Unit 1 / Learning environment 2

Essential reading

Historic milestones of the American

continent

Index

1 The colonial past

2 Independence

3 The American continent in the 19th century

4 Milestones before the postwar period

Key words: colonization, independence, industrialization, Great War, Second World War.
1. The colonial past
For authors like Acemuglu, Johnson and Robinson (2001) the disparities between North America
and Latin America have their origin in the colonial period, and particularly the processes of
colonization they experienced. They argue that in North America the mortality rate of the conquerors
was lower, making the establishment of settlements more likely and, therefore, the organization of
institutional orders like those in Europe. In contrast, in Latin America the mortality rate was higher,
and the probability of settlement was lower, therefore Latin America did not create stable institutional
as in North America.

Figure 1. The thirteen North American Colonies, 1795.

Source: Pilon (n. d.).

North America was colonized by the British, who in 1607 formed the colony of Jamestown in Virginia.
Form this first settlement the thirteen colonies of the northwestern region of the territory of the
United States would spread (see Figure 1). The British established centers of power in the Caribbean,
which allowed them to maintain a very dynamic illegal commerce activity with the Spanish colonies.
The territories of current Jamaica and Barbados where occupied by British back then.

In its origin, religious conflict and the hostile conditions of the territory constituted the most drastic
problems that the first British settlers had to face. The difficult conditions for survival put at risk the
first settlements; their survival depended on the support of the native population that transmitted their
knowledge, but the new settlers nearly eliminated them in several conflicts for the land. This fact makes the
indigenous presence in the territories of North America comparatively less than that of Latin America.

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Once they overcame the initial conflicts, the establishment of permanent settlements allowed a rapid
growth based on agriculture. The good prospects of these settlements encouraged the arrival of new
European settlers. Furthermore, there were guarantees of religious freedom, economic opportunities
and the possibility of self-government. With the settlers arrived the first African slaves that were the
base of the model of exploitation of the North American colonies.

The characteristics described here show the rapid advance of European settlers in North America and
the rapid establishment of stable societies in that territory. By the beginning of the 18th century, the
population had multiplied, and markets had spread along the east coast of North America, thus, early
on, society managed to organize itself with independent and prosperous regimes.

In the case of Latin America, a significant portion of the continent, with domains that include the
southern region of the United States and much of the western fringe of that country, was occupied
by the Spanish. This country became an empire with the expeditions made at the end of the 15th
century: travelers settled on the continent and established their colonial regime between 1550 and
the first decades of the 19th century.

Unlike the North American experience, in the colonization of Latin America, power conflicts were
more frequent and the confrontation with the natives more intense. Upon the arrival of the Spanish,
two great empires controlled large portions of Central America and the Andean zone of South
America. The Aztecs and the Incas respectively had formed centers of organized political power that
conflicted with the claims of Spanish occupation.

With their arrival in the Latin American territory, the Spanish were interested in the exploitation
of gold, however, the abundant native population that upon arrival exceeded 30 million put at
risk their project. Hence, Hernán Cortés (1485-1547) and Francisco Pizarro (1478-1541) had to
take advantage of the tensions that arose within the great empires to successfully conclude their
occupation. The internal tensions among the native were one of the causes of the success of the
Spanish occupation (Ferrer, 2013).

Once the Spanish settled in the territory, they expanded through the territory appropriating land
and indigenous population (Figure 2) that became subordinated to the interests of exploitation of
gold and silver mines of the colonizers. Thus, the first differences in development between North
and South America are due to its conqueror and to the conditions in which the occupation of the
European colonizers took place.

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Figure 2. Spanish Empire.
Source: Ramirez72 (2007).

According to Mahoney (2010), the American colonies controlled by the Spanish were oriented by a
mercantilist economic policy that in few lines implies:

Under a mercantilist political economy, state authorities seek national economic self-sufficiency and
organize a productive activity to ensure favorable trade balances and the accumulation of precious
metals. They are centrally concerned with maximizing wealth generation in the short run to meet their
hefty immediate consumption imperatives (p. 21).

For its part, the colonies of North America had a liberal economic policy in which state authorities
allow economic actors to control surplus capital by stimulating comparative advantages at the
international level and long-term accumulation. In this way, while the Spanish colonies operated with
monopoly markets and strongly focused on the accumulation of precious metals, the British colonies
and some colonizers in the Caribbean such as Belgium and the Netherlands focused on favoring the
accumulation of capital through comparative advantages.

About the colonization conditions, the complexity of existing institutions before the arrival of the
colonizers was also decisive in the differences that arose between the economic blocs. Thus, the
natives of North America had simpler institutions when the occupation took place since they did not
have centralized societies, they had less bureaucracy and less extended agricultural activity. Hence,
the clash with the British who arrived in their territory allowed a faster construction process of new
organizational models and fewer tensions between the groups.

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On the other hand, in Latin America the hierarchical organization of the great civilizations, extended
agriculture, strongly rooted polytheistic beliefs and the complexity of their societies clashed with the
belief systems and the customs of the Spanish, leading to greater tensions and unfavorable conditions
for the establishment of a more stable institutional order.

In any case, the result of the process of colonization in the American continent had common
elements between the North and the South. The first was the disappearance of the majority of
the native population (about 95%). The second was the establishment of a system of political and
economic organization in which the colonizer’s vision prevailed. Last but not least, there was more
intensive exploitation of the territory that led to an integration of America with the rest of the world
through a commercial activity that focused on the extraction of gold and silver, and that ensured the
rise of mercantilism and the recovery of commercial circuits around the world.

Also, the colonization gave way to the first differences between the American societies, which came
from the territory and the occupation patterns. For instance, extractivism in North America was not
possible due to the scarcity of gold and silver, this fact forced its inhabitants to dedicate themselves
to agriculture and commerce and to focus on the accumulation of capital. Latin America, on the
other hand, had large amounts of gold and silver that exacerbated the tensions between the groups
and led to the existence of greater control that restricted capital circulation.

The following table summarizes the characteristics that differentiated the colonization of North and
South America:

Table 1. Main differences in the colonization process between Latin America and North America.

Category Latin America North America

Colonizer’s economic policy. Predominantly mercantilist. Mainly liberal.

Institutions’ complexity upon the High complexity with greater Low complexity, less tension with
colonizer’s arrival. tensions with the arrival of the the colonizing group.
colonizer.

Territory. An abundance of precious metals Precious metals scarceness leading

leading to greater protection. to farm and trade as sources of
generation surplus.

Capital circulation. Low. High.

Source: Politécnico Grancolombiano, adapted from Acemoglu, Johnson & James (2001) and Mahoney (2010).

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2. Independence
The differences deepened during the period of independence. The independence of the United States
occurred between 1775 and 1783 and it had the support of France. They achieved the signing of the
Treaty of Paris on September 3rd, 1783. The growing nonconformity with the British tax system led
to protests in American territory, like the one that took place in Boston in 1773, known as the Boston
Tea Party. Added to this process was the demand for greater participation in parliament that was not
accepted by the British and that precipitated the separation of the United States from English power.

The United States is the first colonial power to be constituted as a liberal democracy, and its
independence was based on the conformation of institutional orders contained in the declaration
of independence signed in Philadelphia in 1776. The establishment of a local government with
representative assemblies and legal systems independent led to a systematic rule of law, the
protection of individual rights and the greater specialization in production with common markets
(North, Summerhill, & Weingast, 2000).

Brazil is at an intermediate point, since it had a more stable institutional order than Spanish America,
but it had a monarch: Pedro I of Brazil, heir to the Portuguese throne, who led the process of
independence proclaimed in 1822. From 1822 to 1889 an empire was established, whose foundations
would be the long tradition of slavery and the interests of the British bourgeoisie that promoted the
freedom of the markets.

At the other extreme is the case of Latin America, where independence took place in a context of the
growing weakness of Spanish commercial power and a systematic loss of territorial control in Spain by its
monarchy that culminated in the Napoleonic occupation in 1808. In the region, independence did not take
place in a unified way, but rather slowly developed with internal struggles between those who defended the
preservation of the colonial order and those who advocated the establishment of the republic.

From the formation of juntas to the declaration of independence of each country, several years
passed and the social orders created did not have the stability or the broad consensus that North
America had. This institutional instability made that, unlike the northern countries, in Latin America:

The demise of the old system raised new conflicts that the nascent states proved unable to resolve.
Throughout this region, attempts to create new republican institutions clashed with the political
foundations of the old order […]The result was huge land grants to wealthy individuals and the church;
rights and privileges for the military; and a large series of local monopolies ranging from production to
commerce, to long-distance trade (North, Summerhill & Weingast, 2000, p. 47).

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Thus, in the Spanish-American colonies, the processes of an institutional organization, the guarantees
of property defense and the expansion of competitive markets were weak and, therefore, led to a
likewise structure in the long term that affected its economic performance. Besides, most of the Latin
American countries acquired large debts with the English to confront the Spanish Empire, a fact that
would add to the already fragile consensus of power that had been reached in the young American
republics the weakness in the State’s accounts.

Despite the weakness in Latin America's republics, Leandro Prados de la Escosura (2005) states that
once the first years of independence were over, this group of countries achieved prosperity around
1850 and distanced themselves from economic blocks such as Africa and European colonies in the
continent, which showed an unfavorable performance by then.

Below, in Table 2, there’s a summary of the most relevant differences of the independence processes
in the continent:

Table 2. Main differences of the independence processes in the US, Brazil and Latin America

Category North America Brazil Latin America

Organization model before Federal with market Centralist with the Centralist with a growing
independence. freedom. dominion of monarchical weakness of Spanish power.
powers.

Defense of property rights Deconcentrated property Concentrated property Concentrated property

and guarantees of market and guarantees of market with guarantees of market with monopoly powers.
power. freedom. freedom,

Institutions stability. High. High. Low.

Visions about Consensus about the A division between the A division between
Independence. independence of the British Brazilian party and the supporters of colonial
Empire. Portuguese party. power and defenders of the
republics.

Source: Politécnico Grancolombiano, adapted from North, Summerhill, & Weingast (2000) in Prados de la Escosura (2005).

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3. The American continent in the 19th century
In the second half of the 19th century, the institutional order of North America found in the Civil War
(1861-1865) a limit that made the world think that the success of liberal democracy the United States
represented had failed. The proslavery society of southern states, dependent on the world economy,
and the protectionist model of the northern states of the country fought in an unprecedented war in
the country's history. According to Eric Hobsbawm:

Only one major obstacle stood in the way of the conversion of the USA into the world economic
power […]: the conflict between an industrial and farming north and semi-colonial south. For while the
North benefited from the capital, labour, and skills of Europe—and notably Britain—as an independent
economy, the South (which imported few of these resources) was a typical dependent economy of
Britain (1996, p. 179).

This opposition of models is finally resolved in favor of the North, therefore, the United States
undertook a process of industrial development based on the expansion of rail networks, the
production of fossil fuels and the subsequent advance of the capital market and the automotive
industry. All these changes took place with a defense of private initiative, the formation of monopolies
and the emergence of speculative practices in the stock market. It is in this environment that the
United States became one of the great industrial powers of the world and that it managed to stabilize
itself as a federal constitutional and democratic republic.

Latin America, in the second half of the century and after the disorder produced the independence
process, focuses on the development of the agro-export model, increasing the number of raw
material exports and allowing to reactivate growth through international markets. According to Leslie
Bethell (2006), differences emerged in this period between the countries of Latin America, since
Brazil, Mexico, Chile, and Argentina created better guarantees for prosperity.

Also, between 1870 and 1929 most of the countries in the region showed a better climate for
investment, which allowed a rapid economic expansion and a reorganization process of political and
social life with a presidential system.

In this way, the 19th century meant for both North America and Latin America a growth acceleration
(more remarkable in the case of North America for its industrial development). This change favored
a global economic integration and allowed the former colonies to find a path of stable growth that
lasted until the 1929 crisis.

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4. Milestones before the postwar period
The 20th century was a period of great transformations in society due to the changes induced by the
two World Wars and the 1929 crisis. For the American continent these three episodes were decisive
in defining the trajectories of the development of the countries.

The United States was one of the protagonists of the two World Wars, and its participation resulted in
its status as a new global hegemonic power, a role it has exercised since 1945 to the present day.

Although the United States was not involved in the first years of the First World War that developed
in Europe 1, it choose to participate for two reasons: on the one hand, the intensification of the
German submarine campaign, whose advantage had grown as a result of the exit of the war of the
Russian Empire caused by the Bolshevik revolution; on the other hand, the financial support of the
German Minister of Foreign Affairs offered Mexico to recover the territories of Texas, Arizona, and
New Mexico, that became part of the United States after the confrontations of these two countries
in the 19th century.

After its entry in 1917, the allied bloc claimed victory, and the United States faced an unprecedented
growth cycle. However, this rapid expansion would end suddenly with the 1929 crisis. According to
Cameron and Neil (2015), the causes of said crises were:

• Tariffs were not reduced to facilitate imports or reduce interest rates to stimulate investment.

• The failure of international cooperation: the US did not renounce the collection of debts, and
the European countries showed signs of economic deterioration, the loans flow reduced.

• Ford interrupted the production of the T Model, there was a contraction of 22 % in the
automotive sector in 1927.

• The losses due to the stock market crash that affected consumption levels.

As a result of this crisis, the unemployment in the United States was close to 30 %. This made it
necessary to undertake a program of economic reactivation that could not be driven by the private
sector, due to its critical conditions after the crisis. Hence, the US government started a program
known as the New Deal to finance the public deficit. The idea was to recover the economy by
increasing production and reducing unemployment at the end of the 1930s (see Figure 3).

1 The war faced the central powers conformed by the German Empire, the Austro-Hungarian Empire, the Ottoman Empire and Bulgaria against the
countries of the Entente or allies that were France, the United Kingdom, Portugal, Italy, Greece, Serbia, Romania, and the Russian Empire.

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Figure 3. US Unemployment Rate (1930-1945).
Source: SJSU (2018).

The crisis produced other effects that transcended North America's borders: after World War I, the
growing German poverty from the onerous compensation’s conditions demanded in the Treaty of
Versailles and the economic effects of the crash of 1929 led to a progressive strengthening of fascism
in Europe and Nazism in Germany. The rise of the Nazi party and its expansionist program paved the
way to the Second World War.

World War II not only occurred in Europe, it also affected the United States when, for the control
of the Pacific, Japan attacked Pearl Harbor. This was the reason for the participation of the United
States in the war. After systematic attacks made by each part, the battle to control the Pacific
culminated with the attack by the US on Hiroshima and Nagasaki with nuclear bombs.

Figure 4. The Cold War.

Source: Politécnico grancolombiano.

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It is from 1945, when the United States becomes a center of world power, that its trajectory of
development was definitively separated from that of other countries of the continent. After its victory
against the Japanese and the defeat of Nazism at the hands of the Union of Soviet Socialist Republics
(USSR), two poles of power emerged worldwide: the capitalist side, whose most visible power was the
United States, and the socialist side, headed by the USSR. The tension between these two powers,
called the Cold War, lasted until the 90s.

While the United States power grew, Latin America experienced significant changes derived from
the crisis episodes described previously. The 1929 crisis meant credit markets were closing for the
countries of the region and marked the end of the agro-export model. Latin America, thus, initiated
an endogenous development process in which government efforts focused on the promotion of
industrial development and the formation of stronger local markets.

The fast growth with the new industrial commitment for Latin American countries came with the rise
of undemocratic regimes in the largest countries in the region: Getulio Vargas, who was in power in
Brazil between 1930 and 1954; Lázaro Cárdenas in Mexico, who governed between 1934 and 1940;
and Juan Domingo Perón between 1946 and 1955 in Argentina. With the Cold War, these countries
moved towards liberal democratic orders that prevailed until the new cycle of dictatorships in the
region that took place in the 70s.

So, while the 20th century meant for the United States the consolidation of its power and the
reaffirmation of its dominant position worldwide, for Latin America it represented a transition towards
a process of industrial development and political definition of democratic orders.

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References
Acemoglu, D., Johnson, S., & James, R. (2001). The Colonial Origins of Comparative Development:
An Empirical Investigation. The American Economic Review, 91(5), 1369-1401.

Cameron, R. & Neil, L. (2015). A Concise Economic History of the World: From Paleolithic Times to the
Present. United Kingdom: Oxford University Press.

Ferrer, A. (2013). Historia de la Globalización I: Orígenes del orden económico mundial. Argentina:
Fondo de Cultura económica.

Hobsbawm, E. (1996). The Age of Revolution 1789-1848. United States: Random House.

Mahoney, J. (2010). Colonialism and Post-Colonial Development: Spanish America in Comparative

Perspective. United Kingdom: Cambridge University Press.

North, D., Summerhill, W., & Weingast, B. (2000). Order, disorder and economic change: Latin
America vs. North America. In B. Bueno de Mesquita & H. Root. Governing for Prosperity (p. 259).
New Haven and London: Yale University Press.

Prados de la Escosura, L. (10 de 02 de 2005). Colonial Independence and Economic Backwardness

in Latin America. Recuperado de http://eprints.lse.ac.uk/22482/1/wp10.pdf

SJSU. (2018). The Depression of 1930’s and its Origin or Causes. Retrieved from http://www.sjsu.
edu/faculty/watkins/dep1929.htm

POLITÉCNICO GRANCOLOMBIANO 12
Figure References
Acemoglu, D., Johnson, S., & James, R. (2001). The Colonial Origins of Comparative Development:
An Empirical Investigation. The American Economic Review, 91(5), 1369-1401.

Pilon, K. (n. d.). Thirteen North American Colonies Map, 1795 [Photography].
Retrieved from https://es.123rf.com/imagenes-de-archivo/mapa_colonias_americanas.
html?oriSearch=colonias+americanas&sti=nqulmt5hyjns9x3l0s|&mediapopup=5870579

Prados de la Escosura, L. (10 de 02 de 2005). Colonial Independence and Economic Backwardness

in Latin America. [Table] Recuperado de http://eprints.lse.ac.uk/22482/1/wp10.pdf

Ramirez72. (2007). Spanish Empire-World map [Vector]. Retrieved from https://commons.

wikimedia.org/wiki/File:Spanish_Empire-World_Map.png

SJSU. (2018). The first statistic for demonstrating the decline of the economy into depression is the
unemployment rate. [Graphic]. Retrieved from http://www.sjsu.edu/faculty/watkins/dep1929.htm

POLITÉCNICO GRANCOLOMBIANO 13
 TECHNICAL INFORMATION

Module: Cultura y Economía Regional de Europa

Unit 1: Context and history of the American continent
Learning environment 2: Background and history of the
American continent

Author: Claudia Milena Pico

Pedagogical Advisor: Estefanía Ferrero Marciales

Graphic Designer: Cristian Navarro
Assistant: Ginna Paola Quiroga Espinosa

This material belongs to Politécnico Grancolombiano

Its partial or total reproduction is prohibited

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