 200 years ago.
— First wave globalization: good for economic performance, but income distribution worsened.
— The “lost quarter century”: 1980s and 1990s.
— Weight of labor surpluses (the “Arthur Lewis” factor). Southern Cone had a significant advantage.
– Positive equity shocks
— Abolition of slavery (although late in Brazil and Cuba), helps earlier than in the US.
— With a greater lag (well into the twentieth century), erosion in rural servitude enhanced by urbanization and limited agrarian reform (except for Cuba, where reform was extensive).
— Spread of strong labor unions in the Southern Cone.
— 2003-2008 are years of improvements in income distributions, with explanations still subject to debate.
– Regional inequalities: result of first two phases of development. GDP growth rate of Argentina, Uruguay, Chile, Costa Rica > GDP growth rate of Bolivia, Central America (except Costa Rica, Paraguay). Particularly as result of the export age, inequality increased in Latin America.
Alan Dye (AD):
– Overview and summary of the state of the art. Debates.
– History of Latin America is bipolar. Can the countries be thought of as a region? It can and it makes sense.
– Structuralist approach: Raúl Prebisch, Hans Singer and others.
– New quantitative methods.
– Latin America in the international labor regime.
– Strong, sustained growth and sustained setbacks.
– Measures of inequality were not so great before independence, but become significant after independence. Inequality took different forms at different times. In colonial regimes, it mean coercive labor practices. Wealth/land. As time progresses, inequality shifted, as the value of land and resources changes. Land was revalued as demand for exports grew. When land was abundant, it wasn’t valuable, but labor was scarce. When land became more important, inequality originated from this factor. Reopening debates, e. g. how do we understand Latin America inequalities in education.
– Industrialization. Structuralists like Raúl Prebisch shared with other economists. Industrialization began to take off in the 1930s due to policies adopted during the 1930s. Recent empirical findings show industrialization began earlier, in the last quarter of the 19th century. One has to set aside the naive structuralist view in which you might think that industrialization was state-led. Industrial progress began before 1930. But the picture is still very incomplete. Foreign capital was very important, but domestic entrepreneurs were also very important. What about the role of small business? Studies are lacking. We know little about entrepreneurship in the sector of industry supplying industry.
– Ocampo and Bértola show why more research is needed on these questions.
– Role of state-led economic development. Probably the most interesting contribution. Need to develop a better understanding of problems and achievements, and therefore the merits, specially considering the fact those most liberal reforms have been so disappointing. Certain parts of Latin America looked like Western Europe. Pragmatic reasons driving state-led economic development, rather than ideological reasons. Import-substituting industrialization was not the most important part of the period. Brazil and Cuba participated in sugar cartels; Colombia and Costa Rica in coffee cartels; there were many cartels in steel, tin, copper, etc. Business leaders voiced many of the approaches adopted by ECLAC. Before talking about the gross failure of state-led industrialization, we have to recognize these were very good years in terms of 1) economic development, 2) health and life expectancy, 2) education. We know less about the relative strength about private sector-led industrialization in 1910s-1920s. Authors rejuvenate the structuralist arguments with available quantitative evidence.
John H. Coatsworth (JHC):
This book relieves the need for a single volume readable and well written, with modern techniques of economic analysis, quantitative data.
I like the effort to compare Latin America with other world regions and the regions within Latin America.
The big question is when and why Latin America fell behind from the developed world.
We have estimates for the big countries that show that by 1800s Latin America was not really that back behind. When did it happen? Late 19th century, early 20th century. Why did it happen? Ocampo and Bértola tell a very heterodox story. There is too many institutions, policies and structures for a Chicago economist to like this book. Not only the book provides the right questions.
Economic structures, export dependence of certain kind, institutions and policies, human development and the role of inequality in constraining human development and facilitating economic growth.
Three issues that interested me are:
– Problem of evaluating Latin America in comparison to developed/OECD countries. In here we get a fascinating narrative, but I am not sure whether narrative fits the data within the book. We have a series of quite sensible periodizations and it turns out for most of the period Latin America’s GDP per capita was more or less that of the OECD. If you look however at the sub-periods it is quite interesting to see that when Latin America grows quickly it still falls behind. Latin America kept up but did not converge in the 1870s-1929 and then grew but did not catch up (and even diverged) during the state-led industrialization and even had anemic growth rates compared to those of OECD countries. Is it correct to think of the state-led industrialization as successful? If you think of it in terms of growth rates, yes, but in relative growth rates, it does not look like that. Questions of economic structure and exports performance.
– Volatility. Latin America growth rates are quite volatile. Latin America is all over the map. What’s at stake? Causality in the book has to do with fluctuations in commodity exports and the flow of capital into Latin America. Why is capital so skittish? Is it the supply (what happens in Paris, London, New York) or is it what happens in the countries? Where do the changes happen that lead into greater volatility?
– Inequality is central in Latin American history, but the framing might not be the most adequate. There is a legacy of inequality especially in countries with large Indian or slave populations, but I don’t think most of the inequality you see in 20th century has to do with colonial legacy. I think it is what you see is what Kuznets says: inequality is bound to happen by economic development. What is not explainable is the persistence of inequality with the decline of labor surplus? One reason is that state-led industrialization pulls apart wage structures in ways economists would criticize. Some people have jobs in state-led industries; they produce bad quality goods that everybody else has to buy. I wouldn’t blame only governments in Latin America. What I think happened in the end of the 19th century is that elites sought to become rich, they cooperated among themselves, they created an environment where investment was possible, and they sort of figured out how to exclude most of the population from reaping the fruits of economic growth. Then you get a pulling-out of the wage structure, and the exclusion of political power of large strata of the population. Elites found an implicit policy alliance with American elites and so we are able to explain why certain “Communist” governments were overthrown. Political volatility is much greater than elsewhere. People in Wall Street and other capital markets get scared.
Read it anyway because the book is probably right!
JAO: Human capital and human development still lagged behind during the export-led industrialization period (1870s-1929).
Alexander Gerschenkron’s explanation of how it happened in Europe (a more state-led industrialization). Paul Bairoch: the mother of protectionism is the United States. Continental Europe and Latin America came late into the protectionist game.
State-led industrialization is a period of relative stagnation. It is the best period in terms of human development in Latin American history. Income distribution depends on country. Where labor surpluses were not existent by the early 20th century (Argentina, Uruguay), income inequality was improving until military dictatorships worsened it. We have income distribution improvement in Mexico, Venezuela, Colombia during the 1960s, and Brazil being the interesting exception.
What we have in that period is the relative fall of the leaders in Latin America by the 1920s (Argentina, Uruguay, Cuba, Chile, fall behind), but the rest of Latin America doesn’t fall and even Brazil and Mexico catch up.
Argentina was the largest Latin American economy up until 1950 and 1960, when Brazil and Mexico become most important.
We can all agree that the last three decades of Latin America history have been the worst.
The lost decades after independence were lost decades as opposed to developed countries, but they weren’t lost against Asia and Africa. The period where Latin America falls behind particularly Asia and Africa is the last three decades. Hence, in terms of economic growth and human development, the liberalization period has a very poor performance, with the exception of what happened to income distribution in 2003-2008.
AD: What is missing? A discussion of capital markets and interaction of domestic and foreign capital. Pattern of specialization: why is that primary commodity production is so persistent? East Asia has growth that has diversified from labor-intensive activities. Latin America has much in common with Canada, Australia, and New Zealand, as they also started as commodity exporters but these countries were able to change their dependency on resources/commodity exports.
JHC: I think indigenous structures were not behaving badly at all and the role of republican legacies has to be reexamined. The republican legacy seems even more important in the 21st century. Nara Milanich has a book on how family values eroded the legal status of women in Chile. I would be interested to see more about military dictatorships. If you were to see the success stories, Mexico, Central America and the Caribbean will be an area with an interesting performance in the years to come, as Chinese wages increase and these countries have better access to the USA.