As we inch closer to the 250th anniversary of the United States’ Declaration of Independence on July 4th, 1776, it’s crucial to recognize that this date carries a vastly different significance in Latin America. For the U.S., 1776 symbolizes the dawn of a system emphasizing limited governmental powers and individual liberties. Conversely, in Latin America, that very year marked a pivot towards increased authoritarianism and centralized control.
While the thirteen American colonies began their journey to independence, establishing a tradition of self-governance, the Spanish Crown was busy reconfiguring its territories by creating the Viceroyalty of the Río de la Plata and enforcing the Bourbon Reforms. This juxtaposition highlights a fundamental divergence in historical trajectories.
In the U.S., 1776 was the apex of a grassroots movement rooted in institutional consensus. In stark contrast, Latin America saw the fortification of an authoritarian regime, aiming to modernize imperial governance through strict economic and bureaucratic oversight. When the independence wars eventually swept across Latin America decades later, they were not fueled by a natural evolution towards self-rule, but rather triggered by the external upheaval of the Napoleonic invasion of the Iberian Peninsula.
In 1950, Mexican writer Octavio Paz published El laberinto de la soledad, an essay that, when examined through this historical lens, offers vital insight into why liberalism flourished in the United States while remaining a mere footnote in Latin America. Paz’s analysis transcends mere economic considerations, delving into the foundational values and cultural evolution of the region. Whereas the U.S. developed its liberal framework through a lens of historical continuity and a shared civic narrative, Latin American nations frequently treated liberalism as an imported concept—an admirable abstraction layered over deeply entrenched traditional hierarchies and communal values. The central thesis of El laberinto de la soledad is that Latin America’s historical legacy favored centralized authority and communal structures over the individualistic tenets of liberalism.
This divergence is further supported by the work of Douglass North, the 1993 Nobel laureate in economics, who argued that long-term economic prosperity is influenced not just by resources or technology, but by the development of institutional frameworks—the formal laws and informal constraints shaping human interactions. From this perspective, the United States thrived because it established a robust institutional system that ensured stable property rights, minimized transactional costs, and imposed real limits on leaders. In contrast, Latin America inherited a convoluted institutional landscape where the rules facilitated rent-seeking rather than productive investment, effectively trapping the region within the labyrinth Paz described.
As economic historian Deirdre McCloskey emphasizes, this institutional divergence roots itself in contrasting ideologies and rhetoric. She contends that wealth and freedom do not merely stem from institutions but also from a societal narrative that values individual initiative. In the United States, ‘bourgeois virtues’—the ethical appreciation for innovation, commerce, and personal accountability—gained cultural prominence. Conversely, in Latin America, the prevailing rhetoric remained tied to an anti-bourgeois sentiment inherited from the Counter-Reformation, where wealth derived from political privilege and connections rather than market dynamism.
Paz believed that the core issue in Latin America was not merely persistent economic underdevelopment but a profound disconnect within its institutions. This disconnection is glaringly evident in the chasm between the governed and their governors. The abrupt severance from monarchy did not usher in freedom for former Spanish colonies; instead, it left them in a state of profound disarray.
The hierarchical, authoritarian framework established during the Bourbon Reforms and influenced by the Catholic Counter-Reformation did not simply dissipate post-revolution. As Paz noted, independent Latin America faced a serious contradiction: it adopted legal structures that failed to mirror its social realities, reducing constitutions to mere formalities—illusions masking the enduring colonial legacy. Upon gaining independence, Creole elites eagerly sought to fill the legitimacy void by importing concepts and institutions from the American and French revolutions, with the latter resonating more deeply with them due to their admiration for Jean-Jacques Rousseau.
This forced imitation of institutions ultimately reinforced centralized authority, layering democratic practices over a deeply personalistic and patrimonial reality. This is why Latin American educational systems often regard the French Revolution as a pivotal moment in Western history while relegating the U.S. independence movement to a mere afterthought. In 1787, the U.S. Constitution was a reflection of a society that existed—comprised of merchants, landowners, and Puritans aligned in customs and legal frameworks. Latin America, however, lacked such alignment.
Unlike the Constitutional Convention in Philadelphia, which sought to formalize existing social and political agreements, Latin America spiraled into a cycle of violence characterized by instability and brutal confrontations. The absence of shared understanding, which the U.S. Constitution managed to encapsulate, transformed the region into a battleground of competing political ideologies devoid of common ground. In this chaotic environment, caudillismo (strongman politics) and patrimonialism emerged, substituting for the absent institutional frameworks and resolving ideological disputes through force rather than ballots. These tumultuous battlegrounds saw wildly divergent political models vying to shape states with insecure foundations, clashing borrowed ideas of abstract liberalism with a potent legacy of centralism and authoritarianism.
This conflict underscores the tragic hurdles of state-building in Latin America throughout the nineteenth century. While the United States utilized its post-independence years to cultivate its domestic market, establish legal stability, and unify jurisdiction, Latin America squandered its early post-colonial years in relentless chaos and despotism. The harsh reality of this squandered opportunity is palpable: for over fifty years, the region grappled with defining the fundamentals of state sovereignty. In the absence of a collective understanding of the rules, the state was perceived not as a fair protector of rights but as a prize to be seized by rival factions. Political energy was consumed by the urgent necessity of restoring order and central control, leaving little room for the development of enduring legal structures.
This protracted institutional disconnection elucidates why sustainable economic development remained unattainable during this pivotal era. The high cost of Latin America’s post-independence turmoil is starkly evident in data from North et al. (2000): while the region commenced the 19th century with a per capita income comparable to that of the United States, by 1900, the U.S. institutional framework had propelled its per capita wealth to four times that of Spanish American nations.
As North highlighted, economic growth necessitates a framework of credible commitments that mitigates the risks associated with long-term investments. In 19th-century Latin America, the absence of such institutional consensus rendered property rights unstable, contracts unenforceable, and the specter of expropriation ever-present. Wealth creation hinged on political favoritism rather than productive endeavors. Thus, the lack of a constitutional consensus not only fueled political violence but also stifled the emergence of modern capitalism, ensnaring Latin America in economic stagnation that no borrowed ideas or abstract laws could remedy.
This conclusion is critical to articulating Paz’s central political lesson, which serves as a profound precursor to modern institutional economics. Long before Douglass North formally demonstrated that formal rules falter when misaligned with informal constraints, Paz intuitively exposed the fallacy of perceiving freedom as a top-down concession. His core political lesson underscores the fundamental error of regarding liberty as something that can be bestowed by a central authority. As Paz famously articulated, Latin America’s founders grappled with a tragic disconnect where “our political programs were beautiful, but they had no relation to our reality,” effectively reducing the liberal legal order to a mere veneer for persistent personalism.
Consequently, Paz’s enduring thesis serves as a cautionary tale: the region’s institutions will only attain stability and strength when we liberate ourselves from the colonial mindset that subordinates the law to the whims of powerful leaders. As long as we await a leader to resolve what must be a collective endeavor, the path out of the labyrinth will remain locked, and solitude will persist as our only destiny.
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 serves as 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.
