Latin American Economics Quiz I

Outstanding features of colonization

Government, extraction of wealth from Americas

Spanish colonial administration

Hierarchical, well defined, loosely organized -Distance between Old and New Worlds/slow communication led to a good amount of local autonomy -Visita: on the spot investigation of subordinates -Residencia: judicial inquiry into public behavior -Crown maintains good control through principle of legitimacy

5 types of freedom (Sen)

INSTRUMENTAL freedoms: -Political freedoms -Economic facilities -Social opportunities -Transparency guarantees -Protective security These means link to the ends (constitutive freedoms)

Saving and the current account

If government spends more than its tax revenues (i.e., budget deficit or government dissaving) and private saving stays constant, then the current account will run a deficit.

Conclusions about changes in the world economy 1840-1913

"1. the existence of a NUCLEUS WHICH ACHIEVED A CONSIDERABLE ADVANCE IN THE PROCESS OF CAPITAL ACCUMULATION, concentrating a large proportion of industrial activity, practically all centered on the production of equipment; this nucleus was also the finance centre for world exports of capital goods, controlled the transport infrastructure in international trade, and was the major import market for primary products." "2. the EMERGENCE OF THE SYSTEM OF INTERNATIONAL DIVISION OF LABOR UNDER THE HEGEMONY OF THIS GROWTH POLE; the inducement to specialize favored rapid settlement of vast empty spaces in temperate zones and the integration of other areas into the world market through the export of primary products." "3. the CREATION OF A NETWORK FOR TRANSMITTING TECHNOLOGICAL PROGRESS as a subsidiary of the international division of labour; this network facilitated the export of capital and at the same time linked capital outflows to the system of international specialization which it tended to consolidate; since production of capital goods was concentrated in the nucleus described above NEW PRODUCTION TECHNIQUES also remained geographically concentrated, benefiting those activities in which the dominant economy already had experience or in which it had more direct interest. Hence the evolution of technology was conditioned by the system of international division of labour that emerged with the Industrial Revolution."

Dependency theory influential factors

(1) the economic analyses of the United Nations Commission on Latin America (ECLA), which found severe weakness in the processes of growth that depended on the export of primary products,' and (2) the Marxist concerns with the role of imperialism, economic transformations from feudalism to capitalism, and the opportunities for revolution.

1800-1820s

- Haiti (1804): Toussaint l'Ouverture and Jean Jacques Dessalines; l'Ouverture killed in 1802. Dessalines continued and declared independence in 1804. - Mexico (1810). Hidalgo had already proclaimed the end of the caste system and the legal equality of all Spanish subjects. - Paraguay (1810). - Chile, Venezuela (unsuccessful). At the same time or originated by the events happening in Europe. Napoleon invades Spain exiling the King and son (1808) out Spain until 1812. Bolivar (1819) and Sn Martin offered the slaves freedom if they joined them. -Mexico and CA (1821) Rest of the 20 countries of LA of Spanish America had achieved independence.

Hacienda system

-Patrimonialism -Land owner exerts authority; administration of estate highly personal. Capitalistic marketplaces emerge through trade. -Regional economies seldom diversified and rely on single product -Stagnation more common

Viceroys

-New Spain: Mexico, Spanish Caribbean islands, Central America except Panama -Peru: centered in Lima. Panama, Tierra del Fuego -New Granada -River Plate

Origins of native Latin American people

-Old theory: they came through Beringia about 20-40k years ago -New refined theory: 15-17k years ago -Two waves during a period of about 2k years -Divided when they enter the continent: East and South -Two clearly different mtDNA groups

Srivinasan

-"HDI is the equally weighted sum of deprivation of a country with respect to each of three components: life expectancy at birth, literacy, and real income per head." -"The only conceptually appropriate metrics for valuing functionings and capabilities have to be personalized prices of values, namely, sets of values that are specific to the situation, location, time, and state of nature." -"The interesting issue is not conceptual but empirical!" This criticism goes to the heart of the applicability

Dependency definition

-"[Dependency is]...an historical condition which shapes a certain structure of the world economy such that it favors some countries to the detriment of others and limits the development possibilities of the subordinate economics...a situation in which the economy of a certain group of countries is conditioned by the development and expansion of another economy, to which their own is subjected." (Theotonio Dos Santos, "The Structure of Dependence" 1970) =It is possible to divide the Dependency Theorist in about three groups: liberal neoclassical, Marxist and a more obscure group called world system theorists. =Relations might be called: dominant/dependent, center/periphery, or metropoli/satellite

Changes in world trade

-1.5 billion in 1820s -3.5 billion in 1840s -40 billion just before WWI "The same phenomenon occurred in countries exporting primary products - the case of the Latin American countries - in which exports were developed at the expense of subsistence economic activities."

Adam Smith

-An Inquire onto the Nature and Causes of The Wealth of Nations -March 1776 -The concern of Smith was understanding and explaining how countries (specifically England) develop. -Built a model in which L(abor), T(land) and K(capital) were essential part of the production process. -Free market would bring people to well being. -"Civil government, so far as it is instituted for the security of property, is in reality instituted for the defense of the rich against the poor or of those who have some property against those who have none at all"

Spanish administrative posts

-Audiencia: highest royal court/consultative council in New World -Presidencias and captaincies-general: major subdivisions -Cabildo: municipal government

Cities in New World

-Baroque -Radiate king's power -Order and extravagance -Wealth and power of the monarch and God -Brazilian cities: walls to protect from foreigners -Mexico City: grandeur and squalor

Reasons for decline of native population

-Battles of conquest, seizure of agricultural lands, disruption of families, fall of birthrate, disease, discouragement. 1/10 of what it had been. Accelerated racial mixing.

Phisiocrats

-Believe that the land was the only source of wealth in direct contrast with the Mercantilists. Phisiocrats understood that production was the source of wealth and exchange. -Proponents of laissez-faire. Opposed all government intervention not though of taxes but regulation. (wording ?) -They are the economic thinkers who introduce the "free market" concept. -Two main thinkers of this school: A. R. J. Turgot and F. Quesnay. -Most well known of these economic thinkers was F. Quesnay, author of Tableau Economique.

Brazil (1808-1822)

-Braganza run away from Lisbon (1808) -Moves the headquarter of the kingdom to Brazil -King Dom Joao VI -Joao VI left Brazil back for Portugal (1821) -Dom Pedro son of the King declared independence of Brazil (1822) -Economic Ideas: Brasil had phisiocratic ideas, 1822

Enlightenment

-Combat ignorance, superstition, and tyranny (Voltaire & Rousseau) -Challenges to absolute monarchy questioned; the rights of rulers as well as the ruled (Crown and Orthodoxy of Church) -Beliefs in the equality of men -Supremacy of the intellect

Audiencias

-Councils to help administer to the vast viceroyalties. Clumsy and corrupt; quickly constructed

Countries that didn't exist until after 1820s

-Cuba -Belize -Guianas -Panama -Puerto Rico -Dominican Republic -Caribbean nations (i.e. Trinidad and Tobago, Grenada, Cayman, etc.)

Factors underlying the decreasing Terms of Trade (ToT)

-Demand for primary goods expands less rapidly than demand for industrial goods due to a lower income elasticity (ENGEL'S LAW). A 10 percent increase in world income does not raise demand for coffee by 10 percent. In the long term, there is a shift in consumption to goods that involve more skill and less raw material. -The TECHNOLOGICAL SUPERIORITY of the industrial countries means that their exports embody a more sophisticated technology and their prices embody profits from innovation, including the development of synthetic substitutes for primary commodities. -The STRUCTURE OF LABOR MARKETS is different in industrial and developing countries. In industrial countries, technical progress leads to higher factor incomes rather than lower prices of exports. In developing countries, productivity gains are not translated into higher wages because of widespread unemployment; instead, prices decline. An increase in productivity thus benefits overseas consumers rather than developing country producers.

Sen: constitutive and instrumental roles of freedom development

-Development as a process of expanding the real freedoms that people enjoy -Expansion of freedom viewed as both (1) primary end and (2) principal means of development (1) and (2) respectively called the "constitutive role" and the "instrumental role" of freedom development -Constitutive role relates to importance of substantive freedom in enriching human life; include avoiding starvation, premature morbidity, literacy, political participation, uncensored speech (END) -Process of development has to include removal of deprivations from freedoms -Instrumental role: concerns the way different kinds of rights, opportunities, and entitlements contribute to the expansion of human freedom in general and thus development (MEANS)

Sen's ideas about development

-Development as freedom -Capabilities: substantive human freedoms -"An adequately broad view of development is sought in order to focus the evaluative scrutiny on things that really matter, and in particular to avoid the neglect of crucially important subjects." -Constitutive freedoms and instrumental freedoms. -Freedom as development or constitutive part of development. -Freedom as instrument as means/tools to work toward development/freedom -Sen argues that capability deprivation is a better measure of poverty than low income, because it can capture aspects of poverty hidden by income measures. -Famines are usually caused by a lack of purchasing power or entitlements, not by actual food shortage — famine-struck areas sometimes continue to export food — and are easy and cheap to avoid, with state employment schemes the most straightforward approach -A.1 The most important weakness of Sen's chapter (book) is not explaining how to move from a stage of undevelopment to a level of development. Meaning from a level without freedoms to a level of having freedoms (as listed.) -A.2 It's relevant since give us a framework for which to struggle to achieve.

Initial Iberian colonization

-Did not want to conquest and settle, wanted to trade. Since Americans had little interest in trade, want to extract tribute instead -Profits made up for travel costs -Gold: imperishable, easy to ship, valuable. New Granada (Colombia) principle source of gold. Incentive to settle Southern Brazil -Not a lot of the profit stays in Americas; Iberians lose a lot to the English as well -Cities grew where metals appeared; farming and agriculture needed to support them. End up producing more than mining, also good for American welfare. Land and labor systems that result form economic and social patterns of future Latin America

Other points about IS

-Earlier arguments emphasized the important of diversification, of the creation of new activities, possibly at the expense of the specialization that comparative advantage (CA) dictates. -The less CA is violated, THE LOWER IS THE COST of the investment. -Of course, it is the cost of creating a new economy. It is the benefits relative to costs what matter. (Def. comparative cost estimating: Experience based COST estimating in which COSTS associated with current JOBS are compared with costs associated with previously completed jobs for which detailed data is available).

Conquering Indians

-Easier in highlands where society was complex and institutionalized. Had nowhere to flee. Systems of administration replaced w/ conquerers. -Lowlands more difficult due to organized tribes and villages of extensive agriculturalists. Thus, conquer families. -Mestizos identify with dominant European populations -Flee to remote areas where some of these populations still live -African slaves were more inhibited -Some Indians develop attack methods against Europeans: result was chronic warfare

Columbus Trips

-First trip: Aug. 3, 1492 from Palos, Spain - October 12, 1492 -Second trip: Sept. 25, 1493. Introduction of slavery by CC February 1495.) CC stayed til Sept., 1495 -Third trip: May 30, 1498-October 1500 -Fourth trip: May 9, 1502-Nov. 7, 1504 -Others: Narvaez (1519), Balboa (1513) and Magellan (1525); Portuguese exploration

David Ricardo

-Followed Adam Smith on free market -Applied the benefits of free market to international trade (comparative advantages)

Spanish colonial wealth

-Gold, silver, dyes, chocolate beans, hides, sugar, spices -Mines in Mexico, Bolivian highlands -Use new techniques, investments, freighting methods not previously seen in the Americas

What kind of IS?

-If the accepted rationale of IS is to PROTECT AND INFANT ECONOMY while it matures to the point that it can perform satisfactorily in the world economy, the society MUST, WHILE PROTECTED, LEARN -Protection might induce monopolists to enjoy such protection causing cost to society and not changing as expected. It might create distortion which in this context means that the new activities are inconsistent with the economy's factor endowment. -It is important to the argument of this chapter that THE PROTECTION it studies DOES NOT IMPOSE MAJOR DISTORTIONS. The argument for IS is NOT AN ARGUMENT FOR DISTORTIONS or that distortions are not important -A question of WHO IN THE SOCIETY BEARS THE COST OF THE INITIAL STAGE in contrast with free trade. This cost generated by the reduction in goods and services due to the new state of protection might be seen as an investment.

Indian population growth

-Indigenous population 1% or less in Euro- and Afro-America -Exception: Guianas -Population growth has been slow overall but the indigenous population has been increasing more quickly than the general population -Dramatic increases in Chile, Venezuela, C. America; has doubled in some places -Villages politically independent; tribal identity result of common language and customs. Warfare frequent; shamanism is developed -Closed corporate peasant communities -Highly developed crafts e.g. textiles, pottery, jewelry; specialization depends on the village. Introduction of cheap manufactured goods induces competition -Season migration on cash crops -Nuclear family basic social unit

Pre-Classical Political Economists (15- C)

-Mercantilism (gold&silver) At the beginning of this period, the term used was bullionism, which in practice meant the hording of gold and silver (countries increase wealth by holding as much of these metals as they can). Government has control of foreign trade. -From the late middle ages, it was called simple mercantilism. In this system wealth went toward a. the merchant capitalist; b. rulers (king); govern. employees. c. Rent-seekers: not the effort of their work. d. Domestic and International Trade

Mercantilism

-Mercantilist ideas promoted European expansion and rise of commercial capitalism -Impetus to empire -Dictated trade policies -Bullion distinguished successful mercantilist programs -Commerce highly controlled; Crown had many monopolies -Government controls foreign trade (16th century - late 18th century) -Increase wealth by accumulating mass amounts of gold and silver. Need favorable balance of trade. Colonies play a major role (produce raw materials and act as a market to import manufactured goods) -Portuguese mercantilism not as effective as Spanish mercantilism -Latin Americans eventually conclude mercantilism doesn't meet their needs

Jevon, Merger (1871) and Walras (1873)

-Published the development of the ideas defended previously by Say, Senior and Bastiat which put together the theoretical foundations of "marginalism," theory based on the general utilitarian philosophical perspective. -Utility is related to exchange value. Therefore, value depends entirely on utility. -Walras: Introduction of the GE model (prices go to overall equilibrium rather than partial equilibrium) -"The reason why the price of diamonds is higher than that of water, for example, owes to the greater additional satisfaction of the diamonds over the water. Thus, while the water has greater total utility, the diamond has greater marginal utility."

Corollary (as it relates to saving and the current account)

-Reducing the current account deficit (↓-CA or X) requires increasing private saving (∆S) relative to investment (I), and expanding domestic output (∆Y) or income relative to domestic spending (C - T), OR -By reducing the government deficits, either by reducing spending or by raising revenues or both.

Karl Marx

-Role labor plays in production and the accumulation of K (growth). -Profits and their accumulation a result of the surplus of extra value generated by labor or surplus-value, as Marx called it, and appropriated by the capitalist. -Wrote his critique of the capitalist system based on his "labor theory of value" in a planned 3 chapter document called Das Kapital or Capital. He died before seeing the first chapter published.

Pre-Colombian America

-Size: estimates vary from 10 to 100 million people. -Probably close to 80 million. - 60 million in intensive agriculture - 20 million in lowland extensive agriculture - 1-2 million hunter-gatherers Population decimation: - Dropped 95% by 1650 (about 130yrs) to 4m

Spanish settlement

-Spain had few domains outside the Americans, unlike Portugal -Settlement was steady. Agriculture rapidly progresses. -Merchant class develops to handle trade; exercise virtual monopoly over trade and commerce in Spanish America -Plata region a symbol of Spanish growth. Argentina thrives; Buenos Aires develops strategic importance -Village system permitted maximum use of few clergy; become self sufficient and raise some commercial crops -Missions ward off foreign threats

Haciendas

-Specialize in crops -Originally to feed mining towns, later facilitate international trade

Portuguese colonial wealth

-Sugar, gold, diamonds, chocolate, rice

Rise of Napoleon

-Tamed the French Revolution Invaded Haiti; Attacked Spain: weakened the power of the Crown; Attacked Portugal - make the King run away to Brazil -Anti‐tax law revolts Tupac Amaru in Peru (1780) and New Granada (1781); Brasil: Phisiocratic ideas

Delinking (ISI)

-The basic characteristics of a strong economy are flexibility and the capacity to transform resources into a wide range of products, and the capacity to determine its own economic destiny. There are several reasons why a non-growing economy needs protection to develop these characteristics. -Development essentially is a process of LEARNING and SEARCHING in the context of continues change. -Protection is intended to extend the opportunities for this learning process. More accurately, it is a means of creating a process of development that builds on search and learning. -In a world of continuous change in technology, tastes, political affiliations, and ideas of the good life, development is necessarily a matter of trial and error, of moving in one direction today and another tomorrow. The capacity to do this at relatively low costs is an essential characteristic of a growing econ. IS seeks to create this characteristic.

Bruton: In Defense of ISI

-The idea is that by replacing the imports of certain commodities by domestic production, the economy will be so modified that it will begin to be more independent, more resilient, more diversified, and better able to generate increasing welfare as a matter of routine. -1) tariff as a government policy for solving problems of Balance of Payments ≠ part of IS strategy. -2) Infant industry, which rest on the assumption that an activity can be identified which, if given some initial period of protection, will later be able to compete in an unprotected market ≠ of "Infant economy" as is the case of IS.

Import substitution industrialization

-The theory of COMPARATIVE ADVANTAGE, which underlies arguments for free trade, implies that countries gain by exporting goods that intensively USED THEIR RELATIVELY ABUNDANT FACTORS. -In Latin America, these (the abundant factors) are NATURAL RESOURCES AND LABOR. The theory fails to take into account, however, the dynamic nature of resource endowments. Developing countries are CAPITAL POOR, but capital is not a natural endowment; it is accumulated in response to market conditions.

Celso Furtado

-Three primary producing zones: (1) countries exporting temperate agricultural commodities (principally Argentina and Uruguay, which relied on extensive land use); (2) countries exporting tropical agricultural commodities, such as sugar, tobacco, and coffee (lowland regions); and (3) countries producing mineral products (Mexico, Chile, Peru, and Bolivia, and later Venezuela, an oil producer) -World economic depression terminated long phase of Latin American export expansion -Furtado suggests import-substitution industrialization -Changes in world economy due to industrialization lead to (1) rise in economic growth rate in many countries following integrated industrialization pattern (2) dramatic increases in population rates and urbanization (3) creation and rapid expansion of a fund of transmittable technical knowledge related to the forms of production (4) intensification of international specialization -"advance beyond the first stage of industrialization required economic measures designed to change the structure of the industrial nucleus"

Revolutions

-US Revolution (1776). Characteristics: first in the hemisphere; separation of church and the state; racial inequality a nonissue; support to latinamerican "independentistas" -French revolution (1789). Characteristics: Declaration of the Rights of Man; Liberté, égalité, fraternité; Killed the old monarchs but created a constitutional monarchy; Restricted the power of the church. -Haiti: 1791

Development

-Underdevelopment must be seen as a product of an array of complex and continuously changing interactions between: 1. Past and Present 2. Natural and Human Environments 3. External and Internal Conditions -Multitude of obstacles to development vary with place and time -Critical to remember that the above theoretical ideas aid us in asking pertinent questions

Indians of the New World

-Very diverse -Mexico southward more developed than the North -Hunter gatherers (Argentina, Uruguay, coastal Brazil); lowland agriculture (Chile, Brazil, Bolivia, Peru), intensive agriculture (Central America, Antilles) -Between 13-100 million, probably 80 million w/ 60 million a part of civilizations -95% population decline; Caribbean population wiped out in less than 50 years. 4 million left in S.A. after 1650 -Ways colonial policies implemented differs across regions

Church in the New World

-Wealthy elites become clergy -Wealth not evenly distributed -Tithe -Omnipotent in Western Hemisphere -Educated many Indians

Settlement of Brazil

-Widely but thinly settled -Colonists fill voids as their numbers grow -Foreign threats hasten settlement of the coast -Population growth did not keep up with territorial expansion -Royal control over Brazil tightened overtime; independence of municipal governments restricted

Instrumental freedoms include...

-political freedom: opportunity that people have to determine who should govern and on what principles -economic facilities: ability to have, to own, and to use economic resources for the purpose of consumption, production, or exchange. -social opportunities: include education, health care, and other types of services -transparency; and, openness and transparency in economic and political life, preventing corruption, financial irresponsibility, and underhanded dealings -protective security: social safety net that prevents people from falling into misery, starvation, and even death, which are all different but interconnected

Theories of development

1. "An unlimited supply of labour may be said to exist in those countries where population is so large relatively to capital and natural resources, that there are large sectors of the economy where the marginal productivity of labour is negligible, zero, or even negative." 2. WW Rostow: a. A traditional society is one whose structure is developed within limited production functions, based on pre-Newtonian science and technology, and on pre-Newtonian attitudes towards the physical world. b. The second stage of growth embraces societies in the process of transition; that is, the period when the preconditions for take-off are developed. c. The take-off is the interval when the old blocks and resistances to steady growth are finally overcome. The forces making for economic progress, which yielded limited bursts and enclaves of modern activity, expand and come to dominate the society. The rate of effective investment and savings may rise from, say, 5% of the national income to 10% or more. d. After take-off there follows a long interval of sustained if fluctuating progress, as the now regularly growing economy drives to extend modern technology over the whole front of its economic activity. Some 10-20% of the national income is steadily invested, permitting output regularly to outstrip the increase in population. e. We come now to the age of high mass-consumption, where, in time, the leading sectors shift towards durable consumers' goods and services: a phase from which Americans are beginning to emerge; whose not unequivocal joys Western Europe and Japan are beginning energetically to probe.

post-independence Conflicts

1. 1821. Mexico empire (AdI) after independence and annexation of CA. (9 month.) 2. 1822. Haiti takes over DR. 3. After (1823), CA defeats the empire losing Chiapas. 4. 1828. Brazil attempts to take over the Banda Oriental. Formation of Uruguay. 5. 1830. Gran Colombia breaks apart into 3. Bolivia splits from Peru. Chile invades Peru. 6. 1836. Texas broke away from Mexico. 7. 1844. Creation of DR (1861-1865) 8. 1830s-1880. Argentina and Chile war against natives.

Conquests

1. Columbus himself 2. Cortez to Mexico (1519-1521) a) Alvarado to CA (1525) b) Balboa (1513) 3. Pizarro to Peru (1531-1533)

Institutions

1. Encomienda (1503-1570's) a) Law of Burgos (1512) b) New Law of the Indies (1542) 2. Repartimiento (1503-1800s) 3. La Hacienda (1525 - ...). Property to the recipient: Spanish

Economic consequences

1. End of monopsonistic trade (one buyer, many sellers) 2. Fair trade: buying cheaper - selling a little better. 3. "International capital markets" 4. FDI. 5. K flight 6. No taxes.

Changes after WWI in the world economy

1. First, there was a REVERSAL OF THE UPWARD TREND in the external trade coefficient of the industrialized countries. 2. There was a persistent DETERIORATION IN WORLD MARKET PRICES OF PRIMARY PRODUCTS. This tendency, already discernible in the preceding period, became MORE PRONOUNCED AFTER 1913. To the short-term INELASTICITY OF SUPPLY OF PRIMARY COMMODITIES and the structural rigidity of countries specializing in primary production for export, was added the effect of technological progress as a factor responsible for this downward trend in world prices of raw materials. 3. Another "tendency worth noting is the steady change in the composition of world trade - a tendency that became apparent only after the Second World War."

What are the causes and consequences of post-independence conflicts?

1. Territorial disputes. 2. Border disputes 3. Ambitions lead by business interests 4. These conflicts were taken advantage by the foreign powers. British empire. 5. Impoverishing the new countries.

Colony's processes

1. The arrival 2. The exploration 3. The conquest 4. The actual colonization

W.W. Rostow: stages of economic growth

1. Traditional Society 2. Preconditions for take-off 3. Take-off 4. Drive to maturity 5. Age of high mass-consumption

Weaver and Jameson

1. What are the value assumptions in a economic development paradigm? - human nature, - good life; and, - good society. 2. What operational criterion for attaining the - goal of good life, and - goal of good society? 3. What is the methodology incorporated in each paradigm? The paradigm has to contain a - theory of underdevelopment and a - theory of development Definition of "good society" by Marxists: 1. consumer sovereignty: similar to traditional econ emphasis on participation on social activities. 2. worker sovereignty: have to find jobs that they want and that enhance their "human capacities" 3. citizens sovereignty: mechanism for adding peoples preferences for community 4. society has to acceptably solve problem of inequality.

Treaty of Tordesillas

1494

Spanish colonial history ends

1810-1825

Period of rapid industrialization

1840s-1873

"Bourgeois" Kondratiev

1843-1897

World trade composition before and after WWI

1913 | 1953 foodstuffs: 2.9 | 2.3 [DROPS] agricultural raw materials 2.1 | 14 [INCREASES] minerals: 13 | 2.0 [DROPS] manufactured goods: 37 | 43 [INCREASES]

Latin America: Evolution of External Trade

1930-1934 | 1935-1939 quantum of exports -8.8 | -24 terms of trade -24.3 | -10.8 capacity to import -31.3 | -12.9

Debt crisis main years

1982-1990

Latin American region total population

2000 - 511,735; 2010 - 582,564; 2015 - 616,537 In thousands

Actual Colonization

A. The Government 1. Creation of the Viceroyalty of New Spain (1531, Mexico): Captancy Galicia and Guatemala 2. Creation of the Viceroyalty of Peru (1541): Nueva Granada (1739) and River Plate (1776) B. Laws of Burgos (1512): 1. Officially creating the Encomiendas. In terms of size, they were granted no more than 150 people and no less than 40. These people had assigned some reachable task but to be paid, had to care for the provisions, living quarters, hygiene and treat the Indians in a humanitarian way. Women had to stop working from the fourth months of pregnancy. Prohibited punishment. C. The New Laws (of the Indies) (1542): re-stated the Law of Burgos regarding the treatment of natives.

Pope who allowed Spain to colonize New World

Alexander VI (Spanish)

Conclusion about IS

An IS strategy can be defended in terms of the need for protection while a non-growing economy establishes the conditions or characteristics necessary for its routine operation to result in rising social welfare. -a) protection is certainly necessary for some developing economies to establish routines to improve social welfare. -b) importance of policy-making process -c) consistency of policy

18 original countries of Latin America

Argentina, Brazil, Bolivia, Colombia, Costa Rica, Chile, Dominican Republic, Ecuador, El Salvador, Haiti, Honduras, Guatemala, Mexico, Nicaragua, Paraguay, Peru, Uruguay, Venezuela

What's next after independence?

Can these countries survive? -Politically? (1) Legal framework: Constitution, secondary laws, taxes (2) Questions as: where is the capital?Division: states, provinces or departments? (3) Bureaucracy (4) Budget -Economically? (1) Output (2) Market for those products, Domestically/Internationally (3) Labor force (4) Capital (5) Technology -Social conditions? (1) Racial disparities (2) Is freedom for everybody? (3) Living standards (4) What the new government can do to improve their people's lives (education, health care)?

Magellan

Circumnavigated Earth (1525)

Area of Spanish America

Covered 9,000 miles Vast Travel and communication difficult Portugal, being smaller and poorer, did not have the same resources as Spain; paid more attention to its Far East colonies

Intendancy unit

Created by Bourbons -Allows for increased/centralized power -Cuba was first intendancy

Who directed move toward independence?

Creole/mazombo elites

Balboa

Crossed Isthmus of Panama to Pacific Ocean (1513)

Narvaez

Cuba, Mexico, Florida (1519)

Andre Gunder Frank

Dependency analyst -Links to countries at economic center prevents Latin America from developing by draining resources and capital from the periphery and moving them to the center -Wrote Capitalism and Underdevelopment in Latin America -Rejects dualist idea of traditional vs. modern society -Not just international peripheries and centers, also regional and domestic centers ("outposts" of Europe, North America) -Regions that are the most underdeveloped today had the closest ties to the metropoles in the past (e.g. ex mining regions) -Greatest economic growth comes when ties to the metropoles are the weakest (Chile manufactures during European wars)

Background on dependency theory

ECLAC's studies suggested that economic activity in the richer countries often led to serious economic problems in the poorer countries. The possibility of such an outcome was not predicted by neoclassical theory, which had assumed that economic growth was beneficial to all (Pareto optimal) even if the benefits were not always equally shared, since it could not harm anybody. Prebisch's initial explanation for the phenomenon was very straightforward: poor countries exported primary commodities to the rich countries who then manufactured products out of those commodities and sold them back to the poorer countries. The "Value Added" by manufacturing a usable product always cost more than the primary products used to create those products. Therefore, poorer countries would never be earning enough from their export earnings to pay for their imports. Prebisch's solution was similarly straightforward: poorer countries should embark on programs of import substitution so that they need not purchase the manufactured products from the richer countries. The poorer countries would still sell their primary products on the world market, but their foreign exchange reserves would not be used to purchase their manufactures from abroad.

Empire social structure

EMPEROR Priests - Career Warriors - Administrators Plain soldiers - common farmers - merchants and traders Slaves

Principal justification for ISI

Infant industry argument - Countries may have a potential comparative advantage in some industries, but these industries can not initially compete with well-established industries in other countries. - To allow these industries to establish themselves, governments should temporarily support them until they have grown strong enough to compete internationally. Prebish-Singer Hypoth

End of 19th, beginning of 20th century

Mexico -During the first decade of the 20th century, the production of minerals and petroleum - the country's basic export sector - grew at an annual rate of 7.2%. This is 2x as fast as manufacturing production and nearly 3x as fast as agricultural production." Brazil -Population increased 70% (from 10.1 million in 1872 to 17.3 million in 1900). Between 1880 and 1910, the total length of railways increased 7x (from 3.4 to 21.3 thousand kilometers.) Coffee exports, which amounted to around 4 million 60-kilogram bags in 1880, rose to almost 10 million in 1900 and to over 16 million on the eve of the First World War, a total seldom surpassed in later years. Argentina -Population doubled, increasing from 3.6 to 7.2 million; the country's railway network was extended from 12.7 to 31.3 kilometers; cereal exports rose from 1,038,000 to 5,294,000 tons, and exports of frozen meat rose 1400% (from 27,000 to 376,000 tons). CONCLUSION: Latin America became an important component of world trade and a key source of raw materials for industrialized countries

Brazilian administrative posts

Overseas Council Treasury Council -Facing a threat from the Spanish in the Plata region, the Portuguese moved their viceroy up the coast (also because of an economic crisis in the mining region) -Captaincies: principle territorial subdivisions in Brazil -Municipal councils (local, elected): income from rent, taxes, fines, license fees -Mazombos: whites born in Brazil (local pt. of view) vs. Reinois: whites born in Portugal (global pt. of view)

Encomienda

People "entrusted"; work for the settler or supply tribute for goods or cash. In return, taught Christianity and Spanish way of life. -Home governments begin to oppose; draft labor emerges. Problem: discrepancy between native and privileged populations. After 1600, increasingly common. When not enough, black slaves imported -Contributed to mounting death rates -Missionaries undermined power of encomienda heads, leading to political friction -Cortes institutionalized it; Charles V abolished it. Too hard to eradicate, thus Spanish Crown and royal officials in New World didn't always act in harmony -Aldia: Brazilian version

Economic Systems

Pre-Columbian: -Inca system of labor as a service to the Emperor and mita (service to Emperor) for rest of the year (public works of roads, temples, etc.) -Aztec labor system: Free and mandatory to Emperor but freer for the non-Emperor -Colonial system Hispaniola: introduction of la encomienda in the Americas

Main features of colonization

Rapid exploration, rapid installation of government, economic employment of settled lands, exploitation of native labor, importation of black slaves, spreading of Christianity

Private and public saving

S = SP + SG S = (Y - T - C) + (T - G)

Repartimentio

Temporary allocation of Indian workers to given task. Provided major share of workers to mines and furnished the agricultural labor force. -Becomes device of debt peonage, tying Indians to land with minimal maneuverability -Spanish pushed Indians into bad land e.g. the highlands

Prebish-Singer Hypothesis

The PS hypothesis (1949-1950) argued that there is a structural tendency for the terms of trade of developing countries to deteriorate because of the concentration of their exports in primary commodities.

Changes as a result of the Great Depression

The contraction of the export sector led to two types of reaction, depending on the degree of diversification attained by the economy concerned: (1) factors of production were shifted back into the precapitalist sector -- subsistence agriculture and craft manufactures -- as the money economy shrank; (2) the industrial sector geared to the home market was expanded in an effort to replace, wholly or in part, goods previously purchased abroad. The second case constitutes what has been called the import-substitution process

Developments and events leading to independence

Three types of events are relevant in the years preceding independence: 1. Enlightenment 2. US and French revolution 3. Weakening of the power of the Crowns.

Main motives for conquest

Wealth and evangelization -Portuguese less concerned than Spanish with evangelization, but spread of Jesuit missionaries allowed them to move westward beyond Tordesillas line

National income accounting identity

Y = C + I + G + X where Y is national income or GDP, C is consumption spending, I investment, G government spending, and X is net exports or the current account. Also, Y - C - G = S = I + X (saving equals the sum of investment and the current account)

Cardoso and Helwege on ISI

• "the protectionist policies associated with ISI played an important role in stimulating economic development in Latin America. Certainly viable alternatives to the lSI strategies of the 1940s and 1950s were not present. Moreover, Latin America enjoyed high growth rates prior to the 1970s." • import substitution was deemed inefficient. The policies that were adopted in the wake of its demise depended to a large extent on how successful the policies that were adopted in a successful country was in its export markets.

Standard text book interpretation ISI

• Import substituting industrialization was a trade policy adopted by many low and middle income countries before the 1980s. • The policy aimed to ENCOURAGE domestic industries BY LIMITING competing imports. • It was often accompanied with the belief that POOR COUNTRIES WOULD BE EXPLOITED BY RICH countries through international financial markets and trade.