Chimneys in the Desert: Industrialization in Argentina During the Export Boom Years, 1870-1930 - Hardcover

Rocchi, Fernando

Hardcover

ISBN 10: 0804750122 ISBN 13: 9780804750127

Publisher: Stanford University Press, 2005

Synopsis

This book offers new topics and new perspectives on the economic history of Argentina before the 1930 Depression. It focuses on the evolution of early industrialization in a country primarily associated with cattle-ranching and agriculture, and single-mindedly characterized as a case of a successful export economy. Taking an original approach, the book cross-examines traditional economic issues such as production and finances, and new cultural patterns, such as consumption, the role of women, paternalism, and ideology.

The first years of Argentina’s industrialization, from the 1870s to the 1920s, coincided with a time of great innovation, a brisk turn from tradition, and quick modernization. This book shows that industry not only helped Argentina’s economy along, but spearheaded its modernization. It challenges the long-lasting “canonical version” that industry was a victim of a capital market and a state extremely hostile to manufacturing. Access to financing for industrial endeavors was much easier than previously thought, while the state supported industry through tariffs.

About this title

About the Author

Fernando Rocchi is Associate Professor and Chair of the Department of History at the University of Torcuato Di Tella, Argentina.

From the Back Cover

"Rocchi's exemplary study plays the invaluable role of stimulating a new, more vigorous and more empirically-grounded debate on an old but immensely important subject."—The Americas
“A must for anyone interested in Argentine history and economic development”—CHOICE

From the Inside Flap

This book offers new topics and new perspectives on the economic history of Argentina before the 1930 Depression. It focuses on the evolution of early industrialization in a country primarily associated with cattle-ranching and agriculture, and single-mindedly characterized as a case of a successful export economy. Taking an original approach, the book cross-examines traditional economic issues such as production and finances, and new cultural patterns, such as consumption, the role of women, paternalism, and ideology.
The first years of Argentina’s industrialization, from the 1870s to the 1920s, coincided with a time of great innovation, a brisk turn from tradition, and quick modernization. This book shows that industry not only helped Argentina’s economy along, but spearheaded its modernization. It challenges the long-lasting “canonical version” that industry was a victim of a capital market and a state extremely hostile to manufacturing. Access to financing for industrial endeavors was much easier than previously thought, while the state supported industry through tariffs.

Excerpt. © Reprinted by permission. All rights reserved.

CHIMNEYS IN THE DESERT

Industrialization in Argentina During the Export Boom Years, 1870-1930By FERNANDO ROCCHI

STANFORD UNIVERSITY PRESS

Copyright © 2006 Board of Trustees of the Leland Stanford Junior University
All right reserved.
ISBN: 978-0-8047-5012-7

Contents

List of Figures.........................................................................................................ixList of Tables..........................................................................................................xAcknowledgments.........................................................................................................xiiiAbbreviations...........................................................................................................xviiIntroduction: Industrialization in an Agrarian Economy..................................................................11. The First Factories: The Dawn of Argentine Industry, 1870s-1890s.....................................................162. The Market as an Object of Desire: The Rise of Domestic Industrial Consumption.......................................493. The Victory of Big Business: Industrial Growth in the First Decades of the Twentieth Century.........................864. Only One Argentina: The Creation of a National Market for Manufactured Goods.........................................1255. Tension and Harmony in the Industrial Family: Entrepreneurs and Workers in Argentina's Factories.....................1526. Money and Factories: The Myths and Realities of Industrial Financing.................................................1777. The Empire of Pragmatism: Politics and Industry in the Period 1880 -1930.............................................204A Midway Industrialization: Concluding Remarks..........................................................................237Appendices..............................................................................................................249Notes...................................................................................................................259Bibliography............................................................................................................343Index...................................................................................................................385

Chapter One

The First Factories: The Dawn of Argentine Industry, 1870s-1890s

The First Industrial Setting

By the 1890s, the landscape of Buenos Aires had experienced noticeable transformations, and its skyline had been transformed by the presence of a new type of building: the factory. Adrin Patroni, a labor union activist, wrote a report in 1897 depicting the grimy life of workers in an industry that "without dispute, only twenty years ago ... was unknown in here." As a result, the city of "Buenos Aires has changed its appearance; once, it was only distinguished by the great number of belfries, but very soon, very tall chimneys dominating the landscape could be seen wherever one looked." The newspaper La Nacin, mostly unsympathetic to the bustling industrial activity, had made a similar comment three years before:

Those who used to take a stroll along the outskirts of the capital city must have noticed what we assert; at every corner one meets the erect chimneys of masonry, tall and sharp, culminated in a tuft of smoke, the unequivocal sign of a national industry.

Another publication, also noted for its lack of enthusiasm for manufacturing-The Review of the River Plate, a local magazine for the British community in Buenos Aires-went further in complaining about the inconveniences that the new buildings caused:

The fact of a large extension of manufactured goods in our midst is not to be gainsaid. One has to ascend to some point in the city of Buenos Aires from which he can command an extensive view ... to become convinced of the fact that this has at least begun to be a manufacturing city. The number of new factory chimneys is astonishing, and an unwelcome evidence, if further evidence were desired, is to be found in the extension of the soot plague, especially in the southern districts, and in the center when the south wind blows.

If factories were evident across the landscape, their products were not as obvious in the stores. In the 1890s, many of the items manufactured in Argentine factories copied foreign models and were sold as if they had been made abroad. As the same journal noted,

For the truth of it is that every manufactured article in this city is sold, not for what it is, but for what it imitates; and the art of imitation is carried to a very high pitch of perfection indeed.

As a consequence, domestic goods turned out to be quite invisible to unquestioning eyes.

Industry either existed or did not exist, according to what the observer perceived. This simultaneous visibility and invisibility has led to different conclusions in scholarly research. For social and urban historians, industry was of paramount importance; for all other academics, especially those interested in economics, it was insignificant. This chapter will untangle this confusion by showing that these conflicting conclusions arose from the complexities and paradoxes permeating early Argentine industrialization.

Argentine factories were virtually nonexistent until the 1870s. In 1876, the scientist Ricardo Napp explained the reasons for such an absence: "No industry can prosper in a country with only one inhabitant for each 2 square kilometers, where the labor force is very expensive, and where there is no capital and technological knowledge." Between the year when Napp described the manufacturing prospects of the new nation and 1900-around the time when the first observers mentioned in this chapter spoke-industrial output had grown seven-fold and was especially perceptible in the city of Buenos Aires (see Table 1.1 and Figure 1.1).

The rise of factories in the last quarter of the nineteenth century resulted from a see-saw movement comprising two opposing forces both supportive of industry: depressions and demand growth. The deeper incorporation of Argentina into the world market in the mid-nineteenth century changed the national history. Cycles of world capitalism began to set off booms and depressions in the local economy. Argentina experienced an economic boom from the 1850s to the 1870s thanks to the export of wool. This affluence spurred the arrival of immigrants to a country with a scarce population and where the promotion of European immigration became an obsession. Everybody in power shared the motto created by Juan Bautista Alberdi, the man who wrote the outline of the National Constitution of 1853, in effect until 1949-"Gobernar es poblar" (to govern is to populate). By 1869, according to the data from the first national census, foreigners already composed 11 percent of the population. But the number reached 50 percent in the city of Buenos Aires and 17 percent in the region most benefited by the export growth.

A recession in 1866 that hit the wool international market, however, halted this long-lasting period of prosperity. But this recession was mild compared to the one the country experienced, as did most of the world, in 1873. The tenacity of the 1873 crisis, which lasted until 1877, halted the arrival of foreign capital, drove government incomes downward, and jeopardized the process of state formation. But it also promoted an opportunity for manufacturing. After years of confusion, during which the administration discussed whether to default or to pay the external debt with substantial changes in economic policies, President Nicols Avellaneda chose the second alternative. In 1876, the national government decided to abandon the gold standard begun in 1867 and to impose higher duties on a variety of imported goods, including some previously untaxed, in order to reduce the trade deficit, swell the state treasury, and pay the international financial debt. The first policy led to devaluation and raised the price of imports through the exchange rate. The second policy went in the same direction.

As a result, some (albeit few) industrial firms took advantage of import substitution, and their installations started to resemble real factories. Imports fell more than a third between 1875 and 1876, and the level of the first year was not recovered until 1881. In the late 1870s, the amount of industrial inputs in the entire group of imports doubled compared to the pre-crisis level-a clear demonstration of a rise in local manufacturing. The parallel maintenance of the rate of capital goods in the total number of imports, however, reveals the rather unmechanized nature of this first wave of import substitution (see Table 1.2). The first fruits of this nascent industrial sector appeared in an 1881 exposition that, according to bystander Emile Daireaux, succeeded because "domestic industrial progress was already important [enough] to justify a continental exhibition of manufactured goods." Although growing, industry still was handicraft in nature. This was apparent in the kind of artisanal artifacts displayed, as well as in the mixing of sculptors and painters with industrialists.

Import substitution could show only minimal results in a country with around two million people, as was the case of Argentina in the 1870s. Sustained industrial growth could take place only with a rise in demand, a phenomenon that began to occur in the 1880s, after the depression was over. Between 1875 and 1890, the Argentine population increased from 2,161,000 to 3,613,000, mostly under the influx of almost one million immigrants, mainly from Northern Italy. In addition, the GDP per capita grew 60 percent, thanks to a remarkable economic performance. By then, the country had become a major destination not only of European immigrants but also of British overseas investments. By 1875, Argentina attracted 12 percent of this country's capital in Latin America and was rated fourth after Peru, Brazil, and Mexico in the British capital preferences. By 1890, the percentage reached 35 percent, and Argentina was at the forefront of British investment interest, with numbers that doubled the sums going to Brazil and Mexico.

With immigration, Argentina could profit from the benefits of human capital provided by recent arrivals, an issue especially important for manufacturing-many factories, indeed, could not have opened had the skills of the immigrant population not been available. But the new settlers also provided a demand market as well as a source for workforce. By 1890, consumers, labor, capital, and technology were no longer as scarce as in 1876, when Napp had analyzed the reasons for the lack of industry. Nevertheless, the results were still modest: this period's estimates show an industrial annual growth of 5.2 percent, well behind that of the overall economy, which increased at an annual rate of 8.4 percent (see Table 1.3).

Numbers at the turn of the twentieth century indicate the magnitude of industrial growth. Census data offer a general overview-capital, the use of steam power, and the size of the workforce all increased (see Tables 1.4 and 1.5)-but their conclusions are tainted by the already mentioned problems of aggregation and lack of potential comparison. Disagreggate data, showing the workforce evolution, reveal a much more impressive increase in the largest firms, which turned out to be the leaders in the industrial activity (see Table 1.6).

The influence of large companies sparked a momentous change in the late 1880s, when a few firms located in the city of Buenos Aires started to produce on the basis of an incipient standardization by higher consumption. The booming economy changed dramatically in 1890, when Argentina suffered an economic depression that exceeded the 1873-1877 one. A monetary experiment had started in 1883 with the idea to go back to the gold standard that had ended in 1876, but it was short-lived. At the beginning of 1885 a crisis in the balance of payments forced the Argentine government to end the brief experience with gold standard. That year the price of gold went up from one to 1.36 paper pesos (the local currency-there were two currencies, the gold-backed one [peso oro] and the nonconvertible paper pesos). Economic growth regained strength in 1886 and reached momentum in 1887 and 1888. Difficulties began in the southern summer of 1888-1889, and by March of 1889 the price of gold had increased to $1.55 paper pesos. The government closed the Stock Exchange to end what was called a speculative movement, but when it reopened in September the price of gold had risen to $2.20 paper pesos. In 1890, the crisis moved to the political arena, and by July the incumbent president Miguel Jurez Celman was forced to resign in favor of his vice president, Carlos Pellegrini. Pellegrini had to face a banking crisis in March of 1891 and a further devaluation of the local currency. The gold quoted at $4 paper pesos in the worst months of that year. The new president launched a program of fiscal reforms designed to tackle the economic turmoil by reducing the trade deficit and increasing state revenues through the raising of import tariffs (see Table 1.7). In an atmosphere in which both foreign investments and confidence in the country's future were scarce, the collapse of domestic currency and the rise in tariffs combined to create a favorable milieu for local industry. Not surprisingly, the Unin Industrial Argentina (UIA) maintained an optimistic outlook amidst the depression:

It is an ill wind that blows no good. The crisis which sweeps the nation is enormous.... [The] nation is in a situation that no one can envy. At the same time the wind blows ideally for national industry, and it should be seen as providing the opportunity to elevate industry by a supreme effort to the heights that we desire. In the 1890s, industrial growth surpassed that of GDP (see Table 1.3). Although the already established firms faced an initial drop in their demand due to recession, import substitution soon increased their output. During the last years of the golden 1880s, machinery had been introduced in the production of beer, cigarettes, matches, soap, candles, paper, and alpargatas (a cheap slipper with a rope sole and canvas body). The recessive but protective atmosphere of the 1890s solidified this trend. Firms already producing large quantities in the late 1880s increased their output after an initial fall in demand; others switched from small- to large-scale production; and new companies began operating.

By the time the nineteenth century ended, industry was a significant force in Argentina's economy. Manufacturing, however, was still very new and, not surprisingly given its recent evolution, was characterized more by its omissions than achievements. Because the Argentine case resembled the beginning of a smooth and slow process rather than a big spurt or a take-off, the nascent manufactories faced major limitations. This became apparent by 1897, when the country faced a new depression. As explained at the end of this chapter, the industrial growth that spanned the last three decades of the century was largely responsible for the crisis.

The Features of the First Factories

The early growth in manufacturing activities was very modest and limited to a restricted number of goods of simple manufacture. Textile manufacturing, the alleged mainstay of an early industrial economy, was almost nonexistent in the 1880s. Prior to 1888 only one firm-the Fbrica Nacional de Paos (National Clothing Factory)-was dedicated to producing woolen textile items. Its story is almost mythical since it symbolizes, for some scholars, the failed attempt to fully industrialize and the conspiratorial atmosphere faced by industrialists in the export boom period. In this particular case, at least, the perception is partially accurate. As I said before, in 1866 an international crisis affected wool, the main staple export of Argentina, and the very same year landowners created an association, the Sociedad Rural Argentina (Argentine Rural Society), to defend their interests. As a response, local wool producers found an alternative to diminishing external purchases in the potential domestic demand created by textiles. The Fbrica Nacional opened in 1873 with a labor force of sixty workers, most of them women and children. The depression that began this year reinforced the idea of promoted industrialization. The end of the crisis, however, killed wool producers' enthusiasm for this project. In later years, the factory struggled to survive, and in 1879 it went to bankruptcy. This failed attempt to substitute imports was just one part of a larger story that involved more successful developments of manufacturing activities, such as those resulting in shoes, tobacco products, furniture, carriages, metal goods, and food processing.

Labor-intensive activities, made-to-order production, and lack of mechanization characterized most of the first mills until the late 1880s. Some of them employed hundreds of people, resembling those of other countries at the dawn of industrialization, but the Argentine pattern of early industrial growth differed from those that experienced proto-industrialization (a step before the rise of modern factories in which workers manufactured in the countryside in agreement with a city merchant who sold the output). Buenos Aires, where most of the industry grew, was a marginal city during most of the colonial times. The area in which it was settled had been inhabited by nomadic indigenous people who were killed or incorporated into the white world. Colonized by few people for two centuries after its founding in 1580, Buenos Aires grew mainly as a commercial port in the late eighteenth century. Thus, it did not possess an artisan group that would have been transformed and ultimately destroyed by the arrival of mills. Nor did the number of people involved in the activity of the mills match the numbers of the more populated areas in Latin America. The first Argentine factories did initially employ handicraft methods, but this was not the result of a previous tradition in the country; it was based on the human capital provided by immigrants, some of them already artisans in their native countries. Argentine industry, then, started almost from scratch, and its factories rose like chimneys in a desert.

The use of handicraft labor on a large scale pervaded early industry in Argentina. This scenario differed from standardization, but it was suitable for a small and unstable market. Shoe production provides a good example. According to one industrialist source, shoe making employed ten thousand people in Buenos Aires in 1872, many of them recent arrivals to the city and only sporadically productive. Rising popular income during the booming economic years of the early 1870s prompted an increased domestic demand for shoes; however, imports soon filled the market. The number of workers dropped to twenty-eight hundred because

That enormous mass of shoes in a country without enough consumers forced the owners to offer their merchandise to the merciless hammer of the auctioneer who sold it at a very low price. This meant a financial loss for some establishments and bankruptcy for most of them. Due to the lack of orders, they had to quit the shoe industry to work as car drivers, maids, tramway stagecoach drivers, and other professions.

Relief for the shoemakers came with the previously mentioned tariffs of 1876 that followed the 1873 depression and the subsequent fall in imports. The number of workers recovered and jumped to thirteen thousand by the end of the decade. Fostered by the rise in domestic demand in the 1880s, shoe manufacturers increased the number of laborers but did not mechanize (as late as 1887, and with a single exception, the industry lacked steam-powered machines, even in establishments employing as many as three or four hundred people). As a chronicler later remembered, by then "subdivision of labor and better use of raw material lacked importance"; most of the work was done under the putting-out system, a type of production in which factory owners provided (or "put out") inputs to workers who finished them at home and returned the final output to the industrialist. Soles were usually given to the official, who cut them however he wanted since he obtained materials that supplemented his meager salary. Moreover, some of these factories were using noncapitalist methods to obtain their workforces, such as "contracting" abandoned children from the Defensora de Menores (Defense of Minors Office). By the 1880s, local shoe production was so primitive that it could not compete with higher-quality imported articles and was limited to the production of the coarsest goods sold on the market. But by doing so, it was able to find a niche in the satisfaction of local demand and, thanks to its flexibility, bear with success the ups and downs of the Argentine economy.

(Continues...)

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Edition details

• Publisher: Stanford University Press
• Publication date: 2005
• Language: English
• ISBN 10: 0804750122
• ISBN 13: 9780804750127
• Binding: Hardcover
• Edition number: 1
• Number of pages: 416