The upcoming 250th anniversary of the United States’ Declaration of Independence on July 4th, 1776, is a moment of reflection. While this date marks the beginning of a system based on limited power and personal freedoms in the U.S., it holds a contrasting significance in Latin America. In this region, 1776 signified a pivotal shift in the opposite direction.
In Philadelphia, the thirteen colonies embarked on a journey towards independence, formalizing a deeply rooted tradition of self-governance. Conversely, in Latin America, the Spanish Crown intensified its hold by creating the Viceroyalty of the Río de la Plata and implementing stringent Bourbon Reforms. This simultaneous occurrence highlights a fundamentally different trajectory.
For the United States, 1776 represented the climax of a grassroots movement centered around institutional consensus. In stark contrast, Latin America saw the fortification of a centralizing, authoritarian model. This was aimed at modernizing imperial governance through rigid economic and bureaucratic control. When independence movements eventually reached Latin America decades later, they were a reaction to the external collapse triggered by the Napoleonic invasion of the Iberian Peninsula.
In 1950, Octavio Paz, a prominent Mexican writer, published El laberinto de la soledad, which, interpreted through this historical context, provides valuable insights into why liberalism emerged robustly in the United States yet remained only a minor note in Latin America. Paz’s analysis transcends economic factors, delving into the foundational values and cultural evolution of the region. While the U.S. crafted its liberal framework from a legacy of historical continuity and shared civic ideals, Latin American nations often regarded liberalism as an imported concept—an abstract notion superimposed on longstanding traditional hierarchies and communal values. The central theme of El laberinto de la soledad posits that Latin America’s historical context favored a centralized authority and communal structures over individualistic liberalism.
Support for this divergence comes from the insights of Douglass North, a Nobel laureate in economics in 1993. North suggested that sustainable economic success is influenced not only by resources or technology, but also by the evolution of institutional frameworks—both the formal laws and the informal constraints that shape human interactions. From this perspective, the United States thrived because it established a resilient system that guaranteed stable property rights, reduced transaction costs, and imposed genuine limits on leaders. In contrast, Latin America inherited an intricate institutional landscape that favored rent-seeking behavior over constructive investment, ensnaring the region in the very labyrinth that Paz described.
Deirdre McCloskey, an economic historian, supports this institutional divergence and underscores the importance of ideas and rhetoric. She asserts that wealth and liberty are not merely products of institutions but arise from a societal shift in how individual initiative is valued. In the United States, the ‘bourgeois virtues’—an ethical appreciation for innovation, commerce, and personal responsibility—achieved cultural prominence. Conversely, Latin America remained closely tied to an anti-bourgeois ethos rooted in the Counter-Reformation, where wealth was often linked to political privilege and connections rather than market-driven innovation.
Paz contended that the core issue in Latin America stemmed not from perpetual economic underdevelopment, but from a fundamental disconnect within its institutions. The disconnect is most evident in the stark division between those in power and the governed population. The rupture from the monarchy did not bring liberation to the former Spanish colonies; instead, it left their societies in profound turmoil.
The hierarchical and authoritarian framework established under the Bourbon Reforms and influenced by the Catholic Counter-Reformation persisted despite the revolution. As Paz aptly observed, independent Latin America faced a significant contradiction: it adopted legal frameworks that did not mirror its societal realities, transforming constitutions into mere formalities—illusions concealing the enduring remnants of colonial governance. In the aftermath of independence, Creole elites sought legitimacy by importing ideas and institutions from the American and French revolutions, the latter of which felt more familiar to them as followers of Jean-Jacques Rousseau.
This forced imitation of institutions ultimately solidified centralized authority, layering democratic ideals over a reality characterized by personalism and patrimonialism. This is why the educational systems in Latin America emphasized the French Revolution as a cornerstone of Western history, often relegating the U.S. independence fight to a mere sideline. The U.S. Constitution of 1787 was a reflection of a preexisting society comprising merchants, landowners, and Puritans whose customs and laws were in alignment. Latin America lacked such congruence.
In contrast to the Constitutional Convention in Philadelphia, which aimed to formalize established social and political agreements, Latin America descended into a cycle of violence, marked by instability and conflict. Lacking the shared understanding that facilitated the U.S. Constitution’s formation, the region became a battlefield for competing political agendas devoid of common ground. In this lawless atmosphere, caudillismo (strongman politics) and patrimonialism supplanted absent institutional frameworks, resolving ideological disputes through force rather than democratic processes. On these tumultuous fields, disparate political models contended to shape states that lacked solid foundations, where borrowed concepts of abstract liberalism clashed with an enduring centralist, absolutist, and authoritarian legacy.
This turmoil illustrates the formidable challenges of state-building in Latin America during the nineteenth century. While the United States focused on growing its local market, establishing legal stability, and unifying its jurisdictions, Latin America squandered its early post-colonial years in sustained chaos and despotism. The harsh reality that ensued was that the region struggled for more than fifty years to define fundamental principles of state sovereignty. Without a shared understanding of governance, the state was perceived not as a fair protector of rights, but rather as a prize to be captured by rival factions. Political resources were primarily devoted to restoring order and central authority, leaving scant opportunity for constructing enduring legal frameworks.
This prolonged institutional disconnect elucidates why sustainable economic development proved elusive during this critical period. The ramifications of Latin America’s post-independence turmoil are underscored in North et al. (2000): at the dawn of the 19th century, the region’s per capita income was comparable to that of the United States, but by 1900, the U.S. institutional framework had propelled its per capita wealth to four times that of Spanish American nations.
According to North, economic advancement requires a framework of credible commitments that mitigates the risks associated with long-term investments. In 19th-century Latin America, the absence of such institutional agreements rendered property rights precarious, contracts unenforceable, and threats of expropriation constant. Wealth generation became reliant on political favoritism rather than on productive endeavors. Consequently, the lack of a constitutional consensus not only led to political violence but also obstructed the rise of modern capitalism, entrenching Latin America in a cycle of economic stagnation that mere borrowed ideas or abstract laws could not remedy.
Ultimately, articulating Paz’s central political lesson is crucial as it serves as a significant precursor to modern institutional economics. Long before Douglass North formally illustrated that formal rules falter when misaligned with informal constraints, Paz intuitively highlighted the fallacy of perceiving freedom as a top-down concession. He emphasizes that treating liberty as a grant from a central authority is fundamentally flawed. As Paz poignantly articulated, Latin America’s founders encountered a tragic disconnect where “our political programs were beautiful, but they had no relation to our reality.” This reality rendered the liberal legal order a mere facade masking persistent personalism.
Thus, Paz’s enduring thesis delivers a cautionary message: for the region’s institutions to become stable and robust, a break from the colonial mindset is imperative—one that compels us to elevate the law above the will of any single leader. As long as we await a leader to resolve the issues that each of us must address, the path out of the labyrinth will remain barred, leaving solitude as our only fate.
References
McCloskey, D. N. (2010). Bourgeois Dignity: Why Economics Can’t Explain the Modern World. University of Chicago Press.
North, D. C. (1990). Institutions, Institutional Change and Economic Performance. Cambridge University Press.
North, D. C. (1991). Institutions. Journal of Economic Perspectives, 5(1), 97-112.
North, D. C., Summerhill, W., & Weingast, B. R. (2000). Order, Disorder and Economic Change: Latin America vs. The United States. In B. Bueno de Mesquita & H. L. Root (Eds.), Governing for Prosperity (pp. 17-58). Yale University Press.
Paz, O. (2019). El laberinto de la soledad, Postdata, Vuelta a El laberinto de la soledad (6ª ed.). Fondo de Cultura Económica. (Original work published 1950).
Constanza Mazzina is the Director of the Undergraduate Program in Political Science and the Postgraduate Program in Institutional Economics and Political Science at the Universidad del Cema in Buenos Aires. She is also a Fellow of the Friedman Hayek Center and a member of the Academic Council of Libertad y Progreso.
