The Socio-Economic Origins of the Latin American States: 1800-2000

• In Event: States, Institutions, and Market Forces

Abstract

“State” might be the single most important concept in comparative politics. Yet, how states are formed is still a subject of debate. There are many theories. In most cases, the recipe is clear-cut: types of colonial rules, factor endowments, strong property rights protection, access to credit, incentives for taxation and external threats are said to be strong predictors for state capacity in Latin America. Unfortunately, almost all these theories rely on the study of a couple of cases, preventing an analysis which is by definition cross-sectional. More important, perhaps, these theories do not offer a generalizable theory of the political economy of the origins of state-capacities in LA. This paper will try to contribute to solve this gap. In particular it will try to take distance from the standard mantra of the relationship between economic and political development and the protection of property rights. It will also be an opportunity to build something different from the typical relationship between conflict, taxation and development of bureaucracies. As I explain in this paper, not even Europe is a story of that sort. I present a tentative working hypothesis: institutions that are the cause of political and economic development are a function of the relative unequal distribution of economic power between two types of elites, “landowners” and “industrialists”. Elites organized by different systems of production -i.e., agriculture and manufacture- will have different preferences over taxation, provision of public goods, etc. Each of these preferences are assumed to maximize more one sector over the other. It is their relative inequality, what leads to introduce strong institutions that allow both economic sub-sectors to profit in economic equilibrium. And such, strong states are in reality a function of alliances within economic elites able to build political compromises between them. These compromises are built around an institutional framework to “credible commitment'' between these two elites a peaceful economic activity which eventually leads to a more profitable way to continue investment and resource extraction. I use several cross-sectional panels of economic history data covering around 200 years, where my analyses strongly suggest that in fact this is the case.

Author

• Hector Bahamonde, Rutgers University