Category Archives: economics

by Joel | 3 May 2022 · 6:14 am

China’s Silver Shortage, 1830s

From Imperial Twilight: The Opium War and the End of China’s Last Golden Age, by Stephen R. Platt (Knopf, 2018), Kindle pp. 304-307:

There was nothing the government could do about the weather, but the root cause of the economic turmoil in the 1830s, and the problem from which many of the others grew, was a human one: China’s monetary system had gone haywire. It was mainly a problem of currency, of which the Qing dynasty had two primary forms: copper for small transactions and silver for large ones. Copper came in minted coins (with holes through the middle so they could be strung on a loop for convenience), while domestic silver—nearly pure and known in English as “sycee”—was unminted, traded by weight in units of measurement called taels that were just under an ounce. In normal times, a tael of silver was worth a thousand copper coins, and, value for value, the excessive difficulty of moving large amounts of copper between provinces meant that silver was the medium through which all long-distance trade was conducted within the empire. Silver was also, significantly, the basis on which tax quotas were assessed. By contrast, copper was the medium of the rural marketplace and menial wages. Nearly all of the income and savings of the lower classes of China—farmers, hired laborers, craftspeople—were in copper coins.

The crisis was that the value of silver had begun to rise sharply, and as it rose the exchange rate between silver and copper skewed out of control. From the ideal rate of 1,000 copper coins per tael of silver in the eighteenth century (even less at times, which was a boon for peasants since it meant their copper money was worth more), it had risen to 1,200 by the time Daoguang came to the throne. By 1830 it reached 1,365 copper coins per tael of silver and showed no signs of stopping. Since taxes were assessed in a fixed amount of silver, which had to be purchased with copper currency, this meant that by the early 1830s the peasants of China had suffered a nearly 40 percent increase in their effective tax burdens for reasons none fully understood. And as with nearly every problem in the empire, the corruption of officials made a bad situation even worse, as tax collectors commonly charged even higher rates of exchange so they could pocket the proceeds. By the late 1830s, some regions were reporting copper–silver exchange rates as high as 1,600 to 1, with tax collectors independently demanding as much as 2,000 copper coins per tael of silver owed. This dramatic decline in the worth of copper currency was disastrous for the general population, piling economic hardship on the poor who could scarcely bear it and sparking widespread tax protests that layered on top of all the other sources of dissent against the government. But although the emperor could occasionally grant tax amnesties to regions afflicted by floods or drought, the government quite desperately needed every tael of revenue it could get and so the exactions continued.

…

Even with that outflow of sycee silver, however, the inflow of Spanish dollars to purchase tea and silk at Canton should have been able to maintain a relatively steady overall silver supply in China (and in fact, since the late eighteenth century Spanish dollars had been preferred even over native sycee in some of China’s most important domestic markets). But on that count, a range of forces far beyond China’s borders came into play. First, it had been American merchants who brought most of the silver to China in the early nineteenth century (fully one-third of Mexico’s entire silver output between 1805 and 1834 was carried to China by Americans). But a shift in U.S. government monetary policy in 1834 made silver more expensive for American merchants, so they switched abruptly to using bills of exchange—which were acceptable to the Hong merchants but resulted in a decline in the amount of tangible silver entering the country from abroad. With the drop in American imports, China, which for centuries had been the world’s largest net importer of silver, unexpectedly turned into an exporter of the metal.

In the even bigger picture, though, what the Chinese scholars who blamed foreign trade and opium for the scarcity of silver in China did not realize was that it wasn’t just a Chinese problem: by the 1820s, silver was becoming scarce everywhere. Most of the world’s supply at this time had come from mines in Spanish Mexico and Peru (thus the importance of the Spanish dollar), but national revolutions in Latin America that began in the 1810s shut down those mines and choked off the world’s largest fonts of the precious metal. Global production of silver declined by nearly half during the 1810s—the same time its value began to creep upward in China—and it continued to decline during the decade that followed. The ramping up of the opium trade in 1820s China thus coincided fatefully with the onset of a global slump in silver output that would last for the next thirty years.

Regardless of where the specific blame lay, it was a devastating confluence of economic forces for China: the loss of sycee through the opium smuggling trade, the global scarcity of silver after the Latin American revolutions, and the drying up of American silver imports into China together helped cause a catastrophic decline in the empire’s supply of the metal. And it was a vicious cycle, for as silver became more valuable in China, wealthy families and businessmen would hoard it, removing even more from circulation and making the problem worse.

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by Joel | 1 May 2022 · 9:36 am

China’s Decline Under Daoguang

From Imperial Twilight: The Opium War and the End of China’s Last Golden Age, by Stephen R. Platt (Knopf, 2018), Kindle pp. 302-304:

Conditions in China were getting worse under Daoguang’s reign. By the time he took the throne, and to some degree beginning even with his father, Jiaqing, it becomes easier to speak of the empire each sovereign inherited rather than what he created or built. They, and the emperors and regents to follow, would have their successes—the dynasty would, after all, survive into the early twentieth century—but rarely did they leave China in a more solid position than they had found it. By the early nineteenth century, an inexorable process of decline was setting in, the slow setting of a sun that had reached its zenith under Qianlong in the late 1700s. Jiaqing had done his best, making strong efforts to rein in the corruption of the military and suppress the White Lotus and other rebellions. But under the rule of his son Daoguang, new problems would plague the empire even as old ones kept coming back in different forms.

Patronage, bribery, and embezzlement were the accepted norm among civil officials, especially in the lower orders. Population pressures on the land continued unabated, and Han Chinese settlers seeking an escape from the crowding continued to move into mountainous regions of the empire that had long been home to indigenous peoples, sparking incidents of ethnic violence. A breakdown of trust between the government and peasants worsened. The military was weakened by Jiaqing’s cost-cutting measures after the White Lotus campaigns. Through the 1830s, internal rebellions erupted in different parts of the empire with regularity, every year or two—some led by religious sects similar to the White Lotus, others by rebel factions bonded together by regional or ethnic ties. The many divisions that ran naturally through a vast and diverse multiethnic empire were turning more frequently and more visibly into fractures.

Opium wove its way right through the tattering fabric of this restive society, the single most visible symbol of the Chinese government’s inability to control its people. In spite of Daoguang’s strong desire to control the drug, coastal enforcements on smuggling had failed so completely that by the later 1830s when a foreign ship materialized near the coast it would find not naval patrols but thousands of buyers standing along the shore and whistling to it in hopes that it would drop anchor and sell to them. A major north–south land transport route for opium through Hunan province formed the locus of a series of uprisings that took place in central China in 1836, and imperial troops transferred inland to pacify them turned out to be such heavy users of opium themselves that they could barely fight. Ironically, they had acquired their drug habits in the course of their previous mission, which was to police the smugglers on the coast near Canton.

China’s rising domestic unrest caught the attention of foreigners in Canton, who worried about damage to tea and silk production from the disturbances in the interior. However, some of them also sensed opportunity in the ones that took place on China’s periphery. In 1833, an explosive revolt of aborigines on Taiwan threatened Qing imperial control of the island for several months, in the midst of which it was announced in Britain’s parliament that Taiwan had “declared its independence of the Chinese.” Some foreigners had already begun touting Taiwan as a potential British colony, a base from which they could conduct their trade with China free from the restrictions of Canton. They argued that, morally speaking, to take control of Taiwan would be nothing like trying to seize territory on the Chinese mainland, because Taiwan had been a Dutch possession prior to its conquest by Qianlong’s grandfather Kangxi, so they judged it to be merely a colony of the Qing Empire rather than essential Chinese territory. According to one Canton English-language newspaper, the Taiwanese were a conquered people, “vassals of China; not willingly, but in consequence of bloody wars,” and so even foreigners who opposed aggression toward China shouldn’t object to the British taking control of the island, which the paper judged would be praiseworthy even if only for the sake of “ridding its people of the tyranny of the Chinese.”

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by Joel | 24 April 2022 · 12:38 pm

Opium Culture in Qing China

From Imperial Twilight: The Opium War and the End of China’s Last Golden Age, by Stephen R. Platt (Knopf, 2018), Kindle pp. 225-229:

It is unclear how many Chinese smokers of opium in the early nineteenth century were what we might call addicts. Some certainly were, but given how much was being imported they could not have been many relative to the size of the empire. By the start of Daoguang’s reign in 1820, the nearly five thousand chests being imported from India each year were enough to support about forty thousand average habitual users empire-wide, or as many as one hundred thousand of the lightest daily smokers, so at most a few hundredths of a percent of the population. Furthermore, most users at this time seem not to have been terribly debilitated by opium—they led productive lives and were not outcasts from their families or professions. Indeed, opium smoking was a generally open, public act and there were many socially encouraged reasons to take part in it. Medicinal reasons aside—and there were dozens of those—businessmen smoked opium to focus their minds and help them make smarter deals (at least they imagined that was the effect). Students smoked it for the clarity it brought, thinking it would help them succeed on the civil service examinations. For the stylish it was a relaxant to be offered to guests after dinner. For the privileged with little to do, like the eunuchs of the Forbidden City or Manchu courtiers with few responsibilities, it was an escape from boredom.

Opium was, in other words, perfectly acceptable in respected circles. An aesthetic culture of gorgeously wrought pipes and other accessories grew up around its use by the wealthy, the very expense and extravagance of those tools elevating the act of smoking itself. The Chinese fashion for smoking, moreover, was quite profligate in comparison to the eating of the drug that went on in Britain; much was wasted in the process, and a smoker could easily go through an amount of opium in one day that would kill someone who ingested it directly. For those in more humble situations who couldn’t afford to smoke it themselves, employment in the opium trade still provided a chance for income as couriers and petty dealers.

From a purely economic standpoint opium had its advantages. Valuable and easy to carry (it was worth more than three hundred times its weight in rice), foreign opium was a very good business proposition for Chinese merchants in Canton. Being illegal, it could be turned around quickly for a profit in silver—within a few days in most cases, as compared to tea, which involved large cultivation and transportation networks, and generally took half a year or more to produce a return on each year’s investment. Since the Canton traders made more back from their customers inside China than they paid to the foreign suppliers, trading in opium also served as a convenient way for them to increase their own silver stocks, which they could then use to procure tea for sale to the foreigners. And though they had to pay bribes to officials, the illegal trade was otherwise, de facto, free from taxes.

There is no evidence that the moral exhortations of the Daoguang emperor caught on with the general public in any meaningful way. The widespread public opposition to opium on moral and public health grounds for which China would be known in the twentieth century was at this time entirely absent. Though perhaps the public’s resistance to imperial moralizing was only to be expected; in the early seventeenth century, the Ming dynasty had tried to suppress tobacco for reasons very similar to the Qing dynasty’s ban on opium—even to the point of ordering execution for anyone who cultivated or sold it—but they did not succeed. By the time of the Qing dynasty, those prohibitions were long forgotten and tobacco was an accepted staple of daily life in China. There was no reason the Jiaqing or Daoguang emperors’ edicts against opium should have been more likely to find success.

The Chinese of the early nineteenth century are often described as being uniformly insular and scornful of anything foreign, thanks mainly to an overly literal reading of the boilerplate language in Qianlong’s edict to George III where he claimed that he did not value foreign things. But this was not really the case. For wealthy urbanites in China, Western goods were all the rage by the 1820s—furs, glass, intricate clocks, cotton textiles, and other products of the Canton import trade, which were highly sought after by those with sufficient money to buy them. Far from encountering any kind of disdain for foreign objects, Chinese retailers in the early nineteenth century found that attaching the adjective “Western” to their merchandise was in fact the key to a higher selling price.

This consumer fashion for foreign products helps explain why the opium from British India became so popular in China. Against latter-day nationalist claims that the British came and forced opium down the throats of helpless Chinese consumers, there was in fact an existing system of domestic opium production in China already in place to compete with the import market at Canton (especially in the empire’s western and southwestern provinces). There were also separate avenues for importing the drug overland from Central Asia—and opium from all of those sources was much cheaper than the Indian opium the British brought to Canton. But opium was a luxury good, and its wealthy consumers weren’t looking for a bargain; they were looking for status. Fashionable users of the drug in urban China preferred the opium from British India (the Patna, with its East India Company seal of quality) largely because it was “Western” and therefore seen as far more sophisticated to buy and smoke.

By the late eighteenth century, when British traders began carrying Indian opium in meaningful quantities to Canton, they did so because they knew a market was already waiting for them there. They could not force the drug down anyone’s throat—indeed, they couldn’t even get themselves into the country; all they could do was to carry their opium to China’s southern coast and sell it to Chinese agents. Everything from there on into the Qing Empire was entirely in Chinese hands. Moving forward into the nineteenth century, the extensive smoking of opium emerged as an almost uniquely Chinese social custom, the Canton market for the drug growing to become, primarily for domestic reasons, the most demanding in the world. If opium was illegal in name, it was almost never so in practice, a fact as apparent to outsiders calling at Canton as to insiders within the Qing Empire. As one British dealer testified to a government committee in 1830, “Every now and then there is a very strong edict issued against the trade; but, like other Chinese edicts, it is nearly powerless. It imposes a little difficulty perhaps for the moment, and enables the Mandarins to extort from the dealers.”

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by Joel | 22 April 2022 · 9:39 am

Early Chinese Opium Trade, 1700s

From Imperial Twilight: The Opium War and the End of China’s Last Golden Age, by Stephen R. Platt (Knopf, 2018), Kindle pp. 193-194:

Robert Bennet Forbes, John’s rosy-cheeked older brother, was a middleman in the drug trade. The Lintin he had just fitted out in Massachusetts was destined for use as a “receiving ship”—based off the southwest corner of Lintin Island, far from the reach of the authorities in Canton, he operated it as a floating warehouse for drug shipments. Foreign vessels coming in from India and elsewhere with cargoes of opium would stop first at Lintin, offload their chests of the drug onto Forbes’s ship or another in the harbor, then proceed up to the Whampoa anchorage outside Canton with their holds empty of contraband and clean for inspection. In certain “money-changing shops” in the foreign compound, their captains or supercargoes could meet with the English-speaking agents of Chinese opium wholesalers (some, but not all, of whom were Hong merchants—since the trade was illegal, the Hong merchants’ monopoly on foreign trade did not apply to opium as it did to tea). After agreeing on a price, the foreign merchants took payment for their opium, while the Chinese dealers sent their own men out to Lintin to retrieve the shipment from the holding vessel.

Robert Bennet Forbes’s job was a simple one. His cargo was not his own; he merely held it on consignment for other traders who had assumed the risk (storms, pirates, market fluctuations) of getting it to south China in the first place. Chinese smugglers took all of the responsibility for moving the drug inland and up the coast—and, eventually, for retailing it within China. They also took responsibility for bribing government officials to ensure that no inspections would be made at Lintin, or at least to make sure that such inspections would be announced well in advance. There were in fact Chinese warships stationed on the opposite side of Lintin Island from Forbes’s ship, off the island’s northeastern shore, but they were under a different county’s jurisdiction than the smuggling anchorage and generally only sailed around the island in order to collect bribes from the smugglers before returning to the northeast again. As captain of the Lintin receiving ship, Robert Bennet Forbes thus bore almost no risk at all. All he had to do was stay put and keep the opium safe, earning a commission for each chest he held. The hardest part of the job, for a young New Englander who loved to sail, was having to stay in one place all the time. For suffering that, he brought in an income that in today’s currency was worth more than $800,000 per year.

The basic fact was that the opium poppy grew very well in British India, which otherwise was a spectacularly unprofitable colonial venture (and which, without the rich profits from the Canton tea trade to offset its losses and debts, would likely have bankrupted the East India Company). European traders learned early on that there was a steady if small market for opium in China even though it was illegal there. As early as 1719 we can find the Chinese demand for the drug making an appearance in The Farther Adventures of Robinson Crusoe, Daniel Defoe’s lesser-known sequel to his novel Robinson Crusoe, where Crusoe, who was rescued from his castaway fate in the previous book, made a run from Siam to China to sell opium, “a Commodity which bears a great Price among the Chinese, and which at that Time, was very much wanted there.” Though Crusoe originally intended to sail north in China to sell it, he was advised to “put in at Macao, where we could not have fail’d of a Market for our Opium.”

There are more formal records of British traders carrying Indian opium to China by 1733, when the East India Company notified the captains of two of its ships of “the late severe laws enacted by the Emperour of China for the prohibition of Ophium,” admonishing them that “you are neither to carry, nor suffer any of it to be carry’d in your Ship to China, as you will answer the contrary to the Hon’ble Company at your peril.” Going forward, the “Honourable Company” refrained from carrying any opium on its own ships, judging that the potential loss of its aboveboard tea trade was not worth the smaller reward to be gained from drug trafficking. That did not end the matter, however, but simply made an opening for independent operators who were more willing to take on the dangers of the illegal trade.

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by Joel | 17 April 2022 · 9:50 am

China Envy in Late 1700s

From Imperial Twilight: The Opium War and the End of China’s Last Golden Age, by Stephen R. Platt (Knopf, 2018), Kindle pp. 9-11:

There were good reasons why the East India Company did not do anything else that might put their little foothold in China at risk. In the eyes of Europeans in the late eighteenth century, the empire of the Qing dynasty was an unequaled vision of power, order, and prosperity. It had long been, as Adam Smith described it in 1776 in The Wealth of Nations, “one of the richest, that is, one of the most fertile, best cultivated, most industrious, and most populous countries in the world.” Smith believed China to have been at a stable climax of development for eons—at least as far back as Marco Polo’s visit in the thirteenth century—which meant that although it did not have the capacity to develop any further (an advantage he reserved largely for Europe), it nevertheless showed no signs of retreating from its pinnacle of prosperity. “Though it may perhaps stand still,” he insisted, “[China] does not seem to go backwards.”

Enlightenment champions of reason saw in China the model of a moral and well-governed state that needed no church—a secular empire, founded on rational texts and ruled by scholars. “Confucius,” wrote Voltaire with admiration in his Philosophical Dictionary of 1765, “had no interest in falsehood; he did not pretend to be a prophet; he claimed no inspiration; he taught no new religion; he used no delusions.” In reading extracts from Confucius’s works, Voltaire concluded, “I have found in them nothing but the purest morality, without the slightest tinge of charlatanism.” The state that had been founded on those works was, he believed, the oldest and most enduring in the world. “There is no house in Europe,” he observed, “the antiquity of which is so well proved as that of the Empire of China.”

China’s political unity in the later eighteenth century was dazzling not just to British economists and French philosophers but to Americans as well, once they began to emerge as a nation of their own. In 1794, a U.S. citizen of Dutch descent, who had served as interpreter for an embassy from the Netherlands to China, dedicated the published account of his voyage to George Washington, celebrating in particular “the virtues which in your Excellency afford so striking a resemblance between Asia and America.” China was for him the standard by which Western countries could be measured: Washington was virtuous because he exhibited some of the qualities of a Qing dynasty emperor. The highest hope that the writer could muster for the future of his new nation was that Washington, in his “principles and sentiments,” might procure for the United States “a duration equal to the Chinese Empire.”

These were not just Western fantasies. China in the eighteenth century was not only the most populous and politically unified empire on earth, but also the most prosperous. The standard of living in its wealthy eastern and southern cities was easily a match for the companion regions of western Europe, as was life expectancy. To measure by the consumption of luxury goods such as sugar and tea, the quality of life in eastern China in the 1700s appears to have left Europe behind. At the same time, however, due to the Qing government’s tight strictures on foreign trade and residence, China was also seen from outside as impossibly guarded and remote, “the only civilised nation in the world,” as one British writer put it, “whose jealous laws forbid the intrusion of any other people.” The immense riches of the empire were—to the eternal frustration of westerners—always just out of reach.

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by Joel | 15 April 2022 · 4:03 pm

Chinese Civil Service System in late 1700s

From Imperial Twilight: The Opium War and the End of China’s Last Golden Age, by Stephen R. Platt (Knopf, 2018), Kindle pp. 54-55:

For all the admiration of the Chinese examinations by outsiders, however, by the late eighteenth century the system was beginning to fail. It had always been extremely difficult to pass the exams, but as the population expanded in the Qianlong reign there were far more candidates than before who wanted to take part in the competition, and proportionally fewer government jobs with which to reward them. The competition became more and more fierce, and great numbers of talented candidates were left behind, creating a glut of highly educated men with few career prospects. They generally found unsatisfying work as tutors, secretaries, and bureaucratic underlings, unreliable jobs that required a high level of literacy and education but were transient and depended entirely on the patronage of their individual employers. These men were failures in the eyes of their parents, many of whom had spent lavish sums on their sons’ educations in hopes of their becoming officials and bringing power and prestige to the family.

Furthermore, even those scholars who did manage to pass the examinations might still have to wait ten or twenty years before a position in the imperial bureaucracy opened up to them through normal channels. By consequence, the system of civil appointments became fertile ground for bribery schemes. Those who controlled the appointments demanded huge fees from qualified candidates before they would give them a position—in essence, forcing them to purchase their jobs, and then often making them pay yearly sums to hold on to them. As the practice spread, great numbers of officials began their careers in heavy financial debt to their superiors—debts they were expected to make up for by squeezing bribes from their own inferiors or finding other ways (such as embezzlement) to supplement their meager salaries and pay for the fees and gifts that were required of them.

At the lowest levels, where the vast imperial governing apparatus reached the level of the common people, this pyramid of graft resulted in widespread petty oppression and outright cruelty by minor officials towards the populations they governed—especially the peasants and those on the margins of society, who were most vulnerable to their extortions. Such victims had little or no effective legal recourse if they were harassed or beaten or had their meager property taken by greedy officials. All they could really do, if they were desperate enough, was to revolt.

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by Joel | 14 April 2022 · 9:16 am

Origins of the Opium War

From Imperial Twilight: The Opium War and the End of China’s Last Golden Age, by Stephen R. Platt (Knopf, 2018), Kindle pp. xxiv-xxvi:

This is a book about how the Opium War came to be—that is, how China declined from its eighteenth-century grandeur and how Britain became sufficiently emboldened to take advantage of that decline. The central question of the war, as I see it, is not how Britain won, for that was never in serious doubt—in military terms the Opium War pitted the most advanced naval power in the world against an empire with a long and vulnerable coastline that had not needed a seagoing navy in more than a hundred years and so did not have one. Rather, the central question is a moral one: how Britain could have come to fight such a war in China in the first place—against, it should be noted, savage criticism both at home and abroad.

A sense of inevitability has always been projected backwards onto this era in hindsight, as if the war were always meant to be, but when viewed in the light of its own time the Opium War could hardly have been more counterintuitive. Aside from the audacity of sending a small fleet and a few thousand troops to make war on the world’s largest empire, critics at the time pointed out that Britain was putting its entire future tea trade at risk for only the vaguest and least justifiable of goals. It seemed paradoxical in the 1830s that a liberal British government that had just abolished slavery could turn around and fight a war to support drug dealers, or that proponents of free trade would align their interests with smugglers. If we revisit these events as they actually unfolded, rather than as they have been reinterpreted afterward, we find far more opposition to this war in Britain and America on moral grounds, and far more respect for the sovereignty of China, than one would otherwise expect.

One reason a reader might not expect such opposition to this war is that we too easily forget how much admiration China used to command. Because of its great strength and prosperity in the late eighteenth century, Europeans viewed China in a dramatically different light than they did the other countries of the East. At a time when India was an object of British conquest, China was an object of respect, even awe. Occasional calls for the use of naval power to advance trade there were struck down as self-defeating, while British traders in Canton who made trouble were generally ordered home or at least reminded to behave themselves. In commerce, China held all the cards. In stark contrast to the British Orientalist vision of India in the late eighteenth century—lost in the past, childlike and divided, a prize to be captured and controlled—China represented instead a strong, unified empire and another living civilization.

For that reason, readers who are familiar with the East India Company as a force of imperial conquest in India will find a very different face of it in China. When young Britons went to work for the Company overseas, it was India that attracted the military adventurers, the administrators, those with dreams of empire. The bean counters, by contrast, went to Canton. (And remarkably, it should be noted that in the early nineteenth century those bean counters in their quiet factories served the Company’s bottom line in London far better than the conquerors of India did.) Even as goods—especially cotton and later opium—flowed steadily from India to China, there was almost no professional circulation between the two regions, where Company agents developed largely separate worldviews. When visitors acculturated to British India intruded into the separate world of Canton, they would often cause problems—not just with the Chinese, but with their more experienced countrymen as well.

The Opium War would force those two worlds together, tainting the old admiration and respect for China with a taste for blood. The war would never be universally popular in Britain, however, and fierce opposition to the use of force in China would linger for a long time afterward (another controversial China war in the 1850s would entail the dissolution of Parliament and new elections to disempower the British lawmakers who tried to stop it). Nevertheless, by the time the war finally began, an ongoing collision of two competing worldviews—between those British who respected China’s power and prosperity and those who said it was no more enviable than India—reached a crucial threshold.

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by Joel | 10 April 2022 · 2:49 pm

Latin America’s IMF Era

From The Penguin History Of Latin America, by Edwin Williamson (Penguin, 2010), Kindle pp. 576-577:

Essentially, Latin America faced an acute problem of governance after the debt crisis of the 1980s. The IMF had defined the main objectives of policy, which were to curb inflation, deregulate and privatize the economy, and service the foreign debt. But if the goals were clear, the means of achieving them were not. The crux of the problem was finding effective authority to see through the IMF reforms, but effective authority depends on legitimacy, which rests, in turn, on a consensus as to the founding principles of the state. And, as we have seen in this book, the inherent weakness of the state in Latin America lay precisely in a chronic inability since Independence to establish a lasting national consensus of this kind (see Chapter 9, pp. 374–7). All the same, the IMF required governments in these weakly based states to slash public spending and lay off huge numbers of workers in societies that were already the most unequal in the world. Even so, where one might have expected a return to the kind of revolutionary struggles or military dictatorships that marked the 1960s and 1970s, democratic politics endured in virtually all the republics throughout the 1990s and beyond.

The persistence of democracy was due more than anything to the collapse of communism in Eastern Europe in 1989–90, and then in the Soviet Union itself in 1991, bringing to an end the Cold War between the USSR and the USA. As a result of this collapse, Marxism lost its ideological force – Cuba was not regarded as a viable model in the 1980s and 1990s – but it also weakened the extreme right, which could no longer block social reform by inviting the US government to intervene in order to prevent Soviet infiltration into its ‘backyard’. Internal and external events thus drove Latin American politics towards a vaguely defined centre ground, but if the result was democracy, this was democracy that rested on a consensus of despair, for there was nowhere either for the left or the right to go but to the ballot box in order to try to fix the problems of the wrecked economies.

The question was how to induce electorates to swallow the medicine prescribed by the IMF. Governments had to consult the people to win some measure of consent, and electorates grown weary of inflation, violence and disorder did tend to consent to free-market reform in the 1990s. Voters were fed up with the empty promises and corrupt deals associated with traditional parties, so they tended to elect new or independent candidates to the presidency, as in Brazil, Peru, Colombia, Venezuela, Bolivia, Ecuador, and even in Mexico after the ruling party had been forced to give up rigging elections. Many countries reformed their constitutions. In a few cases, such as Colombia or Chile, it was to strengthen democratic institutions by improving representation and accountability. In most others it was to maintain continuity of reform by allowing a president to serve additional consecutive terms. In others, notably in Peru (1993), it was to move towards authoritarianism, or even veiled dictatorship. ‘Democracy’ was still a fairly malleable concept in Latin America, too often permeated by more traditional practices such as patronage and clientship, caudillo-style personalism and electoral manipulation (see Chapter 9, pp. 346–9). Thus, in a few republics such as Peru, Venezuela, Bolivia and Ecuador, there emerged what has been termed ‘delegative democracy’, a new version of the old tradition of caudillo populism, whereby executive power was ‘delegated’ to a charismatic leader via the ballot box, giving him a mandate to override the institutional checks and balances represented by the legislature or judiciary.

The quest for effective authority was shaped by the complexion and recent history of individual republics, but problems of governance were critically affected also by the ebb and flow of the globalized economy, over which nation states had little control. During the years of international expansion – roughly from 1992 to 1998 – governments were able to carry out liberalizing reforms with considerable public backing, but the Thai devaluation crisis of 1997, followed by Russia’s default in 1998, created a backwash that spread unrest through Latin America until about 2002, cutting growth and overwhelming governments, some of which fell to furious protestors. (The period 1998–2002 became known as ‘the lost half-decade’.) However, when world trade expanded from 2002, most Latin American countries experienced an extraordinary boom in exports of oil, minerals and agricultural goods to the developed world, and especially to China, so problems of economic management tended to ease once again. Then in late 2008, the globalized economy lurched into recession once more after a massive banking crash in Wall Street and London, with consequences for political stability and liberal democracy that were hard to foresee.

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Filed under democracy, Eastern Europe, economics, Latin America, military, nationalism, U.S., USSR

by Joel | 4 April 2022 · 8:03 am

Cuban Revolution of 1933

From The Penguin History Of Latin America, by Edwin Williamson (Penguin, 2003), Kindle pp. 441-443:

The election to the presidency of the Liberal Gerardo Machado in 1924 at first promised an end to the graft of the previous administration. Enjoying widespread popularity, Machado embarked on a programme of public works and measures to diversify the economy. But the fall in sugar prices of the late 1920s led him to repress strikes and protests, and when he got a controlled congress to grant him a further six-year term in 1928, he faced an explosion of anger from the student movement. As Machado’s rule became increasingly repressive, students and middle-class intellectuals took to violence and terrorism. The students formed a Directorio Estudiantil, which was to play a continuing oppositional role in the island’s politics. In 1931 there appeared a secret organization calling itself the ABC, whose members were young middle- and upper-class nationalists inspired by the Peruvian Haya de la Torre’s APRA movement. ABC pistoleros resorted to assassinations and shoot-outs in the streets with Machado’s brutal police. The unrest spread as labour unions joined the opposition to the dictator.

Reluctant to send in troops as in the past because of the nationalist agitation, Washington used its ambassador, Sumner Welles, to negotiate an end to Machado’s rule. But the nationalists resented Welles’s intervention and called a general strike in August 1933 (the Communist Party, fearing a US invasion, withdrew its support for the strike and tried to do a deal with Machado, which discredited it in the eyes of students and nationalists). Machado finally bowed to the pressure and went into exile. There followed an upsurge of revolutionary activity – occupations of factories and sugar mills by workers, looting of wealthy districts, and mob attacks on collaborators with the dictatorship.

The moderate government of Carlos Manuel de Céspedes, installed by the army in concert with Sumner Welles, was unable to control the situation. In September 1933 a revolt of non-commissioned officers – among whose leaders was a Sergeant Fulgencio Batista – unseated Céspedes and handed over power to a five-man committee chosen by the Directorio Estudiantil. The Havana students had succeeded in creating a nationalist revolution and, after some confusion, they chose one of their professors, the patrician Dr Ramón Grau San Martín, as provisional president. Workers now occupied sugar mills, in some cases demanding wage rises at gunpoint; strikes, riots and gun battles broke out all over the island. Grau’s government passed a number of radical measures, such as the expropriation of a small number of US-owned sugar mills, some redistribution of land, the limitation of the working day to eight hours, restrictions on the employment of cheap non-Cuban labour from other Caribbean islands and the extension of the franchise to women.

Still, the revolution of 1933 was primarily the work of student agitation and, apart from the expected hostility of the USA and the Cuban business community, it was opposed by the Communists, the ABC nationalists and by ousted army officers, who staged a number of revolts. Four months later Grau’s government was overthrown by a coup led by Fulgencio Batista, who effectively became the strongman of Cuba for the next decade, ruling at first through presidential stooges and then, from 1940, in his own right.

Batista was a military populist, a mulatto from a very humble background who had risen from the ranks and whose core constituency remained the enlisted men of the armed forces. As befitted a Latin American leader of the 1930s, he presented himself as a benefactor of the people, using the resources of the state for nationalist and redistributive ends. In 1934 the Platt Amendment was at last annulled, and a larger US quota for sugar helped raise production from the doldrums of the 1920s and early 1930s. Although Batista had the backing of US and Cuban business interests, he took steps to cultivate the trade unions, passing social welfare legislation, building houses for workers and creating employment through large public works programmes. A new labour confederation, controlled by a Communist leadership, was incorporated into the strongman’s political machine. In the countryside, Batista redistributed some land and, following the example of the Mexican Revolution, initiated a programme of rural education, often staffed by army personnel.

Dismayed by the failure of the 1933 revolution, the students and radical nationalists formed a new party in memory of José Martí, the Partido Revolucionario Cubano-Auténtico, which became the principal opposition to Batista. Terrorism continued to be a habitual feature of political life, but by the late 1930s Batista felt secure enough to permit elections for a constituent assembly. In 1940 a new nationalist, social-democratic constitution was passed by a Batista-dominated assembly, which included universal suffrage, state rights over the subsoil, state ‘orientation’ of the economy and labour rights such as a minimum wage, pensions, social insurance and an eight-hour day.

The constitution of 1940 ushered in a period of legitimate democratic governments, though there was no weakening of the Cuban tradition of political gangsterism and corruption. Batista won a clean election in 1940 and continued to implement his populist programme in the improved economic climate fostered by the war and the consequent US aid. Yet radical nationalism reasserted itself in 1944; Batista lost the election – having forborne from rigging it – to Dr Grau of the Auténticos, and retired to the USA a wealthy man.

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Filed under Cuba, democracy, economics, education, labor, migration, military, U.S.

by Joel | 1 April 2022 · 3:33 pm

Brazil’s Economic Miracle

From The Penguin History Of Latin America, by Edwin Williamson (Penguin, 2003), Kindle pp. 428-429, 435:

The reasons for the failure of the guerrillas are complex. With their predominantly middle-class, university-educated cadres they were unable to break out of their political isolation – the clandestine Communist Party disapproved of the guerrillas’ strategy and blocked their access to working-class organizations. The terrorist attacks on military targets precluded the emergence of any sympathetic groups within the armed forces who might have staged a coup d’état, this being the usual short cut to power for progressive movements in Latin America. But, decisively, the guerrilla campaign coincided with the long-awaited upturn in the economy. From 1968, while the guerrillas were robbing banks and bombing barracks, life was getting better for the middle classes and the skilled workers in the cities, which is where, in a rapidly urbanizing country, the political fate of the nation would be decided. In short, what finally put paid to the prospects of the urban guerrillas was the arrival of the Brazilian ‘economic miracle’.

As far as the generals were concerned, the ‘miracle’ obviated the need for an explicit political ideology to run the state. The tremendous popular enthusiasm generated by the idea of an economic miracle was manipulated by the junta to rationalize their continued suspension of full democratic rights. The economic upswing was ‘miraculous’ in that it seemed to be a sudden take-off into self-sustaining industrial growth, the hallmark of a modern economy. Brazil was at last on its way to world-power status from the doldrums in which it had found itself for the best part of the 1960s.

The Brazilian rate of economic growth was indeed amazingly good: in 1968–74 the economy grew at an average yearly rate of between 10 per cent and 11 per cent. Even after the sudden rise in the world price of oil in 1973, which seriously damaged all the industrial economies, the Brazilian rate of growth averaged between 4 per cent and 7 per cent a year. By the mid-1970s the volume of exports had quadrupled since 1967. Far more significant was the fact that manufactured goods had replaced coffee as the major component of exports: the stubborn Latin American problem of monoculture – the dependence on the export of a single primary commodity – had been solved.

Without doubt, a substantial industrial revolution had occurred in Brazil; and it had largely been engineered by technocrats sponsored by the armed forces. But this success was built on the programme of industrialization achieved over many years since the foundation of the Estado Nôvo by Getúlio Vargas in 1937. Underlying the intervening conflicts of parliamentary politics, there had been a remarkable continuity in the course of Brazilian development from the Getúlio Vargas era to the military governments of the 1960s and 1970s. Development continued to be based on a sustained drive for industrial growth largely financed by foreign loans and investment, but directed by the state. The military governments of the 1960s and 1970s kept all basic industries and utilities under state control; they largely retained the nationalist policy of import-substitution industrialization by selective tariffs; and they also preserved the core of the social welfare and labour legislation of the Estado Nôvo.

…

Brazil’s extraordinary drive to modernize in the twentieth century produced a powerful industrial economy in the space of little over three decades. The costs were enormous: acute dislocations of regional economies, the destruction of virgin lands, an imbalance between the countryside and the cities, and deep cleavages between the working class, industrial capitalists and the middle classes. And yet, industry did not become productive enough to absorb the potential labour force, while the countryside remained under-productive and socially divided. Successive governments tried to force the pace of industrial development, as well as increasing spending on welfare programmes to alleviate the social misery. The results were vicious circles of inflation and budget deficits, which spiralled uncontrollably, robbing governments of authority. In 1964 the armed forces intervened to try to restore order, but by the late 1970s they too had been drawn into the spiral of inflation and debt; their historic pursuit of ordem e progresso had led, paradoxically, to a situation where economic progress had become the enemy of social order.

The Brazilian crisis of the 1980s was as much a crisis of the state as of the economy. In the medium term economic improvement might come through an upturn in the world economy combined with a successful anti-inflation programme and international assistance with debt relief. But a lasting settlement of the crisis would require the emergence of a legitimate democratic state, whose representative institutions could command the confidence of the nation as a whole.