Published online by Cambridge University Press: 03 June 2009
Hernando de Soto's recent book, The Other Path, argues that capitalism has not failed in Peru and Latin America, rather, it has not been tried. Basing his case on the observation that Latin American economies are strangled by arcane policies and regulations, de Soto goes on to bolster his point by providing a fresh and powerful look at the undeniable reality of the large “informal,” and thus unregulated, economic sector in Peru. As with any such generalization, how strongly does its explanatory value remain when measured against specific events, over long periods of time? This article seeks just such a perspective. It examines the impact of such regulations as mining codes and mineral taxation on the efforts of Chilean copper entrepreneurs to compete worldwide in the nineteenth century. De Soto may be correct in his contention that today's highly regulated economies keep Latin Americans from being as productive as their resources justify, but to extend this view into the past ignores earlier productive accomplishments, as well as significant efforts at different times and places to cast off Latin America's mercantile legacy.
The authors are grateful for research support in Chile from the State University of New York, University Awards Committee, and from the National Science Foundation.
1 Soto, Hernando de, El otro sendero: la revolución informal (Bogotá: Editorial Oveja Negra, 1987; English ed., The Other Path: The Invisible Revolution in the Third World) (New York: Harper & Row, 1988).Google Scholar
2 “Informal” refers to the unregistered, unregulated, and illegal shops, services, and production operating alongside the formal and regulated economy. De Soto estimates 50 percent of Peru's economy falls into the informal sector.
3 Charles W. Anderson, Politics and Economic Change in Latin America: The Governing of Restless Nations (Princeton, New Jersey: D. Van Nostrand Company, Inc, 1967). Chapter One, in particular, influenced the authors' thinking on this topic.
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6 Every issue of the Engineering and Mining Journal of the 1880s contained editorial commentary and news on the swelling world copper demand. The EMJ gave copper an especially prominent role from 1882 to 1884 as overall United States production began to total more than any competitor. See Bohan, Merwin L. and Pomeranz, Morton, Investment in Chile: Basic Information for United States Businessmen (Washington, D.C.: U.S. Government Printing Office, 1960), 87, for a typical business observation about this period of increasing copper demand.Google Scholar
7 See Roberts, R. O., “Development and Decline of the Copper and Other Non-Ferrous Metal Industries in South Wales,” Transactions of the Honorable Society of Cymmrodorian (South Wales, 1956);Google Scholar and Barker, T. C. and Harris, J. R., A Merseyside Town in the Industrial Revolution: St. Helens 1750–1900 (London, 1959), 240–446, for a British interpretation of this process.Google Scholar
8 Clearly, twentieth-century copper politics in Chile has generated a considerable interest. An excellent and thorough analysis of the post-World War II era is found in Theodore Moran, H., Multinational Corporations and the Politics of Dependence (Princeton, New Jersey: Princeton University Press, 1974).Google Scholar
9 Chile still holds approximately 40 percent of the world's copper reserves, both as vein and porphyry coppers. Reserves are estimated on the basis of ore that can be mined “economically” (where the cost of production is below a given market price). Early copper mines were based on veins (cracks in other rocks filled with concentrations of the metal); in the late nineteenth-century porphyry deposits (very low concentrations of the metal dispersed throughout a huge area) became the mainstay of the industry. See Parsons, A. B., The Porphyry Coppers (New York: American Institute of Mining and Metallurgical Engineers, 1933);Google ScholarHollister, Victor, Geology of the Porphyry Copper Deposits of the Western Hemisphere (New York, 1978);Google Scholar and Bateman, Alan M., Economic Mineral Deposits (New York: John Wiley and Sons, Inc. 1981), 482.Google Scholar Given unlimited free energy, most metal reserves are limitless, as mineral distribution in very small quantities is vast, especially if ocean bottom nodules are considered. For an overview of the nodule aspect of copper, see Bowen, Robert and Gunatilaka, Ananda, Copper: Its Geology and Economics (New York: John Wiley and Sons, 1977).Google Scholar
10 Brown, Nicol and Turnbull, Charles, A Century of Copper (London: Effingham Wilson, 1906), 20–21.Google Scholar
11 This type of social Darwinist thinking and language is found in the mining journals of all countries. Mining journals were read not just by mining engineers and investors, a conservative lot to this day, but also by the investing public. For most of the last century the leading journal in the United States has been the EMJ and in England, the Mining Journal of London. Both had an informational role like the contemporary Wall Street Journal. The Mining Journal's original title at its founding in 1835 was The Mining Journal, Railway and Commercial Gazette; Forming a Complete Record of the Proceedings of All Public Companies.
12 1848 refers to the date after which the United States had fall access to the lands of the West—lands that had earlier been a part of Mexico.
13 The best summary on the role of idea of progress in Latin America is Burns, E. Bradford, The Poverty of Progress: Latin America in the Nineteenth Century (Berkeley: University of California Press, 1980).Google Scholar The authors have also been influenced by John Stanley's introduction to Sorell, Georges, The Illusions of Progress, John and Charlotte Stanley, trans. (Berkeley: University of California Press, 1969).Google Scholar
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An earlier holder of this view is Cochran, Thomas C., “The Legend of the Robber Barons,” The Pennsylvania Magazine of History and Biography, 74 (July, 1950). Cochran puts forward the position that “comparative studies need to be made of the place of entrepreneurship in varying national cultures. There seems little doubt that such studies will go further toward explaining the economic progress of different regions than will any assessment of potential natural resources. It is these cultural elements, to a very large extent that determine who will become entrepreneurs, a culture with feudal standards of lavish living or the support of elaborate ceremonial organizations of church and state will obviously not have the capital to invest in economic development that will be available in a culture where frugal living, saving, and work are the custom” (pp. 320–1).Google Scholar
Another very recent expression of this view is found in Novak, Michael, “Why Latin America is Poor,” The Atlantic (March, 1982). Novak extends the present into the past when he writes, “Why, then, didn't Latin America become the richer of the two continents of the New World? The answer appears to be in the nature of the Latin American political system, economic system, and moral-cultural system. The last is probably decisive” (p. 67).Google Scholar
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Less prominent but also significant in the downgrading of Chilean entrepreneurial ability is Pederson's, LelandThe Mining Industry of the Norte Chico, Chile (Evanston, Illinois: Northwestern University, 1966).Google Scholar A geographer, Pederson looks at silver, gold, and copper from the Conquest to the present, providing a broad historical perspective. A view similar to Reynolds is expressed: “The vast majority of Chile's mining entrepreneurs were incapable of adopting more than the simplest of the new techniques, such as oil lamps as a replacement for tallow candles” (p. 193).Google Scholar Again there is a blurring of the decades. Still other studies repeat these notions: Sumwald, Joseph and Musgrove, Philip, Natural Resources in Latin American Development (Baltimore: Johns Hopkins University Press, 1970), 167;Google ScholarConde, Robert Cortes, The First Stages of Modernization in Spanish America (New York: Harper & Row, Publishers, 1974), 69–71;Google ScholarMacDonnell, Lawrence, “The Politics of Expropriation, Chilean Style,” Quarterly of the Colorado School of Mines, 68:4 (October, 1973), 195–6; and Moran, Multinational Corporations, 20–22.Google Scholar
These studies assume a lack of effective nineteenth-century entrepreneurship in Chile. They ignore the years prior to the 1880s. The studies are also strongly influenced by the bitter twentieth-century copper analyses that appeared in Santiago as Chileans debated how to respond to the dominance of United States capital in the Chilean copper industry. The classic Chilean study is Encina, Francisco A., Nuestra inferioridad econdmica, sus causas y sus consequencias (Santiago: Imprenta Universitaria, 1912);Google Scholar also important is Varas, Santiago Macciavello, El problema de la industria del cobre en Chile y sus proyecciones econOmicas y sociales (Santiago: Universidad de Chile, 1923). Macciavello Varas is a key source for Reynold's position on the nineteenth century. The weakness of all of these studies, from our point of view, is their lack of discrimination about the decades from the 1840s to the 1880s.Google Scholar
16 Gras, N. S. B., Business and Capitalism (New York: F. S. Crofts and Co., 1939).Google Scholar
17 A useful summary of the older literature is found in Louis Galambos, “American Business History” (pamphlet, The Service Center, American Historical Association, n.d.).
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22 See n. 15 for a review of this literature.
23 Influential in forming this approach has been Charles Tilly, Big Structures.
24 Most historical studies of the copper industry focus on just one country or mining district. There are, however, several studies that take a comparative perspective on copper from a technical point-of-view: Brown, and Tumbull, , A Century;Google ScholarParsons, , The Porphyry Coppers;Google Scholar Bowen and Gunatilaka, Copper; Hollister, , Geology of the Porphyry Copper Deposits; and Otis Herfindal, Copper Costs and Prices: 1870–1957 (Baltimore, Maryland: Johns Hopkins University Press, 1969).Google Scholar One popular description of copper mines is both interesting and useful: Joralemon, Ira B., Romantic Copper: Its Lure and Lores (New York: D. Appleton Century Co., 1934).Google Scholar
Among the many monographs and articles on Welsh and Cornish copper, the work of R. O. Roberts stands out. Especially important is his article cited above in n. 7: “Development and Decline.” For the United States regions, see Gates, William B., Jr., Michigan Copper and Boston Dollars: An Economic History of the Michigan Copper Mining Industry (Cambridge, Massachusetts: Harvard University Press, 1951);CrossRefGoogle ScholarRichter, F. E., “The Copper Industry in the United States, 1845–1925,” Quarterly Journal of Economics, 41 (February and August, 1927), 236–91, and 684–717;CrossRefGoogle ScholarMurdock, Angus, Boom Copper: The Story of the First U.S. Mining Boom (Calumet, Michigan: Brier and Doepel, 1964);Google Scholar and Glasscock, C. B., The War of the Copper Kings (New York: Grosset and Dunlap, 1935).Google Scholar
For Chile, in addition to those works previously cited, see Miller, Benjamin L. and Singewald, Joseph T., The Mineral Deposits of South America (New York; McGraw-Hill Book Company, 1919);Google ScholarMamalakis, Markos, The Growth and Structure of the Chilean Economy: From Independence to Allende (New Haven: Yale University Press, 1976);Google ScholarSayago, C. M., Historia de Copiapó (Copiapó: Imprenta de “El Atacama,” 1874);Google Scholar and Little, James M., The Geology and Metal Deposits of Chile (New York: The Bramwell Company, 1926).Google Scholar
Two studies specifically investigate the causes for the decline of Chilean copper, and the conditions that allowed for the takeover of the Chilean industry by United States capital. See Przeworski, Joanne Fox, The Decline of the Copper Industry in Chile and the Entrance of North American Capital, 1870–1916 (New York: Arno Press, 1980);Google Scholar and Bravo, Juan Alfonso, “United States' Investment in Chile: 1904–1907” (Masters thesis, Department of History, American University, Washington, D.C., 1980).Google Scholar
25 The MJ, from 1838 through 1848 in weekly chronicles, followed the Chilean pressure on the copper mines of Cornwall. The best contemporary review of this crisis is found in United Kingdom, House of Commons [Select Committee on Copper], British Sessional Papers, “Copper Ore: Copies of all Memorials and Petitions Presented to the Board of Trade, and to the Chancellor of the Exchequer, Respecting the Duty on Copper Ore, and Copies of the Answers Sent to the Applications Since January, 1849” (March 15, 1847).
26 Copper production statistics before 1880 are not always reliable, but they do provide a general production range useful for comparison. The mining regions listed in Table 1 constitute, each in its turn, the leading pre-1900 world producers.
27 Egleston, T., “The Port Shirley Copper Works,” School of Mines Quarterly, 7:4 (July, 1886), 1–25;Google Scholar and “Commerce and Progress of Chile”, Merchants Magazine and Commercial Review, 13 (1845), 325–6.Google Scholar
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30 Mackenna, Benjamín Vicuña, El libro del cobre y del carbon de piedra en Chile (Santiago: Imprenta Cervantes, 1886). The views of Vicuña Mackenna are further supported by correspondence from industry leaders, which arrived too late for inclusion in this classic book—correspondence stored in the Archivo Nacional de Chile, Fondo Benjamín Vicuña MacKenna. In preparation for El Libro de Cobre, he wrote to all of the leaders in copper asking for their recollections and recommendations for the industry. Most helpful were letters from Juan Mackay, Guillermo C. Biggs, and Enrique Sewell.Google Scholar
31 Two sets of Chilean Congressional debates chronicled the position of landed agricultural interests in the face of calls for mining code reform. In both the Chamber of Deputies and the Senate, see the Boletín de las sesiones ordinarios de la Camara de Diputados and the same for the Senado for 1872 to 1874; and again for 1882 through 1888.
32 The Congressional debates of the 1870s and 1880s are a topic in and of themselves. Mine code reform implied restricting the rights of surface land owners. For a characteristic exchange, see Bolatín de las sesiones ordinarios del Senado, 24 July 1872, 102–6.Google Scholar
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35 Chouteau, Eujenio, Informe sobre la provincia de Coquimbo (Santiago de Chile: Imprenta Nacional, 1887). His introduction is an expression of belief in inevitable progress, cast in terms of a strong copper industry needing a new impulse of modernization.Google Scholar
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50 Dumping of surplus production was standard procedure for North American industry during the era. See Crapol, Edward D. and Schonberger, Howard, “The Shift to Global Expansion, 1865–1900,” in From Colony to Empire: Essays in the History of American Foreign Relations, Williams, William Appleman, ed. (New York, 1972), 186.Google Scholar
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52 Ibid.
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85 There is some confusion in existing writing on various minerals and their regulations in nineteenth-century Chile. For example, in his study of the Chilean economy Markos Mamalakis touches on nineteenth-century copper at several points, making the familiar argument about the incapacity of the copper sector to modernize, but he makes an additional important reference to government policy: “If true laissez-faire ever came close to existence in Chile, it was in nitrate and copper mining” (p. 40). While he is correct in pointing to policy as a factor to be examined, the two minerals, nitrate and copper, were produced under wholly different legal bases prior to 1888. Copper was highly regulated, nitrate not at all.
86 “Código de Mineria,” Bolaín, 6:7 (31 01 1889), 194.Google Scholar
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90 Varas, Santiago Macciavello, “Breve estudio,” La Riqueza Minera de Chile, 3:28 (01, 1925), 509.Google Scholar
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