Lessons from Latin America
I’ve spent the last week in Montevideo, Uruguay, attending a Summer School* on the economic history of the region. I’ve listened to presentations on demographic change in Chile, war in Bolivia, and regional inequality in Brazil and met students from Colombia, Ecuador, Argentina, Mexico and, of course, Uruguay. I’ve been exposed to my own ignorance: Latin America to me was a continent of football, Spanish and partying. And while these are central to Latino life, I’ve been exposed to its past variations – the diverse impacts of colonialism, independence, and post-independence growth and stagnation – and present peculiarities – the work ethic of São Pauloan Brazilians, the Italianness (and therefore fierce hand-gestures) of the Argentines, the placid nature of Uruguayans (in contrast to the outlier, Luis Suarez).
I’m embarrassed to say that I had thought of Latin America much like most of the world thinks of Africa.
This is tragic because we, as Africans, have much to learn from the Latin American experience. Argentina, and specifically the area around its capital Buenos Aires, was the richest region in the world at the end of the nineteenth century, spurred on by migration and agriculture expansion. A century later, much of Buenos Aires is dour and downtrodden as the country experiences yet another economic crisis and bout of political turmoil. (On Friday, amidst riots which left 22 Argentinians killed, President Fernando de la Rue resigned and fled the government palace in a helicopter; I’d walked around the palace just a week earlier.) In contrast, many countries in Latin America are booming (Colombia, Peru, Uruguay, Brazil), mostly due to resources and an insatiable demand from China, but also stronger domestic consumption, improvements in education and good macroeconomic policies.
Nineteenth-century Latin America presents an especially useful comparison to twentieth-century Africa. Melisa Luc of the University of Barcelona showed how resources and weak institutions caused border wars (sound familiar?) between several Latin American countries in the nineteenth century, while Gerardo Sanchez of the University of Buenos Aires found large increases in regional inequality during Argentina’s Belle Epoque, suggesting a positive relationship between rapid economic growth and inequality. It’s perhaps this severe inequality, together with the devastating impact of the Great Depression, that would a few decades later ferment the rise of military rule and Peronism. Africa is experiencing its own Belle Epoque, also labelled ‘Africa Rising’. But, learning from the other country experiences, is this a sustainable growth strategy?
Dani Rodrik doesn’t seem to think so. In his latest Project Syndicate contribution, he argues that African countries lack the ‘productive dynamism’ that allowed Asian countries to achieve persistently high growth rates. “As in all developing countries, farmers in Africa are flocking to the cities. And yet, rural migrants do not end up in modern manufacturing industries, as they did in East Asia, but in services such as retail trade and distribution. Though such services have higher productivity than much of agriculture, they are not technologically dynamic in Africa and have been falling behind the world frontier.” In short, what African countries lack are “the modern, tradable industries that can turn the potential into reality by acting as the domestic engine of productivity growth.”
Why did this ‘productive dynamism’ occur in Asia and not in Latin America? And what can be done in Africa to promote such dynamism – and avoid the failures of Argentina?
Answers to these questions, I believe, lie in better comparative economic history.
*I’d like to thank my host, Luis Bertola, for the invitation to visit and for his kind hospitality. And a special thanks for last night’s perceto steak, which was braaied to perfection.