H-NET BOOK REVIEW
Published by [EMAIL PROTECTED] (February, 2000)
John Coatsworth and Alan Taylor, eds. _Latin America and the World
Economy since 1800_. Cambridge, Mass.: Harvard University Press,
1999. xv + 484 pp. $49.95 (cloth), ISBN 0-674-51280-4; $24.95
(paper), 0-674-51281-2.
Reviewed for EH.Net by Richard Salvucci <[EMAIL PROTECTED]>,
Department of Economics, Trinity University, San Antonio, Texas
Welcome to the Cliometric Revolution, Latin Style
When I started graduate school in 1973, there were no textbooks on
Latin American economic history. Today, depending on your
definition of a textbook, there are three or four in English alone.
In 1973, we argued about the Asiatic mode of production and
precapitalist economic formations. Today we discuss conditional
convergence. In 1973, bourgeois economists were the enemy. Today a
bourgeois economist is your dissertation supervisor. Welcome to the
Cliometric Revolution, Latin style. It's been 25 years in coming,
but now that it's come, it's come with a vengeance.
The present anthology is an artifact of that revolution and like all
historical artifacts, it requires a bit of study to appreciate its
meaning in full. And so to begin, I'm going to quibble with the idea
that what you read here is really all that novel. After all, there's
always been some cliometric work on Latin America, as the
outstanding books of Carlos Dmaz Alejandro on Argentina or Clark
Reynolds on Mexico might attest. In my primary field, Mexican
history, you could point to things done by Luis Tellez or by Jaime
Zabludovsky as recognizably cliometric, but Tellez and Zabludovsky
have gone on to major careers in government service rather into
careers as economic historians. What's more unusual is to find
suitably trained professionals doing purely academic work--doing
economic history for a living. For that we can thank, at least
partly, a sea change in development ideologies in Latin America,
where economists in universities can now spend their time thinking
about conditional convergence (whose acquaintance they may have made
in some gringo institution) rather than about the Asiatic mode of
production. And I think I have some idea why.
For my generation, it was the fall of Allende in 1973 that was
critical. For this one, it is the fall of the Berlin Wall. That
makes all the difference in the world. You can write sympathetically
about the economic history of Cuban sugar mills without espousing
the labor theory of value. You can study the history of financial
markets in Brazil without being implicated in the overthrow of Joco
Goulart in 1964. For now, at least, there are no gangster regimes
advocating "market friendly" policies while energetically murdering
their own citizens. The ideological and political baggage of the
1960s and 1970s is, for want of a better phrase, just so much
history. Hence what we read here by so many relative newcomers to
the field. Their authors are students, not prisoners of the past,
and that's what makes their scholarship worthwhile. I do have a
small bone to pick with the volume's title. This is not a book
about Latin America since 1800. It is mostly about Argentina,
Brazil and Mexico since 1870, which is not quite the same thing.
There are no Indians. There is no Caribbean or Central America. No
Andes. But worse, there are really no papers that engage with the
period before 1870 and that is a real problem. As John Coatsworth's
perceptive essay on the nineteenth century puts it, "the available
quantitative evidence shows that Latin America became an
underdeveloped region between the early eighteenth and the late
nineteenth century" (p. 26). In other words, most of the papers in
the volume-Carlos Newland's excepted-do not address the principal
issue of Latin America's economic history, namely, the origins of
what Lant Pritchett has called "divergence, big time." Even if you
argue in reply, that X (what existed before 1870) causes Y (what
changed later), the historian is liable to wonder why X occurred
when it did and not before, especially if Y is extremely profitable,
the proverbial big bill on the sidewalk.
I think I know why. Sensible historians avoid the period before 1870
because it is a Hobbesian world where life, not to mention some of
its major actors, was nasty, brutish and short. For most of Spanish
America, the era before 1870 (and after Independence in the 1820s)
is much, much harder to work in, let alone understand. The archives
with which I am familiar (mostly Mexican, to be sure) are a
mess-disorganized, uncatalogued, impenetrable-and very nearly
impossible to utilize. Of course, the messiness of the sources
faithfully reflects the messiness of economic and political life at
the time, with unending coups, countercoups, invasions,
constitutions, blockades, wars, partitions, regulations,
proclamations, declamations, you name it. There's no stable
structure for understanding, essentially. Unfortunately, this is
where the action is, unless you regard disorder itself as the
proximate cause of poor economic performance. As anyone reading this
is probably aware, there's really no consensus about that either.
For this reason, I take claims made for the cliometric potential of
Latin American economic history the way I take tequila: in limited
doses, and with many grains of salt. Still, triumphalism only
infects the blurbs to the volume, for the "Introduction" by John
Coatsworth and Alan Taylor is conspicuously moderate in tone. So
maybe I shouldn't complain. Besides, the papers are generally very
good and a couple are outstanding. One of the most coherent themes
here is the importance of financial markets and institutions in
facilitating or accommodating economic growth. This really is a new
direction, at least in the Latin American context, for I can think
of little in the older historiography that makes this point with any
cogency. A very interesting paper by Michael Twomey provides the
relevant context in arguing that "[t]he general trend of direct
foreign investment [in the twentieth century] has been downward
relative to income and, probably, total capital stock" (p. 192).
Portfolio investment aside, which Twomey identifies as mainly, until
1990, loans to governments, the implication is that domestic sources
of capital were increasingly important between 1913 and 1950, the
years when foreign direct investment fell sharply relative to GDP.
Twomey's argument frames papers by Stephen Haber, Anne Hanley,
Leonard I. Nakamura and Carlos E. J. M. Zarazaga, Gerardo della
Paolera and Alan M. Taylor, and Gail D. Triner.
First, Brazil. Anne Hanley's study of business finance and the Sco
Paulo Bolsa offers a good point of departure. In the spirit of
Twomey's conclusions, Hanley argues that the role of foreign capital
in direct investment "while sizeable, mainly played a supporting
role in the domestic business formation that was the cornerstone of
Sco Paulo's development." The industrial and utilities sectors
"actually found their base in the domestic capital market" (both
quotations, p. 126). And it was the impersonal mechanism of the
stock exchange rather than traditional kin-based finance that fueled
"a type of financial Big Bang" between 1905 and 1913 (p. 131).
Similarly, Gail Triner finds that the recharter of the Banco do
Brasil in 1905 created a "natural infrastructure for financial
transactions" (p. 224) that supported a "strong, centralized role
for the national government in the economy." And like Hanley, Triner
emphasizes that "[t]he banking system increasingly accumulated and
reallocated financial resources of the private sector at the expense
of either personal or other institutional channels" (p. 226, both
quotations). After 1905 the real money supply and the monetized
economy grew rapidly, even as the economic predominance of Sco Paulo
was consolidated.
The evolution of a modern financial infrastructure for Brazil had
measurable implications for the growth of industrial productivity in
Brazil after 1890. Stephen Haber's sophisticated analysis of capital
market regulation and the development of a securities market argues
that "one crucial piece of the puzzle explaining the lack of
industrial development before 1890 and rapid industrial growth after
1890 was access to capital" (p. 279). The maturation of debt and
equity markets along with the establishment of limited liability
laws and mandatory financial disclosure lowered the cost of capital.
As a result, the cotton textile industry, which is Haber's focus,
grew more quickly than it would have had traditional patterns of
kin-based and other less formal avenues of finance been maintained.
In short, "entrepreneurs who could best combine the factors of
production and choose the optimal output mix were able to mobilize
capital that otherwise would not have been available to them" (p.
279).
Argentina has always seemed baffling. Between 1870 and 1900, real
per capita product there doubled, but after 1900, it would not do so
again until 1958. In other words, the rate of real per capita growth
fell from 2.3 percent per year to 1.19 percent per year, which is
some slowdown. For Gerardo della Paolera and Alan Taylor, a capital
constraint is (part of) the answer. The domestic financial system
was simply unable to replace the dwindling supply of British capital
after World War I. Caught between the gold standard, international
convertibility, and repeated financial crises, the monetary
authority, the Caja de Conversisn, was unable to support domestic
banks and maintain convertibility at the same time. For this reason,
Argentine banks "had to maintain a higher capital cushion" than
their foreign counterparts who could borrow abroad much more easily.
"[D]omestic banks could not fill the void left by the retreat of
foreign capital after 1914" (p. 163). A paper by Leonard I.
Nakamura and Carlos E. J. M. Zarazaga raises some questions about
this argument by looking at returns to Argentine debt instruments,
which don't seem particularly high. Daniel Dmaz Fuentes' chapter on
the gold standard in Argentina, Brazil and Mexico reminds us that
the Argentine peso was inconvertible between 1914 and 1927, an
awkward point for della Paolera and Taylor as well. Nevertheless,
their discussion of the non-monetary aspects of financial crises in
Argentina is very stimulating. I have heard it said by some
historians that there is nothing "new" in the findings of the new
economic history of Latin America. I defy them to read della
Paolera and Taylor and then tell me that. I doubt the critics have
read Bernanke's 1983 paper and the subsequent work it inspired. The
remaining papers are somewhat more difficult to characterize because
they deal with a wide variety of subjects. Let me give some
examples.
Students of Mexican history will welcome the chapters by Graciela
Marquez and Aurora Gsmez-Galvarriato. Both make extensive use of
archival data and both question commonly held beliefs about Mexico
between 1890 and 1920, the last years of the Porfiriato (the
dictatorship of Porfirio Dmaz from 1876 through 1910) and the
opening decade of the Mexican Revolution (which lasted until 1920,
1938, 1968, or last week, depending on how you view Mexican
history). Marquez shows that it is not enough to simply label
Porfirian Mexico a high-tariff country since nominal protection fell
sharply during the 1890s. It never recovered its former levels
before the outbreak of the Revolution. Gsmez-Galvarriato looks at
real wages in the Santa Rosa textile factory in Veracruz. Stability
in real wages through 1907 gave way to a sharp decline between 1907
and 1911. A marked recovery occurred between 1911 and 1913, only to
fall sharply during the bitterest years of the civil war
(1914-1916). From 1917 through 1920, real wages recovered, but did
not rise much above their level in 1907. I think Marquez and
Gsmez-Galvarriato are saying that the stories we tell about Dmaz and
the coming of the Revolution are not likely to hold up under the
careful scrutiny of a new historiography informed by detailed
industry and firm-level studies. Where this leaves the big studies
of the Revolution, such as Alan Knight's, which retells many of the
old verities, remains to be seen.
Both William Summerhill and Alan Dye contribute chapters that
represent aspects of larger projects. Dye's study of the contracts
between sugarcane growers and millers in Cuba lays to rest the myth
that the contracts between growers and millers evolved to exploit
the growers, upon whom they were coercively imposed. Summerhill's
paper on Brazilian railroads concludes that "The direct impact of
the railroad in Brazil places it comfortably within the top tier of
the cases for which economic historians have constructed social
savings estimates" (p. 391). Interested readers can certainly learn
more from Dye's _Cuban Sugar in the Age of Mass Production_
(Stanford, 1998) or Summerhill's forthcoming _Order Against
Progress: Government, Foreign Investment and Railroads in Brazil,
1854-1913_ (Stanford, scheduled for Summer 2000).
Papers by Lee Alston, Gary Libecap and Bernardo Mueller; Andri A.
Hofman and Nanno Mulder; and Carlos Newland round out the volume.
All are well worth reading.
A final observation: It's ironic that economic historians of Latin
America stress the study of institutions, a theme that features
prominently in this volume as well. For those of us trained in the
early 1970s, "institutional history" was something to be avoided,
the province of dullards and the unimaginative. It was a matter of
faith, enshrined in a famous article by James Lockhart, that the
only real historians of Latin America were social historians, and,
well, social historians had better things to do than pay attention
to, of all things, institutions. Institutions didn't affect the
behavior of real people, and real historians studied real (read:
ordinary) people. My how times do change. There isn't much doubt
about who's doing the interesting history of Latin America these
days. Not a few of them are represented in this excellent
collection. Now if only I could get them to explain the Asiatic mode
of production to me, my life would be complete. Fat chance.
Richard Salvucci teaches at Trinity University. He is co-author with
Linda K. Salvucci of "Cuba and the Latin American Terms of Trade in the
Nineteenth Century: Old Theories, New Evidence," forthcoming in the
_Journal of Interdisciplinary History_ in Autumn 2000.
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