Tracing the reversal of fortune in the Americas: Bolivian GDP per capita since the mid-nineteenth century

Abstract

In the centuries before the Spanish conquest, the Bolivian space was among the most highly urbanized and complex societies in the Americas. In contrast, in the early twenty-first century, Bolivia is one of the poorest economies on the continent. According to Acemoglu et al. (Q J Econ 117(4):1231–1294, 2002), this disparity between precolonial opulence and current poverty would make Bolivia a perfect example of “reversal of fortune” (RF). This hypothesis, however, has been criticized for oversimplifying long-term development processes by “compressing” history (Austin in J Int Dev 20:996–1027, 2008). In the case of Bolivia, a comprehensive description and explanation of the RF process would require a global approach to the entire postcolonial era, which has been prevented so far by the lack of quantitative information for the period before 1950. This paper aims to fill that gap by providing new income per capita estimates for Bolivia in 1890–1950 and a point guesstimate for the mid-nineteenth century. Our figures indicate that divergence has not been a persistent feature of Bolivian economic history. Instead, it was concentrated in the nineteenth century and the second half of the twentieth century, and it was actually during the latter that the country joined the ranks of the poorest economies in Latin America. By contrast, during the first half of the twentieth century, the country converged with both the industrialized and the richest Latin American economies. The Bolivian postcolonial era cannot therefore be described as one of sustained divergence. Instead, the Bolivian RF was largely the combined result of post-independence stagnation and the catastrophic crises of the late twentieth century.

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Notes

  1. 1.

    The economic importance of Potosi was higher at the beginning of the colonial period (1570–1630) than thereafter (Bakewell 1984; Tandeter 1993). Recent works by Arroyo-Abad et al. (2012) and Allen et al. (2011) show the relative decline of Potosi relative to other economies in the Americas and the world since the second half of the seventeenth century.

  2. 2.

    In Why Nations Fail, Acemoglu and Robinson (2012: 104) also provide a different, less optimistic, view of the Argentinean development process than in their previous works. In this book, they consider the country’s economic dynamism before the 1920s as a typical example of unsustainable growth under extractive institutions.

  3. 3.

    See, for instance, Mercado et al. (2005), Humérez and Dorado (2006), Grebe et al. (2012), Machicado et al. (2012) and Pereira et al. (2012).

  4. 4.

    Some quantitative approaches to the evolution of some sectors or certain specific periods can be found, for instance, in Morales and Pacheco (1999), Mendieta and Martín (2009); Bértola (2011), Peres Cajías (2014), or Carreras-Marín et al. (2013).

  5. 5.

    We have excluded from the 1900 figure the population from the former Bolivian coastal areas (Litoral), which were still included in the census despite having being lost in the Pacific War.

  6. 6.

    The 1900 national census distributed this population as follows: 27 % in the Department of Tarija, 21 % in the Department of Santa Cruz, 16 % in the “Territorio de Colonias”, 16 % in the Department of La Paz and less than 10 % each in the Departments of Beni, Cochabamba and Chuquisaca. The distribution of this population in 1950 was similar, and is consistent with the history of Bolivian State expansion (Barragán and Peres-Cajías 2007), since the “infidel population” would be located mainly in the tropical lowlands and the Chaco, i.e. mostly in the northern and eastern areas of the country.

  7. 7.

    Neither migration nor the territorial loss associated with the Pacific War might explain a decrease of 200,000 people in the Bolivian population over the second half of the nineteenth century. The population of the areas that were lost to Chile in the early 1880s may be estimated at ca. 74,000; see Yáñez et al. (2012: 21). Likewise, net Bolivian migration might have involved even lower numbers. For instance, according to each country’s official census, by 1895, the number of Bolivian-born citizens living in Chile and Argentina, which were probably the main destinations of Bolivian emigration, was 8869 and 7361, respectively, whereas the number of foreigners living in Bolivia in 1900 was 7425. Therefore, the decrease in the Bolivian population between 1846 and 1900 that Dalence’s estimate would involve might only be explained by a catastrophic decline of the “infidel” tribal population (by illness or displacement to neighboring countries). While this possibility cannot be completely ruled out, given the absence of information, here we have conservatively preferred to accept the 1950 Census suggestion and assume a stagnant evolution of this demographic group. Taking Dalence’s figure, however, would not substantially alter the main feature of our GDP and per capita GDP series. The main change would obviously affect the 1846 estimates, which would be 18 and 19 % lower, respectively, than in our series. This, however, would still be consistent with the sustained process of economic divergence of the Bolivian economy during the second half of the nineteenth century that is described below. Later on, the difference would become much lower, amounting to just 3 % in 1890.

  8. 8.

    In order to estimate this series, we have increased the 1950 Census figure by 0.7 %, which is the estimated census omission for that year according to ECLAC; see Yáñez et al. (2012: 11). For 1900, the Census estimates an omission of 5 %, which is also incorporated in the calculation. Following Yáñez et al. (2012), we also account in the series for the demographic effects of the Pacific War (1879) and the Chaco War (1932–1935).

  9. 9.

    Maddison (2003) and Yáñez et al. (2012) provide alternative population series for Bolivia, which start, in the first case, in 1900, and, in the second, in 1826. Differences between those series and our own are not very large (always lower than 11 %), with the exception of the last few years of the nineteenth century and the early twentieth century in the case of Yáñez et al. (2012). The reason for that difference is twofold. First, Yáñez et al. (2012) assume a population figure for 1900 of 1,561,000, much lower than the total census estimate. This is apparently the result of the exclusion by those authors of the non-censed population, non-subjected communities and census omissions. Second, for 1882, they accept the figure reported in Table 2, which we consider a clear underestimate on the basis of the preceding and later figures. The result is that our estimate of the Bolivian population for 1890 is 20 % larger than the figures provided by these authors.

  10. 10.

    The League of Nations and UN yearbooks provide some data on agrarian production for Bolivia, but they are difficult to accept, showing huge changes between consecutive years and being inconsistent with the information reported in the Agrarian National Census of 1950.

  11. 11.

    Bolivian foreign trade statistics might underestimate rubber production, since a lot of Bolivian rubber was moved to Brazil through the porous border line between both countries. Unfortunately, the importance of this smuggling activity is impossible to quantify.

  12. 12.

    According to Dalence (1851), Bolivian food imports in 1846 were rather limited, consisting of just 100,000 cargas of potatoes and chuño, “a lot of” ají and “many” arrobas of rice. A low level of Bolivian import capacity in the mid-nineteenth century would be consistent with the small size of the mining output and exports at the time. This might have been partially overcome, however, by the depreciation of the Argentinean peso relative to Bolivian silver and the resulting increase in Bolivian terms of trade with Argentina (Irigoin 2009). Nevertheless, the impact of this process on Bolivian food import capacity would have been rather low, since legal imports from Argentina accounted for only 7 % of total Bolivian imports at the time, and only 12 % of these were compounded by food—most commonly cows (Dalence 1851: 268–274). In addition, the value of the Bolivian currency in relation with the Argentinean peso was not stable over time and, given the persistent monetary heterogeneity in Argentina, probably not uniform across regions (see Irigoin 2009: 563–568). Finally, if our assumption on the low level of Bolivian food imports is too low, this problem would involve an overestimation of the agrarian production in the mid-nineteenth century, but this would be compensated for by the underestimation of the relative value of silver exports and production.

  13. 13.

    This is the nutrient availability level used by Arroyo-Abad et al. (2012: 153) in their bare-bones basket for Latin America during the colonial era. Although this amount is rather low in comparative terms, we have preferred to use it here in order to account for the possibility that Dalence underestimated the level of food imports (see above, footnote 12). We have excluded the “non-subjected” population from the calculation of the nutritional needs of the Bolivian society because we estimate the subsistence production of this population separately from the rest (see below).

  14. 14.

    We assume that Dalence’s underestimation mainly affected agricultural produce, rather than livestock. This is based on the fact that Dalence’s estimation of meat consumption per person was very similar to that provided by the 1950 Agrarian Census, which was around 23 kilograms per year (CEPAL 1958: 268). If Dalence’s figures for the whole agrarian sector were accepted, this would represent almost 20 % of the total nutritional intake of the population of the country. This percentage is too high to be likely; for example, meat has been estimated as representing 12 % of the total nutritional ingest in colonial times in Mexico, Peru, Bolivia and Colombia by Arroyo-Abad et al. (2012: 153).

  15. 15.

    This was the percentage in 1950 (CEPAL 1958). Dalence (1851) does not present data for this sector for 1846.

  16. 16.

    Rubber exports were negligible until 1890, when they started growing at a very quick pace. In the 25 years before 1915, they amounted, on average, to around 20 % of total Bolivian exports. After 1915, due to Asian competition, and with the exception of the Second World War years, rubber exports became marginal. Export data come from Gamarra Téllez (2007) for 1890–1926 and from the official trade statistics afterward. The relative price of rubber in 1950 has been taken from Christopher Blattman’s database: http://chrisblattman.com.

  17. 17.

    Under the oversimplifying assumption that these communities lived at subsistence level and all their economic activity was food production, we assume their per capita agrarian (and total) GDP to be 300 Geary-Khamis dollars of 1990. This is the subsistence minimum assumed by Milanovic et al. (2010: 262).

  18. 18.

    On this assumption, see Gómez (1978) and Mitre (1986, 1993).

  19. 19.

    For this section, we rely on the complete mining production data estimated by Haber and Menaldo, which were kindly provided to us by the authors.

  20. 20.

    We assume that the relative importance of the production of the last four minerals was negligible before 1908.

  21. 21.

    Registered industry: 33.5 %; non-registered industry: 29.3 %; urban artisan production: 30.4 %; and rural artisan production: 6.8 %.

  22. 22.

    For each year, we have taken the average of the imports of that year and the previous one, in order to account for the time lag between the purchase of the raw materials and the commercialization of the industrial product.

  23. 23.

    A similar procedure is followed in Alvarez-Nogal and Prados de la Escosura (2007) for the early modern Spanish economy.

  24. 24.

    We do not consider gas production and distribution because this sector was negligible in Bolivia before 1950.

  25. 25.

    We assume that power capacity was the same in 1890 and 1891.

  26. 26.

    The validity of the methodology described in the text has been tested by comparing the Chilean and Peruvian available CPI for the early twentieth century (taken from Braun et al. 2000; and Portocarrero et al. 1992) with an alternative CPI for those countries, estimated as is indicated in the text. Both series are very similar in the two cases.

  27. 27.

    Due to its marginal importance during the period, air and river transport services have been ignored.

  28. 28.

    According to CEPAL (1958), by 1951 railway revenues were 57 % of road transport revenues. There is, however, a high margin of error in the latter, due to the low quality of the available information.

  29. 29.

    We have increased the available railway mileage data (www.docutren.com) with an estimate of the tramway mileage in operation, calculated from information in República de Bolivia (1911: 72–73), Alarcón (1925) and http://www.tramz.com/bo/bos.html.

  30. 30.

    For 1933–37, it is impossible to obtain data on gasoline imports from the trade statistics, and we have estimated it from information on total fuel imports, taken from CEPAL (1958: 54).

  31. 31.

    Imports and exports are available in real terms since 1925 in CEPAL (1958: 54). Before 1925, we used our estimated CPI to deflate imports and used our volume index of mining output (see above) as indicator of the evolution of exports in real terms.

  32. 32.

    Apparently (although they do not indicate it explicitly), Morales and Pacheco (1999) assumed that Bolivian GDP and exports grew at the same pace between 1900 and 1929. This may partially explain the deviation between their series and our own figures on 1900, since we estimate the ratio exports/GDP to have grown substantially between 1900 and 1913.

  33. 33.

    Due to the lack of information on Morales and Pacheco’s estimation methodology, it is not possible to know the reasons for that difference, which might be associated to the high weight of certain variables (such as public revenues) in these authors’ calculations. On the relatively low impact of the Great Depression in Bolivia, see Bértola (2011: 262).

  34. 34.

    Before the 1850s, the Bolivian coast was a marginal space from an economic point of view. For example, population in that region was equivalent to 0.3 % of the total Bolivian population in 1846. However, this space became increasingly important between the late 1850s and its conquest by Chile in the Pacific War, thanks to guano, saltpetre and silver export booms.

  35. 35.

    On these calculations, see the previous section and the Appendix.

  36. 36.

    Imports, exports and rural and urban population for 1846 have also been taken from Dalence (1851).

  37. 37.

    See Henriques (2012) for a first approach to price movements of specific products in Bolivia in the early nineteenth century.

  38. 38.

    On the other hand, in an international comparison of Bolivia with higher-growing economies, this problem would be partially compensated for by the bias in the opposite direction which is associated with the use (as is customary in this literature) of the 1990 PPP ratios that underlie the Maddison Project database.

  39. 39.

    As a consequence of a steady reduction in mortality rates and the stagnation of birth rates—which were, according to CELADE’s estimates, around 45 per 1,000—the annual average growth rate of the Bolivian population was around 2 % from the early 1950s to the late 1960s, and increased up to 2.3 % per year from the late 1960s to the early 1990s. It was not until the first years of the twentieth-first century that the Bolivian population started growing at annual rates below 2 %.

  40. 40.

    In addition, inequality in the agrarian sector would also have increased over time, due to the expansion of big properties at the expense of land under indigenous communities’ control; see Gotkowitz (2007) and Platt (1982).

  41. 41.

    However, the comparison of Bolivia with Peru and Mexico is affected by the large error margins of the GDP figures for the three countries before the Interwar period. More specifically, the earliest Peruvian estimates (557 Geary-Khamis dollars of 1990 in 1896 and twice this level 15 years later) seem rather dubious.

  42. 42.

    By contrast, it would instead be in line with the description of the Argentinean economy as constrained (like Bolivia) by the presence of extractive institutions (Acemoglu and Robinson 2012) or as affected by a negative “institutional reversal” in the early twentieth century (Araoz 2011; Prados de la Escosura and Sanz-Villarroya 2009).

  43. 43.

    The main exception to that common pattern was Venezuela, due to its specific growth trajectory, which can be explained by the evolution of the Venezuelan oil industry. In that case, Bolivian divergence was sustained until 1950 but did not continue thereafter.

  44. 44.

    The fanega equivalence raises more doubts than the rest, because a value of 105 libras would be relatively low (although still possible) in the Bolivian context and, unfortunately, we have been unable to locate the “legal” Bolivian fanega of the mid-nineteenth century, which is the specific fanega used by Dalence. However, the equivalence that we use is the only one that is consistent with the global amounts of production reported by Dalence. The only alternative to using a higher weight equivalence for the fanega would be to use a lower one for the carga and the arroba, but we are already applying the lowest possible weights for those two units.

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Acknowledgments

This research has benefited from financial support from the Spanish Ministry of Economy through the project ECO2012-39169-C03-03; from the University of Barcelona through the APIF (2008–2012) fellowship program; and from the Catalonian Research and Universities Grant Agency through the BE-DGR-2011 fellowship program. We thank Rossana Barragán, Luis Bértola, Stephen Broadberry, Stephen Haber, Alejandra Irigoin, Pablo Mendieta, Leandro Prados de la Escosura, Rodrigo Rivero, Mar Rubio, Sabrina Siniscalchi and César Yáñez for their helpful comments and for sharing unpublished data with us. We also thank the comments by two anonymous referees. The usual disclaimer applies.

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Correspondence to Alfonso Herranz-Loncán.

Appendices

Appendix 1: estimation of the nutrient content of the Bolivian agrarian production in 1846

As is indicated in the text, our estimation of Bolivian agrarian production in 1846 is based on the following assumptions: (1) nutrient availability was 1,940 calories per male adult-equivalent per day; (2) animal products were correctly assessed by Dalence (1851); and (3) in the case of agricultural products, Dalence’s estimates correctly reflect the composition of output, but not its level.

Table 5 indicates the nutrient content of different products which are the basis of our calculation, and the percentage contribution of each product to the nutrition of the Bolivian population that results from Dalence’s data, after our correction.

Table 5 Food production and nutrient content of the Bolivian agrarian output in 1846

In order to do the calculations, we have transformed the traditional weight units that were used by Dalence (fanegas, cargas, arrobas and libras) in kilograms. While Dalence does not offer a table with the equivalences, he presents the total weight in pounds (libras) of an aggregate of different products that were expressed in several units. The following equivalences would be consistent with that information: 1 libra, 0.46 kgr; 1 arroba, 25 libras; 1 carga, 100 libras; 1 fanega, 105 libras. These values, in addition, would be the only ones jointly consistent with the equivalences of these units in the Bolivian provinces, as reported in: http://sizes.com/units. Footnote 44

On the other hand, we assume that a nuclear family of a father, a mother and two children consumed the same quantity as three male adults (Allen et al. 2011). Considering this relationship and the population structure of 1900, which is offered by the 1900 National Census, the total population in 1846 has been converted into total adult population. We have also accounted for the food imports reported by Dalence (1851: 236): 100,000 cargas of potatoes and chuño, “a lot of” ají and many arrobas of rice, assuming that ají and rice imports had the same weight as potatoes and chuño imports. We have finally added up the nutritional contributions made by milk and eggs (taken from Allen et al. 2011).

Appendix 2

Table 6 Bolivian pc GDP ($ Geary-Khamis of 1990), 1846–2010

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Herranz-Loncán, A., Peres-Cajías, J.A. Tracing the reversal of fortune in the Americas: Bolivian GDP per capita since the mid-nineteenth century. Cliometrica 10, 99–128 (2016). https://doi.org/10.1007/s11698-015-0125-2

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Keywords

  • Bolivia
  • GDP
  • Economic growth
  • Reversal of fortune

JEL Classification

  • N1
  • O4