The Toll of 200 Years of Independence

Starting this year and continuing over the next 14, countries throughout Latin America will host extensive festivities to commemorate 200 years since the end of Spanish rule and the advent of independence.

In many respects the bicentennial celebrations could not have come at a more appropriate time. Latin America has successfully weathered the worst financial crisis in decades, fairing better than most other regions and far better than it has in previous crises.

As such, Latin America can not only afford to put a little extra into the rallies, military parades and cultural celebrations that are part and parcel of these events, it can do so as a more self-reliant and self confident region than ever before. Indeed, U.S. Secretary of State, Hillary Clinton, recently told an audience in Quito, Ecuador, that U.S. and European leaders could take “some well-deserved advice on economic management from some of our Latin American counterparts.”

The road from independence to paragon of success hasn’t been easy, of course. In economic terms, breaking the yoke of imperialism, freeing colonies from taxation by the crown and lifting a trade monopoly with Spain, wasn't always cause for celebration.

Economic historians such as Jeffrey G. Williamson argue that breaking from Spain brought years of economic backtracking to Latin America. Between 1822 and 1860, military expenditures ate up 77 percent of total budgets in Latin America as nations financed efforts to reunify now independent territories.

These efforts brought violence and instability, which had a profoundly negative effect on economic growth. Some economic historians calculate that gross domestic product per capita between 1820 and 1870 grew a meager 0.07 percent annually. This virtual stagnation has led them to dub the post emancipation decades as “lost decades” for Latin America.

For some economic historians, such as Leandro Prados de la Escosura, at Universidad Carlos III in Madrid, this assessment is too harsh. He points to “exogenous factors such as climate and location” that made it impossible for Latin America to perform as well as countries in the northern hemisphere.

In 1800, for instance, the United States had a magnificent network of rivers and no place in England was farther than 30 miles from sea. In Latin America, by contrast, most natural resources were located in difficult terrain and far from the ocean.

Whatever its cause, economic growth faltered and didn't take hold until conflicts ended and stability returned toward the last decades of the 19th century. And when it did, social and political circumstances insured that economic success led to ever expanding concentrations of income and wealth, far more so than in the former British colonies.

“When fertile land became available for commercial exploitation as railroads were built, there was a massive redistribution of wealth in favor of upper classes as peasants were induced to give up their land,” said John H. Coatsworth former director of Harvard's David Rockefeller Center for Latin American Studies now at Columbia University.

Persistent, low levels of education of the general population also broadened inequality in the former Spanish colonies. As Coatsworth pointed out in an interview, the U.S. literacy rate in 1820 was higher than Mexico’s in 1960. “If there had been higher rates of literacy and secondary and university schooling, the wage structure would not have become more unequal.”

While there is no easy way to quantify inequality from independence to today, we can say without question that Latin America's record of serving the majority of its population has been abysmal. Indeed, as we gather to celebrate independence, the region remains the most unequal in the world. Today, 10 of the 15 most unequal countries in the world are in Latin America.

Sure, there is evidence that in the past decade swelling revenues from commodity exports, combined with improved levels of education and new safety net programs, have reduced inequality.

But there are serious doubts over the sustainability of such gains. Commodity prices are naturally volatile and producers are subject to the whims of importers. Meanwhile cash transfer subsidies provided to the poor under the condition that children be kept in school are still unproven for breaking the cycle of poverty.

Continuation of disparities has also inspired some to exhume economic models once left for dead. Venezuela and to a lesser extent Bolivia, Ecuador and Nicaragua, have adopted a new socialism that would close the gap between rich and poor by increasing, for instance, state ownership of production.

It has, however, managed to scare away private capital, erode productivity and even bring about food and electricity shortages. These new policies are even at risk of initiating an economic collapse that would dramatically set back the clock in the region's long struggle against poverty and inequality.