Before us lies the whole South American continent —a new frontier, even richer in natural resources than was our own great West of a century ago and in approximately the same state of undevelopment. Furthermore, there is already a large population, waiting and anxious to co-operate in the progressive things which we know so well how to do. There lies a new and mighty field for the exercise of all our venturing minds and talents which are now suffering frustration. There is the opportunity to create a world planned with the benefit of all our accumulated knowledge, and not thrown together haphazardly as was our own. Building from the beginning we could avoid all our own mistakes, false steps, tremendous waste, abuses of land and labor. Whole eras of transportation development could be eliminated—railways that were quickly outmoded, narrow highways that followed old wagon trails, streetcars that impeded the flow of modern high-speed traffic. Instead, from the beginning, there would be broad straight highways of easy grades; bridges planned to accommodate the traffic of years to come; cities located with an eye to human health and to proximity to material sources and not where rivers happened to meet; water power, agriculture, mining, manufacturing, commerce—all developed simultaneously in proper relation to each other and with due regard to conservation and the promotion of human betterment.
Everywhere in this country you hear of the need for economic, military, and ideological consolidation with the other nations of the Western Hemisphere to form a bulwark against the spread of totalitarianism; yet few people realize how absolutely necessary such a consummation is, especially if the British war effort should fail, nor how desirable it would be under any circumstances. Its possibilities for the good of all concerned, apart from the problems of military defense, are beyond imagining.
It is clear to thoughtful people that, alone in a world economy of the totalitarian order, our system of trade and free enterprise could not endure. To function under such conditions, two things would be necessary—a market within our own borders for everything we can produce, and an unlimited supply of all raw materials. The United States, though stronger in these two essentials than any other nation, is nevertheless wanting in both. We are not and never can be self-sufficient. But the western world potentially is. Consolidated into an economic unit, operating under a regulated system, it could not only stand alone but attain a prosperity beyond anything known previously to man, and achieve a standard of living for all its inhabitants that perhaps would by example eventually bring about the overthrow of economies based upon the subservience of one race to another.
The accomplishment of this would require time and money, and from some, sacrifice; but it is feasible. American enterprise, ambition, imagination, and skill are equal to it. It presents a challenge worthy of them and offers as a reward the salvation of a noble social philosophy and vast material benefits as well.
Since we have long enjoyed economic co-operation with Canada and will undoubtedly continue to do so, there is no need to dwell upon her in these considerations. In the matter of raw materials, her resources may be regarded as our own, for there is little difficulty involved in obtaining them.
According to United States government authorities, the critical raw materials not produced here or in Canada, or which are produced in insufficient quantities, are antimony, chromium, manganese, sisal fiber, mercury, quartz crystal, quinine, opium, rubber, tin, tungsten, mica asbestos, cork, iodine, kapok, platinum, and vanadium. Many of these are already produced and all of them are capable of production in almost unlimited quantities in various parts of Latin America. The most important of these are antimony and tin, necessary for the babbitt metal in the bearings of every wheel that turns; tungsten, manganese, and vanadium, essential to the manufacture of certain types of steel; mica for electrical insulation; rubber, mercury, and chromium. The supply of mica from Madagascar is completely shut off now; chromium no longer comes to us from Turkey; and Spain, which produces two-thirds of the world’s mercury, will undoubtedly be closed to our commerce shortly.
Many products such as rubber and cinchona bark, from which quinine is derived, can be cultivated in Latin America; but they have been largely neglected there. They have been introduced into faraway tropical countries and developed on a scale which has made those countries the principal source of supply for commercial purposes. Already Bolivia supplies one-fourth of the world’s tin, and considerable antimony and tungsten. Colombia yields one-half of the world’s platinum, and Peru, ninety-five per cent of the world’s vanadium. Yet the surface has hardly been scratched, the mineral and vegetable wealth of Latin America hardly touched. Vast areas of the southern continent have not even been explored. Economists agree that Central and South America comprise potentially the richest area on earth for the production of raw materials. These resources, added to our own and to those of Canada, would make the Western Hemisphere wholly independent in the matter of raw materials, and one of the two requirements for self-sufficiency would be fulfilled.
The other essential—that of a home market for all our products—appears to present an insurmountable obstacle to a plan for economic co-operation; but it is answerable in the fact that Central and South America, plus the Caribbean islands, constitute a potential market of 120,000,000 people, a great majority of whom, according to our standards, lack even the barest necessities of life. The question then becomes one of increasing the purchasing power of that vast market, of raising the living standards of those millions of people— a difficult question and a tremendous problem, to be sure. It suggests an undertaking of Homeric proportions. It constitutes the basic factor in the suggestions to be made in this article.
Never before in the history of inter-American relations has the time for achieving hemispheric solidarity been so propitious as now. The southern countries, deprived to a great extent of their European markets, and loath, as we would be, to scrap their trade policies for a system of barter, are facing serious financial difficulties. Even when they are willing to trade on a barter basis, as some of them have already tried to do, the lack of ships for transportation of goods to and from the warring countries has caused delays and loss through spoilage, and the results have been disappointing. Many German and Italian agents, who have long enjoyed large slices of Latin American business, are now actually supplying their customers with products from the United States because they are unable to get delivery from their own countries.
As a result of the Good Neighbor policy, the old antagonisms in Latin America toward the United States have been considerably diminished. The old conception of Uncle Sam as the “Colossus of the North” is disappearing fast. The people have seen totalitarian imperialism operating in other parts of the world and they don’t like it. Beside the wholesale crimes against small nations on the part of Hitler, Mussolini, and the Japanese, the long-resented abuses by the United States in the past now seem no more than minor indiscretions. Furthermore, Latin Americans are becoming convinced that Uncle Sam has had a change of heart, that his old swashbuckling methods are things of a past era, never to be revived.
The time is ripe for action now. Soon it may be too late. This is our opportunity to save ourselves, our continent, and perhaps the world. Yet there are grave indications that we may delay until economic pressure and propaganda win Latin America for the Nazis and Fascists.
What are the reasons for our hesitancy and inaction? Why haven’t our customary drive and ingenuity been brought into play? Because of fear on the part of North American business interests; because of parallel and competitive production in some Latin American countries; because certain North American producers, principally wheat-growers and stock-raisers, know that we cannot replace Europe as a market for South American exports without damage to our own industries. The solution of that problem brings us back to our primary consideration: we must develop the vast native market of Latin America; we must increase the purchasing power of those 120,000,000 people, most of whom now have so little of the world’s goods.
But is there such a vast potential market? For manufactured products, yes, that can be granted; but for foodstuffs and farm products—the commodities in which we compete with the Latin Americans? Anyone who has traveled in Latin America away from the beaten paths can answer that with an emphatic affirmative. There is a potential market great enough not only to absorb all such things produced in Latin America itself, but the North American surplus as well.
Argentina is the principal country which exports the products in which our interests clash—beef, hides, and wheat; she is also the country, and for precisely that reason, which is most reluctant to join in the steps toward inter-American co-operation for defense which have already been taken. Let us look at the rest of Latin America with those competitive products in mind.
Outside of Argentina and Uruguay, wheat bread is a luxury which the average Latin American cannot regularly afford and seldom sees. His starch diet comes mainly from hard corn, which we call “horse corn,” and which itself is often scarce and expensive; the pounded and dried root of the yucca, which has the texture, taste, and nutritive value of sawdust; and in some places, parched grains of barley. Comparatively few peons ever have wheat bread; all of them love it. I have seen grown men on a day of fiesta buy, with the equivalent of five cents saved for the occasion from their meager wages, two American saltines and munch them in great joy.
Beef is also a rare item in the diet of the peon class in a great many of the countries. In the mountain regions and in the wooded and dry regions, which comprise a great portion of Central and South America and the Caribbean islands, there is practically no beef consumed by the average native. In other sections, lack of refrigeration and transportation make it hard to obtain, even when cattle are raised nearby. A bit of hard, sun-dried beef on special occasions, a scrawny chicken, or pork from a lean hog raised on slops in the door-yard, are all in the way of meat your average peon ever enjoys. Many of them never have those, dried fish being their chief source of protein.
Go into the interior of the Latin American countries, or even walk about in the cities, and note how many people you see who are barefooted. Notice how many wear cotton sandals with soles of woven fiber or even of rubber from old automobile tires. Yet Argentina has no market for her hides, now that trade with Europe is curtailed.
Cotton is another product of Latin America which North American industry fears. Most of it is shipped abroad, and some of it is returned, woven into cloth and sold at prices which few can afford to pay. If every peon in Latin America who is clad in the tattered and unbelievably patched remnants of an old cement sack were able to buy enough cloth to keep himself decently clothed, there would be no problem of a market for cotton.
If all this is true, why has so little effort been made by the southern producers to develop this market themselves? There are many reasons, and we shall try to deal briefly with some of them, Mainly it is indifference, and in some cases, lack of vision, or a deliberate desire to keep the living standard of the peon class low. The European market was easy, was ready to hand; loading onto foreign ships was much simpler and cheaper than building roads into the interior and buying refrigerated trucks. We must remember that Latin America has been exploited (not developed as it should have been) largely by foreigners whose interest was in their own lands, not in the countries where they operated. Their object was to take out, not to put anything in. The low wage standards (and consequently the low purchasing power) of the workers was precisely why they were operating there, why they could afford to compete in world markets with the added costs of shipping. It was to their interest to keep the native down. After a century of foreign exploitation of the wealth of Latin America, the living standards and the purchasing power of the average native remain what they were in colonial times.
Another reason is the great prevalence in the southern countries of high revenue tariffs—not protective tariffs, which have some economic justification, but tariffs for revenue only, which have no justification at all and are obviously the poorest means for obtaining state funds. By placing an excessive price-burden on materials not produced in the country, this practice serves to stifle the development of industry within and thus to keep the living standard down by depriving the people of the ability to buy. This is largely the cause of the almost complete lack of trade between neighboring Latin American countries and their consequently meager industrial development. For instance, one country may have quantities of limestone and sandstone, but no coal, while its neighbor may have plenty of coal but none of the other two minerals. Because of revenue tariffs the cement industry cannot be developed in either country. The mineral deposits lie idle until some foreigner arrives to mine them and ship them away. Similarly, one country may have great quantities of bauxite but no water power for cheap electricity, while a neighbor may have water power in abundance but no bauxite. Nothing happens until the Aluminum Company of America comes in and ships the bauxite off to the United States because it can be dug up more cheaply by peon labor than we can do it here, where, incidentally, we have plenty of bauxite of our own. And in the countries where the ore was mined the price of aluminum utensils is beyond the means of the average housewife.
In the matter of water power, it is interesting to note that the South American continent, with its towering mountain ranges and heavy rainfall, is potentially the greatest producer of hydro-electricity per square mile in the world. In Brazil alone there are 378 great waterfalls and innumerable smaller ones. Yet there has been practically no development, and the price of steam and Diesel electricity in the urban centers is enormous. Broadly speaking, there is no electricity in rural communities.
Venezuela produces a great part of the world’s supply of crude petroleum, and all of it is shipped abroad for refining. The price of gasoline in Venezuela is about fifty cents a gallon. Venezuela is also a cattle country, yet butter costs about a dollar a pound. Steers are exported on the hoof, yet beef is an expensive luxury in most parts of the country. Hides are exported, yet shoes are very dear and most of the people wear alpargatas of woven cotton. Cotton is produced in abundance, but printed cloth and drill, shipped in from England, are sold at very high prices.
Of course, all of these conditions are slowly being changed; out we cannot afford to wait now for natural processes. We must act quickly on a plan of such scope as to solve all of these problems, or most of them, simultaneously. Let us consider some broad suggestions for a plan of this nature in which, at least in the early stages, regulation will be an essential.
The first step would be the establishment of an Inter-American Committee of representatives of all the American nations, with voting strength perhaps in proportion to respective populations, and with broad powers to function in many fields. It would be somewhat like the Tennessee Valley Authority on a far vaster scale, reaching into social, industrial, and economic problems throughout the whole hemisphere. The so-called “cartel” which is already in the formative stage is a step in the right direction, but it does not go far enough, nor is it broad enough in scope. It merely nibbles at the edges, when what is needed is something that will reach to the very heart. The Committee must have ample funds at its disposal, its members must be outstanding and completely disinterested men, and there must be an advisory corps of experts in every field.
The first job would fall to the Committee’s propaganda bureau, whose task it would be to persuade the various governments to adopt the plan—not an easy accomplishment in view of the many powers which would have to be surrendered through legislative action; but it could be done, if a conception of the plan as a whole were presented and the immediate benefits for all were emphasized and made clear.
The second task of the propaganda bureau would be to encourage better understanding among the American nations themselves by correcting the many misconceptions that each of them has about the others. An intense campaign toward this end should be launched; and if the word “propaganda” falls rudely upon our sensitive ears, we can call the process by its other and perfectly respectable United States name, “advertising.”
Many of these misconceptions are unfortunately our own and the field for much of this educational enterprise would be the United States. The wholly fallacious but widely-held belief that the Latins are an inferior people must be stamped out. A knowledge of their history and accomplishments in art and science must be developed, and the ridiculous representations of the Latin American character and background in Hollywood movies must be strongly condemned. North Americans must be made to realize that one arrogant act by a tourist or a labor foreman can nullify the good effect of a whole fleet of relief ships for earthquake victims.
The attitudes of North American business men toward Latin America could stand considerable revision. Our manufacturers have long considered the southern countries as little more than a dumping ground for factory seconds, unsaleable surpluses, old models, and items which have failed to attract home buyers. For example, in the best shops of Latin American cities I have often found articles of clothing bearing well known United States trademarks and selling at very high prices, stamped in inconspicuous places with the word “second.” The word meant nothing to the Spanish-speaking clerks or to the shop owners, who, with innocent good faith, offered the articles as of first quality. Guarantees and obligations for servicing mechanical products, for the most part faithfully fulfilled in this country, are largely ignored in Latin America. Agents are not commonly provided with facilities for carrying out such obligations, though they are often stipulated in the sales contracts.
Business men, operating in the southern countries, must be disabused of the idea that political corruption is universal and that bribery is a normal element of the native system. That is simply not true. If you know North American cities at all and know Latin American cities as well, you will realize that there is more political corruption here than there. An investigation of the findings of the F. B. I. on the gangster-racketeer-politico set-ups in this country would be shocking to the average Latin American official. Beyond all doubt there is a far greater proportion of cities in the United States where privilege can be bought with money or influence than there is in any country south of us. It would be foolish to claim that corruption does not exist at all in the Latin countries. It does exist, certainly; but what foreign operators never seem to realize is that much of it is directly traceable to their own practices. They themselves have been the corrupting agents. For years they have gone into Latin American countries with the conviction that bribery was the indicated procedure, with their fists full of money which they dangled temptingly before ill-paid and until then honest officials. They have schemed with unscrupulous politicians, backed revolutionary movements that favored their interests, provided funds for building up and maintaining corrupt political machines. Seldom have they acted unselfishly to eliminate the practices which they pretend to deplore.
Another prevalent misconception is that Latin American labor is lazy and unintelligent. The foreign boss in Latin America almost invariably judges native workers by the output of laborers at home, failing to consider climatic conditions, diet and health standards, unfamiliarity with new methods and tools, and innumerable other factors. As a matter of fact, long centuries of laboring in their own environment have taught the natives the best methods; foreign workers cannot even equal their output for any long period of time, And if foreigners were to live under the same conditions, work the same hours at the same wages, most of them would die within a short time. Furthermore, it has been proved in the oil fields of Venezuela that the native worker is imaginative and quick to learn, and when given a chance, can rapidly master the operation of the most complicated machinery. Anyone who has ever seen an Andean peon carrying a load of a hundred pounds on his back for fourteen hours with nothing to eat but a handful of corn meal can tell you something about the laziness of native workers in the “land of manana,” so dear to Hollywood and the writers of popular fiction.
As an immediate and emergency measure, the first task of the Committee itself would be to buy up all of the agricultural and meat surpluses of the southern countries and distribute them, not in the United States, but among the Latin American countries which are lacking in them, at such prices as can be paid in deferred installments. Some of those surpluses might have to be stored for future distribution, and there would undoubtedly be a loss involved. However, the immediate result would be a favorable public reaction, the awakening of interest in the plan as a whole, and an inclination on the part of the people to participate in further measures.
The Committee should be empowered, as one of its most essential functions, to regulate all tariffs between the American countries. These should be fixed (or even eliminated where desirable) in accordance with the recommendations of expert economists, after a complete study of the productive possibilities of the entire continent, of the needs of individual countries, and of their relations to each other geographically and productively. The delegation of this authority to the Committee would undoubtedly meet with great resistance in the various governments and the winning of it would be the propaganda bureau’s most difficult job.
The principal and all-important task of the Committee would be to foster new enterprises of every sort in Latin America through the offer of loans for long terms at low rates of interest. Loans would also be made for development of transportation and communication facilities—construction of roads and bridges, improvement of harbors and docks, procurement of ships for the water routes.
Each country should have, as well as representation on the Inter-American Committee, a home board composed of experts in various industrial fields. To this board every new enterprise, whether on the part of native or of foreign interests, would make application; and the application, after thorough study, would be submitted with a report and recommendations to a licensing bureau of the Committee, empowered to grant the loans and issue permits. The new enterprise would be required to operate under the observation of agents of this bureau and in accordance with specifications as to wage standards and labor conditions. Native labor would be employed as far as possible. Production quantities would be allowed with the internal market as a primary consideration and an export percentage fixed in accordance with needs of the other member nations. The old plan of exploitation entirely for foreign markets would thus pass out of existence, Export would be permitted only in the amounts needed by other countries of the hemisphere and would be apportioned among competing units. If, in studying an application, the bureau found that a proposed enterprise could not operate profitably while living up to the prescribed conditions, it would be declared economically unnecessary and the loan disallowed. Since the money risk would be the Committee’s, the imposition of these conditions would be entirely within its natural rights.
Thus, with the increased purchasing power of natives employed at better wages, new businesses of every kind would simultaneously come into being in Latin America. The lag would be absorbed by the capital surplus provided by the Committee loans. The tendency would be toward the development of many new small industrial units, employing native workers and producing for local consumption. Large foreign interests would not be tempted because of the export restrictions.
However, North American manufacturers would find a vast new market for their products because of the new purchasing power of the Latin American workers. North American technicians, skilled laborers, miners, scientists, and specialists of every kind would find employment. During the construction period particularly, until native industries came into production, there would be a tremendous market for such things as cement, steel, building material of all kinds, and machinery; and that market would continue for a long time, for we are dealing with the development of a whole continent.
Where is all this money to come from? The greater part of it would have to come from the United States. The other countries would be expected to contribute also and the money could perhaps be raised through bonds sold to citizens in all the countries; but even then the North American people would have to subscribe to the greatest share. However, our investors have for many years provided the funds for a large part of Latin American development and for every sort of wild scheme. Millions upon millions of dollars, lent after little or no investigation by private banks to businesses over which there could be no sort of supervision, and to shaky and evanescent governments, have poured southward in a steady stream from this country. All too frequently the projects have failed to materialize—the political picture in the country has changed, or else the money was never used for the intended governmental work but vanished mysteriously with the ousted politicos; and the North American investors were left holding worthless bonds. Why then not advance money which would be lent only after careful investigation, expended under strict supervision, and providing a fixed return, a return which would be assured because of the foreclosure power of the Committee in the case of default of interest payments? Operating for only a few years under a similar system of investigation and supervised expenditure of borrowed money, the F. H. A. is now functioning admirably and is showing a profit balance of $31,000,000. The system suggested here is no more than the use of the same principles on a broad scale.
And apart from all this, there is the plain fact that no price would be too high when the objective is the salvation of our social and economic structure. Here, along the lines of this or some other plan, is the possibility of creating a New Western World, in which mankind can more nearly reap the full heritage of the earth’s riches, utilizing the experience of centuries of struggle.