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Between Le Longue Durée, Globalization and the Expansion of the
Frontier: Income Inequality in Chile 1860-1930
Luis Bértola & Javier Rodríguez Weber
Paper presented to the Conference
A Comparative Approach to Inequality and Development:
Latin America and Europe
Madrid, 8-9 May 2009
Abstract:
This paper presents a new set of estimates of income inequality in Chile between
1860 and 1930. Trends in inequality are discussed from two perspectives. First, we
explore whether inequality is part of a set of long run features of the Chilean economy.
These long-run features have to do with social relations and institutions operating both
domestically and at the level of Chile’s relationship with the world economy. Second,
the paper focuses on the impact of two related events during the period in question: the
First Globalization Boom and the expansion of the Chilean Southern and Northern
frontiers
Our findings are that Chile was a society that by the mid-19th Century showed
already high concentration of wealth, political power and income, where the hacienda
system, of colonial origin, was a rather archaic one. The first early impact of
globalization in Chile strengthened the power of the elite and had a negative impact on
income distribution. The expansion of the frontier opened up a process of social change
in the periphery of the Chilean economy and income distribution tended to improve, but
the core of the old system remained alive and controlled the State policies. During the
first decades of the 20th Century, while GDP growth rates decreased, the Chilean
economy became more dependent on international prices. The distribution of income
worsened considerably in the context of rising domestic prices and the distribution of
power and wealth in favor of the elite.
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Between Le Longue Durée, Gobalization and the Expansion of the Frontier:
Income Inequality in Chile 1860-1930
1. Inequality and development in Latin America: the state of the art
According to a wide range of studies carried out between the 1950s and the 1970s,
the roots of Latin America’s underdevelopment are to be found in its colonial period. A
high degree of dependency on foreign markets, capital and technology as well as an
economic structure in which wealth and political power was highly concentrated, were
responsible for a pattern of development characterized by sluggish growth and the
reproduction of high levels of social and economic inequality (Stein and Stein 1970,
Cardoso & Faletto 1967 & 1979, Cardoso & Perez Brignoli 1979, Furtado 1974, Frank
1967, and many others). These authors usually took a negative view of what we now
call the First Globalization Boom, because it involved an authoritarian construction of
national states and reinforced the concentration of power and wealth in the hands of an
oligarchy. This oligarchy, in turn, was highly dependent on markets, trading, finance,
services and technology controlled by foreign companies and states. Generally, these
authors were critical of, but also somewhat sympathetic to, attempts made by Latin
American countries to change the basis for their economic growth. During the so-called
ISI-period structural change, social transformation and improvements in social
conditions were promoted in what would later be labeled a process of growth “from
within” (Sunkel 1991). According to this academic tradition, the structural reforms
promoted since the 1970s in most Latin American countries contained some good
fundamentals. However, they reinforced a long-run development path based on high
income and wealth concentration, international competitiveness based on a perverse
pattern of specialization in low-skilled and natural resource-intensive sectors, as well as
high volatility.
In recent decades the intellectual atmosphere has shifted towards different
approaches that focus on actions taken in the 20th century as the primary sources of
Latin America’s backwardness. In particular, the new ideas examine inward-looking
growth, state interventionism, forced and artificial industrialization and different
varieties of populism as the main causes of the disappointing economic and social
outcomes of 20th Century Latin America’s development up to the 1980s. By going
global and following best practices, Latin America should have caught up with
developed countries, like the South-East Asia had recently done. What we now call the
First Globalization Boom appeared to be the golden path to development, and deviation
from this path cost Latin America dearly.
During the last decade, the First Globalization Boom has been revisited by many
scholars, including some who focused on Latin America. Jeffrey Williamson studied the
period from many different points of view (Williamson 1995, 1999, 2002). His main
message is that Latin America did relatively well during that period, and could have
done much better had it been less protectionist. Latin America also suffered an increase
in inequality due to the process of factor price convergence. According to the
Heckscher-Ohlin-Samuelson model, the price of land increased significantly in relation
to wages due to the intensification of immigration. The terms of trade moved in favor of
Latin America, strengthening the position of the landowning classes and inhibiting
structural change in the long run. Williamson’s latter contributions help to nuance the
strong pro-globalization points of view of the early 1990s.
Latin American economic history has also been revisited by other scholars. Neoinstitutional economic history has produced many comparisons between Latin and
North America, in order to unearth the fundamental explanations for long-run growth.
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Engerman and Sokoloff (1997, 2000), North, Summerhill & Weingast (2000), Landes
(1998), Robinson (2006), Acemouglu, Johnson & Robinson (2002, 2005), have all
agreed with the previous thesis regarding the colonial roots of Latin America’s
inequality and backwardness. The authors differ in their explanations of the origins and
causes of the institutional settings in Latin America. However, they all stress the
institutional setting that emerged soon after the conquest as the cause of long-run trends
in inequality. The major features of these institutions were the concentration of wealth,
mercantilism, religious and cultural intolerance, racism and exclusion, an authoritarian
and centralized state, low human capital formation, limited political democracy and the
presence of extensive privileges for the elite. Implicit in this line of research is the idea
that development in Latin America during the last two centuries followed the path set
during the Colonial period and did not diverge from it. This resembles Braudel’s ideas
about the longue durée. However, in the Neo-institutional approach, long-run prisons
are not cultures, but institutions.
While the idea that Latin America’s colonial heritage set it on a particular
development path is plausible, it does not mean that what happened in the centuries that
followed was inevitable. The post-colonial periods are being intensively discussed,
especially the years immediately following independence. As several authors have
proposed (Prados 2007, Bates, Coatsworth & Williamson 2006), the way in which
independent states were built had a lasting effect on the institutions of those countries.
This idea has also contributed to a deeper understanding of the post-colonial era in
Africa.
Similarly, explanations that focus on the First Globalization Boom do not
necessarily have to neglect Latin America’s “colonial roots”.
Previous contributions to Latin American economic history agree on the profound
changes that occurred during the First Globalization Boom and on the variety of
transitions in the region (Cardoso Faletto 1967, Duncan & Rutledge 1977, Cardoso &
Pérez Brignoli 1979, Sunkel & Paz 1982, Bauer 1986, Glade 1986, Bulmer-Thomas
1994, Bértola & Williamson 2006). The basic idea put forth by these authors is that the
opportunities provided by the First Globalization Boom promoted a drastic expansion of
the agrarian frontier and radical changes in the distribution of assets among the
population. At the same time, the power of the state was significantly strengthened.
Governments increasingly adopted the previously mentioned authoritarian character and
vigorously enforced the property rights of the elite. The response of Latin American
countries to globalizing forces varied according to their previous institutional settings
and social structures, as well as to their natural endowments and what has been labeled
the “commodity lottery”. They also varied according to their different colonial
heritages. As a result, inequality between Latin American countries increased became
by the climax of the first globalization. These outcomes, in turn, constituted different
contexts in which the later process of import substitution took place.
The debate surrounding the role of inequality in growth has been increasing. The
literature is already well-known. The discussion of the Kuznets curve, which mainly
focused on the impact of growth on inequality, has given way to the study of the impact
of inequality on growth. From a neo-classical point of view, income inequality
negatively affects the formation of human capital, reduces access to credit and generates
political instability. Inequality has also received attention from other perspectives.
Income inequality puts limits on domestic demand. A small domestic market does not
allow consumption of more sophisticated products to grow, thus hampering innovation
and specialization in the mass-production of low quality goods. The elite develop
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limited consumption of luxuries without any positive impacts on the domestic economy
(Willebald 2006).
2. La longue-durée
The study of the long-run features of the Chilean society can be approached from two
perspectives: the domestic economic, social and political structures and institutions, and
the relationship with the international economy. Of course, both perspectives are closely
interwoven.
Since the beginning of Spanish colonization, the driving force behind the Chilean
economy was the export sector (Salazar & Pinto, 1992; 15), and it has remained so until
recently.
The origins of the Chilean export sector are to be found in the links with the
Peruvian Potosí and Lima markets, which demanded Chilean wheat, produced in the
Central Valley. At the end of the 18th Century, the Bourbonian Reforms stimulated the
international links, either through a more liberal trade regime, or simply through the
undesired expansion of smuggling.
The role of international trade increased after Independence. The Chilean merchant,
mining and landed elites were mainly orientated toward liberal ideas and an export-led
strategy (Véliz, 1963; Salazar & Pinto, 1992; 18). The impacts of the First Globalization
Boom were noticed early on.
After the State-led Industrialization period, Chile remained closely tied to the world
economy.
Over the centuries, the Chilean export sector has always been concentrated in a few
staple goods. Each went through different cycles, often determined by the “commodity
lottery”. The colonial expansion of wheat production was resumed early after
independence, together with the expansion of copper production. Nitrates followed a
cycle of their own, with exports collapsing after the 1920s. Copper is still the Chilean
economy’s star, even as exports have become more diversified. Still, the balance of
trade shows that commodities are the only group showing a trade surplus (Cimoli &
Porcile, ECLA).
The domestic social and political order was based on a structure that took form early
in the Colonial Era and went through several changes over time. Originally, the
hacienda and the encomienda were almost the same thing. The hacienda was to the
ownership of land what the encomienda was to the right to dispose of labor. Land
ownership was concentrated in large estates, which remained remarkably stable until the
mid 19th Century (Bauer, 1994; 26-28). In the 18th Century, when the hacienda was
oriented towards the production of wheat for export, some of its features persisted: large
estates, sluggish technological change and the control of important amounts of labor
clearly stratified into different categories. As demand expanded, growth was extensive,
adding new land and labor to the preexisting units (Salazar & Pinto, 1992; 103). This
trend seems to challenge the general view that a country’s resource endowments imply a
specific fate in terms of the social order and economic performance, and in particular
that wheat production will always lead to small scale, egalitarian, agrarian development
(Engerman & Sokoloff). In Chile’s case, wheat production is probably more a curse
than to a blessing.
The hacienda was not merely a production system but the centre of the strongly
hierarchical social structure. In the 17th Century, control over labor was as important as
control of land, due to the decreasing availability of workers caused by high mortality
rates among the domestic population (Salazar & Pinto, 2002; 100). The hacendados
reacted by introducing the inquilinaje, an “institution” destined to last for centuries.
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Originally, the inquilinos were free renters, which had access to a piece of land that
was part of the hacienda. They could cultivate crops and breed animals in exchange for
payments in kind (wheat or other crops) or cash (Góngora, 1960; 93-95). When rents
could not be paid in kind or cash, they could be paid in the form of services. This
became the dominant trend, and what were originally free renters became heavily
indebted peasants bonded to the land. It was a kind of sharecropping where the rent was
paid with labor. Within a century, the old encomendero became a landowner, a lord of
servants. These servants paid in different ways for the right to live in the hacienda.
The labor system was complemented by two other kinds of workers: permanent and
temporary peones. The former earned a salary, part of which was in the form of a small
allotment of land that they were allowed cultivate. The latter were seasonal workers.
Besides, there existed free peasants in the surroundings of the haciendas cultivating very
small farms, who provided the haciendas with seasonal labor.
This system was extended and reinforced during the expansion of wheat production
in the mid 19th Century (Bengoa, 1988; 60-71).
According to Bengoa, this stability of the hacienda system is the main reason for the
historical stability of the Chilean State itself (Bengoa, 1988; 85). Control over land and
people were the basis of social and political power. Hacendados and their descendants
occupied many prominent positions in military, political and administrative bodies.
However, the structure of economic, social and political power cannot be understood
without the examining role played by the owners of merchant and financial capital.
They were the real link to the international economy, but they were not necessarily
different from the land-owning elite. The elite were really involved in all these different
economic and political activities. While during the colonial time they had a strong
alliance with colonial political institutions, after independence they simply took over
control the political system (Salazar & Pinto, 1999: 38; Góngora, 1970: 125-126;
Salazar, 2003: 47; Bengoa, 1988; 11; Mellafe, 2004, Bauer, 1994).
In a continent ranking worst in terms of inequality, by 2003 Chile was among
the five most unequal economies in Latin America. (De Ferranti et. al., Table 1.1).
Many consider the social question to be one of the main shortcomings of the otherwise
seemingly successful Chilean model. Translating income differences into differences in
height and allowing mean income to equal mean stature of the population, we could find
people shorter than one centimer, while others were as high as the Mount Everest
(Espejo & Mery, 2006).
3. Globalization, frontier expansion, institutions and inequality
Even if we argue that these general features of the Chilean economic, social and
political system were long lasting, they still went through important changes over time.
Our aim is to see how inequality behaved during the First Globalization Boom, and
detect whether the new configurations of power introduced altered the long-run features
described above. In other words, the question is whether the pattern of development
seen in Chile in the 20th Century, unequal or not, is the result of either long-run trends,
or completely new constellations of forces created during the export-led growth
experienced since the mid 1850s.
The period we are studying features two central processes: globalization and the
expansion of the Chilean frontier both to the South and the North. The two processes
are not delinked from each other.
A very influential interpretation of the changes in inequality during the First
Globalization Boom is offered by the Heckscher-Ohlin-Samuelson model, and Jeffrey
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Williamson’s (see especially Williamson 2009) application of it to Latin America. The
basic idea behind this approach is that the transport revolution changed relative factor
endowments and initiated a process of adaptation of prices to the new equilibrium. The
abundant factors in a region tended to increase their prices relative to other factors. In
land-abundant regions the rental-wage ratio increased, as well as inequality.
“The inequality-globalization connection in the nineteenth century can be
summarized this way: globalization seems to have had an inegalitarian effect in
(initially) land-abundant countries, a force raising inequality by rewarding
landowners more than workers; and globalization seems to have had an egalitarian
effect in (initially) land-scarce countries, especially in those that stuck with free
trade and resisted pleas for protection.” (Lindert & Williamson, 2001; 13).
This basic approach may be complemented and modified, providing different
outcomes.
One obvious complement is that these forces may produce different impacts
according to the specific settings of actors and institutions in a region. The impact of
these trends may be quite different in family-based farmer economies with access to
well developed free labour markets, than in, say, a slave economy like the Brazil in
1872, or hacienda-dominated Chile in the 19th Century. Trends in land-labour ratios do
not say anything about absolute inequality levels and social features of different
societies.
Also, we can examine whether we can approach globalization forces as a once for
all change in factor endowments and a subsequent adjustment to this new equilibrium.
The best way to approach this is as a process in which technological change and
economic growth produce waves of productivity growth, in turn altering transport and
commodity prices. Two different outcomes may be noticed. First, globalization makes
new factors of production available, and the increased supply causes the relative factor
price to fall. That makes these new regions competitive in distant markets. Later on, the
expansion of demand for these new factors may raise their relative prices. However, this
is one time change, but rather a process of continuously counteracting forces. So, the
expected outcome has to do with what the frontier looks like: how fast productivity
grows in maritime transport, channel building, railroad expansion, engineering
infrastructure, other terrestrial communication, etc. Obviously, the cost of introducing
new amounts of factors of production (land) also depends on institutional contexts: the
strength of the state, the strength of the elites, the interaction between colonizers and
native populations, property rights, access to labour, control of commercial networks,
etc. This point was recently made by Harley (2007).
“Influenced by an older literature, I tend to think about nineteenth-century
globalisation in terms of expansion of an Atlantic economy into frontier peripheries
from its north-western Europe core rather than a ‘regime switch to openness’. Of
course, both elements were present, but a major part of globalisation was the
expansion of the core into newly settled peripheries rather than a change in trading
relationships between established economies. A key feature of the peripheries,
which the Williamson lens leaves out of focus, was that they originally lay beyond
the frontier of organised economic activity and globalisation was about their
incorporation. (…) Globalisation is seen as the evolution of the relationship of the
European core with an expanding periphery – usually but not always in the
Americas. (…) Integration of a frontier into the Atlantic economy involved the
discovery of export staples, a process of learning how best to exploit them and the
mobilisation of capital and labour for their exploitation.” (Harley, 2007; 240-241)
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The impact of frontier expansion on relative factor prices was already highlighted by
Rybczynski in 1955. Recently, Shanahan & Wilson, (2007; 14) studied how
globalization, combined with the expansion of the frontier, produced very different
outcomes in different regions of Australia. While Victoria showed the expected increase
in the rental-wage ratio, the land-abundant South Australia shows a decrease in this
ratio. Emery, Inwood & Thille (2007) report a similar variety of outcomes in different
Canadian regions.
Besides the impact of frontier expansion in purely economic terms, the institutional
settings involved are crucial for the distributive outcome. Again, the Australian case
sheds light on that point.
“Despite their superficial similarities in one factor input (land), other factors
such as labour and capital, as well as differences in policies and governance, could,
and did, influence the measured level of inequality. In South Australia, government
legislation and technological invention appear to have combined to decrease land
prices and lower inequality for 20 out of 50 years. These findings are important.
They suggest that in the Australian case at least policy differences did affect the
returns to factors and measured inequality. Such variation was the result of relative
resource abundance, which governments could influence through policies that
opened up land or assisted (hindered) migration. Ultimately, long-run resource
flows still produced outcomes that saw returns to relatively abundant factors
improve relative to scarce.” (Sanahan & Wilson, 2007; 18).
The point of the decisive role of institutions has been a classical one. Let´s only
mention Adelman´s comparison between Argentina and Canada and the recent
contributions on New Zealand and Uruguay (Álvarez, Bértola, Porcile 2007). More
recently, García and Robinson (2009) made a similar point:
“... most countries in the Americas had an open frontier, how that frontier
land was allocated differed a lot... Our hypothesis suggests that if political
institutions were bad at the time of frontier settlement, the existence of such
frontier land might actually lead to worse development outcomes, probably
because it provides a resource which non-democratic political elites can use to
cement themselves in power” (García & Robinson, 2009:17-18).
Another concern with this approach is the strong assumptions underlying it. The two
most mentioned in the literature are the assumption of constant returns to scale and that
technology is ubiquitously available. What are the implications of those assumptions in
this case?
- If we assume that the same technology is available everywhere, we
assume that, once markets move towards equilibrium growth rates, factor
prices will tend to converge.
- Furthermore, if technology is freely available, then no changes in
productivity growth and per capita income may arise from that aspect.
As an outcome, factor allocation is transformed into the key-explanation
of economic performance. Productivity growth and its determinants
almost disappear from the scene and from the core of the analysis.
- It does not consider that economies of scale are especially important in
transport networks and in frontier expansion, a central aspect of this
process.
- Different social institutional and organisational patterns have long-lasting
impacts on productivity growth and technical change. Moreover, they
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have an impact on the way the fruits of technological change are
distributed, both within and between countries and regions.
We will try to analyze the Chilean experience with these ideas in mind.
4. Trends and phases in income inequality
4.1 Chilean GDP
Chilean GDP grew relatively fast from 1860 to WWI (Graph 1). As shown in Graph
2, the gap between Chilean GDP and that of more developed countries shrank. Even so,
the absolute difference was rarely less than 40% of the per capita income of the leading
countries. The trend changed after WWI, when Chilean GDP started to diverge.
Growth was clearly export-led, driven mainly by the mining industry, but also by
agriculture. Two different growth cycles may be noticed. The first, starting in the 1850s
and lasting until the early 1870s, was dominated by wheat, flour, copper and silver
exports. The second is the nitrates boom: after showing strong growth starting in the
1880s, there were large fluctuations after the 1910s, finally collapsing by 1930 (Cariola
& Sunkel, 1982; Meller, 1998; Salazar & Pinto, 2002). This export-led growth had
strong impacts on the rest of the economy, in terms of urbanization, demographic
change, growth of the service sector (especially the State) and creating a small market
for manufacturing production.
As shown in Graph 3, the foreign trade-coefficient grew noticeably during both
cycles.
Graph 1. Gross Domestic Product and Gross Domestic Income at 1908-1910 prices, 18601930 (1908-10=100)
1000
GDI
GDP
100
1860
1864
1868
1872
1876
1880
1884
1888
1892
1896
1900
1904
1908
1912
1916
1920
1924
1928
10
GDI: own estimates. GDP: Díaz et al 1998.
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Graph 2
Chile´s per capita GDP in relation to Australia, UK and USA., 1860-1930
70
60
50
40
30
1860
1870
1880
1890
Chile/Australia
1900
Chile/RU
1910
1920
1930
Chile/EUA
Graph 3: Foreign trade coefficient, 1840-1930..
70
60
Porcentaje (%)
50
40
30
20
10
1841 1847 1853 1859 1865 1871 1877 1883 1889 1895 1901 1907 1913 1919 1925
Based on Braun et al. (2000) Table 5.6
4.2 Income estimates: the data
Here we present two different types of estimates. The first is a continuous inequality
series for the years 1860 to 1930. The second is a set of benchmark estimates for the
years 1875, 1885, 1907 and 1930.
In both cases the strategy used for constructing the estimates is similar. First we
organize the population according to the economic activity in which they are engaged.
Then we search for information in order to assign each occupational group an income.
Thus, our database contains information on the active population with an identifiable
profession.
While the continuous series has some restrictions in terms of the income categories
considered, it has the virtue of showing trends in inequality more clearly. The changing
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structure of the active population by sector of activity (agriculture, mining,
manufacturing, construction, transport and communications, commerce, and others) is
based on Galvez & Bravo (1992), but many corrections were introduced in order to
make the available information compatible.
These large sectors include several occupations each. Additional disaggregation was
made for some occupations, such as the agrarian sector and mining. In other cases, some
occupations were aggregated in larger groups.
With respect to income, several different sources were used and made comparable.
When prices or income were not directly available, factor price series were applied to
existing data in order to complete the information. In some cases, the values are the
result of interpolation between other available years.
Appendix Table 1 presents the different occupations considered, their weight at the
start (1860) and end (1930) years, as well as the main source of information for both the
size and income of each group.
The benchmark estimates are based on census data and have different features for
each year. This makes them more difficult to compare with each other. However, they
have the virtue of allowing for more in depth studies of each year because the level
disaggregation is higher, as well as allowing for inter-regional comparisons. Appendix
Table 2 shows the different income groups considered in each benchmark estimate.
Detailed information on incomes may be found in Rodríguez Weber (2009).
4.2 One proxy for the Gross Domestic Income, 1860-1930 and Ginicoefficients
The continuous series may be regarded as a Gross Domestic Income series. When
comparing it to the GDP series, a warning is necessary. The main purpose of our series
is to estimate income inequality. The sources used were those that are best suited for
this purpose. The GDP series focuses less on how income is distributed and pays more
attention to output. Thus, divergence between both series is not an unexpected result.
Growth rates for the whole period are rather similar and both series show a faster
growth rate in 1860-1900 than in 1900-1930. The GDP series is more volatile (Table 1).
Another difference is that the GDI growth rate is higher than the GDP growth rate in
1870-1900, while the opposite is found in 1900-1930.
Table 1: GDP and GDI growth rates, 1860-1930
1860-1930
1860-1900
1900-1930
current prices
constant 1908-1910 prices constant per active population
own
Díaz et. Al
own
Díaz et. al
own
Díaz et. al
5,70
5,90
2,60
2,80
1,53
1,57
4,80
5,30
2,80
3,20
1,60
1,84
7,00
6,70
2,30
2,10
1,43
1,20
Sources and comments:
GDP: constant prices, Díaz et. al (1998); current prices, Díaz et. Al. Inflated by the general price
index, excepting for agriculture and mining, which were inflated by special sectoral indices. Price
indices were taken from Wagner (1992).
GDI: current prices, own estimates; constant prices, deflated by the same price indices as for
GDP inflation.
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In terms of growth per member of the active population, the GDP series shows a
strong reduction of growth rates in the first decades of the 20th Century. The GDI series
also shows a reduction, but a more modest one.
The Gini-coefficients arising from the GDI series are presented in Graph 4. The
inequality level is rising during the first decades of the series. A downward trend is
noticed from the early 1870s until the first years of the 20th Century. Then there is a
sharp rise, continuing until 1930.
An important bias present in the GDI series is that it does not take into consideration
the income of foreign investors in nitrates production. This was a particularly important
component of total income at the end of the 19th Century, during the nitrates boom,
before production went into the hands of national capitalists. In order to have an idea of
the impact of this component, Graph 5 presents a functional distribution of income
between wages and profits. The two series are quite similar except during two periods:
the records for 1895-1905 are low but not exceptionally low as in the GDI series, and
the 1920s, which show decreasing instead of increasing inequality. The inequality levels
at the end of the period are high in both cases.
The benchmark estimates also presented in Graph 4 yield rather similar results to
those of the continuous series. They will be used to discuss regional inequality.
In what follows we will look at three different periods separately: 1860-1873, 18731905 and 1905-1930.
Graph 4. Gini-coefficient 1860-1930, continuous series and
benchmarks estimates
0,7
0,65
Índice de Gini
0,6
0,55
0,5
0,45
0,4
1860 1865 1870 1875 1880 1885 1890 1895 1900 1905 1910 1915 1920 1925 1930
Own estimate of Gross Domestic Income. Income of foreign owners of nitrate mills are not included.
5. Increasing inequality during the wheat cycle 1840-1875: globalization,
commodity lottery and the hacienda
After Independence, the Chilean economy started a period of relatively fast and
stable growth. Growth was based on wheat, silver and copper exports. According to
Braun (2000) the export-coefficient doubled between the early 1840s to the early 1870s
(see also Graph 3).
We are not able to estimate the changes in inequality during the whole period. Our
hypothesis is that the rising trend in inequality found in 1860-1875 had started by the
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1840s. This inequality trend could be interpreted in two different but complementary
ways.
Table 2: Yearly growth rates of GDP by sector at constant prices and GDI at current prices., 1860-1930)
Agriculture Mining
ManufacturingOther
Total
1860-1873 Real GDP
3,68
2,84
3,37
6,37
3,63
Current income
2,80
3,10
3,76
4,45
3,43
1873-1905 Real GDP
0,50
5,59
2,70
4,64
2,85
Current income
4,81
7,10
5,43
5,56
5,69
1905-1929 Real GDP
3,26
4,01
2,24
1,29
3,03
Current income
5,02
9,25
7,70
10,32
8,34
1905-1930 Real GDP
2,81
2,54
1,93
0,55
2,20
Current income
4,00
6,49
6,59
9,80
6,91
GDP: Diaz et. al. (1998, Cuadro AE 12); GDI, own estimate.
Wheat production in the Central Valley of Chile experienced a short-lived success in
the commodity lottery during these years. Massive migration into new areas on the
coast of California and to Australia produced a large increase in demand that
temporarily could not be met by their domestic production. The expansion of the
Atlantic economy, partly due to falling transport costs, opened a window for Chilean
wheat production to be exported overseas. But soon the markets of these settler
economies were being supplied by their own domestic production. In the 1860s the
British market became an important destination for Chilean wheat. High wheat prices
and falling transport costs created an opportunity for great fortunes to be earned in
Chilean agriculture (Bauer 1970:87, 93-95, 154-155, 157; 1994) for the first time in its
history.
As shown in Table 3, agrarian exports increased from 17% of total exports in the
1840s to 40% in the early 1870s.
Table 3: Value of exports by sector of origin, 1846-1890 (5 year-averages)
Million dollars per year
%
Período
Mineras
Agropecuarias
Manufacturas
Otras
Mineras
Agropecuarias
Manufacturas
Otras
1846-1850
5
2
-
2
63
17
-
20
1851-1855
8
4
-
2
56
26
-
18
1856-1860
13
4
-
2
71
20
-
9
1861-1865
15
5
-
1
72
23
-
6
1866-1870
16
9
-
1
62
34
-
4
1871-1875
17
13
0
2
53
40
1
6
1876-1880
20
8
0
0
68
30
2
0
1881-1885
38
6
2
-
83
12
4
-
1886-1890
42
5
1
-
86
11
3
-
Braun et. al 2000, Table 5.7
Wages remained at similar levels during this period (Díaz et. al., 2007). However,
there exists some evidence that land prices increased significantly. Claudio Gay
mentions the example of the Choapa hacienda, which was rented at 8,000 pesos in
1837, and at 18,910 pesos in 1850. 8 years later, after being divided into 7 different
units, the total rent went up to 52.950 pesos (Gay, 1863: 100).
Wheat production is often considered a crop that promotes small scale family
farming and a fair income distribution (Engerman & Sokoloff, 1997). However, the
Chilean case shows that the expansion of wheat production for export was based on,
developed with, and reinforced by, the traditional hacienda.
Salazar & Pinto (1992:103) argue that this cycle produced extensive growth, putting
more land, inquilinos and peones into work. The property rights of hacendados were
13
reinforced both by law and by the establishment and control of the precise limits of the
hacienda. The extension of cultivated land involved a more effective use of the land of
the hacienda, the transformation of pastureland into cultivated land, and the subdivision
of the very large colonial units (Bengoa, 1988: 209).
Within the hacienda the division of labor increased, incorporating vineyards and
dairy production. The increased production per hectare allowed an increase in the
number of families living from income earned on the hacienda (Bauer 1994; 153-155).
According to Bauer, Chilean wheat producers were conscious of the ephemeral
conditions that allowed them to export and about the lack of natural competitiveness of
Chilean wheat. Thus, producers opted not to invest in the sector (Bauer 1970: 157). An
observer from the early 20th Century sustained that this prosperity cycle changed the
habits of landowners in many ways. The increasing land rents, far from feeding
productive investment in the land, served to finance a new urban life, the construction of
luxury houses and the organization of costly parties and ceremonies (Schneider, 1904:
7; Bauer 1994; 135) adds that a share of the land rents where invested in banking,
urban properties, commerce and mining. Through these means, the old class of
hacendados became more integrated with other sectors of the economic elite.
However, other scholars emphasize different things. The integration of the elite was
also driven by the increasing attraction of land as an investment opportunity for other
members of this class. According to Salazar (1985: 157-162), the wheat boom attracted
the interest of capital from other origins that introduced important changes to the
traditional haciendas. The so-called merchant-hacendados invested in certain
technological improvements and stimulated some mechanization of the productive
process.
The wheat cycle did not leave labor relations unchanged. It seems that a two-fold
took place. On the one hand, the social and economic position of the inquilinos
continued to fall in the haciendas. They ended being in an even worse position than the
peones: they had to pay exhorbitant prices for housing, and indebted inquilinos were
forced to supply family labor to the hacendados (Salazar, 1985; 163-166). At the same
time, increasing wheat prices and the expansion of production induced an increase in
demand for labor. Young descendants of inquilinos families had an opportunity to leave
the haciendas, and could find occupation elsewhere. While they could be seen as a good
alternative for more modern estates, the traditional haciendas saw them as a threat. They
were a labor force outside of the control of the hacendados, who could press for wage
increases as wheat prices increased. As Bengoa (1988; 151) states, while free labor in
the 19th Century was searching for a piece of land where to settle down, the new
gañanes had broken their subordination to the land and tried to find a job in different
places (mines, services, ports, agriculture, etc), exhibiting a great deal of mobility
(Salazar, 1985; 171-172) .
Thus, the hacendados preferred the inquilinos, who were more easily controlled.
Furthermore, the credit system seems to have been an important vehicle in order to
weaken the position of the inquilinos. Contrary to the Australian and American
experience, hacendados were in a position to take advantage of the official financial
system and in turn, they were the financers of the peasants established at the hacienda.
Hacendados usually bought the harvest in advance at half the market price (Bauer 125126, 171). The inquilinos and the peasant population near the hacienda became
increasingly indebted and were therefore exposed to increased extractions of family
work.
14
6. Decreasing inequality and nitrates: State-led frontier expansion and
structural change, 1873-1905
The 1870s were years of crisis. The end of the wheat cycle, the crisis of copper
production, and an international economic crisis, were all factors that contributed to a
decline in GDP. As shown in Graph 3, the foreign trade coefficient was strongly
reduced. Around that time some politicians argued, in the spirit of the era, that Chile
needed a war and to incorporate new territories and new export staple goods in order to
counteract the crisis and improve national performance. They were not simple
speculations. Chile won the Pacific War against Bolivia and Perú, and incorporated to
its territory the natural-resource-rich Norte Grande. Another war was won in the South,
against the indigenous population of the Araucania.
Chile’s territory almost doubled. As shown in Table 4, the distribution of economic
activity in the territory changed accordingly. The expansion to the North was not only
important in terms of population but particularly in terms of income. The North made an
important contribution to per capita income growth. Even if the expansion to the South
deserves considerable attention, we will limit our examination to the expansion to the
North.
Table 4: Regional distribution of population and income, 1875-1907 (%)
1875
1885
1907
Region
Income share
Pop. Share
Ratio
income/pop.
Shares
North
17
12
1,4
Centre
70
75
0,9
South
13
13
1
North
22
17
1,3
Centre
64
66
1
South
14
17
0,8
North
28
18
1,6
Centre
57
65
0,9
15
17
0,9
South
As shown in Graph 1, GDP growth shifted to a lower growth path after the 1880s
compared to the previous period. However, the expansion of the frontier produced a
once off increase in GDP.
Growth was followed by structural change (Table 5). Mining (including nitrates)
almost doubled its share in GDP, while agriculture significantly reduced its
contribution. As a result, population became more concentrated in urban areas. Still, the
agrarian population was 62% in 1907 (74% in 1875, Hurtado 1966, Table 2).
According to Meller (1998; 21), all previous booms experienced by the Chilean
economy were insignificant compared to the nitrates boom. This was the first truly
capitalist sector of the economy, given the scale of production, the technology it used
and labor relations based on wage earners, who did not produce anything that they
consumed directly.
Nitrates faced increased demand from European agriculture, which was confronted
with increasing domestic costs and external competition (Miller & Greenhill, 2006).
Nitrates were extracted from a region 750kms long and 0.5-10kms wide, running
parallel to the Pacific Coast. Distance to the sea was 40-80km. Several towns grew
15
along this strip; several ports saw increasing activity and transport networks flourished
(Cariola & Sunkel, 1982; 81).
Table 5. Sectoral GDP shares, 1871-1910 (ten-year averages, %)
Agriculture
Mining
Manufactures
Public sector
Total
1871-1880
39
17
35
9
100
1881-1890
27
26
36
12
100
1891-1900
25
28
34
12
100
1901-1910
22
32
29
17
100
1911-1920
23
37
27
13
100
1921-1930
24
36
29
12
100
Based on Diaz et. al. (1998), TAble AE 12.
The main technological transformation introduced in nitrates production was the
Shanks system. It allowed to process low quality caliches and was energy and labor
saving. During the 1880s productive capacity increased three-fold, while production
costs were reduced by 40% (Pinto & Ortega, 1990; 40). At the same time, increasing
returns to scale were present, and the mills demanded higher minimum scales. While a
typical mill in the 1870s demanded an investment of about £23,000, the Shanks system
required a minimum investment of £40,000 and by the early 20th Century the average
mill involved an investment of about £100,000 and employed 300 workers (Pinto &
Ortega 1990; 41-44).
Decreasing inequality during this period was the result of different forces.
In the North, a capitalist labor market flourished, drawing large quantities gañanes,
in spite of the hard climatic and working conditions (Pinto & Ortega, 1990; 65-66).
Wages were higher than in the agrarian sector in Central Chile: two to three times
higher according to Pinto Vallejo (1998; 31). This was not counterbalanced by the
higher costs of living they likely encountered. Also, many opportunities for wageearners were to be found in activities linked to the nitrates industry, for example,
railway building.
The expansion to the South was the scenario of confronting interests. Some land
was given to indigenous groups. Other farms were given to domestic families (some of
them members of the army, both officers and soldiers). These farms tended to be subdivided over time, giving rise to poor minifundia. Some land remained in the hands of
immigrant settlements. Finally, a group of originally medium-size estates considerably
increased their size over time (Bengoa, 1988; 253). The South looked like a new
environment in which the development of a new kind of agrarian society distinct from
the traditional hacienda was possible, although the influence of the traditional system
was present.
Two other features of the production of nitrates added to the above-mentioned trend.
Nitrate mills were mainly owned by foreigners, whose profits were not considered as
part of domestic income (they are considered in GDP estimates). Second, due to Chile’s
monopoly over nitrates production in world markets, the state was able to tax exports,
which allowed for the expansion of state bureaucracy.
Changes in income inequality had a clear regional component. Table 6 shows how
inequality decreased in the North and in the South, while remaining for the most part
unchanged in the Center. Following Rybczynsky (1955), inequality was reduced in
regions were the supply of land increased significantly. If we look at inequality by
16
sector, the reduction of inequality present in the mining sector strengthens the previous
conclusion.
In order to take into account the impact of foreign nitrates mill owners on the
distribution of income, we have shown the relationship between profits and wages in
Graph 5. The difference between this and the continuous Gini-coefficient series seems
to be that while the latter continues to fall until the early 20th Century, the former shows
a stable distribution.
Graph 5. Profit-wage rate, 1860-1930
1,2
1
0,8
0,6
0,4
0,2
1860
1863
1866
1869
1872
1875
1878
1881
1884
1887
1890
1893
1896
1899
1902
1905
1908
1911
1914
1917
1920
1923
1926
1929
0
It is possible to consider the reduction in inequality as a process unfolding in two
stages. As shown in Graph 6, inequality decreased first due to the impact of mining. The
impact of mining on the agrarian labor market started to be perceived and the profit
share in agriculture started to fall, adding to the reduction of total inequality.
40
100
Graph 6: Profit shares in agriculture and mining (1880-1905)
38
90
36
80
34
32
70
60
28
26
50
24
40
22
Agro
Minería
20
1880 1882 1884 1886 1888 1890 1892 1894 1896 1898 1900 1902 1904
30
Mining
Agriculture
30
17
The case may be clearly understood looking at the income of the gañanes. They
were agricultural workers at the bottom of the social hierarchy, accounting for 18-26%
of our active population. Their personal income increased from being 35% of average
income by the 1880s to 48% in 1905. Their real income increased considerably since
the mid 1890s (Graph 7).
Graph 7: Gañanes real income, 1880-1930 (1913=100)
160
150
140
140
130
120
110
Deflactado por IPC
80
100
60
90
40
80
20
70
60
0
1880
1890
1900
DPI Matus (2006)
1910
DPI Díaz & Wagner (2008)
1920
1930
Agrarian prices (Wagner, 1990)
The economic and territorial expansion during this period could not have been
carried out without a strong role played by the State. The Chilean State was among the
most developed in Latin America, as evidenced by its military victory in the Pacific
War.
The State came to play an important role in the distribution of income. The
monopolistic position enjoyed by Chilean nitrates allowed the State to charge nonnegligible taxes on nitrates exports. By the 1890s, this source of revenue (Table 7)
accounted for half total State revenues. Graph 8 shows the share of Gross Value Added
by mining that was appropriated by the State: up to 39% at the end of the century.
Table7: Fiscal revenues by origin, 1850-1929 (%)
Mining
Direct
Indirect
domestic
Indirect
froeign
Non-fiscal
Extraordinary
1850-1859
0
11
23
62
4
0
1860-1869
8
9
22
52
4
6
1870-1879
5
7
23
56
6
2
1880-1889
35
6
8
44
8
0
1890-1899
53
1
1
30
6
10
1900-1909
50
0
2
31
6
10
1910-1919
50
3
8
29
8
3
1920-1929
28
10
9
23
9
20
Wagner, Jofre & Luders, 2000; Cuadro 1
Deflactado por Precios Agrícolas
120
100
18
The traditional elite benefitted from the expansion to the North, as increased State
revenues allowed the reduction of fiscal pressure on other economic sectors. Also, the
State created the Caja de Crédito Hipotecario, a credit system that mostly benefited the
rich elite. Obviously, the increased State revenues fed a growing and powerful body of
civil servants, especially the armed forces, whose role was decisive in the annexation of
new territories and maintaining the domestic order.
Graph 8: Share of Gross VAlue Added by mining captured as
state revenues, 1880-1905
45
40
35
(%)
30
25
20
15
10
1880 1882 1884 1886 1888 1890 1892 1894 1896 1898 1900 1902 1904
7. Divergence, inequality and expansion of the hacienda system: 1905-1930
The period under consideration has many contradictory trends which do not allow
presenting an easy summary.
1913-1930 has always been a difficult period for Latin American historiography, as
the First Globalization Boom already was showing signs of exhaustion, but it should
continue until the late 1920s. At the same time, WWI introduced many disruptions that
blur the difference between ephemeral facts and trend changes.
According to Díaz et. al. (Graph 1 and Table 1), during the three first decades of the
20th Century, and especially after 1913, Chile´s GDP and per capita GDP growth slowed
down. As shown in Table 5, no important structural change took place, excepting for a
continued modest expansion of the mining sector and a reduction of the weight of the
public sector. Since then, Chile started to diverge with world leaders, breaking the trend
of the late 19th Century (Graph 2).
This changing trend seems to be related to the performance of the export sector.
Graph 3 shows that the foreign trade coefficient changed the increasing trend followed
during most part of the 19th Century and much earlier than any kind of inward-looking
policy could take place.
With respect to inequality, the decreasing trend of the late 19th Century was reverted
according to almost all measures: benchmark estimates, the continuous series and the
profit-wage ratio. The inequality increase looks as very important and seems to have
been present in every sector, excepting for services, and in every region.
We can always doubt about the absolute increase of inequality. Let´s see if we can
find reasonable explanations for that or if we have to assume that we have
overestimated this movement.
19
Nitrates.
A first movement has to with the partial ¨nationalization¨ of nitrates production.
Chileans controlled by 1920 more than 50% of the mining sector. This was mainly
because foreign owners became assimilated rather than because of new Chilean
investments (Soto Cárdenas, 1998; 52). At the same time, it seems that this could have
eroded the chances of the state to extract revenues from the now local elite. In the 1920s
the role of mining in state revenues decreased in favor of extraordinary sources, i.e.,
foreign debt. These two facts have to be interpreted together with a third and decisive
one: the production of nitrates was rather obsolete in technological terms. Nothing
happened after the introduction of the Shanks system, excepting for the use of oil
instead of coal. Thus, profits were highly dependent on the evolution of world prices.
Agriculture
The slow rhythm of the expansion of demand for labor in the North already noticed
in the previous period was combined with a continuous growth of the agrarian
population. This led to a reversion of the previous trend of the income of gañanes. This
was combined with what can be labeled as a regression in the evolution of the social
structure and institutions of the South. While this region showed varied patterns of land
tenure and farm sizes, the early 20th Century witnessed how the South adopted the old
hacienda model of the Central Valley (Bengoa, 1990; 154-155).
Indeed, the inquilinos system became a dominant labor relation. However, some
differences with the Central Valley could be noticed. Wage relations were more
important and share-cropping was the dominant form in which inquilinos paid for the
land.
The state played a decisive role in the expansion of the hacienda system to the
South, through the concession of land to entrepreneurs in order to promote immigration
of colonos from Europe. While these colonos seldom came, the concessionaries
extended their property rights over these lands. Concessions were huge in size: under
the Presidency of Riesco in 1901-1905 46 of them amounted to 4.5 million hectares (for
this and many other examples, see Bengoa (1990; 167 footnote 23). According to this
author, what happened in the Araucania at the beginning of the 20th Century resembled
very much what had happened in the Central Valley 300 years before.
Relative prices, exchange rates and terms of trade
Chile had two episodes of fast devaluation of its currency and a correspondingly
high domestic inflation. The first one was during the 1880s and up to the mid-1890. In
close relation to the war, the state had to expand its expenses. Even if adopting the gold
standard was always under discussion, this step was never taken. The Chilean growth
model was too much dependent on the expansion of the state. Thus, its current needs
often led to deficits, the search for external financial support. In turn, it contributed to
the occurrence of balance of payments deficits, devaluation, inflation, and so on. As
shown in Graph 4, the episode of fast devaluation provoked an upsurge of inequality.
The second episode took place especially during WWI. This time inflation was
triggered off by increasing export and import prices. As shown in Graph 9, after decades
of decreasing export and import prices, export prices started to rise by the mid 1890s,
why the previously stable terms of trade improved significantly up to 1906. This
relatively high price level was maintained through the 1920s.
As shown in Graph 10, agricultural and mining prices grew much more than the
consumer prices index, implying a redistribution of income in favor of the export sector.
20
Graph 9: Terms of trade 1860-1930 (1913=100)
300
160
Exports and imports
120
200
100
80
150
Terms of trade
140
250
60
100
40
50
20
1860 1865 1870 1875 1880 1885 1890 1895 1900 1905 1910 1915 1920 1925 1930
Exports
Imports
Terms of trade
Price movements were also linked to the exchange rate. While the first devaluation
episode was directly dependent on the needs of state expenditures in relation to the
Pacific War and the 1891 year Revolution, devaluation and inflation in the early 20h
Century seems to reflect some kind of institutional inertia linked to the consumption
habits of the elite (Millar Carvacho 1994; 428-429). In 1904-1907 the amounts of issued
paper money answered for 50% of that of the whole period 1876-1907 at current prices
(Clavel & Jeftanovic 1983, Table 1). During these years, an important share of the new
emission was directed towards the acquisition of bonds of the Caja de Crédito
Hipotecario, whose activity directly benefitted the hacendados (Clavel & Jeftanovic
1983).
21
Índices 1913=100. Escala logarítmica
1000
Graph 10: Price indices 1883-1930
(1913=100)
100
10
1883/1887
1 888/1892
1 893/1897
1 898/1902
1 903/1907
1 908/1912
1 913/1917
1918/1922
1923/1927
DPI Matus (2006)
DPI Díaz & Wagner (2008)
Agriculture, Wagner (1990)
Mining
This process was exacerbated by the outbreak of WWI. While export prices
boomed, the State supported banks and the nitrates industry and met deficits with new
paper money emissions (Clavel & Jeftanovic 1983; Table 2, Soto Cárdenas). A nonnegligible actor is the security forces, who answered for about a quarter of total public
expenditure (Wagner, Jofre & Luders, 2000: Tables 3.I and 3.II).
8. Main conclusions
Our study shows that the impact of the First Globalization Boom on the distribution
of income in Chile had varying outcomes, depending on the commodity lottery, the
expansion of the frontier and on the way in which social structures and economic and
social institutions interacted both in the core areas of the Chilean society and in the
frontier.
Three distinct trends could be found.
1. Since the mid 18th Century and up to early 1870s the “commodity lottery”
transitorily benefitted Chile´s wheat exports to California, Australia, and then Great
Britain. More than an expansion to new areas, the wheat boom led to a more efficient
use of the land already in hands of hacendados. While some haciendas did modernize,
mainly because of the investment by merchant capitalists and some peasants were
forced to the free labor market, the core of the colonial hacienda system not only
persisted, by social conditions became harder for the inquilinos and their families.
Income distribution moved clearly in favor of the agrarian, mining and commercial
elites.
2. The 1870s were years of crisis and wheat exports collapsed. The relatively strong
Chilean State came to play a decisive role in the expansion of the frontier towards the
North and the South. The Pacific war against Bolivia and Perú and the pacificación of
the Araucania doubled the Chilean territory. Between the 1880s and the early 19th
Century a trend of decreasing inequality was noticed. In the North, production of
nitrates adopted capitalist labor relations and attracted large amounts of free labor, the
22
gañanes. The combined effect of a large increase of the natural resources, the increased
demand for labor and the impossibility of attracting labor by other means than economic
incentives, led to a positive trend in income distribution in the mining sector, especially
when compared to the traditional hacienda system. Besides, as nitrates production was
in the hands of British capital, this share of income is not accounted for in our estimates
of total income. However, even when this income is accounted for comparing profits
and wages, the decreasing inequality trend is noticed. In the South, frontier expansion
adopted a variety of forms, where the traditional hacienda system was combined with
settlements of European immigrants, spontaneous occupation by peasants, and
concessions to enterprises and army personnel. By then, this was a region with
relatively low inequality, whose expansion added to the general trend. The Central
Valley of Chile, suffering the wheat crisis, recovered much later. It was not until the
1890s that the incomes of the gañanes started to rise and the general trend was present
even there.
3. The first decades of the 20h Century showed a clearly different scenario. While in
previous periods Chilean per capita GDP grew relatively fast and kept pace with income
growth in the core countries, since WWI Chile started to diverge from the core and the
income gap, which was very important, continued to increase. Makin things even worse,
income inequality grew significantly. While GDP growth in real terms was slowing
down, the general domestic price level grew relatively fast. This was the result of
domestic monetary expansion (a trend already present in the mid1880s), which was
partly the result of domestic political economy and partly the result of the impact of
increasing international prices and improved commodity prices and terms of trade. The
nitrates industry moved into Chilean hands, accounting for increased domestic
inequality. At the same time, the mining sector´s contribution to State revenues was
reduced. In a context of technological stagnation real wages remained stable, but profits
were increased following international prices. The most important changes took
probably place in the agrarian sector. While the agrarian population continued to grow,
the trend in real wages was reverted and the social relations experienced some kind of
reversion, especially in the South. There, the concessions of land made by the State
contributed to the recreation of the social relations prevalent in the hacienda system.
Even if share-cropping became the dominant institutional arrangement and free labor
was also present, land concentration increased as well as the power of the hacendados,
inhibiting the possible development of a powerful agrarian middle class.
In short, Chile was a society that by the mid-19th Century showed already high
concentration of wealth, political power and income, where the hacienda system, of
colonial origin, was a rather archaic one. The first early impact of globalization in Chile
strengthened the power of the elite and had a negative impact on income distribution.
The expansion of the frontier opened up a process of social change in the periphery of
the Chilean economy and income distribution tended to improve, but the core of the old
system remained alive and controlled the State policies. During the first decades of the
20th Century, while GDP growth rates decreased, the Chilean economy became more
dependent on international prices. The distribution of income worsened considerably in
the context of rising domestic prices and the distribution of power and wealth in favor
of the elite.
The pattern of development followed by the Chilean society during the First
Globalization Boom, being globalization friendly, did not generate a dynamic
productive structure particularly friendly towards technological change and dynamic
and egalitarian social change. On the contrary, strong links with the world economy, at
the time they promoted structural change and expansion to new territories, preserved,
23
under new forms, archaic social structures that inhibited further growth: le longue durée
appeared under new forms.
This strong link between integration to the international economy and archaic
domestic social structures and institutions are behind the temptations of the so called
dependency school to imagine a process of progressive social development isolated
from the international economy. In reaction to that, many scholars and politicians have
believed that the recognition of role of the international economy and by being proglobal, the road to economic growth and development should be almost automatically
found.
Neo-institutional approaches have correctly emphasized the role of domestic
institutions to understand the lack of economic dynamism. However, their focus on the
very long-run has blurred the way in which these social institutions have evolved, and,
particularly, an extreme focus on domestic institutions has blurred the way in which
institutions regulating international relations have evolved.
Thus, a complex interaction between domestic and international transformations is
needed, in order to economic growth, structural change and technical progress to take
place.
24
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Appendix Table 1. Sources for the income series
SOURCE (NUMBER)
PROCEDURE (NUMBER)
SECTOR
Agriculture
1860%
1930%
45,7
40,2
SOURCE (INCOME)
Landowners
1,9
2,5
Tornero (1872), Salazar (1985), Bengoa
(1990), Gálvez y Bravo (1992), Censo
Población (1930), Censo agrícola (1936)
Disaggregation of censal profession
"agricultores"
Tornero (1872), Wagner,
(1990)
We depart from 1861's income
(Tornero 1872), and project by the
agrarian price index IPALS (Wagner,
1992)
Peones and Gañanes
26,3
19,7
Gálvez y Bravo (1992), Censo Población
(1930)
Aggregation of different "professions" of
farm workers
· Bauer (1994)· (Díaz et. al.
2007)· Wagner (1992)·
Bengoa (1990)
Daily salary (Bauer, 1994) times
working days by year (Wagner, 1992)
Peasants
17,5
18
Salazar (1985)
Salazar, (1985, Table 2; 36)
Mining
3,3
6,2
Salazar (1985), Bauer
(1994), Díaz et. al. 2007,
Wagner, 1992), Bengoa
(1990)
We depart from 1861's income
(Salazar, 1985) and project by an ad
hoc index composed by IPALS index
and gañanes's income
In 1907 and 1920 the occupation
"mineros", according to the 1930 Census
Share of mining gross income at
· Braun et al (2000)· Díaz
current prices produced by nationals
et. al. (1998 y 2007)· Cariola
(copper, yodo, nitrates), minus taxes
& Sunkel (1983)· Wagner et.
and salaries, is distributed among
al (2000)
Chilean capitalists.
· García (1989)· Wagner
(1992)
Capitalists
0,01
0,01
Gálvez y Bravo (1992), Censo Población
(1930)
White collars
0,3
0,6
Gálvez y Bravo (1992), Censo Población
(1930)
We apply to all years the proportion of
1930
3
5,6
Gálvez y Bravo (1992), Censo Población
(1930)
Aggregation of many categories of mining · Salazar (1985)· Ortiz
workers
Letelier (2005)
Industry
31,8
24,4
Capitalists
0,4
1
Díaz, et. al (1998)
Number of "industries"
Textile artisans
22,9
7,9
Gálvez y Bravo (1992)
Agreggation of many categories of
artisans and workers.
Carpenter
2,4
3,4
Gálvez y Bravo (1992)
Aggregation of many categories of
artisans and workers.
Metalurgia
0,6
1,4
Gálvez y Bravo (1992)
Building worker
1,2
1,9
Gálvez y Bravo (1992)
Aliments y afines
1
1,6
Gálvez y Bravo (1992)
Skill textile artisans
1
1,9
Gálvez y Bravo (1992)
Aggregation of many categories of
artisans and workers.
Skill Carpenters
0,1
0,7
Gálvez y Bravo (1992)
Aggregation of many categories of
artisans and workers.
Skill Building
workers
0,2
2,6
Gálvez y Bravo (1992)
Aggregation of many categories of
artisans and workers.
2
2
0,6
0,03
4,2
1,5
Blue collars
Others
Transport
Train labourers
White collar
workers
Professional
Drivers
State
Civil servants (eight
categories)
Teachers (six
categories)
Aggregation of many categories of
artisans and workers.
Aggregation of many categories of
artisans and workers.
Aggregation of many categories of
artisans and workers.
PROCEDURE (INCOME)
Foreman in 1869 projected by a
general wage index (Índice general de
remuneraciones, Wagner 1992)
Original data for 1860-1879; 1904,
1916 and 1919. Interpolation
otherwise.
· Carmagnani (1998)· Braun Utilities 1915 and 1918projected by an
index of gross value added by industry
et al (2000)· Díaz et. al.
minus wages.
(1998 y 2007)
· Alvarez (1936)· Anuario
(1871) · Censo Industrial
Direct information for several years and
(1895)· Ortiz Letelier (2005)·
interpolation otherwise.
Errazúriz y Eizaguirre
(1903)· Díaz et. al (2007)
Aggregation of many categories of
artisans and workers.
Gálvez y Bravo (1992), Anuario 1871,
Braun et al (2000), Díaz et. al. (2007)
Aggregation of railroad "professions" and
disagreggation in professionals, white
collar and workers by the proportion in
Anurario 1871. Drivers is the result of the
agregation of many categories.
Gálvez y Bravo (1992), Censo Población
(1930) Anuario 1871
Disagregation of census categories by
wage structure in 1871
Mean income of each category in 1870
· Anuario (1871)· Díaz et. al
(Anuario, 1871) projected by Rojas as
(2007)
in Díaz et. al (2007).
· Anuario (1871) · Errazúriz
y Eizaguirre (1903)· García
(1989)· Wagner (1992)·
Díaz et. al (2007
We estimate the income of three
categories of railroads workers using
the data from the Anuario 1871. These
categories (professionals, white collars
and blue collars) porjected by railroads
wages (Wagner 1992).
0,001
0,2
0,001
0,6
1,9
0,3
0,1
2,4
6,1
1,6
0,2
1,6
Soldiers and
policemen (seven
categories)
1,4
2,9
Personal services
16,7
18,9
Professionals
0,2
1,2
Gálvez y Bravo (1992), Braun et al
(2000), Díaz et. al. (2007)
Aggregation of many categories
· Díaz et. al (2007)
Civil engineer income from Rojas,
quoted by Díaz et. al. (2007)
16,5
17,7
Gálvez y Bravo (1992), Braun et al
(2000), Díaz et. al. (2007)
Aggregation of many categories
Salazar (1985)
Direct information for several years and
interpolation otherwise.
16,5
17,7
Gálvez y Bravo (1992), Braun et al
(2000), Díaz et. al. (2007)
Aggregation of many categories
Braun et al (2000).
Urban servants
and labourers
Sirvientes y peones
urbanos
35
Appendix Table 2. BENCHMARKS ESTIMATES: STRUCTURE OF CATEGORIES
SECTOR
AGRO
1907
1875 and 1885
CAPITALISTS
Landowners
(three
categories)
LABOURERS
peones and
"gañanes"
CAPITALISTS
Capitalists
Emplyees
INDUSTRY
Shoemakers and
textile artisans
bulding workers
CAPITALISTS
EMPLOYEES
Landowners (six
Empleoyees
categories)
Peasants
Capitalists
Mining workers
Capitalists
LABOURERS
Landowners
peons and
(four categories) "gañanes"
Peasants
MINING
1930
Emplyees
LABOURERS
Peons
"Inquilinos"
Capitalists
Emplyees
Mining workers
Mining workers
Capitalists
low skill artisans
Employees
Capitalists (three
(three
categories)
categories)
high skill
artisans
industrial
workers (three
categories)
low skill artisans
high skill
artisans
cook
high skill
artisans
TRANSPORT
DOMESTIC
SERVICE
STATE
COMERCE
OTHERS
Capitalists (two
categories:
railroads and
others)
Employees (two
categories:
railroad and
others)
Workers (two
categories:
railraods and
others)
transport
workers
transport
workers
Servants and
peons
Servants and
peons
Civil servants
(four categories)
Civil servants
(four categories)
Civil servants
state workers
(two categories)
Teachers (three
categories)
Teachers (three
categories)
Teachers (two
categories)
Soldiers and
policemen (four
categories)
Soldiers and
policemen (three
categories)
Soldiers and
policemen (two
categories)
Servants and
peons
Capitalists (five
categories)
Proffesionals
Workers
Employees
Peones