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Globalization in Latin America Before 1940

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  • Jeffrey G. Williamson
  • Luis Bertola

Abstract

How much of the good growth performance in Latin America between 1870 and 1913 can be assigned to the forces of globalization? Why was industrialization so weak? Why was inequality on the rise? This paper offers an answer to these questions. It starts by exploring the disadvantages associated with geographic isolation from world markets and the transport revolutions that helped liberate Latin America from that isolation, a pro-global force. It then asks how independence contributed to massive de-globalization during the decades of lost growth' between the 1820s and the 1870s. Next, it documents what happened to the external terms of trade in Latin America between 1820 and 1950: from the 1890s onwards the terms of trade deteriorated, but it also underwent spectacular improvement before the 1890s, suggesting that it had something to do with the fairly fast' Latin America growth during so much of the belle ‚poque. While booming relative prices of exports certainly fostered trade, policy suppressed it: tariff rates were higher in Latin America than almost anywhere else in the world between 1820 and 1929, long before the Great Depression. The paper then asks why. The answer is to be found mainly with revenue needs rather than with some precocious import substitution policy. High tariffs still had a powerful protective effect, regardless of motivation. However, protective policy was modified by those powerful and positive terms of trade shocks, yielding on net weak early industrialization. Finally, the paper documents that inequality rose in most of Latin America up to World War I, while it fell thereafter. The correlation between globalization and inequality is likely to have been causal.

Suggested Citation

  • Jeffrey G. Williamson & Luis Bertola, 2003. "Globalization in Latin America Before 1940," NBER Working Papers 9687, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:9687 Note: DAE ITI
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    File URL: http://www.nber.org/papers/w9687.pdf
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    References listed on IDEAS

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    1. Hadass, Yael S & Williamson, Jeffrey G, 2003. "Terms-of-Trade Shocks and Economic Performance, 1870-1940: Prebisch and Singer Revisited," Economic Development and Cultural Change, University of Chicago Press, vol. 51(3), pages 629-656, April.
    2. Harley, C. Knick, 1988. "Ocean Freight Rates and Productivity, 1740–1913: The Primacy of Mechanical Invention Reaffirmed," The Journal of Economic History, Cambridge University Press, vol. 48(04), pages 851-876, December.
    3. Hatton, Timothy J. & Williamson, Jeffrey G., 1998. "The Age of Mass Migration: Causes and Economic Impact," OUP Catalogue, Oxford University Press, number 9780195116519.
    4. Bairoch, Paul, 1972. "Free trade and European economic development in the 19th century," European Economic Review, Elsevier, vol. 3(3), pages 211-245, November.
    5. Prebisch, Raúl, 1950. "The economic development of Latin America and its principal problems," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 29973, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    6. North, Douglass, 1958. "Ocean Freight Rates and Economic Development 1730-1913," The Journal of Economic History, Cambridge University Press, vol. 18(04), pages 537-555, December.
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    Cited by:

    1. Grafe, Regina & Irigoin, Maria Alejandra, 2006. "The Spanish Empire and its legacy: fiscal redistribution and political conflict in colonial and post-colonial Spanish America," Journal of Global History, Cambridge University Press, vol. 1(02), pages 241-267, July.
    2. Josef Falkinger & Volker Grossmann, 2005. "Institutions and Development: The Interaction Between Trade Regime and Political System," Journal of Economic Growth, Springer, vol. 10(3), pages 231-272, September.
    3. Tena Junguito, Antonio, 2008. "Bairoch revisited : tariff structure and growth in the late 19th century," IFCS - Working Papers in Economic History.WH wp08-04, Universidad Carlos III de Madrid. Instituto Figuerola.
    4. Tena-Junguito, Antonio & Lampe, Markus & Fernandes, Felipe Tâmega, 2012. "How Much Trade Liberalization Was There in the World Before and After Cobden-Chevalier?," The Journal of Economic History, Cambridge University Press, vol. 72(03), pages 708-740, September.
    5. Jeffrey G. Williamson, 2010. "Latin American Growth-Inequality Trade-Offs: The Impact of Insurgence and Independence," NBER Working Papers 15680, National Bureau of Economic Research, Inc.
    6. Eugenia Correa, 2012. "Money and Institutions: The Long Path of the Latin American Financial Reforms," Chapters,in: Employment, Growth and Development, chapter 11 Edward Elgar Publishing.
    7. Matthias Finger & Rolf W. Künneke (ed.), 2011. "International Handbook of Network Industries," Books, Edward Elgar Publishing, number 12961, April.
    8. John Marangos & Charles J. Whalen, 2011. "Evolution without fundamental change: the Washington Consensus on economic development," Chapters,in: Financial Instability and Economic Security after the Great Recession, chapter 8, pages 153-178 Edward Elgar Publishing.
    9. Catarina Figueira & David Parker, 2011. "Infrastructure Liberalization: Challenges to the New Economic Paradigm in the Context of Developing Countries," Chapters,in: International Handbook of Network Industries, chapter 27 Edward Elgar Publishing.
    10. repec:got:cegedp:81 is not listed on IDEAS
    11. Enriqueta Camps, 2009. "Globalization and culture shaping the gender gap: A comparative analysis of urban Latin America and East Asia (1970 - 2000)," Economics Working Papers 1145, Department of Economics and Business, Universitat Pompeu Fabra.
    12. Williamson, Jeffrey G., 2009. "History without evidence: Latin American inequality since 1491," Center for European, Governance and Economic Development Research Discussion Papers 81, University of Goettingen, Department of Economics.
    13. Enriqueta Camps, 2013. "Market Openness and Culture as Factors that Shape the Gender Gap: a Comparative Study of Urban Latin America and East Asia (1960-2000)," Working Papers 694, Barcelona Graduate School of Economics.
    14. repec:spr:manint:v:49:y:2009:i:4:d:10.1007_s11575-009-0005-8 is not listed on IDEAS

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • N7 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services

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