Latin America: Its Rise and Progress

by Francisco García Calderón

On the one hand the budget is loaded to create new employments in order to assuage the national appetite for sinecures, while the protective tariffs are raised to enrich the State. Thus the forces of production disappear, life becomes dearer, and poverty can only increase. America has until lately known little of productive loans intended for use in the construction of railways, irrigation works, harbours, or for the organisation of colonies of immigrants.

The product of the customs and other fiscal dues is not enough to stimulate the material progress of a nation. So application is made to the bankers of London or Paris; but it is the very excess of these loan operations and the bad employment of the funds obtained that impoverishes the continent. The excessive number of administrative sinecures, the greed of the leaders, the vanity of governments, all call for gold; and when the normal revenues are not sufficient to enrich these hungry oligarchies, a loan which may involve the very future of the country appears to all to be the natural remedy.

The budgets of various States complicate still further a situation already difficult. They increase beyond all measure, without the slightest relation to the progress made by the nation. They are based upon taxes which are one of the causes of the national impoverishment, or upon a protectionist tariff which adds greatly to the cost of life. The politicians, thinking chiefly of appearances, neglect the development of the national resources for the immediate augmentation of the fiscal revenues; thanks to fresh taxes, the budgets increase. These resources are not employed in furthering profitable undertakings, such as building railroads or highways, or increasing the navigability of the rivers. The bureaucracy is increased in a like proportion, and the budgets, swelled in order to dupe the outside world, serve only to support a nest of parasites. In the economic life of these countries the State is a kind of beneficent providence which creates and preserves the fortune of individual persons, increases the common poverty by taxation, display, useless enterprises, the upkeep of military and civil officials, and the waste of money borrowed abroad; such is the "alimentary politics" of which Le Play speaks. The government is the public treasury; by the government all citizens live, directly or indirectly, and the foreigner profits by exploiting the national wealth. A centralising power, the State forces a golden livery upon this bureaucratic mob of magistrates and deputies, political masters and teachers.

To sum up, the new continent, politically free, is economically a vassal. This dependence is inevitable; without European capital there would have been no railways, no ports, and no stable government in America. But the disorder which prevails in the finances of the country changes into a real servitude what might otherwise have been a beneficial relation. By the accumulation of loans frequent crises are provoked, and frequent occasions of foreign intervention.

A policy of thrift would have led to the establishment of economic equilibrium. Foreign gold has poured in continually, not only in the form of loans but in the shape of material works—railways, ports, industries, and industrial undertakings. It is in this way that English capital has accumulated in the Argentine, Uruguay, Brazil, and Chili, where it has become a prominent factor in the industrial development of the country. In the Argentine it amounts to 300 millions, in Brazil to 150 millions, in Chili to 51 millions, and in Uruguay to 46 millions of pounds sterling.

New problems arise from the relation between the size of the population and the amount of the capital imported. The increase of alien wealth in nations which are not fertilised by powerful currents of immigration constitutes a real danger. To pay the incessantly increasing interest of the wealth borrowed, fresh sources of production and a constant increase of economic exchanges are necessary; in a word, a greater density of population. The exhaustion of the human stock in the debitor nations creates a very serious lack of financial equilibrium, which may result, not only in bankruptcy but also in the loss of political independence by annexation.

The solution of the financial problem depends, then, upon the solution of the problem of population. Immigrants will solve it by increasing the number of productive units, by accumulating their savings, by irresistible efforts which lay the foundations of solid fortunes. It is true that the wealth which they will create will also be of foreign origin, but in the second or third generation the descendants of the enriched colonists will become true citizens of the country in which their fathers have established themselves. They will have forgotten their country of origin, and will mingle with the old families which conserve the national traditions.

The ideal of peoples whose economic condition is dependence is naturally autonomy; without it all liberty is precarious. A considerable stream of exports flows from America to Europe to pay for imports and the interest on foreign capital. Only this large exportation of products, as in the case of the Argentine, Mexico, and Brazil, can maintain a favourable commercial balance. The Argentine economist Alberto Martinez has demonstrated that as in his country there is neither an economic reserve nor a national capital, the diminution of exports causes serious financial disturbances; exchange is unstable, the rate rises, trade falls off, and credit is suspended.

In other countries the economic system is instability itself. It depends almost entirely on two or three agricultural products—coffee, cane-sugar, and rubber—and the incessant fluctuations in the prices of these products, which constitute the wealth of the country. One does not observe the regularity of the exports of the Argentine and Brazil, nor any important industrial development. To remedy the lack of equilibrium in the budget and to pay the interest on the foreign debt, the State, the guardian of the public fortune, once more resorts to loans. The creation of a national capital is thus an urgent necessity for these prodigal democracies.

By stimulating the development of agriculture, by creating or protecting industry, by diminishing the budgetary charges by the reduction of useless bureaucratic employments and sumptuary expenses, the Latin-American governments could gradually establish the necessary reserves.