Economic Development in the Americas Since 1500: Institutions and Endowments

Guest Author: Stanley L. Engerman

 

“A book by Stanley L. Engerman and Kenneth L. Sokoloff”

 

Ken Sokoloff and I were concerned with two related questions.  First, what were the relative levels and growth patterns of income in North America (Canada and the United States) and Latin America (South America, Central America, Mexico, and the Caribbean) after the arrival of Columbus.  Second, what has been the explanation for the growth patterns observed.

The answer to the first question is that prior to 1750 economic development in Latin America exceeded that of North America, but after that the growth rates of per capita income in North America greatly exceeded those in South America, so that in the twentieth century per capita income in Latin America basically fell to less than one-half that in the United States and Canada.  The early high per capita income in South America and Mexico resulted from the century-long lead in settlement for the Spanish and Portuguese, and the fact that they went to the richest, most populous, and most developed societies in the Americas, the areas settled by the Aztecs and Incas, which together accounted for nearly three-quarters of the Native-American populations of the New World.

The explanation for these growth patterns has been a source of considerable debate among scholars. This has been concerned with the development of economic and social institutions in the Americas, and the relative importance of the patterns brought over to the New World by colonizers from the various European nations and the effects of the characteristics in the Americas, particularly the differences due to climate, resources, and topography which influence the nature of the crops (and livestock) that can be grown in different areas.  The tropical climate permitted the growth of sugar for export to Europe, and sugar was produced on large plantations utilizing large amounts of labor.  This labor was frequently done by slaves, and the existence of large landowners with political and economic power led to great inequalities of income, and Latin America has long been the area with the greatest extent of inequality in the world.  The natural conditions in most of the United States, particularly in New England and the Mid-Atlantic states differed.  The climate there was also too cold to permit sugar production and the principal crops were wheat and grains, which could optimally be produced on small scale, family farms by landowners or free laborers, often immigrants from England and elsewhere in Europe.  Thus the degree of inequality was less than in Latin America, and this was reflected in North America’s more extensive suffrage, the greater spread of education, a more liberal banking system, and a more egalitarian system of land allocation.  These favorable conditions for economic growth were influenced by the natural attributes in North America.  The various colonies of each European settling nation often had different institutions because of differences in natural conditions (as suggested by comparing New England and the British Caribbean).

 

Author’s Bio: Stanley L. Engerman is the John H. Munro Professor of Economics and Professor of History at the University of Rochester, and Research Associate for the National Bureau of Economic Research. He received his Ph.D. in economics from Johns Hopkins University.

Professor Engerman has authored and co-authored many books such as  Time on the Cross: The Economics of American Negro Slavery (with Robert Fogel); A Historical Guide to World Slavery (with Seymour Drescher); Slavery, Emancipation, and Freedom: Comparative Perspectives; and Slavery (with Seymour Drescher and Robert Paquette).

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