Early on in the settlement of Brazil, the king of Portugal, Dom Joao III, created a number of hereditary “captaincies” – enormous land grants the size of states today. Needless to say, the captains who got these captaincies were extremely wealthy, well-connected individuals. Also needless to say, someone who is given a property the size of, say, Oregon, isn’t going to care too much about developing that property. That person’s major source of wealth is not developing property, its making nice to the king who can give him more property.
Now, consider the captaincy. In every single case, there were already people living there at the time the land was granted. In many instances, natives (who would soon be virtually wiped out), but also European settlers. Many were criminals or just the random dregs of society, while others were hoping to make a quick buck and go back to Europe wealthy.
Regardless, the vast majority of Brazilians were living on what, legally (assuming the Portuguese government had right to decide what was legal) living on land owned by others who had little interest in that land. And its not like there was anyplace else to go… the Portuguese split of the lands under their domain, the Spanish did the same to the lands under their domain, ditto the Dutch, and whoever else was jostling around in South America.
So what do you do? Well, say you, as a settler goes and builds something. If it produces wealth, the landholder will express some interest. So your incentive is either not to build anything, or build on the sly, in the boondocks. If you get too big, too successful, someone else – the captain or his descendents, would simply take your stuff away. (And those of you who are ready to argue that – “No, that’s irrational. The captain’s best interests are served by encouraging small businessmen to create a thriving economy on his property” forget that doing that takes effort and foresight, but simply seizing provides a benefit here and now, especially to someone born of enough privilege.)
So not much gets developed. And this goes on for generations.
Eventually, the 1960s come around. Outside of the cities, much of the country is poor and undeveloped. Its still owned by a few large families for whom focusing on what’s going on in the boondocks or encouraging any economic development doesn’t pay off in the short run, so why bother? Its still lived on by small farmers who are doing their best to stay under the radar of the captain’s descendents.
And yes, its Brazil, but its also Argentina, and just about every other country in the region. And since its the 1960s, people in the region – at least the city dwellers – believe that their time has come. This is Brazil’s (or Argentina’s or Chile’s or Uruguay’s) decade. A populist who originates from a very wealthy family is President (again, this is Brazil, but it is also other South American countries) looks across the large, relatively prosperous cities, teeming with life and bustling with commerce, and he looks across the vast wasteland that is the backlands, and he says to himself… “The small property holders in the cities made these cities capitalist and prosperous. But the big property owners who own the vast, vast tracts of land have made the rest of the country poor and backward. Property rights are vastly important – without them, the cities would never have developed. But the initial assignment of property rights in the hinterland was inefficient, and has led to waste. Since property rights were assigned for random reasons in the first place, why not reset the clock, and start over?”
The populist President from a very wealthy family then gives a speech with the words “Land Reform.” The other wealthy families talk to the generals. One of the generals gives a speech: “The military will not tolerate any hint of Marxism.” The President isn’t concerned – after all, he isn’t a Marxist – he believes in property rights, small tradesman (a la Adam Smith), tariffs on imports, the infant industry argument, and the Virgin Mary. These are also the things the general believes in. Where they differ is that the President feels the original allocation of property rights was both wrong, and has hurt the country. The general feels otherwise.
And then one day the generals overthrow the President. The new President is a general. He gives a speech: “The military will save the country from the Marxists. No dissent will be tolerated. The Marxists will be crushed, and then there will be elections. Probably in six months.”
10 years pass, and there are no elections. There are also no Marxists – Marxism is a stupid, stupid idea anyway, and most people weren’t stupid enough to fall for it. But there are a lot of dead people who were labeled Marxists.
At some point, eventually, the economy tanks under the military, which does share two penchants with real Marxists – they tolerate no dissent, and run a command economy. And the people are unhappy. And enough is enough. And some of the people have little left to lose. Their children had been taken away during the night, and have never come back.
So they march. Maybe they march in a circle in front of the Presidential palace, or they fill a square in a big city. And the military has a choice – they can gun these people down, like they gunned down so many before, maintaining their economy like a Marxist totalitarian economy. Or they can do nothing. And because they are dispirited by now, they do nothing.
And so another politician from a very wealthy family steps forward. He tells the people – “I really was in opposition this whole time.” The marchers ally themselves with that politician. He talks to the President – a general who was so dispirited, he had previously said, when asked how he wanted to be remembered: “I want to be forgotten.”
And an agreement is reached. There is one more military President, or perhaps there isn’t. And then the politician, the one who supposedly had always been in opposition, becomes President. After him, there are elections.
And eventually…. the general, the one that originally overthrew a democratically elected President, dies. And the Washington Post writes an editorial praising him, and praising the fact that the general, unlike the Marxists, really made a difference. After all, just look at how the economy since the general left office.