As long as this region doesn’t take inequality seriously, we will never find capitalist redemption.

Today it seems unthinkable, but in the middle of the 18th century, the colonies in the south of the American continent were more prosperous than the English-speaking ones in the north, as Michel Reid well reminds us in The Forgotten Continent. How is it then explained that, with industrialization and the expansion of capitalism, the latter have become the main power in the world, while the former, in the most unequal region and one of the most unstable? Why, rather, was the United States so much more prepared for capitalism than its neighbors to the south? (You may also be interested in: In Defense of Polarization).

There are, broadly speaking, three types of theories in this regard. The first are culturalists and they attribute this to the influence that British Protestantism and Iberian Catholicism had in their respective colonies. Max Weber was the first to point out how much Protestantism trains in the art of capitalism. This also explains why capitalism developed more vigorously in the Netherlands, Germany, and the United Kingdom than on the Iberian Peninsula. While for Protestantism the perpetual accumulation of capital is a way of exalting God, for Catholicism it is reason enough to go to the confessional. Moreover, while Catholicism, according to Saint Thomas, celebrates social hierarchies, Protestantism privileges the direct relationship between individuals and God. Protestantism, in the name of God, is as individualistic as capitalism in the name of the majesty of money.

The second are of a sociological nature and highlight the original homogeneity of North American citizenship—composed almost exclusively of middle-class whites—, unlike Latin Americans, whose social contracts were agreed between castizos, mestizos, mulattoes, and other castes, giving rise to to a deeply hierarchical social order.

The third point to geography. Economists Stanley Engerman and Kenneth Sokoloff say that the geographical conditions of the South favored economies of scale—sugar, cotton, coffee, and mining—, giving rise to large plantations and farms, further exacerbating social hierarchy. Meanwhile, conditions to the north favored non-scale economies—such as cattle ranching or grain farming—which led to family farms and a more egalitarian society.

why Capitalism Did Not Thrive in The South

One of the reasons why capitalism did not thrive in the South as it did in the North was the high degree of hierarchization.
Most likely, none of these theses by themselves is sufficient to explain the considerable difference between the two poles of the continent, but rather that this is due precisely to the fact that all three had an impact. Whatever it is, all three suggest that one of the reasons why capitalism did not prosper in the South as it did in the North was the high degree of hierarchization. In such unequal societies it is practically impossible to build robust markets, as well as catapult innovation through the old method of competition. This, in turn, distorts the heirs of Thatcher and Reagan in the region who affirm that poverty should appear among the State’s priorities, but not inequality. As long as this region doesn’t take inequality seriously, we may never find capitalist redemption or stop oscillating between golden and lost decades.

But taking into account the present circumstances —in Colombia, the GINI in rural land is 0.89— the invisible hand of the market by itself is not in a position to punch inequality, but only to further concentrate resources. So not only production, but also redistribution—which is not the same as expropriating or nationalizing—should be targeted by the visible hand of the State. Redistribution is a precondition not for socialism, but for capitalism. For those who social justice is not a sufficient argument to declare war on inequality, here is one of a utilitarian nature.

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