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May 01, 2014

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Great explanation. So noted decline is the result of something that affected the entire Southern Cone. Policy unlikely, so some kind of geographical issue, like maybe cost of shipping imports?

Could still be policy, if it was something adopted by all the countries for some underlying reason common to the three.

But Australia and New Zealand also experienced relative decline on their parts, if (in Australia's case, at least) nothing quite so dramatic.

Interesting and interestinger.

Okay, my first inclination would be to blame it on the changes in the rubber industry that occurred around this time. And in general, a renewed process of industrial advances and colonial exploitations, like systemic rubber plantations in SE Asia and Africa, such that margins for primary exports fell or became negative. This would have had knock-on effects to local industries that sopped up the incoming money.

As a thought experiment, what do you think would have happened to northern US industry had the UK implemented a colonial scheme around cotton forty years earlier than it did?


Well, that's my lazy theory...

That was up in the north, around Manaus. It didn't contribute to the Sao Paulo economy: very few linkages. Not trade, not fiscal transfers, not labor migration, not rents going south. The rubber boom might as well have been in a different country; to effect, it was.

Same applies to Argentina. Remember, any explanation has to explain the entire Conosur.

There are other problems with the hypothesis, but that's the big one.

Almost certainly not rubber.

Understood. That's why I mentioned the cotton thing--northern manufacture had economic underpinnings from cotton export. Could be the money sloshing around Amazonas eventually reaches the hub and quietly underpin economic activity. I was also thinking in the back of my mind about Spanish gold and silver driving economic growth in the rest of Europe while undermining Spanish economy...

It's also understood that this was a very facile guess, because it's so obvious and any economist worth her salt would have twined together a tight theory of economic history. The alternative explanation for me was that shipping became a larger component of final goods provision somehow. Or it could be that the reason to be at distant ports declined, say, the whale oil industry made use of many ports and made further trade profitable, but when the whale oil trade declined, lower margin tradestuff went elsewheres.

Of course, we're basically sixty years too early, since whale oil industry declined severely from about 1850 on and there were booms later on. We could check what the really profitable goods (non-obvious stuff) were in the relevant time period, but I suspect that the actual reason is probably some absurd interplay between monetary issues from excessively hard Sterling of that era(austerity after Encilhamento--which popped, mind you, after a minor Argentine political revolution nearly caused widespread default), coffee glut dynamics, rubber?, mining, and industrial mismatch.

Historical mysteries are fun.

Rubber is not a terrible guess, but there are two things to note beyond the fact that it won't explain why Argentina follows the pattern.

First, cotton wasn't that important to the North in the United States. It wasn't nothing, but a counterfactual north without any links to the South develops about as fast. Maybe faster. See Irwin and Ransom and the rest. (You should read the collected works of Gavin Wright ... every American should. I'll add Leah Boustan when her book comes out next year.)

Second, rubber was even less important to Brazil as a whole.

The lack of links between the north and south is just icing on the cake.

But it isn't a bad first hypothesis.

Looking at Amazon, I appreciate the Gavin Wright stuff. Old South, New South got put on the wish list.

Irwin, Ransom, I'm not finding quickly at 4AM, so I'll find later. Boustan, only way I'll see that one is from a library, I think, and I'm a deep pile under of books I think I should read.

Leah's book isn't out yet; she's still finishing the manuscript. But some of the papers are here: http://www.econ.ucla.edu/lboustan/research.html

She is indispensable to understanding modern America. It is fair to think of her work as The Warmth of Other Suns, but with systematic evidence.

Her book is going to be seminal.

Ransom is two basic works: with Richard Sutch One Kind of Freedom: The Economic Consequences of Emancipation and the rather less serious The Confederate States of America: What Might Have Been. (Spoiler Alert: what might have been is very very bad until Teddy Roosevelt reconquers the place.)

Doug Irwin's work are mostly papers on the historical impact of protectionism.

With Wright, don't forget Sharing the Prize: The Economics of the Civil Rights Revolution in the American South. That plus Old South, New South may be the best economic histories of the United States ever written, because of their regional focus rather than despite it.

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