Ensayos de Historia Econ?mica: Uruguay y la regi?n en la econom?a mundial 1870-1990

Published by EH.NET (May 2002)

Luis B?rtola, Ensayos de Historia Econ?mica: Uruguay y la regi?n en la

econom?a mundial 1870-1990. Montevideo, Uruguay: Ediciones Trilce, 2000.

199 pp. ISBN: 9974-32-229-4.

Reviewed for EH.NET by Michael J. Twomey, Economics, University of Michigan,

Dearborn.

The title of this fine book reveals two facts about it — the contents are

essays, as opposed to a unified analysis, and the geographical coverage is

Uruguay together with its neighbors. Most of the essays were co-written, and

some have appeared as working papers or have been published in academic

journals.

The analytical approaches of the book’s central chapters combine a neoclassical

open economy model with additional inspiration from the literature on the new

growth economics — think of the big picture type of work of Jeffrey

Williamson. The major focus is the analysis of Uruguay’s growth experience

compared with that of neighboring Argentina and Brazil, as well as with that of

countries in Europe and North America. The book builds on the recently

published work by B?rtola and others (El PBI Uruguayo 1870-1936, y otras

estimactiones, Universidad de la Rep?blica, 1998), which constructed

estimates of Uruguay’s real GDP and its major sectoral components for the

period from 1870 until 1936, when official estimates become available.

The new, key, stylized fact is that Uruguay’s real GDP per capita was one

quarter higher than Argentina’s in 1875, and subsequently fell relative to that

of her larger neighbor — to equality in 1890, fluctuating thereafter so that a

century later Uruguay’s level was ten percent lower than Argentina’s.

Evidently, the familiar story of Argentina’s relative stagnation does not hinge

on some arguably exceptional national characteristics, and in Chapter 3 B?rtola

and his co-author Gabriel Porcile lead us to consider the economic factors that

the two countries shared, starting with being countries of recent settlement

with rural, temperate climate-based exports that for a time followed classical

free trade. The Brazilian case provides a healthy contrast — as we knew from

Angus Maddison — with a GDP per capita that was only one-third of that of

Argentina in the late nineteenth century, by 1990 the gap had been narrowed to

only twenty percent. Overall, their analysis rejects trade openness as the main

determinant of relative convergence, and indeed they assert that policy changed

its effectiveness over that century. It is argued that both Uruguay and

Argentina suffered from developed country protectionism, and Uruguay’s

livestock sector was particularly unable to incorporate technological change.

Other factors contributing to the differential growth path of these three

southern cone countries are Brazil’s catching up in educational attainment, and

her greater reliance on multinational firms for manufactured exports.

This too brief summary of a chapter that could easily have been published in a

major journal suggests the author’s use of contemporary theoretical approaches

to engage some of the classic debates of the region. Indeed, B?rtola, whose

Ph.D. is from Gothenburg, Sweden, constantly returns to rigorous quantification

of economic factors such as trade openness, the convergence of industrial

structures, and co-movements of real wages and real output. For example, his

fifth chapter (jointly written with Fernando Lorenzo) uses time-series analysis

to demonstrate the high correlation of Uruguay’s short run cycles with those of

Argentina during the period 1875-1913, when there was a complete lack of such a

correlation with those of Brazil. There was a high correlation of the cycles

for the three countries over 1913-1929, but during the middle years of the

century these correlations were lower, and only towards the end of the 1970s

did they recover their earlier levels. Thus we are presented with a

sophisticated statistical analysis of historical data; an exercise some will

wish had been extended to a search for explanations in terms of the commodity

composition of trade, growth rates of trading partners, policy differences, and

so on.

The book’s last two chapters narrow the focus to Uruguay and the period up to

1930. B?rtola’s estimates of manufacturing output show that industrialization

had been occurring long before the Great Depression. There is a nuanced

discussion of the role of tariffs in this growth. Taxes on imports had affected

trade at least since the 1870s, although it is argued that these were initially

motivated as much by budgetary needs as by protectionism, as they accounted for

two-thirds of government revenue even at the end of the nineteenth century.

Furthermore, the rise of manufacturing also responded to non-tariff factors,

such as the growth of domestic demand, in turn fueled by the growth of

population, urbanization, and exports. Protectionism was reduced in the second

decade of the century, as inflation lowered the real level of nominally fixed

tariffs, and a major fiscal reform emphasized taxes on consumption and

property. World War I produced negative effects on the country’s economy, as

trade and capital flows were reduced. Government revenues and outlays also fell

in real terms. Both industrial production and real GDP fell, with the latter

taking a full decade to recover. Inflation lowered real wages by one-fourth, a

blow only marginally affected by the legislation of the eight-hour working day

The analysis in these chapters contributes to an ongoing re-evaluation of that

controversial early period of the century associated with President Jos? Batlle

y Ord??ez, whose second term ended in 1915. Batllismo policies were

pro-urban and pro-worker, while being anti-large landowners and anti-British,

in a context of high income and what has been described as one of the earliest

modern welfare states. An important part of B?rtola’s contribution is simply

quantification; one chapter’s sub-section is given the sweet-and-sour title of

“How rich were we when we were rich?” More generally, the series on real GDP

reinforces the previously held impressions about recessions during the 1890s

and World War I, while allowing comparisons with subsequent periods of

stagnation, not to mention the comparisons with neighboring countries.

There is a broader point related to the first chapter’s discussion about the

role of economic history in the continuum defined by the academic fields of

history and economics. B?rtola’s practice of our craft situates him more toward

the latter pole. Thus his discussion of batllismo concentrates on the

presentation and analysis of new economic data, appropriately adjusted for

inflation and cyclical effects. These chapters are directed toward readers who

already have considerable knowledge of the country’s socio-historical context,

in contrast, say, with Henry Finch’s A Political Economy of Uruguay since

1870 (London: Macmillan, 1981), which remains the most useful introductory

book-length treatment of the country. That our author knows the issues and the

literature is indicated by his chapter summarizing recent work on the economic

history of Uruguay, which was also published in a special issue of the

Revista de Historia Econ?mica (Madrid, 1999). His contribution —

centering the historical analysis in the appropriate empirical base — is most

welcome, and we eagerly await its further extensions.

Michael Twomey is Professor of Economics at the University of Michigan,

Dearborn. He has worked in Peru, Colombia, and Mexico. His most recent book is

A Century of Foreign Investment in the Third World (Routledge, 2000).