244 CHAPTER 11 THE TRIUMPH OF NEOCOLONIALISM AND THE LIBERAL STATE, 1870–1900
The New Colonialism
The new economic system fastened a new depen-
dency on Latin America, with Great Britain and
later the United States replacing Spain and Por-
tugal in the dominant role; it may, therefore, be
called “neocolonial.” Despite its built-in fl aws and
local breakdowns, the neocolonial order displayed
a certain stability until 1914. By disrupting the
markets for Latin America’s exports and making
it diffi cult to import the manufactured goods that
Latin America required, World War I marked the
beginning of a general crisis of neocolonialism and
the liberal state.
Although the period from 1870 to 1914 saw
rapid overall growth of the Latin American econ-
omy, the pace and degree of progress were uneven,
with some countries (like Bolivia and Paraguay)
joining the advance much later than others. A
marked feature of the neocolonial order was its
one-sidedness (monoculture). One or a few pri-
mary products became the basis of prosperity for
each country, making it highly vulnerable to fl uc-
tuations in the world demand and price of these
products. Argentina and Uruguay depended on
wheat and meat; Brazil on coffee, sugar, and briefl y
rubber; Chile on copper and nitrates; Honduras on
bananas; Cuba on sugar.
In each country, the modern export sector be-
came an enclave that was largely isolated from the
rest of the economy and that actually accentuated
the backwardness of other sectors by draining off
their labor and capital. The export-oriented nature
of the modern sector was refl ected in the pattern
of the national railway systems, which as a rule
were not designed to integrate each country’s re-
gions but to satisfy the traffi c needs of the export
industries. In addition, the modern export sector
often rested on extremely precarious foundations.
Rapid, feverish growth, punctuated by slumps that
sometimes ended in a total collapse, formed part of
the neocolonial pattern; such meteoric rise and fall
is the story of Peruvian guano, Chilean nitrates,
and Brazilian rubber.
The triumph of neocolonialism in Latin Amer-
ica in the late nineteenth century was not inevita-
ble or predetermined by Europe’s economic “head
start” or the area’s past history of dependency. The
leap from a feudal or semifeudal economy and soci-
ety to an autonomous capitalist system, although
diffi cult, is not impossible, as the case of Japan makes
clear. Following independence, the new states had
to choose between the alternatives of autonomy or
dependency, or in the words of historian Florencia
Mallon, “between focusing on internal produc-
tion and capital formation, on the one hand, and
relying increasingly on export production, foreign
markets, and ultimately foreign capital, on the
other.” However, the formation of the dynamic
entrepreneurial class and the large internal mar-
ket required by autonomous capitalism could not
be achieved without such sweeping reforms as the
breakup of great estates, the abolition of peonage
and other coercive labor systems, and the adoption
of a consistent policy of supporting native indus-
try. But these reforms required a powerful, activist
nation-state committed to the regulation of market
forces and the redistribution of material resources.
Most sections of the elite, however, found them too
costly and threatening. Instead, they embraced the
liberal developmental creed that stressed the need
to privatize public resources, reduce government
expenditures, dismantle state bureaucracies, pro-
vide incentives to foreign investors, and encourage
export trade. Most Latin American elites, therefore,
chose the easier road of continued dependency,
with fi rst Great Britain and later the United States
replacing Spain as the metropolis.
Latin America in the nineteenth century,
however, produced some serious efforts to break
with this pattern of dependence. We have already
described two such efforts. A remarkable and tem-
porarily successful project for autonomous devel-
opment was launched in Paraguay under the rule
of Dr. Francia and the Lópezes, father and son.
Their state-directed program of agrarian reform
and industrial diversifi cation transformed Para-
guay from a backward country into a relatively
prosperous and advanced state, but the disastrous
Paraguayan War interrupted this progress and
returned Paraguay to backwardness and depen-
dency. In Chile, in the 1850s, an alliance of mining
capitalists, small farmers, and artisans attempted
to overthrow the landed and mercantile oligarchy