An Economic History of Twentieth-Century Latin America

Published by EH.NET (February 2002)

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Enrique C?rdenas, Jos? Antonio Ocampo and Rosemary Thorp, editors, An Economic History of Twentieth-Century Latin America, three volumes. New York: Palgrave, 2000. Volume 1: The Export Age: The Latin American Economies in the Late Nineteenth and Early Twentieth Centuries , 344 pp. $75 or ?52.50 (hardback), ISBN:0-333-91304-3; Volume 2: Latin America in the 1930s. The Role of the Periphery in World Crisis, 320 pp. $69.96 or ?50.00, ISBN: 0-333-63341-5; Volume 3: Industrialization and the State in Latin America: The Postwar Years, 360 pp. $75 or ?52.50, ISBN: 0-333-63342-3.

Reviewed for EH.NET by Edward (Ted) Beatty, Department of History, University of Notre Dame.

The three densely packed volumes that constitute An Economic History of Latin America in the Twentieth Century mark the culmination of a long-term project to present the region’s economic history from the 1870s through the late twentieth century. Their publication is a landmark event, and these volumes should provide an essential reference on the economic history of the region for some time to come. Each volume stakes out one of three principal subperiods: volume one examines the “Export Age,” ca. 1870 to the 1920s; volume two probes the region during the 1930s; while volume three focuses on the era of “accelerated industrialization,” ca. 1940-1980. Each volume begins with one or more introductory and thematically oriented chapters that set out the central economic and historiographic issues for the period, followed by chapter-length studies of particular countries. Argentina, Brazil, Chile, Columbia, Mexico, and Central America get chapters in each volume, while Peru is covered twice and Bolivia, Cuba, and Venezuela each once. The authors of the country studies in each volume all occupy central positions in their fields, and most are Latin Americans themselves. One of the many attributes of this collection is to disseminate their work widely in Britain and North America. Each chapter builds on the authors’ previous scholarship and most synthesize the central historiographic debates and contributions of the extant literature. This review will concentrate primarily on volumes one and three. The second volume is a reprint of Latin America in the 1930s, edited by Rosemary Thorp and first published in 1984. This ambitious project also yielded an overview volume, Progress, Poverty and Exclusion: an Economic History of Latin America in the Twentieth Century, written by Rosemary Thorp and published in 1998 by the Inter-American Development Bank and Johns Hopkins Press. It has been reviewed for EH.NET by Alan Taylor.

Volume one, The Export Age, traces how the expansion of world trade and investment largely drove Latin America’s export growth and was itself a product of nineteenth century revolutions in technology, transportation, and institutions. The result was an extraordinary demand for raw materials and the opportunistic response of most Latin American nations. While geography, natural resource endowments, and domestic social and political features shaped the particular way in which each nation engaged the world economy and was in turn shaped by that engagement, the underlying factors convincingly justify the unity of a regional periodization. While our understanding of the overall contours of this story and its periodization have in many ways remained unchanged over the past half century, important aspects have changed remarkably, even over the past decade. Several merit particular mention.

First, recent monographs have increasingly examined the significance of early industrialization in countries like Brazil and Mexico over the period 1880-1914. In these cases and others, investment in domestic manufacturing came precisely when producers in the North Atlantic countries could place ever cheaper and better quality goods in Latin American markets. While export growth and export linkages help us understand the changing domestic markets that made large scale domestic manufacturing possible, they were nowhere sufficient. New investments to import foreign technologies and erect large factories made sense only with programs of government protection, both at state and national levels. While these efforts are not detailed in any of the chapters here, there is widespread recognition of the role of the state in shaping investment patterns in the export sector as well as in other activities. Several chapters incorporate this revisionist story, although it is notably ignored in the title and to a great extent in the introductory chapter of volume one. We are left with the implicit conclusion that it is debatably anachronistic — misleading at most and overly narrow at least — to continue labeling the 1870-1914 era simply as Latin America’s “export age.”

Second, several of the contributions here suggest that if Latin America fell further behind the industrialized North Atlantic in the late nineteenth century (or, seen another way, did not take full advantage of opportunities for growth), it is not because the region exported too much, but that it exported too little. Beginning in the 1940s one common view of the region’s economic history (most visibly expressed by ECLA economists) held that the opening of Latin American economies in the nineteenth century and the export booms that accompanied this opening led to growth but also to underdevelopment, due in large part to a secular decline in terms of trade (see E.V.K. Fitzgerald’s account of this in chapter 3 of volume 3). The pessimism, which colored much of the scholarship on the export age before the 1980s, has given way to a more complex and mixed account. The revisionist argument that late nineteenth century export growth provided a significant foundation for twentieth century development (including physical infrastructure, manufacturing capacity, state capacity, and human capital) is present in a number of the accounts here. The chapters on Colombia and Bolivia state this most clearly (see, for instance, p. 62), but the theme runs throughout the volume. What is missing, however, is a broader assessment of the way in which linkages, spillovers, and externalities of export sector growth were not narrowly economic in scope but shaped fundamental social and political transitions during the 1880-1920 period. The chapters of Alan Knight on Mexico and Roberto Cort?s Conde on Argentina provide partial exceptions to this tendency. In contrast to the generally pessimistic tone of many earlier accounts of nineteenth century development — its dependent nature, limited technology transfer, rising inequality — this volume offers a more positive account of substantial growth, of a new foundation for future development, and of the creation of a modern state.

Volume two, Latin America in the 1930s, compiles papers first written in 1981 and 1982 and subsequently published in 1984. The current volume is an exact reprint. I touch on it only briefly here as it was extensively reviewed fifteen years ago. Despite its age, these contributions still stand as authoritative assessments of the region during and immediately following the Great Depression, and this holds true both for the summary chapters by Carlos D?az Alejandro and Charles Kindleberger as well as for the individual country studies. Two issues strike me as I read the volume now, nearly two decades after it was first written. First, the moderately revisionist view of these contributions still holds up: the Great Depression may constitute a turning point in economic thought and certainly helped shape the region’s move towards state-led industrialization, but in many important ways the 1930s witnessed a continuation of tendencies already apparent in the 1920s. In particular, nearly every one of these country studies note that import substituting industrialization (ISI) was already underway, and most decisively so in the larger nations. If in the early 1980s these authors attributed the beginnings of ISI to the 1920s, more recent research has placed its origins exactly in the so-called “export-era” of the late nineteenth century, as I noted above. Second, this volume represents the last chance for an examination of Latin America’s twentieth century history as yet uncolored by the economic debacle of the 1980s and the subsequent movement towards neoliberal openings. Although in its particulars the story presented here of the region’s response to 1930s trade and finance shocks differs in relatively minor ways from what might be written today, its tone throughout lacks the pervasive pessimism and critique of state-led industrialization which has largely characterized writing in the post-debt crisis era. This is not to say, however, that the accounts presented here can be ignored because they are dated — quite the contrary. They continue to provide our most authoritative assessment of the macro-economic crisis and response during that crucial era, and it might be argued that their pre-crisis perspective provides us with an important corrective to the consistently critical assessments of recent years. Needless to say, the more recent work of Enrique C?rdenas, Alan Taylor, and others provides essential new perspectives.

Volume three, Industrialization and the State in Latin America, makes the issue of state intervention explicit. Over the past decade or so there has been if not a revolution, then a significant shift in conventional views of Latin America’s post-war economic history. Although state-led industrialization, import substituting industrialization (ISI), or desarrollo hacia afuera has had its critics since the 1950s, it has been roundly vilified over the past decade or so as responsible for many if not most of the current ills of the region. The lead chapter in this volume provides a revisionist view — the first synthesis of the region and era written over a decade after its final collapse in the early 1980s. On one hand, the authors generally do not question the now-common acceptance of the inefficiencies generated by the long duration of highly protective policies, although most prefer not to dwell there long. Their macroeconomic focus tends to see costs in terms of the region’s lost opportunity to exploit the benefits of expanding world trade between 1950 and 1970, instead of in microeconomic inefficiencies. On the other hand, the authors balance this pessimistic view with an appreciation for the development that occurred in most countries through the period. This included most importantly the linkages of industrial growth to technological capacity, the emergence of effective national states, and the development of social infrastructure, including human capital. This is most explicit in the overview chapters and the account of Argentina, but runs through each chapter in some form. Most of the contributions in this volume also prefer to view the policy foundations of ISI as a result not of domestic policy errors or a rent-seeking political economy, but of rational short-term responses to international and macroeconomic circumstances in a world where few alternatives appeared feasible. By the 1960s, recurring macroeconomic crises and growing social conflict made the aggressive pursuit of alternative paths even more difficult. Although many countries began a retreat from the more aggressive version of ISI in the 1960s and 1970s (or began to include some export incentives, as in Brazil), its final demise was driven only by the severe external shocks and domestic crises of the early 1980s. How the substantial if problematic industrial growth that occurred from 1940 to 1980 was accompanied by a significant improvement in human development (though also by the persistence of high inequality) is alluded to but not explored in detail.

The editors’ decision to include chapters on technology (by Jorge Katz and Bernardo Kosacoff) and on the role of international institutions like the World Bank and IADB (by Richard Webb) in volume three should be commended. Both provide uncommon and extremely useful perspectives on central actors and outcomes of the ISI era. These two chapters provide novel views of the era of accelerated industrialization, but the chapter by Katz and Kosacoff is weakened by a vagueness that runs through many of the country studies as well. Despite the central role attributed to “institutions” in this chapter and in many of the country chapters, we get relatively little discussion of the nature of institutions: of the relationship between formal structure and administrative practice, of the way in which they structured incentives to invest in productive or rent-seeking activities, and of their mutability in the face of economic and political crises. Author after author asserts the importance of institution building in the post-war era, but institutions remain rather opaque black boxes throughout. The extensive contributions of recent work on property rights institutions and positive political economy finds little reflection here.

Most of the country chapters in volume three emphasize the tremendous change in social welfare experienced by most countries. In the companion volume, Progress, Poverty and Exclusion, Rosemary Thorp summarizes the change between 1900 and 1995: average per capita income (in constant US dollars) rose from $185 to $990, life expectancy increased from 29 to 68 years, while illiteracy fell from 71 percent to 10 percent. Most chapters here also point out how economic growth and average welfare did not mean better income distribution — often quite the opposite. What is not generally explored, however, is the relationship between social welfare and each country’s economic history. Although the implicit suggestion is that social welfare and economic growth are somehow linked, largely ignored is the more direct and causal relationship between politics — a combination of populist politics and the maturation of the basic elements of modern welfare states — and social welfare. The chapters on Venezuela and Brazil present the best accounts of the social consequences of particular growth experiences, although these two present more discouraging accounts of social welfare development than most other countries in the region. The problem throughout is not so much the uneven inclusion of social welfare issues, but rather the lack of an explanation for the relationship among social welfare, inequality, and economic growth.

All three volumes approach Latin American economic history largely from a macroeconomic perspective and with a particular emphasis on the international context. The influence of a distinctly British-style development economics is clear throughout. While the role of the state is a central component of nearly all national stories told in these volumes, and while institutional approaches are touched on here and there, accounting for domestic political economy is absent from most, as is the broader social context. Furthermore, issues such as labor, technology, and consumers receive relatively little coverage, with a few notable exceptions. These contributions, in other words, represent an approach rather removed from recent tendencies by economic historians in the United States to privilege microeconomic topics and institutions, especially those related to property rights and policies which shaped firms’ behavior.

Despite the superb quality of all of these country studies, I will offer two complaints. The first may not be entirely fair. The country studies in all three volumes provide — as advertised — economic histories of national export sectors and their linkages. Most admit up front that the export economy embraced neither most of the national labor force nor (in most cases) most of the nations’ GDP. While the accounts here are impressive, this historian still awaits a more broadly conceived economic history of Latin America since the mid-nineteenth century, an account that would incorporate a broader synthesis of economic and social history within the narrative story. One exception in this first volume is the fine synthesis of export, agricultural, and manufacturing issues in Mexico by Alan Knight, notably further outside the field of economic history than most of the contributors. Secondly (and more frustratingly), there are distressingly few citations and references in these volumes to scholarship after 1990 or so. Antonio Santamar?a Garc?a’s chapter on Cuba is a notable exception, and in general this problem is greatest in volume two (remember, a reprint of the 1984 volume) and in volume one, and somewhat less so in volume three. Given the wealth of new insights that economic historians of the region have offered over the past ten years, this suggests a volume that teeters on the verge of outdatedness at publication. Certainly the tremendous time and logistics that went into the production of these volumes necessitate substantial lag between composition and publication, but the gap here is occasionally striking. Together, however, these contributions succeed in reflecting the sea change in our understanding of the economic history of the long twentieth century in Latin America.

In conclusion, these volumes provide a sorely needed single source on the economic history of modern Latin America. With the exception of Victor Bulmer-Thomas’s broad and indispensable overview of the region, nowhere else is this available. These volumes will prove an enduring and much used reference for present and future economic historians. No other source matches the comprehensive, concise, and sophisticated accounts presented here. As important as this contribution is, however, it speaks only to the converted. Do these volumes speak to non-economic historians? Do they help convince historians of other persuasions that the economic history of their nations-of-study is not only interesting but necessary in order to understand social and cultural history? Do these volumes make this argument — at least implicitly — in a way that is accessible and compelling to those skeptical of the accessibility and relevance of economic history? I think the answer is a tentative yes, although I wish that I could say so with less hesitation. Recently the chasm between economic history, on one hand, and social and cultural history, on the other has widened considerably. This has been nowhere more true than within Latin American history in the United States. I recently attended a seminar of Latin American historians (at an institution not too far from my own) where I was shocked not so much by the presence of antipathy and scorn for social science approaches, as by its vehemence. What the broader community of Latin American scholars need from economic historians are works that seek to bridge or reach across that gap. With the exception of several chapter contributions here (for instance, those by Alan Knight and Roberto Cort?s Conde in volume one), these volumes do not accomplish this — although the introductory chapters by the volumes’ editors stand out in their clear, relatively non-technical, and authoritative presentation of a complex history. (I should note that the summary volume Progress, Poverty and Exclusion by Rosemary Thorp does a better job of presenting a compelling economic history to non-economists, although it too falls short of this ideal.) Most of the country chapters present sophisticated treatments of the nations’ macroeconomic experience over the past century. In doing so they offer a landmark resource for those already interested in the region’s economic history, but will not likely be read closely by others, and that is a shame.

This review cannot do justice to the rich variety of the thirty-three separate chapters collected in these volumes. Suffice it to say that nowhere else will the economist or historian find such a useful collection of concise and authoritative accounts. The concerns I have expressed in this review touch more on what I would have liked to see than on the quality of what is presented, which is excellent throughout. The introductory and overview chapters of the three volumes are alone worth the price of purchase. These should be required reading for every graduate student in the field — and for the rest of us as well. Together these volumes will provide an indispensable reference for future efforts to evaluate and re-evaluate what will continue to be a much-debated era in Latin American economic history.

Edward (Ted) Beatty is Assistant Professor of History at the University of Notre Dame and Fellow at the Kellogg Institute of International Studies. He has recently published a book on industrial policy in Mexico, Institutions and Investment: The Political Basis of Industrialization in Mexico before 1911 (Stanford University Press, 2001), and is currently working on the history of technological change in Mexico during the same period.