Latin America

One of the many problems with reactions like the Guardian's to the news that Bolivia is going to join the Latin-populist-screwAmerica crowd is that it sees the continent's left wing drift as something new. It isn't. Latin America has always been something of a sucker for the latest left wing thinking on how everyone else is responsible for its woes.

Being on the Gold Standard was a good idea before the First World War when it acted as a commitment mechanism demonstrating and encouraging budgetary restraint. This kept interest rates down and allowed the growing Latin American economies to borrow from the developed world and particularly Britain. Unfortunately, it was never possible for South America to reap the full benefits as the commitment was constantly under threat from political pressure from farmers. Such protest was common in the States as well but never caused such intractable problems to a much more stable polity.

Still, in the 19th century it was widely expected that Argentina, with its vast wealth of resources and before oil had become crucial, would become one of the richest states in the world. Indeed, by the start of the First World War its per capita income was similar to that in Germany or France. Things went wrong with the collapse of the world economy during and after the war but this was true elsewhere, certainly in Germany. The new scheme for becoming an industrial giant (because industry creates power, not because it necessarily creates wealth) was to place tariffs on your infant industries. Unfortunately, the lack of competition that tariffs created meant that the new industries remained costly and ineffective. Latin America steadily fell further and further behind European progress as it burdened the rest of its economy with tariff protection for the industries it was trying to develop.

With each generation the region appears to find new justifications and strategies for failing to implement the policies which are creating such success where they are deployed in the rest of the world. Usually the trigger for a renewed experiment with socialism is some kind of macroeconomic crisis. After the Asian financial crisis it was widely accepted that old methods of doing business (relation-based transactions) were making modernisation a source of instability and a process of quiet reform was begun. The response to crises in Latin America, such as the Argentinian collapse, is almost inevitably to give up on the whole project and hope that government can save the day.

South America has many of the advantages in resources that North America has. It also started off wealthier; North America was third prize in the Imperialist landgrab after the Caribbean and the South. The contrasting fortunes of the two regions, the fact that one now has the wealth and power to be the new "imperialist" in the Left's story of victimhood, suggests that the US instinct to trust the individual and enterprise is far more conducive to national success.