Evaluation of Railway Development in Argentine Economy - Example

Running Head: Evaluation of Railway Development in Argentine Economy, 1880-1930 Name: Institution: Course Title: Tutor: Date of Submission: Introduction Over time and especially considering the period 1880 to 1930, the economic history of Argentina is among the most popular with its attraction of various studies conducted by a number of scholars on it. The Argentine economic history is as famous owing to its unique condition as a state that was able to attain advanced development in the early periods of 20th century and later on experienced a reversal. The Argentine early success and later drawbacks inspired a wealth of literature and analyses on the causes of this decline with the aim of unraveling the causes of the success and economic turmoil (Bulmer-Thomas, 1994). Looking back into a clear analysis of the whole history of Argentina puts the British either as progressive partners of Argentina that focused in the country’s development or as the creators of insuperable drawbacks that did much damage through constraining the economic life and public policy of the Argentine people (Corradi, 1985). The British engaged in unequal and biased commercial and financial relations that derailed the Argentine economy alongside the constant military interventions that Argentina faced during its revolutionary period and the immediate post-independence time. After the development and construction of steamships and railways in Latin America, most of the continent’s states had the ability to gear successfully towards global economy that came with many benefits. This development however concentrated much in Argentina and major towns of Brazil since the governments of these countries already had a strong collaboration and joint efforts in British expansion. This was indeed the most important reason for little peremptory interventions in the interests of Britain. As a result, the economies of such countries expanded more tremendously with the extensions of trade areas and farming activities resulting from extended foreign owned railways. In the case of Argentina, the aggregate, construction, and development of railway linesis the major reason for an appreciable portion of the improved economy through improved manufacturing companies that resulted in high productivity growth. Railways construction also laid a strong foundation for the developments enjoyed by the Argentine economy between 1880 and 1930. Although railroads were not the only determinant of overall gains in Argentine economic growth and productivity during this period, they were no doubt among the most important factors that contributed to the high productivity and improved economy at large. For the purpose of this paper, we shall analyze the importance of railway construction and development in Argentine economy (Mitchell, 1964). Railways Construction and its Contribution to Argentine Economy During the liberal age between 1880 and 1930, the Argentine economy assimilated new technologies in its most dynamic sectors. Considering the most profound foreign investments, railway building and participating in trade activities with the industrialized nations made this period tofulfill the dreams of the Argentine people. The introduction of railroads increased transport and hence expanding agricultural exports while at the same time improving old industries that collapsed in the past (Summerhill, 2000). Important industries such as wine in Mendoza and sugar that existed in Tucumán province experienced significant success after their expansion. Surprisingly, the country experienced improved manufacturing though it did not attain industrialization during this period of 1880 and 1930. Up to date, most Argentine people believe that the lack of industrialization in the country before 1930 is the major reason to blame for the country’s long-term economic problems that followed thereafter. The Argentines’ argument is that although the country did grow economically during this period, the country remained highly underdeveloped with its Eighty’s generation failing to attain economy that is self-sustained (Summerhill, 2000). They argue that only such economy is attainable with industrialization, which they did not attain during this period. Most critics came up with a number of reasons that emphasize the discrepancies and pathologies relating to the growth of exports in Argentina during this period. Most of the critics argue that the control of capital and commercial assets by rich people and elite who were majorly landowners and less interested in investments is a major reason for derailed industrialization. Some also blame foreign investment that concentrated more on export and food processing industries coupled with expansive government indifference toward industrial development and finally thelack of political influence that rose furiously among manufacturersand competition from the import of foreign consumer goods as the major reasons why Argentina did not attain industrialization during this period. However, although these claims are all accurate, Argentinian growth was as evident as attested by the yearly growth rate of 9.3 percent (Summerhill, 2000). Another most important economic development that came with the construction and development of railroads was the appearance of more sophisticated national textile and flour milling industries that improved lives of the Argentine people. These two industries developed mainly because railways transported coal that became the main source of power that enabled the industries to be less independent on hydraulic source of power (Summerhill, 2000). The coal transported by railways provided more efficient and effective source of power that saw production in various manufacturing industries rise by almost double their initial rate of production. As such, exports in the country increased and thus the demand for more work forces. This again resulted in creation of more job opportunities hence improved lifestyles. In the second half of the century, expansion of railroads significantly reduced the costs of shipment in Argentina. This played a crucial role in integrating markets, making it possible for the establishment of regional specialization, increased national income, and finally increased productivity than what Argentina experienced before (Mitchell, 1964). Alongside improved commercial farming, railway transport enhanced stock raising for local and foreign markets through improved preparation of pasture. It also facilitated inspired producers of housewares and furniture while motivating entrepreneurs towards industrial activities. Compared to their main competitor in transport, the British railroads in Argentina were relatively cheap and efficient as compared to the already existing water transport system. This greatly saw the contribution of railways transport to the growth of TPF in the Argentine economy. However, the general TPF improvements in the entire Latin America do not only constitute the railways but also TPF gains that relate to the shift from the use of old forms of transport such as water and other overland forms to a more effective and efficient railways transport system (Boyd, J. et al, 1972). This indicates a crucial role played by the railway construction and development as attested by average growth of between 11% and 13% of GDP per capita growth in the decades before 1913 in Argentina. Such a spectacular growth from a single sector alone is indeed quite impressing. Railway construction in Argentina participated and contributed to the prevailing trends of its general economy and profited the country greatly because of its changing structure. The introduction of railway transportation saw a remarkable fall in prices, especially for foodstuffs that remained highly characterized by the European economy from that prevailed between 1878 and 1891.The most important characteristic of this era is the economic mileage attained that mostly was peaceful and marked by low interest rates (Coatsworth, 1979). This season of characterized by low interest rates in particular enhanced British investment in technological innovations that included steel-hulled shipping. At the same time, the increased growth rate of the British population saw high per capita food consumption that provided a market for Argentine food products that were relatively cheap. On realizing the economic importance of constructing railroads, the Argentine state responded to the international market by developing economic policies that promote the construction of national railways. This attracted foreign investors to provide grants and funding support for railways construction and development across the state. In fact,in the year 1881, foreign entrepreneurs were in possession of land and stations offered by the Argentine state government, which later on insured them against any form of governmental expropriation. Besides the insurance offered by the government, the investors also had a guarantee of 7% profits. This guarantee of profits later on proved to be a technical mistake as, it came to be a leading budgetary item that resulted in scandalous abuses in the late 1880s (Fogel, 1962). people who surrounded the liberal politicians as close allies were quite corrupt and often constructed duplicate railroad lines that had poor planning with the sole intent of monopolizing the collection of the guaranteed profits from the government. Among the 29 registered railroads by 1892, only few were genuine while the rest being barely solvent. Comparison of Importance of Railway Construction between the US and Argentina It is a common knowledge that railway construction and development was quite important in Argentina than the United States in the period 1880-1930.This is because the US had successful and efficient alternative sources of transport such as canals and steamboats that plied the country’s vast water systems (Cárdenas et al, 1982). All these sources of transport remained at the management of the state and therefore had little noticeable managerial challenges compared to the Argentine foreign-owned railways. Furthermore, by the period between 1880 and 1930, the US had already put in place effective railroads with its first national railroad opening in 1860 (Cootner, 1963). Drawbacks of Railway Construction in Argentina Being foreign-owned, the argentine railways remained fully under the control of foreign colonialists who valued the railway system of transport as the most primordial weapon destined to maintain the Argentine people in the most primitive and rural condition that presented the Argentine people with no escape. According to Scalabrini Ortiz (1958: 17-18), this was the main reason why the foreign colonialists constructed the railway roads in Argentina. Corruption also rocked the entire railway system. Most fraudulent government officials engaged in activities that involved the construction of parallel railway lines to enable them collect the 7% profits guaranteed by the government (Lewis, 1983). Since these parallel railway lines did not meet standard planning and construction, it resulted in poor services. With the introduction of railway construction and government’s idea of providing land reserves for foreign investors, immigrants failed to benefit from diffusion of land ownership, especially in Pampas where cattlemen pushed them to public lands far from railway lines and markets in general. Furthermore, after the establishment of railway companies through the oligarchy initiative, British railroad companies attained subsidies from government borrowing and soon thereafter faced a season of poor performance when estancieros influenced their government allies to prevent the British railway managers from raising their prices. Poor profits then inhibited the companies from investing on more rail cars. This resulted to a great loss during the harvesting season that saw the estancieros’ wheat rot in rail lines due to insufficient rail cars (Cortés Conde, 2000). Finally, railway developments in Argentina found itself in a difficult situation when the British managers were unable to control their employees. In the early 1900, Argentine employees in British railways came up with a vanguard movement for Argentine labor (Jenks, 1962). This complicated things for British managers who saw their railways construction in Argentina come to an end in 1910 after the Argentine first democratically elected government took power from the conservative regime that devoted total support for railway companies. Conclusion Construction and development of railway lines in the Latin America, and especially Argentina, is one of the mostimportant economic breakthroughs of the 19th century. This is because railway technology ensured an increased productivity, improved transport systems, and a rise in per capita income across the entire region. This paper provided estimates of economic contributions from the introduction of railway technology in Argentina between 1880 and 1930. The result of this research indicated that several economic developments that indeed resulted from railway development and construction in Argentina, were so immense. Ranging from improving agricultural sector to manufacturing, railway development and construction saw increased job opportunities and hence improved way of living. Most significantly, Argentina saw most of its local manufacturing companies improve and expand their productivity since agricultural perishables such as wheat would reach market in time, improved cattle keeping through effective transportation of pasture, and increased job opportunities. As a result of all these economic developments, Argentina was able to expand its exports and hence increased GDP as reflected in increased levels of per capita income within the period. However, Argentine railways construction faced some difficulties such as employee non-cooperation, corruption within the government and insufficient profits for expansion. Reference Boyd, J and Walton, G 1972, The Social Savings from Nineteenth-Century Rail Passenger Services, Explorations in Economic History, 9(3), pp. 233-254. Bulmer-Thomas, V 1994, The Economic History of Latin America Since Independence, Cambridge University Press. Coatsworth, J 1979, Indispensable Railroads in a Backward Economy: The Case of Mexico. Journal of Economic History, 39(4), pp. 939-960. Cárdenas, E., Ocampo, J and Thorp, R 1982, An Economic History of Twentieth Century Latin America, New York, Palgrave, Vol. 1, p. 265-298. Cortés Conde, R 2000, The Vicissitudes of an Exporting Economy, Argentina. Corradi, J 1985, The Fitful Republic: Economy, Society, and Politics in Argentina, Colo, Westview Press. 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