THE LATIN AMERICAN ADDICTION TO CAUDILLOS
The Political Economy of Blaming Others for Underdevelopment
THE QUESTION
Why have Latin American countries failed to develop into liberal democratic industrial states since their independence 200 years ago, while in that period, Europe, the Anglo-Saxon offshoots (USA, Canada, Australia, and New Zealand), and the Asian Tigers created the modern, humane, and efficient industrial and post-industrial liberal democracies of today?
This question is of more than academic interest because the world is now embarking on a new technological revolution that is changing the direction of progress. The first was the Industrial Revolution, which started when Latin America became independent. It introduced machines to increase labor productivity and multiplied the power of the muscle. The current one uses communications and automatic control through software to multiply the power of the mind. Latin America missed the first. It cannot permit itself to miss the second as well.
The Industrial Revolution dramatically increased the productivity of industrialized economies. In 1820, the income per capita of Western Europe was only $1,560 higher than in Latin America. Now, the difference is $26,000. The difference with the Western Offshoots increased from $1,354 to almost $40,000 in the same period.[1] This makes the difference between underdeveloped and highly developed. Without the multiplication of the population's productivity through industrial machinery, Latin America lagged in its development.
The growing distance was not just in terms of income. While Latin America stagnated, European countries also jumped ahead in political and social organization. As a result of their development in all these areas, they have become autonomous. They are essentially the owners of their destinies. In contrast, Latin America depends on the demands coming from these countries. Their economies go well when their demand for raw materials increases and bad when it declines. Latin America has remained a backward region economically, politically, and culturally.
If the region misses the current revolution, its development levels will become even more distant. If this happens, the region will become even more politically unstable, further interrupting its growth and development.
THE PROMISING REGION
This result was not envisioned two centuries ago, just after independence. At the time, Latin America seemed ideally poised for rapid political and economic development in a world that was starting to industrialize. It had enormous reserves of natural resources and a strong cultural and economic connection with Europe that augured joint development, freedom, and democracy. The new states were based on the liberal British ideas of constitutional rule. Their institutions were modeled after the constitution of the United States and the French Declaration of the Rights of Man and the Citizen. Unlike Europe, the region was not burdened with the weight of absolutist kings and a formal aristocracy. It was like a blank page, ready to be written on. It seemed to be the world of the future.
The expectations were high at the time. The following paragraph was written by two Swiss physicians who visited Paraguay in 1819, only to be kidnapped by its sinister dictator, Doctor José Gaspar Rodríguez de Francia, who forced them to remain in the country until 1825 to provide medical services.
At no remote era, perhaps, the republics of South America may expect to enjoy a high degree of prosperity and be enabled to exercise a salutary influence over the governments of Europe…Hence, then, the importance of Paraguay is not to be estimated by its present condition, so much as by that higher state to which it will, in all probability, ultimately arrive…Once settled, it will go on progressing by freedom of trade, and the progress of civilization…When the population of South America shall experience that natural growth, which has been hitherto hindered by vicious institutions; and when its foreign connections shall be multiplied—then will this province [Paraguay] attain fresh importance, becoming, in consequence of the convenience of its rivers (the Parana, the Paraguay and the Vermejo), the centre of commerce with Matogrosso and Upper Peru [Bolivia]. All these advantages will give to Paraguay a leading rank amongst the rising states of South America—. May they, in their turn, be taught from the experience of their misfortunes, to appreciate the fruits of Dictatorships and Presidencies for life![2]
The Swiss physicians would be surprised to learn that Paraguay and Latin America remain poor and underdeveloped almost two hundred years after their trip. Free trade is not yet a reality in the region. As 200 years ago, Latin America remains a promising exporter of raw materials and primitive industrial goods, while many other countries that started producing mainly raw materials industrialized and became modern societies.
They would also be dismayed at seeing how political regimes can get frozen under the scorching sun of the tropics and survive in their essential nature for at least two centuries. Latin Americans have not yet learned from the experience of their misfortunes to appreciate how bitter the fruits of Dictatorships and Presidencies for life are. They would feel dismayed when finding out that the dictators of the early 21st century are not that different from the creepy caudillos they saw in the early 19th century.
At the core of these problems, there is a lack of self-reliance.
THE ORPHAN REGION
Blaming the Foreigners
Latin American countries waged their wars of independence in the name of freedom and democracy. Yet, autonomy and freedom presuppose self-reliance, and for two centuries after their independence, Latin American countries have shown precious few signs of it. On the contrary, many of their features suggest that rather than becoming independent after removing the Spanish yoke, these countries become orphans in search of someone to depend on. Externally, they have looked for this dependence in the United States.
As the former president of Costa Rica, Oscar Arias said at the 2009 Summit of the Americas in Trinidad and Tobago:
I have the impression that each time the Caribbean and Latin American presidents have a meeting with the President of the United States is to ask for things from him or to complain for something. Almost always it is to put the blame on the United States for all our miseries, past, present and future[3].
This attitude is the same as that of old, colonial Latin America toward Spain and the king. The President of Mexico, AMLO, still blames Spain for his country's poverty.
The Caudillos
Internally, Latin Americans have looked for caudillos and dogmatic doctrines that would promise sure development under an automatic “system” that would remove the anguish of freedom. They have tried everything but have not become self-reliant.
The caudillos capitalized on the same philosophy of dependency. They did that by fingering culprits for all their country's problems—the Spaniards, the Europeans, the Americans, the local rich, and other politicians—and promising to expel or destroy them. Thus, they built their power on the hatred they injected into the population. This they have done for two centuries, and, amazingly, they have always found eager followers who think that “this time, we have found the true leader;” Two centuries of hatred have fragmented the population into subgroups incapable of creating the social cohesion needed to pursue a common goal and develop.
The Sisyphus Curse
Oddly, the region is in the same place as 200 years ago, but not because it has been immobile through this period. On the contrary, it has been engaged in continuous revolutions. It has discovered a thousand times the secret of progress, always associated with a unique caudillo who, based on his character or a wonderful ideology, would end poverty and inaugurate the development path. Almost invariably, each of these caudillos, who became immensely rich while the country became immensely poor, was dethroned by another caudillo, who made the same promises as the dethroned one and was eventually dethroned as well, and so on. The process was repeated until the countries hit rock bottom. Occasionally, a responsible government puts things in order when the situation becomes unsustainable. Yet, once order had been restored, a new caudillo took over again to dilapidate the wealth accumulated by the country.
This waving, back-and-forth movement, in which responsible governments rebuilt the country after the previous populist administrations dilapidated its resources, only to see their works destroyed by subsequent populists, resembled the destiny of Sisyphus—the mythical character whom the Greek gods condemned to push a boulder up a mountain forever, only to see it roll down again. This cycle repeated for 200 years.
The case of Bolivia exemplifies the Sisyphus curse.[4]
The Eternal Repetition
On December 18th, 2005, Bolivians elected Evo Morales as their new president. He ran on a slogan saying, “Long live to Coca, death to Yankees.” According to him, his arrival to power marked the beginning of a true revolution that would bring justice to the indigenous population, the poor, and the dispossessed at the expense of the foreigners, the capitalists, and the white people. He promised to end capitalism and neoliberalism and establish a socialist regime.
For all his claims to innovation, Morales’ promises adhered strictly to the most cherished Latin American traditions. Except for one thing—his defense of coca—his ideas were very similar to those proffered by Victor Paz Stenssoro when taking over power 53 years before at the head of a popular uprising. They also resembled the populist discourse of Hernán Siles Suazo, who was Paz Stenssoro’s vice-president and successor in the 1950s, his predecessor in the 1960s and again in the 1980s (Paz Stenssoro was president four times, and Siles Suazo twice). They were similar to the words uttered by Colonel David Toro Ruilova, who announced the arrival of “military socialism” after a coup in 1936. They also reminded the words of Colonel German Busch Becerra, who dethroned him in 1937 and promulgated a constitution that stressed the importance of collectivism over private property. The slogan “land to the Indians, mines to the state” can be traced back to Gustavo Navarro, a radical politician who used it in the 1920s.
Morales nationalized the country’s gas holdings and gas processing facilities. Such actions were not innovative, either. In the 1930s, Busch Becerra confiscated Standard Oil's assets without compensation and issued a decree preventing mine owners from removing capital from the country. In the 1950s, Paz Estenssoro carried out an agrarian reform that gave the Indians most of the land on the country’s highlands, nationalized the tin mines, and created the Mining Corporation of Bolivia.
Rather than providing resources to the people, the nationalized companies made huge losses that destabilized the country’s economy. The revolutionary governments depleted the coffers of the Bolivian treasury, depressed private sector investment, generated high inflation rates, and led the country into deep economic and political crises. The hyperinflation that Siles Suazo achieved in a second presidency in the 1980s was the fourth worst in the history of the world. Following another Latin American tradition, each of these caudillos lost his popularity because of these problems and had to leave the government, in most cases, involuntarily. In their wake, more responsible governments took over and restored fiscal discipline and economic growth. As soon as the economy improved, however, a new wave of populism emerged.
In an ironic turn of events, a consummated populist. Paz Stenssoro was forced to start the last round of stabilization when he took over from his former vice president and successor, Hernán Siles Suazo, in 1985 while hyperinflation raged. Paz Stenssoro, who had pushed down the boulder many times, for once pushed it up by controlling hyperinflation, setting the boulder ready for Evo Morales to push it down again. The subsequent history has followed the same script, with caudillos, new and old, disputing power while the country stagnated.
A similar story could be told about most countries in Latin America, including the richest. The history of Perú, Ecuador, Colombia, Brazil, Argentina, Paraguay, Venezuela, and Central America follows the same cycles as Bolivia's. Even the most stable countries in the region, like Mexico, Uruguay, and Chile, have experienced revolutions and caudillismo.
No other country exemplifies this tragedy more than Argentina. Despite several significant crises, Argentina seemed to be an exception at the turn of the 20th century. The country was ranked the 7th richest economy globally. Even by 1950, it was still number 9. Then, the fall began, leading to the 66th position in 2020. Latin America's poor behavior is shown by the fact that even if it fell about sixty positions in the world’s ranking, Argentina remained one of the wealthiest countries in the region.
Politically, the country remained tied to the caudillos, especially those in favor or against a mythical figure, the combined presence beyond the grave of Juan Domingo Perón and his wife, Evita. Yet another ghost from the past, common to all of Latin America, was the political presence of the military. Many of the significant figures of the last two centuries were military commanders.
THE NEW CHALLENGE
The answer to the question that started this article is that through the last two centuries, Latin Americans have misidentified the sources of wealth, believing that their countries are naturally rich and that such wealth does not flow to the general population because somebody (the Spaniards, the Americans, the Europeans, or the local rich) steal it, and that the solution to this problem is to find a caudillo and a political doctrine that will automatically redirect their natural incomes toward them and turn them rich.
For two hundred years, these miraculous caudillos have failed to appear. In their place, a long line of perverse caudillos has appeared that dilapidate countries' resources and create political disturbances that further discourage investment. In the process, the formation of the true bases of modern society—creating an educated population organized not under the arbitrary wishes of caudillos but instead on solid democratic institutions—has been neglected. The dream of a magical deliverance by a caudillo in his white armor has led the region to a vicious circle that has precluded the development of the true bases of progress.
It is time for Latin America to face the truth of development. Development is not something that happens to societies. It is something that societies must create for themselves through self-reliance, education, and liberal, democratic institutions. If Latin Americans do not realize they are responsible for their future, the region will continue lagging in global development, as it has done in the last 200 years.
Latin Americans must stop seeing themselves as the victims of former caudillos and recognize that these leaders became caudillos because they supported them. They asked for arbitrariness rather than institutions and are now seeing the results. Countries have the governments they deserve, and this is true of their level of development as well. Instead of miracle cures, they must demand education and democracy from their leaders. If they want development, this is what they must change.
Unfortunately, this is not changing. Today, with very few exceptions, all Latin American countries are in the hands of old caudillos threatening to return to the 19th century or having already returned to it—to the Sisyphus damnation to taste the rancid flavor of the dictatorships and presidencies for life that the two Swiss physicians mentioned in 1825. In this way, the Sisyphus boulders are running down the slope all over the region, and in most cases, no Sisyphus seems to be around to push them up again.
Countries that did not invest in machinery and infrastructure during the Industrial Revolution could not expect to generate high incomes for their populations. The same is true now for countries that do not invest in their people's education. This is the case in Latin America.
There are exceptions to this rule, mainly Costa Rica, Uruguay, and Chile. These exceptions confirm the rule. They are exceptional because they have invested in education and health for many decades, and the results show. Latin Americans should stop aiming at changing the world with glorious revolutions and focus on improving the education and health of their citizens. If they do it right, the region will integrate into the knowledge economy created in the rest of the world. If not, the Sisyphus curse would keep destroying the region’s development efforts.
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Manuel Hinds is a Fellow at The Institute for Applied Economics, Global Health, and the Study of Business Enterprise at Johns Hopkins University. He shared the Manhattan Institute's 2010 Hayek Prize. He is the author of four books, the last one being In Defense of Liberal Democracy: What We Need to Do to Heal a Divided America. His website is manuelhinds.com
[1] Maddison Project Database, 2020.
[2] Messrs. Rengger and Longchamps, The Reign of Doctor Joseph Gaspard Roderic de Francia in Paraguay: An Account of a Six Years’ Residence in That Republic, From July 1819 to May, 1825. London: Thomas Hurst, Edward Chance & Co., 1827, pp. vii-viii. Published by BiblioLife, LLC, www.bibliolife.com/opensource. [My emphasis]
[3] https://acceso.ku.edu/unidad5/almanaque/oscararias.shtml
[4] Rex A. Hudson and Dennis M. Hanratty, Bolivia: A country study. Federal Research Division, Library of Congress, December 1989, https://tile.loc.gov/storage-services/master/frd/frdcstdy/bo/boliviacountryst00huds_0/boliviacountryst00huds_0.pdf