Two centuries of hopes and fears: A history of disappointment

OVER the past two centuries Latin America has seen bursts of exaggerated optimism interspersed with long periods of disappointment. It was the original “emerging market” long before the term was invented. Indeed, at the time of its first centennial celebrations in 1910 parts of Latin America seemed to have emerged already. Argentina was one of the world’s ten richest countries; in Mexico guests from around the world took part in lavish banquets organised by Porfirio Díaz to celebrate more than a quarter of a century of stability under his constitutional dictatorship.

But only weeks later the Mexican revolution broke out and was to last a decade. Argentina, for its part, started a long decline from 1930 onwards. Brazilian leaders in the 1950s and then again in the 1970s claimed that their country had taken off, only to see it engulfed by economic turmoil both times.

All in all, the record of the past 200 years has been dispiriting. Income per person in Latin America around 1750 appears to have been broadly similar to that in the future United States, but then an enduring gap opened up. By 1820 the figure had slipped to only about half that in the United States, and by 2000 it had dropped to little more than a fifth, according to the late Angus Maddison, an expert on economic history. Even more galling, over the past four decades many Asian countries have begun to close their income gap with the United States.

What caused the gap with the United States to widen was a pair of disastrous periods for Latin America. The first was from 1810 to 1870. The independence struggle in Spanish America (though not Brazil) was far longer and bloodier than in the United States, and the new states took much longer to achieve political stability.

Between 1870 and 1930—the first great period of globalisation—Latin America did reasonably well, slightly narrowing the income gap with its northern neighbour. But it fell behind again from 1970, mainly because of bad policies, just when Asia began to forge ahead. Latin America took state-led industrialisation behind tariff barriers to extremes, financing it with debt when the oil-price rises of the 1970s slowed the world economy. After adopting liberal economic reforms, the region has begun to narrow the income gap with the United States once again, clearly so since 2003.

The causes of Latin America’s relative failure to develop are the subject of intense ideological debate there today. Popular explanations have included a difficult geography, the cultural legacy of Iberian Catholic corporatism and, as Venezuela’s Hugo Chávez argues, exploitation by outsiders and especially the United States. But many serious scholars now blame the region’s extreme and persistent inequalities, which went hand in hand with political instability, poor policy choices, weak institutions and the undermining of the rule of law.