Pre-Depression LAC

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Latin America:Latin America: 18201820 19301930

From Independence to the eve of Great Depression


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There will be a general overview of Latin America countries (LAC) on

each of the three areas: Economy, Society and Politics

After the overview, there will be specific section, exploring each area in

detail

The areas inter-connection and viewpoints will be explored in the tutorial

The next background power-point will be about the Great Depression.

StructureStructure of this presentationof this presentation


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Guerra a muerte(1814 20): Conventional warfare decimated LAC population

Cost of maintaining armies leave little capital

Independence cut off trade with Spain, a major trading partner Neglected communication systems between former colonies mean the loss of

oversea trade is notcompensated by raise in regional trade.

PrePre--DepressionDepression Latin America:Latin America:

Economy (I)Economy (I)


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Post-Independence (1820 30)

Post-independence violence further deters regional trade, e.g. Mexico before 1850, Brazil until

1840s.

New governments, with substantial public debt for army upkeep, unable to rebuild the economy.

(Prime debt source being UK)

Governments inability to collect tax revenue, plunging it further in debt.

1830 1850

LAC export of primary goods to North America steadily increases.

At the same time, Import from European industries for manufactured goods increases

Small-scale LAC industry out-competed by European (especially British) Industry, leaving thecontinent with little industrial base to produce manufactured goods

LAC export remain to be primary products, e.g. Chilean nitrate, which is plentiful but prices

fluctuates greatly in the international market, whereas manufactured goods price remain

relatively constant.

PrePre--Depression Latin America:Depression Latin America:

Economy (II)Economy (II)


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Key points:

Economy came to a virtual standstill throughout the independence war

Governments cannot stimulate economy due to debt, and its incapability to raise

independent revenue, i.e. taxes

Low population means 1) labour cost is high, further discouraging output.

2) Small domestic spending = lack of consumer

Low population and high prices for goods equates to a weak domestic market

Weak domestic market means

Higher dependence on export market for economic growth; No mass market to grow an industrial base

Export remains to be primary product, leaving the economy highly sensitive to

change in international prices.

PrePre--Depression Latin America:Depression Latin America:

Economy (III)Economy (III)


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Independence war drove out the Spanish colonial elites, leaving a political vacuum. (except

Brazil)

Indigenous people, who fought on both sides of the independence war, pleased neither the old

colonial, nor the new elites.

At the same time, indigenous population fall dramatically, leaving a labour gap The independence war created a meritocratic military, which weaken social stratification

based on race and status. And widen the pool of new elite.

Nonetheless, this changed little on the unequal land distribution, favouring large landowners.

Despite increased women participation in public sphere, with examples such as Manuela

Saenz, women participation post-independence witnessed little change from the colonial

period.

PrePre--Depression Latin America:Depression Latin America:S

ocietyS

ociety


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Two movements: Decentralisation/Regionalisation vs. Centralisation.

Creole (native of pure Spanish descent) Landowners withdrawal from politics leaves political

power gap, which are filled by army generals-turn-politicians, known as caudillos

Caudillos government are largely unstable, due to weak government finance deny caudillo to

reward their followers.

Emergence of strong-man: Not exclusively military, individuals emerge to strengthen

central authority, e.g. Diego Portales (Chile), Juan Manuel de Rosas (Argentina)

Indigenous Indians lost special status under colonial law and communal lands---Whilst

military and politics increase social mobility for middle class mestizos (people of mixed

European and indigenous descent), indigenous Indians suffered.

PrePre--Depression Latin America: PoliticsDepression Latin America: Politics

Outliner: Brazil.1. They acquired a ruling elite, when the Portuguese crown migrated to Brazil during the

Peninsular war.

2. Unlike other Latin American countries, they inherited a monarchy, not a republic.

3. Military played little role in widen membership of elite.


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EconomyEconomy


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Majority of LA elite, old and new, adhere to liberalism and free trade.

Export-Import model was found on liberalisms notion of free trade with little to no

protectionism, and comparative advantage, i.e. countries specialise in producing goods with

minimal input, and exchange surplus.

In practice, it means:

manufactured goods from industrialised Europe and North America.

Key trading partner, before independence, was Spain(due to a closely controlled trade

monopoly to the New World by Spain)

After Independence, key trading partner gradually became Britain, Europe, than North

America.

Liberalism and ExportLiberalism and Export--ImportImport

modelmodel

List ofLA raw materials

- Chile: guano and nitrate fertilizers, wool, industrial metals(esp. copper)

- Argentina: Beef, cow hides, wool, wheat,

- Brazil & Columbia: coffee

- Cuba: Sugar

- Peru: Silver and Sugar


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Economics: Too much resources, no one else wants them, and those do offer a tempting price---Why not?

Abundance of raw materials

High raw material prices due to high demand from industrialising nations.

Foreign imports superior quality and scale of production drove out local industry, deepen the dependence on

foreign manufactured goods.

Self-sustaining landowners, ranchers and mine owners have no domestic market, with the export market often

their only.

Highly stratified socioeconomic structure, with 90% population being manual labour, there is little scope for a

domestic market for local manufacture goods

Politics: No one say otherwise!

No powerful industrial lobby.

Chief beneficiaries of Export-Import model, i.e. merchants, are economically and politically powerful

LA governments are heavily indebted to its customers.

Increase protectionism would have discouraged trade, and reduce tariff revenue. Without tax revenue,government often heavily dependent on it.

Social: We cant do any other way

The combination of labour-intensive primary industry, i.e. agriculture, mining, and lack of skilled labour force,

undercut development of manufacture industry, and favour primary industry

Wide consensus amongst LA elites in progress only through free trade. A consensus encouraged by its

European and American customers.

WhyWhydiddid ExportExport--Import work?Import work?


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Volatile international price for raw materials destabilise LA economic growth

Export-Import model leave little excess money to build up the necessary capital toreinvest and improve production

Foreign import gave often destroys local manufacture industry

Investment depends on industrial nations, e.g. Britain.

Without industrialisation, economic liberalism does not translate into politicalliberalism like industrial nations

Without local capital, Impetus for capital investment are largely foreign. Inconsequence, key economic sectors, e.g. mining, railway, are left in foreign hands.

The problem with ExportThe problem with Export--ImportImport

In Summary: Export-Import model made LA countries depend on the

international economy entirely to survive, in the most unpredictable way.


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Objective: Economic autarky by building local manufacture industry

Why?Reduce dependence on exporting raw material for income

Reduce dependence on foreign manufactured import

Improve current balance of payments health by reducing import.

Regain control of industry and raw material ownership by capital accumulation

How?Build industrial base to manufacture consumption and capital goods for domesticmarket.

Stage 1: Purchase capital goods to create the light industry base for consumers goodsproduction, e.g. TV

Stage 2: Purchase capital goods to create the heavy industry base for producing capitalgoods, e.g. Tractors

ImportImport--SubstitutionSubstitution IndustrialisationIndustrialisation(ISI): The Theory(ISI): The Theory


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SocietySociety


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The colonial militia, established by Charles III(1759 88) and staffed by creoles, became the

core of the independence army. (By 1800, it has 23,000 LA-born members)

Spains substantial military resources meant Spanish Americas gained its independence only

after a long war(1810 1830).

The military circumstance of the war enabled talented mestizosto reach commanding

positions, achieving fame and power in process. This is previously an exclusive domain of

traditional, established Creole families andpeninsulares Examples: Jose Antonio Paez (Venezuela), Jose Maria Morelos (Mexico)

After the war, a combination of large military establishments, lack of alternative careers, the

power vacuum left from the colonial elites, as well as lack of competition from the

landowners and ranchers, who maintained much of the economic power, mestizos generals

entered into politics as caudillos.

Military: Legacy of IndependenceMilitary: Legacy of Independence

Outliner: Brazil

Military weakness of the Portugal Crown meant that, unlike Spanish Americas, Brazils independence

was gained was less bloodshed.

But this also implies no emergence of military leader such as Paez, Morelos, Bolivar or San Martin.

As a result, politics remained in the domain ofhacendados (Landowners), estancieros (ranchers) and

merchants.


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During the colonial times, economic power, in the form of land, retained in threehands: The Crown, the Church and Landowners, as well as a small number ofindigenous communities, retaining their communal land.

After independence, indigenous communities have lost their special status, with it,their communal land.

As a result, Indigenous people often are economically and politically under, in somecases not, represented to their majority status in demography(e.g. Peru, Mexico)

Another effect of land distribution inequality is a highly stratified socioeconomicstructure, this nature restricted political debates and decision making to the elite,usually less than 5% of population.

Land and Social HierarchyLand and Social Hierarchy


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Trade Union: To keep up with expanding export-import trade, countries without endow of a large

indigenous population, such as Argentina, began to pursue aggressive pro-immigrationpolicy, especially in 1880s.

(Compare to Mexico, with its large indigenous endowment, meantMexico did not pursuesimilar policy)

This creates a growing working class population, e.g. railway workers, docks worker, whichorganised themselves by union of craft(similar to guild) rather than industry, reflecting thesmall size of LA industry

As firms in Latin America are of small scale, and concentrated on export-import industries,such as transport, industrial actions seriously disrupt export-import trade.

With the countries dependence on export-import industry, disruption in trade present anequally serious disruption in national economy.

Elites, or governmental, responses varies, from cooperation democracy/Populism torepression/strong-man.

In turn, this creates variety in political system, from cooperative democracy to integrativedictatorship.

Church

Many Latin American countries are predominately Catholic, this also gives the church highlevel of social legitimacy. As it will be seen, the church is often a powerful social forcecountering government actions.

Social forces: Trade Unions and ChurchSocial forces: Trade Unions and Church


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Machismo:based on chivalry, coballerosidadand other medieval conceptions ofknighthood, men in Latin America was often expected to express themselves in public

sphere, often on the womens behalf. Marianismo: Named after the VirginMary, womens role in Latin America were

confined at the private sphere, whilst remain deferral to men in public matters.

This social conception has affected womens role as a political force, and itscontrollability.

MachismoMachismo andand MarianismoMarianismo: Gender: GenderMattersMatters


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PoliticsPolitics


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As export-import trade expands, the emergence of workers and professional class, and their

economical and political demand, provides a threat to the elites interest.

On the other hand, partly out of belief in liberalism, partly out of interest to ensure minimal state

intervention in export-import trade, the elites were encouraged to participate in politics to safeguard

their interest.

The political emphasis of the elite were stability and social control. Namely, no disruption on trade,and suppression of social forces, such as trade union, to preserve stability. In turns, attract foreign

investment and stimulate economic growth.

In turns, foreign investments are used to further centralise power, i.e. use of railway to mobilise

national forces against local authorities.

This is impossible to achieve with particularistic caudillos

In short, the elite seeks to centralise power to a national bureaucracy.Two methods:

Direct oligarchic control of the government, with occasional co-operation, e.g. Chile, Argentina.

Support dictatorial strongman, e.g. Porfirio Diaz (Mexico), Dom Pedro II (Brazil)

The Fall ofThe Fall ofCaudillos, or,Caudillos, or,

TheR

ise ofN

ational BureaucracyTheR

ise ofN

ational Bureaucracy


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Key Comparative themes:

- Economic: Domestic-based, or foreign driven, growth?

Concentration vs. diffusion of wealth?

- Social: Stratification or social mobility?

Men vs. Women?

Indigenous vs. Creoles & Metizos

- Political: Centralisation vs. Regionalisation?

Tax vs. Rent

Latin America: the selfLatin America: the self--convincedconvincedperipheryperiphery


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Next:Next:the Great Depression and Latinthe Great Depression and Latin

Americas reactionsAmericas reactions

Pre-Depression LAC

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