8 - War and the New International Economic Order

Summary

The Second World War, which began in Europe in September 1939, was the third major external shock to strike Latin America in twenty-five years. Despite many similarities with the impact of the First World War and some with the Depression of 1929, the implications of the Second World War for Latin America were quantitatively and qualitatively different from the earlier shocks.

First, the war was far more devastating for Latin America in terms of disruption to its traditional markets. By 1940, the Axis powers controlled much of the European coastline from northern Norway to the Mediterranean Sea, and the consequent British blockade deprived the Latin American republics, despite their initial neutrality in the war, of access to continental European markets. Furthermore, the British market – so important for Argentina and Uruguay – started to shrink as the United Kingdom retreated into a war economy in which only the most essential imports were permitted.

Second, the war erupted after nearly a decade of growing disillusionment with the traditional export-led model in Latin America. World trade in the 1930s had recovered, but it was increasingly “managed,” often bilateral, and heavily distorted by higher tariffs and a plethora of non-tariff barriers. The great powers had frequently acted irresponsibly (e.g., the Smoot–Hawley tariff) or selfishly (e.g., the Roca–Runciman pact). The result was a growing sense of nationalism in a number of Latin American republics and a greater commitment – albeit poorly articulated – to inward-looking development and industrialization as an alternative model to traditional export-led growth.