Weekly Reflection 5

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Week5-PowerPointPresentation.pdf

Economic�Geography Part�1:�Curse�of�Wealth:

Colonial�Period�&�Independence

Colonial�Mercantilism � Controlled�the�terms�of�trade�and�held�

the�vast�colonial�economies�of�Latin� America�in�place�and�provided� immense�financial�wealth�to�the� European�powers

� The�Spanish�system�was�more� efficient/strict�than�the�Portuguese � Trade�was�strictly�controlled�by�the� Crown�– the�colonies�were�only� allowed�to�trade�with�Spain� (Captive�Markets)

� Precious�metals�were�needed�to� purchase�goods�from�Europe�that� were�prohibited�to� manufacture/cultivate�in�the� colonies:�iron,�steel,�fine�textiles,� wine,�olives�

Methods�of�Economic�Control � To�enforce�their�control�of�trade�in�the�colonies,�

Spain: � Limited�the�number�of�ports�through�which� goods�could�move�– Cadiz�in�Spain;�four�ports� in�the�Americas:�Veracruz,�Cartegena,�Colon� (transit�point�to�Lima),�Havana;�Acapulco�– link�with�Philippines � Employed�a�system�that�was�efficient�for� extracting�taxes�for�the�Crown�and�profits�for� colonial�merchants,�but�was�economically� inefficient � Example:�all�goods�had�to�cross�over�the� Andes�to�Lima�before�being�shipped�back� to�Spain�until�the�creation�of�the�La�Plata� Viceroyalty�under�the�Bourbon�Reforms

� Licensing�of�all�trading�companies�– either� over�a�specific�area�or�for�a�specific�product � Unlicensed�trading�and�smuggling�were� common�features�– Colonia,�Uruguay�was� center�of�smuggling�in�17th &�18th centuries�until�La�Plata�was�created

SpainͲAmericas�Trade�Routes

Methods�of�Economic�Control

� Introduction�of�production� technologies�or�agricultural�products� was�prohibited� � Example:�honey�bees�were� prohibited�for�nearly�200�years�– so�Spain�could�maintain�monopoly� on�production�of�sacramental� candles

� Taxes�– levies�on�mining�and�trade� provided�greatest�revenues�– as�much� as�40%�of�colonial�revenue�came�from� gold�and�silver

� Types�of�products�traded�– raw� materials�from�colonies�(gold,�silver,� sugar,�cacao,�indigo)�and� manufactured�goods�from�Iberia� (firearms,�steel�weapons,�paper,�fine� textiles,�books,�soap,�wine,�olive�oil)

Independence�&�Neocolonialism � Independence�thrusts�the�new�nations�of�

Latin�America�into�the�capitalist�world� economy�(disarticulation�of�the�mercantile� system�had�been�underway�for�a�number�of� decades�prior�to�independence,�but�colonies� not�set�up�for�capitalist�system)

� Great�Britain�replaced�Spain�and�Portugal�as� dominant�power�but�through�indirect�means � Loans�to�governments,�investment�in�

export�activities,�construction�of�basic� infrastructure�(communication�and� transportation),�trade�concessions

� Military�force�always�hung�in�the� background�to�get�the�results�GB�desired� – this�type�of�situation�is�referred�to�as� “neocolonialism”

� By�the�early�20th century,�the�US�had� supplanted�GB�as�the�new�neocolonial� power�in�Latin�America

The�Culture�of�Independence � Newly�independent�elites�looked�to�Europe�as�a�

model�for�their�culture�– especially�France � Capital�flight�resulted�because�elites�failed�to�

invest�in�local�economies�(continuation�of� commodity�trade�economic�model) � Consumer�goods�from�Europe�were�desired � Tended�to�invest�in�European�enterprises� instead�of�local�initiatives�

� Preferred�to�continue�selling�raw�materials� and�hold�onto�privilege�rather�than�building� up�all�of�society

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Commodity�Trade

� The�production�of�primary� products�(raw�materials)�for� export � Natural�resources:�oil,�copper,� bauxite

� Agricultural�products:�coffee,� sugar,�bananas,�timber

� Commodity�trade�model� continued�after�independence�– exchange�of�commodities�for� manufactured�goods�– boom� period�from�1870s�– 1930s

Monoculture � Monoculture refers�to�the�dependence�of�an�

economy�on�only�a�few�(often�one�main�one)� commodities � 100�years�after�independence,�a�single�

commodity�accounted�for�over�50%�of�exports� in�at�least�10�Latin�American�states � Venezuela�52%�&�Brazil�62%�(coffee),� Ecuador�64%�(cacao),�Bolivia�72%�(tin),� Chile�71�%�(nitrates) � Banana�Republics – in�many�Central� America�states,�banana�plantations�and� banana�exports�figured�so�prominently�and� the�foreign�companies�that�owned�them� were�so�dominant�in�national�politics�that� this�term�was�coined�to�describe�those� states�– Honduras,�Costa�Rica,�Panama

United�Fruit�Company

BoomͲBust�Cycles � BoomͲbust�cycles�of�commodities�led�to�economic�

instability�– these�price�fluctuation�make�it�problematic�for� state�planning�and�can�cause�a�collapse�of�the�economy

� Competition�– new�producers�added�to�the�market;� Africa�&�Asia�also�produce�coffee,�cacao � Substitution�– a�new�substance�is�found�or�invented� making�a�commodity�obsolete� � Example:�Guano�in�Peru�(1840Ͳ70)�replaced�by� Nitrate�from�Atacama�Desert�in�Chile�replaced� by�synthetic�fertilizers�developed�in�Europe � War�of�the�Pacific�(1879Ͳ1883)�– Chile� fought�Bolivia,�Peru�for�control�of�the� Atacama�after�nitrates,�silver,�copper�found� there

� Depletion�– gold�and�silver�or�other�mined� substances�(Minas�Gerais,�Brazil)� � Flexibility�of�production�– commodities�do�not�often� lend�themselves�to�increased�production�to�take� advantage�of�booms�– overproduction�during�booms� leads�to�severe�busts

Export�Economies�&�Multinationals

� Investment�in�Latin�America�postͲindependence� and�in�the�early�20th century�was�mainly�by� European�and�US�companies � Significant�but�narrowly�focused�economic�

benefits � Unskilled�jobs�to�locals;�skilled�jobs�to� foreigners � Some�reinvestment�in�enterprise�but�little� profit�went�to�the�state � Bananas:�10%�of�retail�value�to� plantation;�1.5%�to�workers

� Infrastructure�investments�focused�on� efficiently�exporting�commodities,�not� linking�the�various�parts�of�a�state

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Failure�of�Commodity�Trade�Strategy � Followed�by�most�Latin�American�countries�after�independence � Some�social�sectors�(usually�elites�– owners�of�

mines/plantations/etc.)�and�some�geographic�regions�did� benefit

� Overall�Latin�American�economies�showed�negligible�economic� growth�and�in�some�countries�living�standards�actually�declined

� Limited�growth�and�narrowly�focused�benefits�did�little�to� stimulate�internal�demand�– therefore�not�encouraging�local� manufacturing�and�industry � When�you�have�a�tiny�elite�and�small�middle�class�there�are� very�few�people�to�make�up�an�internal�market�(not�enough� people�to�buy�things)