Rethinking Economic Development
How should Latin American countries "develop"? I have no idea.
Hello everyone, I hope you all had a wonderful, restful holiday season. I was lucky enough to go home and spend time making gingerbread houses with little cousins, spending much needed time with the grandparents, some good family TV show binging with the family, and of course, getting to see some close friends after a long time.
One of the realities of coming back home is that I face the world I’ve grown up with—a world that tells me to always be looking for the next productive activity, the next step on my “career ladder”, to always be prepared to excel and continue some strange prescribed arc of “high-achieving” “prestigious university” go-getters. And yet, for all my resistance, I couldn’t help but thinking about what comes next. Do I follow my project here and explore how climate change and biodiversity loss affects rural peoples in Latin America? Do I try to get a technical policy job in D.C. writing reports and talking to “clients” so I can build the stairs to my near future super successful career? Do I commit to local organizing, returning home and finding my roots again in on-the-ground community work? I’m not sure.
As a lifelong student, “what do I do next?” can never be separated from “what do I want to study and learn about over the next few years?” And oh boy, has the economy been on my mind for years. It was on my mind when I tried to infiltrate Duke’s Economics department to critique how it taught mainstream economics to students. Or when I almost created my own degree dedicated to sustainable development. Or the continual strain of being a global citizen, in which jobs reports, interest rates, investment returns, and productivity increases dictate how most people consider well-being in the modern world.
For those that know me, I have always been a critic of mainstream economics and how it's been used to quantify and justify certain policies above others. I have explored the ecological consequences of economic growth in highly-developed countries, and have explored the behemoth buzzword of capitalism for all its worth.1 I’ve always wanted to understand the beast. How our lives are shaped by macroeconomic factors, by Ph.Ds from the University of Chicago, by what we call the “economy.” So, one should not be surprised to hear that my curiosity has continued to my time in La Guajira, Colombia.
Taking on Economics: My Amateur Approach
With that intro, I wanted to spend some time taking on economics in La Guajira. I hope these are not straw man arguments, and I appreciate critical and constructive criticism and I continue to develop my line of reasoning. This is less a take on how we apply economic tools (because they do have empirical value in the real world),2 and more a take on how the economic paradigm has, in my eyes, crippled the well-being of Latin America.
This is a piece that is way out of my league. So I'll try my best. For myself. And for people reading. I think a lot of what I'm putting out here makes sense on a human level, but we've been taught to forget that by Mother Culture.3 So here we go. I'm going to make a lot of generalizations, so please stay with me and definitely feel free to correct me where I'm wrong in the comments or by reaching out!
It starts with a text.
Last July, I angrily texted one of my friends demanding a response to my frustration with economics.
The "Global South", or most non-American or European world, has been pillaged by rich nations for centuries. It starts with colonization. What did Spaniards, Englishmen, French, Portuguese, Dutch, etc. kingdoms want? Yes, they wanted to convert indigenous peoples to Christianity. But more so, they wanted gold. Silver. Physical resources that they could pluck from the "New World" to fund their colonial expansion, extravagant public infrastructure, and war chest against each other. Pillaging has taken many forms.
Extensive plantations of cash crops, in which indigenous peoples lost their subsistence agriculture to grow sugar, tobacco, and other unnecessary goods for European settlers to take back to their countries.
Mineral extraction. Mining gold, silver, iron, copper, and whatever other Minecraft material you can imagine to build palaces, make jewelry, and fight wars.
Timber and forest materials extraction: Clearing, chopping, burning, and selling for ships and materials.
When Indigenous peoples died from disease, overwork, and devastation, Europeans brought in slave labor from West Africa. And the process continued.
I feel like people generally know this story. Extract materials and ship them off to foreign powers, all provided by people subjugated to sub-human conditions.
But many think that political revolutions and gaining national independence resolved many of these problems. But look to Haiti for a quick look at why this might not be the case.
“More than 200 years ago, enslaved Haitians successfully revolted against their French masters and declared themselves free. Two decades later, the French government demanded Haitians pay reparations to former slave masters, under the threat of war. Without the funds to pay, Haitians had to take out a loan from French banks. This would come to be known as the “double debt,” and is part of the reason Haiti is one of the poorest countries in the world today.”-NYTimes4
Most Latin American countries struggled with post-independence internal conflict, no public infrastructure to unite peoples and provide common goods, and an economy still largely controlled by foreign nations.5
No, there were no slavery-enforced banana plantations in the Caribbean, but there was the unwelcome presence of the U.S. Fruit Company that controlled regional politics and dictated the economic conditions of the working class during the early 1900s (Bucheli, 2005).
Economic Growth: A Modern Guide
We often look to the United States as the prime example of how development should take place. In fact, much of the foundations of development economics come from America's trajectory from a set of colonies to a world superpower.
In essence, what the U.S. did was reach the phases of economic growth faster than anyone else. Yes, it had a whole period where people were still enslaved in extractive agriculture during "the preconditions for take-off". Or the urban blight of the industrial poor during its "take-off" in manufacturing. But, if we look past the historical negation of rights to African Americans up until the Civil Rights Act (and as many would argue, this de-facto negation continues today), a reliance on bussing in migrant farmers for low-wage work for agriculture, and the continued dependence on fossil fuel exploitation to increase economic growth, the U.S. has a pretty clean playbook.
I hope that anyone reading this article can start to see some of the problems with this playbook. For one, it is entirely based on Western society assumptions of industrial economic development!
Rostow assumes that "traditional society" is stagnant, when in fact human societies have evolved for millenia before the industrial evolution, even if it doesn't take the form of economic growth.6 Rostow assumes some sort of continuity in development, when empirical studies show economic development to be much more complicated.7
But here's the most troubling. It assumes that if you follow these steps, you will reach the heavens of "mass consumption". The one form of well-being, the North Star, the goalpost that development economics aspires to.
Of course, any serious economist would question Rostow's model for a number of reasons. But, it still feels to me that the "Global South" has been promised a version of it. Yes, indigenous peoples will incur violence and loss. Lands and resources will be exploited and exported. But, if you do things right, you can manufacture basic goods. And then advanced goods (see the Asian Tigers, or my Substack article on Singapore). And if you do that, you can finally get a hold in the global trade market where you are the one importing prime materials from other countries for your advanced manufacturing, instead of vice versa. So how does Latin America, or in my case, Colombia and La Guajira, look today?
Extensive plantations of cash crops, in which palm oil, coffee, chocolate, and sugarcane, provide significant revenues for rural peoples. As most Americans would guess, Colombia is also one of the world's leaders in illicit drugs, from marijuana in the past to coca (principal component of cocaine) today.8
Mineral Extraction: The mining of fossil fuels, particularly coal and gas in Colombia, gold in Peru, and critical materials like lithium in Bolivia and Chile,9 are often the largest percentage of GDP, exporting their production to European economies and providing tax revenue for governments to fund social programs.10
Timber and forest mineral extraction: The destruction of the Amazon due to clear-cutting for grazing lands, timber, and agriculture is one of the most well-known environmental stories in the world. It's also not getting much better.
This looks awfully familiar to what we saw during colonization, no? But Latin American countries are not militarily forced to produce these products and enslaved to do so. Rather, they are forced by the global market and global trade arrangements to export goods and keep rural peasants under large levels of debt, subject to fluxuations of global commodity prices (what happens when the price of coffee collapses because Vietnamese coffee floods the market?), and the mounting environmental pressures of extracting too much from their land and needing to expand and fight with one another to keep up production.
Now, how great is it that some of the cheap t-shirts we wear say "made in Colombia", or that American companies flock to Latin America to staff their corporations with call center workers? These are jobs. This is economic growth.
La Guajira is one of the poorest departments of Colombia. It is also one of the richest in terms of mineral extraction, hosting the largest open-pit coal mine in Latin America and various oil and gas deposits. It has been told by multinational companies and multilateral trade agreements that if it exploits its land, displaces some of indigenous peoples, pollutes its water, and sacrifices self-reliance, it can export enough to provide the cash it needs to buy what it actually needs--water, food, housing, and social programs. As my research shows, it may get there, through increased foreign investment in clean energy projects by multinational companies and growing its tourism industry. But we cannot forget the costs of "development".
Is it not the case that world powers like the U.S. have encouraged free trade and low prices so that Latin America could export prime materials and buy more expensive American-made products? Or that now, U.S. industrial policy is aiming to be more protectionist, shutting out Latin American industry (in the goal of curbing China's economic rise) so that it can protect its own industry? That although measurements of poverty, life expectancy, and wealth have risen in Latin America, they have never "taken off" by reaching the utopia Rostow predicts, instead staying subject to more powerful economies that want their bananas, lithium, and beef?
What I'm saying is that maybe we should stop telling Latin America, or "developing countries", to keep following a growth model that U.S. and Europe have taken. That exporting more, producing more, embracing globalization more as industrialization saves everyone may not be the way. That perhaps, ancestral knowledge of how things have been in the past, local and regional networks of fair trade and reciprocity, and resilient, interconnected economies instead of extractive, unequal trade flows should be embraced.
There are a bunch of reasons to dismiss my argument:
First off, I don't know anything about trade. And the amount of economists that will outline the benefits of comparative advantage (if you're good at producing one type of good, produce a BUNCH of it) will overwhelm me.
Second, that maybe I cannot argue with the fact that most material indicators of well-being have increased over the last few centuries. So maybe the growth model does work for humanity, even if it destroys our planet and future generation's access to natural resources in the future.
But more importantly, I'm not sure if it's possible.
I'm not sure how many trillions of dollars are invested in maintaining the current economic paradigm, but I'm sure it's a lot. I bet a lot of Americans would freak out if the price of their coffee suddenly skyrockets because peasant farmers don't want to grow it anymore. And, given the state of international finance and debt, many countries are locked in to exporting goods and developing industries so that they can become credit-worthy enough to receive funds for true social programs like hospitals, credit unions, and public infrastructure.
Leaving this piece with typical uncertainty
I had a conversation with one of my friends, who showed me her presentation of how an indigenous community in Colombia had transitioned from growing coca and being usurped in the political violence of guerilla warfare to sustainable coffee farms. When I told her about my thoughts, she said something like,
"Ya, they told me that they certainly don't want to be growing coffee for their economic livilihoods. But, with environmental degradation and shrinking land, they can't really do anything else to sustain themselves. They need cash to buy real food. After all, we can't escape the fact that we're in a global market. Maybe the best thing we can do is help marginalized people better participate in it."
That's the thing. For all my talk about getting on my high horse and dismissing the extractive relations of globalization and North-South economics, I don't have a true alternative. We can't go "back" to a utopia where Indigenous peoples had fertile, stable lands where they could hunt, fish, and grow what they need to be self-sufficient. Where the United States doesn't need to metabolize millions of gallons of oil, beef, wood, steel, copper, lithium in order to keep up with aging infrastructure. We are stuck on this treadmill. And I can't find a way out.
The actual structure of the world economy has not changed substantially since colonization. It's only shifted responsibilities between countries. And until real change happens, "the Global South" will always be behind.
“Latin America is the region of open veins. Everything from the discovery until our times, has always been transmuted into European--or later--United States-- capital, and as such has accumulated on distant centers of power. Everything: the soil, its fruits nad its mineral-rich depths, the people and their capacity to work and to consume, natural resources and human resources.”- Eduardo Galeano, Open Veins of Latin America
Some of my introduction reads were:
Erik Lindberg on Economic Growth: A Primer
Speth, J.G., & Courrier, K. (Eds.). (2020). The New Systems Reader: Alternatives to a Failed Economy (1st ed.). Routledge
Hans Baer on Global Capitalism and Climate Change
Degrowth: a theory of radical abundance, by Jason Hickel
Relatedly, I do see the value of development economics, which use the rigorous analysis of policies and initiatives to improve social outcomes. How effective can a national healthcare policy be? Or a vaccination campaign? Or monetary assistance for relocating out of high-risk flood zones?)
A subtle reference to Ishmael by Daniel Quinn.
Emmet Lindner. 2022. Investigating Haiti’s ‘Double Debt’. https://www.nytimes.com/2022/05/22/insider/investigating-haitis-double-debt.html
Lost Decades: Lessons from Post-Independence Latin America for Today’s Africa.
Robert H. Bates, John H. Coatsworth, and Jeffrey G. Williamson
NBER Working Paper No. 12610 October 2006
In the case of the U.S. Fruit Company, see
Bucheli, M. (2005). Bananas and Business: The United Fruit Company in Colombia, 1899-2000. NYU Press. http://www.jstor.org/stable/j.ctt155jjtj.
David Graeber, in his book The New Dawn of Everything, beautiful takes on this argument. See some of his ideas here, https://davidgraeber.org/articles/how-to-change-the-course-of-human-history-at-least-the-part-thats-already-happened/.
Itagaki, Y. (1963). CRITICISM OF ROSTOW'S STAGE APPROACH: THE CONCEPTS OF STAGE, SYSTEM AND TYPE. Developing Economies, 1, 1-17. https://www.ide.go.jp/library/English/Publish/Periodicals/De/pdf/63_01_01.pdf
See https://www.skuld.com/contentassets/9655f09ba62d4e5f8425270a6eddbf9c/colombia-drug-smuggling-2023.pdf for some updated statistics on Colombia.
Center for Energy Studies | Energy Insights 2024 | Latin American Energy | Report. Critical Minerals in Latin America. https://www.bakerinstitute.org/research/critical-minerals-latin-america
Roundtable: Can Latin America build a post-fossil fuel economy? Fermín Koop, Patrick Moore, October 23, 2024. https://dialogue.earth/en/energy/roundtable-can-latin-america-build-a-post-fossil-fuel-economy/