IN 1492, ON the eve of the European settlement and colonization of the New World, Bolivia and Peru hosted richer and more complex civilizations than any that existed in North America. After two centuries of colonization, in 1700, per capita income in continental Latin America was $521, and it was a marginally higher $527 in what would become the United States.1 During the eighteenth century, the sugarproducing island of Cuba was far wealthier than Britain’s American colonies. Yet, over the next three centuries, the United States steadily pulled ahead of Latin America in economic growth, such that, by the beginning of the twenty-first century, per capita income in the United States was five times the Latin American average.
It may be that the United States is simply exceptional in its ability to sustain long-term economic growth; if true, any comparison with other parts of the world would be unfair. Yet East Asia has managed to close the gap over a relatively short period of time. For example, per capita income in East Asia was $746 in 1950, or 8 percent of that of the United States; by 1998, it had risen to 16 percent of the U.S. figure.2 In contrast, Latin America’s per capita income in 1950 was 27 percent of that of the United States, and by 1998 it had fallen to only 21 percent. The gap would be even greater if we selected only the high-performing countries of East Asia instead of the region as a whole.