Question 1- Analyze the causes of the economic stagnation that afflicted many of the new states following independence.
There were a number of causes for economic stagnation after independence. While some nations such as Brazil, Chile, and Argentina found economic prosperity in industry such as coffee, metal, and hides, many other nations failed to return to the economic success they had before their independence was gained. Some of these nations are: Bolivia, Peru, and Mexico. These specific nations were mostly dependent on mining for economic balance; however, after they gained independence they lost much of their mining capacity. This in turn broke their economies. The causes for economic stagnation after independence included: the failure to gain foreign investment, and the catastrophe of not redistributing income and land throughout each nation.
After many of the Latin American nations gained their independence from Spain and Portugal (Brazil), they believed that many foreign nations would begin to trade with Latin America and bring a great amount of their own capital. However, this did not occur as planned due to the chaotic political system that was in control of many of the newly free Latin American countries and also due to Europe and the United States having their own industrial revolutions, they were not able to invest greatly in Latin America. They needed to keep most of their capital and resources within their own borders. Instead, Britain began outsourcing much of their manufacturing of goods, mostly textiles, to Latin American nations.
These cheap products hurt many of the local clothing and craft producers in Latin America. The merchant class was virtually destroyed due to the cheap and easily assessable British goods that began to flood the markets of Latin American nations. The British goods also depleted the new nations of their precious metals (gold and silver). Due to the invasion of British products in Latin America, the wealthy merchant families all the way from Mexico City to Argentina were English; however, Iberian merchants were still prominent and controlled the urban and province to province trade.
Once the majority of Latin American countries secured their independence, they failed to act on one necessary issue to achieve economic stability. Income and land were not distributed among the new citizens. If the nations were to redistribute land and income evenly throughout the people, internal markets may have been stimulated. The lower classes would had more money than ever and be motivated to consume more products which would bring the need for a larger market. Since the higher class retained the majority of income and land, consumption came from only a small majority of the citizens. The redistribution would also have stimulated production forces throughout the nation.
Native capitalism and capitalist relations were ruined by: the mistakes made by the newly free Latin American countries and the failure of foreign investors. These factors led to the reinforcement of the hacienda as the dominant entity in the economic as well as political dealings of the new Latin American states. The return to regionalism intensified due to lack of roads and minimal communications due to natural obstructions like mountains. Caudillos began ruling regions and controlling all of the regional business.
Politics and revolution brought about by the caudillos became an economic activity in some Latin American nations. The winners in the revolutions were given control of the customhouse which controlled the collection of taxes on imports/exports. The caudillos could use this advantage to provide jobs, government land, and financial protection to their supporters and themselves. Due to the reliance on politics and military gain, the leaders caused a bloated military and caused resources to be sidetracked from economic development. Also, foreign trade was stressed more than ever which made it so the Latin American nations depended on foreign nations for products, instead of providing for themselves.