Political Order and Political Decay (44 page)

But like all national stories, this historical legacy does not begin to explain the country's success in the second half of the twentieth century. Up until 1948, Costa Rica experienced many of the same political dysfunctions as its neighbors. While family farming was more extensive than elsewhere, growth of the coffee and banana export industries nonetheless created an oligarchy of rich growers who proved perfectly willing to use violence to protect their economic interests. Despite adoption of a democratic constitution when Costa Rica became independent in 1821, the country was ruled by a series of dictators in the nineteenth century and plagued by constant battles between liberals and conservatives who were happy to use electoral fraud and force to seize and keep power. While Costa Ricans date their democracy to the election of 1889, there was a subsequent military coup in 1914 and increasing political polarization as the country began to industrialize. As elsewhere, conservative elites looked on with fear as labor unions formed and new Socialist and Communist parties emerged. All of this resulted in a civil war in 1948 between a left-wing administration under Rafael Ángel Calderón that sought to hold on to power after losing an election, and a coalition of opposition forces led by Social Democrat José Figueres and the candidate who had won the election, the strongly anticommunist Otilio Ulate Blanco.
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El Salvador, Nicaragua, and Guatemala were at this point also dominated by conservative landowning oligarchies that were increasingly challenged by newly mobilized actors like trade unions, Christian social activists, and emerging Socialist and Communist parties. In these three countries, the old elites turned to the military to suppress the Left and protect their interests, while the Left responded by becoming more radical, seeking help from the international Communist movement, and undertaking armed struggle. In El Salvador, a peasant rebellion led by Farabundo Martí was violently suppressed in the 1930s, inspiring a Marxist revolutionary group, the Farabundo Martí National Liberation Front, to challenge the government in the 1970s. In Nicaragua, the Sandinista movement fought the dictatorship of Anastasio Somoza and came to power in 1979 with help from Cuba and the Soviet Union, which then led the Reagan administration to fund the contra movement seeking to overthrow it. In Guatemala, a U.S.-aided coup toppled the left-wing Jacobo Árbenz in 1954 and provoked a long and bloody civil war during the 1970s and '80s. These conflicts were not resolved until the early 1990s and to this day have left a legacy of polarization and distrust.

Why did Costa Rica's civil war not lead to a similar spiral of mistrust and violence? It is hard to explain this except by reference to the choices made by individual leaders at the time. Although Calderón's left-leaning coalition included some Communists, it did not pursue a particularly radical agenda, and indeed in response to charges that it had stolen an election established a new electoral tribunal to more fairly administer future electoral contests. When the conservative rebels led by Figueres overturned the Calderón government by force, they went on to implement a social democratic agenda close to that of Calderón and then restored power to the legitimate winner of the 1948 election, the conservative Ulate. This government accepted in turn a new constituent assembly that strengthened the nonpartisan electoral tribunal and extended the vote to women.
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Most important—and uniquely, for Latin America—the 1949 constitution abolished the standing army. Thus a broadly conservative coalition agreed to deprive itself of the one coercive instrument that was to become the basis for oligarchic power elsewhere throughout the region. This choice influenced the subsequent development of the Left in Costa Rica, which abjured armed struggle and Marxism for a more reformist social democratic path.

The decision of a major political player to use constitutional rules to bind not just its opponents but also itself was very rare in Latin America. It was similar to the settlement coming out of England's Glorious Revolution, which established the very principle of constitutional government. That is, the English revolutionaries did not seize power and exploit the state in their own narrow interests; they accepted binding rules on the grounds of their general validity.

Like Botswana, an African country that has defied the odds to become far more economically and politically successful than its neighbors, it is very difficult to fit Costa Rica into any of the existing theoretical structures that purport to explain economic or political development. The bare facts of its climate, geography, population, and indeed its political history up through the middle of the twentieth century would never have led one to predict that it would perform so differently from the rest of Central America. Contemporary outcomes appear to be the product of a series of happy historical accidents, including the fact that one of its early dictators, Tomás Guardia, was far more enlightened than his contemporaries and did much to promote education as well as to curtail the power of the coffee elite. The good choices made by political leaders like Figueres during the crisis of 1948 were shaped by earlier choices, such as the relative moderation of the anticommunist right, and the corresponding lack of radicalism on the part of the Communists themselves.
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Costa Rica's experience thus underlines the fact that the material conditions of geography and climate, and the social structure they produce, can be offset by good leadership and the choices made by individuals.

THE CLEAN SLATE

If anyone needs further convincing that geography, climate, and population influence but do not finally determine contemporary development outcomes, consider Argentina. It is in some sense the polar opposite of Costa Rica. Whereas Costa Rica succeeded in breaking free of the broader pattern of plantation agriculture and its resultant class and ethnic divisions, Argentina did the opposite. Blessed with geographical circumstances that should have facilitated North American–type democratic and capitalist development, it succumbed to the same kind of class polarization and inconsistent long-term economic performance that characterized old centers of the Spanish empire like Peru and Mexico. The fact that Argentina never became the Canada of the South suggests the limits of all general theories of development that are purely economic in nature.

In contrast to Mexico and Peru, which in pre-Columbian times hosted large indigenous populations, Argentina was founded in a region that used to be referred to as a “land of new settlement,” much like the United States, Canada, Australia, and New Zealand. Of course, these were not actually lands of new settlement. They were in fact lightly settled by hunter-gatherer and in some cases agrarian communities including the Pehuenches, Tehuelches, and Puelches, whose relatives also inhabited southern Chile. These groups put up often tenacious resistance against the settler communities, but eventually they were physically marginalized like those in North America. At this point the settlers could believe they were occupying a
terra nullis
, an empty land where they were free to set up their own institutions.

The Argentine population was thus among the most European of any in Latin America. Unlike Mexico and Peru, it was not divided between a white settler class and a vast mass of Indians and mestizos. Slavery did exist in the late colonial period, and at one time blacks constituted as much as a quarter of the population of Buenos Aires. But slavery was abolished early on and the black population gradually was absorbed into the larger European one.
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There was in fact a massive “whitening” of Argentina's population as a result of the huge migrations from Europe that took place toward the end of the nineteenth century, which increased the country's population from 1.7 million in 1869 to 7.9 million in 1914. Of these new immigrants, 46 percent came from Italy and 32 percent from Spain. While Argentina was divided by region and by the large cleavage between the metropolis of Buenos Aires and the rural hinterlands, ethnicity and race were not big political issues.
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Argentina was the classic example of the “reversal of fortune” that took place in the eighteenth and nineteenth centuries: tropical and semitropical regions that had been rich in the sixteenth century became poor and were displaced by more temperate regions of the former periphery (see chapter 16 above). Argentina during the Habsburg period had been a provincial backwater within the Spanish New World empire, but beginning in the late eighteenth century it began to rapidly overtake the older colonial centers. Indeed, Argentina in the late nineteenth century came to be regarded much as China and Singapore are today, an economic miracle that incited envy, wonder, and a significant level of European investment. Between 1870 and 1913, Argentine exports were the fastest growing in the world, increasing at a rate of 6 percent per annum; at the end of the nineteenth century, per capita GDP was about the same as that of Germany, Holland, and Belgium, and higher than that of Austria, Spain, Italy, and Sweden.
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While much attention has been paid to the country's growth in the late nineteenth century, James Mahoney points out that the acceleration of output dated from a much earlier point, with Argentine per capita GDP reaching a level slightly higher than that of the United States in the year 1800. The country's early growth performance was therefore not a flash in the pan but lasted more than a hundred years from independence up until the Great Depression in the 1930s.
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Argentina in this period was fully incorporated into the global economy. Built around the port of Buenos Aires, it produced not gold and silver but beef, wool, wheat, and other commodities for the European market. Its temperate climate and extensive pampas provided ideal conditions for growing a wide range of foodstuffs, which improved transport technology like refrigerated ships could make available to distant markets. In return, it received high levels of investment from more developed countries, particularly Britain, which equipped the country with railroads, communications, and other infrastructure that vastly stimulated productivity.

The reasons for Argentina's success in the nineteenth century are fairly straightforward. The country was settled after the onset of the more liberal Bourbon period of Spanish colonialism and was therefore never saddled with the kinds of restrictive trade practices, monopolies, and regulations that characterized Habsburg mercantilism. It also didn't have the social legacy of a merchant and landowner elite like those in Mexico and Peru that continued to dominate the economy even after the more liberal reforms were put in place. Argentina was, in the words of historian Tulio Halperín Donghi, a country that was “born liberal.”
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Then, beginning in the 1930s, the reversal of fortune was itself reversed, and Argentina began a long period of economic stagnation and decline. Instead of moving from middle- to high-income status like Canada, Australia, and New Zealand, Argentina fell behind. From a position where it was as rich as or richer than Switzerland, Italy, and Canada, it was reduced by 1978 to one-sixth of the per capita GDP of Switzerland, half of Italy's, and one-fifth of Canada's.
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Argentina went on to become one of the charter members of the club of Latin American countries that experienced the debt crisis of the early 1980s, defaulting on its sovereign debt. Hyperinflation followed, with rates reaching as high as 5,000 percent per year in 1989. The 1990s saw a brief return to monetary stability and growth, as the country pegged the peso to the U.S. dollar via a currency board. But then Argentina succumbed to a major economic crisis in 2000–2001 as the dollar peg was abandoned, and the country fell into a huge depression. Growth returned in the first decade of the twenty-first century on the back of a global commodity boom, but it did so under the leadership of yet another populist government that encouraged short-term expansion at the expense of long-term sustainability. Argentina, for all of its advantages, had regressed to an earlier Latin American mean.

Argentina's poor performance has generated a small industry devoted to the question of what sociologist Carlos Waisman labels the “Argentine riddle” of reversed development.
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A proximate answer to this question is simply bad economic policies implemented by generations of officials and political leaders. Any textbook on international monetary policy or financial crises will feature Argentina, since it has repeatedly brought upon itself cycles of rapid growth, inflation, devaluation, and economic collapse. It is also a textbook case of the evils of economic nationalism: efforts in the 1950s to encourage domestic manufacturing through import substitution—that is, the protection of uncompetitive domestic industries—led to huge inefficiencies, including efforts to develop a car, the Di Tella, that never found a market outside Argentina. These bad policies continue: the populist spending policies of the 2000s have produced the second highest level of inflation in Latin America, something the government has tried to cover up by corrupting the national statistical agency.

But to say simply that the country's poor growth record is the result of bad policy begs the question of why bad policies were adopted in the first place and why the national elites seem to have such a hard time learning from earlier mistakes and putting the country on a sounder footing. The answer lies, of course, in politics. Despite the fact that Argentina in the first decades of the twentieth century appeared to be on its way to developing a liberal and inclusive political order based on a broad middle class, a series of bad political choices in the 1930s and '40s shifted the country into a type of polarized politics much more typical of older states like Peru and Mexico. A society that did not inherit deep class divisions nonetheless developed them, along with a uniquely Argentine brand of personalistic politics and clientelistic mobilization that continues to distort policy choices down to the present day.