Neocolonialism in Latin America

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Neocolonialism in Latin America

The term neocolonialism is used by some authors to describe the relationship of nominally independent countries in Latin America with metropolitan or developed countries from independence in the 1820s to the present. These authors, often referred to as the dependency analysts, stress a continuum whereby Latin America was kept in a condition of economic and, often, political subordination, and its resources were—or so it is claimed—organized in such a way as to promote the interests of developed countries rather than to assure the development of poor ones.

In the half-century after independence, the dominant international power, the United Kingdom, played a controversial role in the continent. The dependency analysts stress, with varying degrees of subtlety and insistence, that British "informal imperialism" replaced Iberian formal empire. They argue further that Latin American governments opened up markets to an influx of British manufactured imports, which served only to sabotage nascent cottage and artisan industries that could otherwise have served as stimuli to a transition to factory industrialization. In other words, Latin American elites, who embraced fashionable ideas of free trade that were rooted in prevailing assumptions that both partners in an international trading relationship benefited equally, were deceived. There was, in practice, no such equality, because Britain enjoyed the advantages of greater experience in international business, control of shipping lines, and a flourishing shipbuilding industry, and could threaten to use the Royal Navy when challenged. A system of international trade, reinforced by commercial treaties that were a precondition of diplomatic recognition of independent nations, was geared to British needs.

This argument is rejected by liberal authors. Some argue that Latin America enjoyed no opportunities for industrialization and development in this period. The region was a marginal component in the international economy of little sustained interest to the British. Indeed, factory industrialization was barely an option for Latin America, owing to shallow markets, an absence of cheap, accessible coal deposits, and costly internal communications. Latin American authors, in particular, contend that deep-seated rigidities, notably the interaction of latifundios (vast landed estates) geared more to prestige than to profit, and minifundios (small, nonviable plots), aborted possibilities of significant growth in agriculture, and precluded the emergence of both a surplus for reinvestment in factory manufacturing and significant rural markets for industrial products.

The consolidation of the world economy between circa 1870 and the global depression (1929–1933) brought considerable growth to Latin America, associated with the export of foodstuffs, minerals, and later oil. The continent was the recipient of a substantial injection of foreign capital and new technology, as well as a considerable influx of European immigrants. According to dependency analysts, this was a period in which international economic relationships were revised in such ways as to guarantee continued subordination of Latin America to the major industrialized countries, which came to include the United States, and, less important to Latin America, Germany and France. For the first time, Latin America was exposed to new capitalist practices, especially the consolidation of U.S. corporate business in agriculture, mining, oil, and banking. While not uniform in their diagnoses, dependency analysts placed a heavy stress upon the sharpening of social and economic inequalities during these decades.

Foreign capital, technology, and skilled management were concentrated in the external sector, and domestic capital was lured by it, frequently leaving the sector producing food staples for domestic consumption—cereals, beans, poultry, vegetables—starved of capital, credit, and technology. Latin American allies of foreign firms in both the state and domestic business cooperated in practices that perpetuated low incomes and little welfare for majorities of the population, while an excessive proportion of profits in powerful foreign-owned businesses was repatriated to the developed countries. Small countries, especially in the Caribbean and Central America, where monocrop export production operated by U.S.-based enterprises was dominant, were vulnerable to unpredictable shifts in the price and demand for their export commodities, which played a part in fostering political instability. This, in turn, provided the United States with pretexts for naval interventions.

The progressive erosion of economic independence and the emergence of distorted, lopsided economies where balanced growth was impossible condemned Latin America to the "deepening" of underdevelopment, so that its economies served European and U.S. needs, rather than those of most of its own citizens. What dynamic diversification was bought about by external linkages, through, for example, greater access to borrowing from Wall Street in the 1920s, tended to benefit domestic minorities and foreign business at the expense of the regions and sectors where capitalism lacked dynamism.

Liberal authors held a radically different view. They claimed that Latin America enjoyed considerable benefits from the normal forces of the market and of competition, and, that, far from being exploitative, foreign connections brought new, tantalizing opportunities for Latin American entrepreneurs and taxable wealth that consolidated and modernized Latin American states. The incipient transnational firms engaged in communications, sugarcane milling, and meatpacking supplied an invaluable example to Latin American businessmen of how business could be organized so as to lower the costs of production and explore economies of scale. Thus Latin America was the fortunate beneficiary of a long period of "export-led growth" and of the cumulative effects of small technical changes that promoted output and productivity. Latin American nations did not achieve a transition to "developed" status, because the opportunities for one did not exist.

The 1930s and early 1940s were decades of considerable flux, in which Latin American statesmen and businessmen were compelled to reappraise their priorities. Historians debate how far international capitalism withdrew from Latin America during these years, and how far they represented a mere hiatus in its advance. Some dependency analysts argued that the combined crises of the depression and World War II (1939–1945) provided the leaders of the continent with new opportunities to reorient its economies along inward-looking lines.

Some of this writing flies in the face of the empirical evidence. Ad hoc manufacturing growth and extemporized responses to acute problems of unemployment and incomes during the depression crisis are over-easily confused with coherent and consistent strategies of industrialization and development from within, which were impossible in countries where economic instability went hand in hand with a high turnover of incumbents in political office. Yet dependency analysts and their critics converge in seeing this period as critical to the understanding of contemporary Latin America. Most agree that a paucity of investigation at national, sectoral, regional, and workplace levels precludes more than a shallow interpretation of these decades. What was manifest, however, was that sustained crisis in Europe meant that the external ascendancy, economic and political, of the United States across the continent was undisputed.

see also Neocolonialism.


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Albert, Bill. South America and the World Economy from Independence to 1930. London: Macmillan, 1983.

Bulmer-Thomas, Victor. The Economic History of Latin America since Independence, 2nd ed. Cambridge, U.K.: Cambridge University Press, 2003.

Cardenas, Enrique, José Antonio Ocampo, and Rosemary Thorp, eds. An Economic History of Twentieth-Century Latin America; Vol. 1: The Export Age: The Latin American Economies in the Late Nineteenth and Early Twentieth Centuries. Basingstoke, U.K.: Palgrave, 2000.

Cardoso, Fernando Henrique, and Enzo Faletto. Dependency and Development in Latin America. Translated by Marjory Mattingly Urquidi. Berkeley: University of California Press, 1979.

Haber, Stephen, ed. Political Institutions and Economic Growth in Latin America: Essays in Policy, History, and Political Economy. Stanford, CA: Hoover Institution Press, 2000.

Thorp, Rosemary. Progress, Poverty, and Exclusion: An Economic History of Latin America Since Independence. Washington, DC: Inter-American Development Bank, 1998.