Forgotten Continent

1. Latin America's Development Struggle: A Tale of Unfulfilled Potential

‘latin america’s attempts to make democracy work, and to use it to create fairer and more prosperous societies, carry wider significance.’

Historical Context. Latin America, once richer than many parts of the developing world, has struggled to achieve sustained economic growth and consolidate its democracies, leading to a deep sense of relative failure. While not uniformly unimpressive, the region's economic performance has lagged behind that of many Asian and European countries, creating a haunting sense of what might have been. This struggle is not just about economics; it's about the region's quest to create equitable political systems and prosperous societies.

Relative Underperformance. Despite periods of respectable growth, Latin America has consistently failed to converge with developed nations, particularly in the decades following the debt crisis of 1982. This relative failure is evident in the widening income gap between Latin America and wealthier countries, as well as the emigration of some of the region's brightest minds in search of better opportunities. The region's attempts to make democracy work, and to use it to create fairer and more prosperous societies, carry wider significance.

Progress and Disappointment. While most Latin American countries have made steady progress in human development, the region's attempts to make democracy work, and to use it to create fairer and more prosperous societies, carry wider significance. The region has become one of the world’s most important and testing laboratories for the viability of democratic capitalism as a global project. This book is a progress report from this laboratory of democracy, on Latin America’s quest to achieve the twin goals of effective and equitable political systems on the one hand, and sustained economic growth and development on the other.

2. Dependency Theory: External Forces as a Historical Burden

‘underdevelopment in latin america is a consequence of development elsewhere, that we latin americans are poor because the ground we tread is rich, and that places privileged by nature have been cursed by history.’

Core Argument. Dependency theory, a prominent school of thought in Latin America, attributes the region's underdevelopment and political authoritarianism to its subordinate role in the global economy and the interventionist policies of the United States. This perspective emphasizes the unequal power dynamics between developed "core" nations and underdeveloped "peripheral" nations, arguing that the former exploit the latter for their own gain. The theory suggests that poor countries are poor because others are rich, rather than because they have failed, for whatever other reason, to develop.

Critique of Capitalism. Dependency theory is fundamentally anti-capitalist, viewing foreign investment and free trade as mechanisms of exploitation that perpetuate Latin America's poverty and dependence. This perspective often leads to a rejection of reformist approaches, instead advocating for radical social and political change to break free from the chains of dependency. The theory has also nourished a view of trade as a zero-sum game, rather than a source of mutual profit.

Limitations and Consequences. While dependency theory highlights some historical truths, such as the exploitation of indigenous and enslaved populations, it ultimately falls short as an explanatory framework. It fails to account for the success of many Asian countries that have achieved development through capitalism and international trade. Moreover, dependency theory can foster a culture of blame, discouraging Latin Americans from taking responsibility for their own development challenges.

3. Cultural Determinism: An Iberian Legacy of Hierarchy and Resistance to Change

‘the stability of its uncompromising symmetries largely dominates, even to this day, the lives of the spanish-speaking peoples almost as convincingly and pervasively as the dynamic asymmetries of the industrial revolution preside over the english-speaking world.’

Core Tenets. Some conservative commentators argue that Latin America's struggles stem from its Iberian, Catholic cultural heritage, which is seen as inherently anti-capitalist and resistant to democratic values. This perspective emphasizes the influence of scholasticism, corporatism, and a hierarchical social order in shaping Latin American societies. The architects of this Iberian cultural edifice were the theologians of the Counter-reformation.

Cultural Resistance to Change. According to this view, Latin American culture is characterized by a resistance to change, particularly the transformations associated with the Industrial Revolution. This resistance is attributed to a preference for stability, hierarchy, and a collectivist mindset over individualism and competition. The mania for central control generated a habit of obsessive regulation which began with Philip ii, the austere monarch at the zenith of spanish power.

Limitations and Counterarguments. While there is some truth to the influence of Iberian culture on Latin America, this explanation fails to account for the region's diversity and the significant changes that have occurred over time. The success of Spain's own democratic transition and economic development demonstrates that cultural traits are not immutable barriers to progress. Furthermore, many Latin Americans embrace Western values and actively seek to modernize their societies.

4. The Elusive Blend: Policies, Institutions, and the Inequality Trap

‘we can view institutions as the cumulative outcome of past policy actions.’

Interplay of Factors. Latin America's development challenges are best understood as a complex interplay of historical legacies, geographical factors, political institutions, and policy choices. The region's persistent inequality, stemming from colonial land distribution and historical discrimination, has created a vicious cycle that hinders progress. This reduces the appeal of incremental reform and increases that of messianic leaders who promise a new world.

Importance of Institutions. Effective states, and better public policies, are the key to reducing inequality and to enabling latin americans to compete more effectively in the world. Institutions, defined as the rules and organizations that govern human exchange, play a crucial role in reducing uncertainty and transaction costs. Strong legal systems, well-defined property rights, and enforceable contracts are essential for fostering economic growth and development.

The Need for Reform. While Latin America has largely achieved macroeconomic stability, microeconomic reform has languished. The region's economies lag in the world league tables of competitiveness, innovation, and friendliness to business. More effective states, and better public policies, are the key to reducing inequality and to enabling latin americans to compete more effectively in the world.

5. Seeds of Democracy: Constitutionalism and the Rise of Caudillos

‘weapons have given you independence. laws will give you freedom.’

Early Aspirations. Despite a history of authoritarian rule, Latin America has a long tradition of liberal constitutionalism, with many independence leaders aspiring to establish democratic governments. However, the region's early attempts at democracy were often undermined by internal conflicts, social inequalities, and the rise of caudillos, or strongmen. The three historical chapters are preceded by two introductory chapters, which set out what is at stake in the region and discuss prevailing explanations for its relative difficulty in establishing prosperous democracies.

The Legacy of Colonialism. The Iberian colonial order bequeathed a legacy of centralized power, hierarchical social structures, and economic exploitation, which made it difficult for democratic institutions to take root. The absence of even a truncated democratic tradition long distinguished mexico from south america. That made the narrowness of the mandate won by Felipe Calderón, a conservative from Fox’s party, in the 2006 presidential election, a potential problem.

The Caudillo Phenomenon. The caudillo, a charismatic military or political leader who commands the loyalty of a following, has been a recurring figure in Latin American history. While some caudillos were enlightened reformers, many were authoritarian rulers who prioritized personal power over democratic principles. The caudillos embodied ‘the will of the popular masses, the choice of the people’; they were the ‘natural representatives’ of the ‘pastoral classes’, according to Juan bautista alberdi, the pragmatic architect of argentina’s 1853 constitution.

6. Cold War Echoes: US Intervention and the Left's Rejection of Democracy

‘those who make peaceful change impossible make violent change inevitable,’

US Influence. The Cold War had a profound impact on Latin America, with the United States often supporting authoritarian regimes in the name of containing communism. This interventionist policy undermined democratic movements and fueled anti-American sentiment in the region. The united states preferred reactionary military dictatorships to reformist democrats.

The Cuban Revolution. The Cuban Revolution of 1959 served as a catalyst for leftist movements across Latin America, inspiring a generation of radicals to embrace armed struggle as a means of achieving social justice and national liberation. However, this embrace of violence often led to tragic consequences, as guerrilla movements clashed with repressive military regimes. The findings of latinobarómetro, an opinion poll taken since 1995 and now covering 18 countries, provide some support for cautious optimism regarding latin american democracy.

The Left's Rejection of Democracy. Influenced by the Cuban model, many on the Latin American left came to view democracy as a tool of the ruling class, prioritizing social justice and national liberation over individual rights and political freedoms. This rejection of democracy contributed to a cycle of violence and authoritarianism that plagued the region for decades. For the first time since the end of the Cold war, liberal democracy was thus facing a seemingly powerful alternative in latin america.

7. The Washington Consensus: A Promise Unmet, a Legacy Contested

‘it’s not enough to have good behaviour in macro-economic policies if you don’t have social policy going in the right direction ... our discussion is what social network we can build to remain competitive and to maintain social cohesion.’

Core Principles. The Washington Consensus, a set of free-market economic policies promoted by international financial institutions, aimed to stabilize and modernize Latin American economies. These policies included fiscal discipline, trade liberalization, privatization, and deregulation. The washington Consensus is indeed an irrevocably ‘damaged brand’ as moises naím, a former venezuelan trade minister, has noted.

Disappointing Results. While the Washington Consensus achieved some successes, such as taming inflation and attracting foreign investment, it also led to disappointing results in terms of economic growth, poverty reduction, and income inequality. The upshot was that in the two decades after 1982, the gap between average incomes in latin america and those in the rich countries widened, while in many parts of asia it narrowed. This disappointing record meant that the free-market reforms fell into widespread, albeit often unjust, disrepute.

A New Consensus Emerges. In response to the shortcomings of the Washington Consensus, a new policy consensus has emerged in Latin America, emphasizing the role of the state in promoting social policies and tackling poverty and inequality. This new consensus seeks to combine macroeconomic stability with a more equitable distribution of wealth and opportunity. The new consensus puts far more importance, rhetorically at least, on the role of the state and social policies in tackling poverty and inequality.

8. Social Transformation: Urbanization, Mobility, and the Quest for Equity

‘The democratic will is vulgar; its laws, imperfect. i admit all this. but if it is true that soon there will be no middle way between the empire of democracy and the yoke of one man, ought we not try rather for the former than submit voluntarily to the latter?’

Urbanization and its Challenges. Latin America has undergone a rapid urbanization process, with most of the population now living in cities. This transformation has brought new opportunities for social mobility and access to services, but it has also created challenges such as poverty, inequality, and crime. The region has gone from being predominantly rural to mainly urban – a transformation that was much more gradual in europe.

Social Mobility and Expectations. Despite persistent inequalities, Latin American societies have become more mobile, with many individuals experiencing upward social mobility compared to their parents. This has led to rising expectations and a greater demand for social justice and equality of opportunity. The task facing the region’s democratic politicians is to create greater political and socio-economic equity without endangering the conditions for profitable private investment and thus for sustainable economic growth.

The Role of Education. Education is a key factor in promoting social mobility and reducing inequality. A more educated workforce is essential to make latin american businesses more competitive. more and better education is also the single most important tool in creating equality of opportunity. A huge effort is needed to improve the coverage and (especially) the quality of education in latin america.

9. Evolving States: From Centralized Control to Decentralized Governance

‘it is not by chance that reforms are so difficult’

Legacy of Centralization. Latin America inherited a tradition of centralized state control from its colonial past, which has often hindered democratic development and economic efficiency. The main argument of this book is that for the first time in latin america’s history, genuine and durable mass democracies have emerged across much of the region.

Decentralization and its Challenges. In recent decades, many Latin American countries have embarked on decentralization efforts, devolving power and resources to local governments. While this has the potential to improve governance and responsiveness to local needs, it has also created challenges such as corruption, inefficiency, and a lack of coordination. The task now is to substitute for cosy deals broad political consensuses on the overall principles of economic and tax policy, shielding business from unpleasant surprises and allowing long-term investment to take place safely.

The Need for Effective Institutions. The success of decentralization depends on the strength of local institutions and the capacity of local governments to manage resources effectively. Building effective states, and better public policies, are the key to reducing inequality and to enabling latin americans to compete more effectively in the world.

10. Latin America's Place in the World: Navigating Globalisation and Geopolitics

‘First, we must cure ourselves of the intoxication of simplistic and simplifying ideologies’

Global Integration. Latin America's future depends on its ability to integrate effectively into the global economy, taking advantage of opportunities for trade, investment, and technological innovation. However, this integration must be managed in a way that promotes sustainable development and protects the interests of the region's most vulnerable populations. The region has become one of the world’s most important and testing laboratories for the viability of democratic capitalism as a global project.

Geopolitical Influences. The United States has historically played a dominant role in Latin America, but the rise of China and other global powers is creating new geopolitical dynamics. Latin American countries must navigate these shifting power relations in a way that promotes their own interests and strengthens their autonomy. The relative neglect of latin america by the outside world is in part benign.

A Path Forward. Despite the challenges, Latin America has made significant progress in recent decades, with most countries moving forward on a path of democratic reformism. By strengthening their institutions, promoting social equity, and embracing a pragmatic approach to economic development, Latin American countries can build a more prosperous and equitable future for their citizens.

Last updated: April 9, 2025