Patrick E. Safie
Professor Faulcon
HUM-2220
02 December 2018
Inequality and Poverty in El Salvador
The poverty and inequality that has plagued El Salvador since the early twentieth century stems from their rule by the Oligarchy, which dates back to colonial times. The Oligarchy's lack of consistency in implementing and following through with reforms has prevented progress from occurring in the country. Furthermore, the many wars and political revolts in El Salvador impeded its economic and social growth. The main focus of the Oligarchy was to turn a profit. And because they essentially ran the economy, they assumed that their actions were best for both their profits and the country's economy as a whole. Their selfish single-minded focus led to a growing economic inequality, which was subsequently accommodated by ethnic and class oppression, which was mostly toward the indigenous Indians. Finally, by the mid nineteenth century, the Fourteen Families declared all communal lands their own, evicting the indigenous Indians from them in the process, often violently (Mopp and Morris 74). By the later part of the century, most of the generals and presidents in El Salvador were major coffee growers or members of the Fourteen Families, which is why the Oligarchy maintained such a strong grip of power over the country. Given the aforementioned circumstances, one can clearly see that the fourteen families have had a long history of control over nearly every aspect of the political and economic life in El Salvador.
El Salvador's problems with inequality began by the mid sixteenth century, when an oligarchy was created in the form of three ecomiendas. The ecomiendas were put in power by the crown in order to grow and export cacao, mostly due to the lack of natural resources to exploit, such as gold or silver (Montgomery 70). Cacao became very popular in Europe, and as a result of the increased demand for cacao, the ecomiendas required more labor, which the local Indians supplied (Montgomery 70). However, the Indians were susceptible to the diseases brought over by the Spaniards, which led to a decline in the Indian population. Because the Oligarchy viewed the Indians as disposable labor, they did not feel the need to treat them to prevent their numbers from dwindling. Instead, the Spanish replaced them with slaves imported from Africa (Montgomery 71). This was one of the first signs of inequality brought to El Salvador by the Oligarchy.
In the seventeenth century, the demand for cacao dropped. As a result of this, El Salvador plunged into an economic depression, and the Oligarchy had to find a new source of revenue, which they found in indigo (Montgomery 71). Indigo was profitable because of the increase in demand for textiles in Europe at this time (Krauss 59-60). This led the Oligarchy to increase its acquisition of land in El Salvador, which was mainly inhabited by the native Indians. On top of being extremely lucrative, indigo was far less labor-intensive than cacao was, so it became the main focus of El Salvador's agriculture by 1600 (Montgomery 71). Unfortunately, these developments had high costs for the Indian populations. When the indigo rotted, diseases would be brought to the Indian villages that cultivated it, killing off entire villages in several instances. When this happened, they were merely replaced by another tribe (Krauss 60). Eventually the mistreatment of the Indians by the Oligarchy led to what would be the first of many revolts in El Salvador. In 1832, a mass of thousands of Indians and peasants sacked San Vicente with the intention of giving control of the land back to the workers. However, they did not stand up to the counterattack by the Oligarchy. Although it failed, the revolt did serve one significant purpose: it was the foundation for several future rebellions between 1872 through 1898. The social and political changes brought about by these revolts led to a restructuring of the government, which was at this time focusing mostly on developing its military. In the process of building up their military, El Salvador's government spending was greatly increased (Krauss 60). This was spending that the government could have used for local investment in order to help develop El Salvador.
El Salvador's lack of economic diversification, particularly in exports, can be summed in the following:
“By 1600 indigo had replaced cacao as El Salvador's principle export, although it was another century before the 'boom' arrived. When it did, it lasted for 150 years. Eventually the demand for indigo declined as a synthetic dye was developed in Europe, and as civil war in the united States closed shipping lanes through the Caribbean. Even before that, however, the Salvadoran landowners had discovered that the volcanic soil of west central El Salvador was well-suited to coffee, which would become the third key to wealth by the late nineteenth century.†(Montgomery 71)
Looking at El Salvador's mono-crop history under the Oligarchy, one can see the country's historical susceptibility to Dutch disease due to the way in which they focused all of their efforts on a single commodity, such as cacao, indigo, and later coffee. The families came to own most of the land in El Salvador with each subsequent depression in the country, and each depression led to fewer land owners as the Oligarchy acquired the land, often without compensation to the former owners (Montgomery 72). This concentration of land ownership in the Oligarchy's hands led to mass unemployment for much of each year because the indigo and coffee grown on the Oligarchy's land required little labor. This is another form of inequality that developed in El Salvador. Furthermore, El Salvador's emphasis on these few crops led to a reliance on the import of basic food items, which most of the citizenship could not afford because of the general lack of employment during much of the year (Montgomery 72).
El Salvador's historical focus on key export products (primarily cacao, indigo, coffee, and cotton) has been a large reason for its lack of social growth and economic equity. Because its income was so dependent on exports, it was highly sensitive to fluctuations in the world market (Cohen and Rosenthal 17). With the implementation of ISI policies, it was expected that the country would reduce its dependency on the foreign market. However, along with rising incomes brought by ISI policies from 1950 through 1980, the export portion of El Salvador's GDP rose by over ten percent (Cohen and Rosenthal 17). El Salvador's reliance on the world market not only affected its trade sector, but it also adversely affected the amount of foreign capital invested into the country (Cohen and Rosenthal 17).
The minimum wage law for agricultural workers came in 1965 with the birth of ISI. The minimum wage helped break down the presence of feudalism in El Salvador's agricultural sector (Montgomery 84). In the past, the colonos or aparcero worked the land in the hopes of one day becoming land owners themselves. After 1965, however, they merely became workers of the land who earned a wage under the land owner. This caused the number of landless peasants to rise from 30,500 in 1961 to 112,100 in 1971, and the numbers in the colonos class to fall from 58,000 to 17,000 throughout the 1970s (Montgomery 84).
Between 1961 and 1971, land ownership was highly concentrated. Even though it was sub-divided, it remained largely in the hands of members of the Oligarchy (refer to Table 1). Land redistribution did not truly begin in El Salvador until 1980, one year after the Nicaraguan revolution. Unfortunately, the Oligarchy's interests hindered the progress of the land reform (Cohen and Rosenthal 25-26). Over a thirty-year period, very few improvements were achieved in the redistribution of land because land was largely re-divided among members of the oligarchical families (Cohen and Rosenthal 26).
Much of the inequality in modern El Salvador is also rooted in its coffee plantations. In the 1950s through the 1960s, more peasants were forcefully evicted from their lands to both sustain coffee growth and to expand cotton production. The acquisition of these lands for production led to an increase in demand for labor. However, labor was being paid so little that workers were still condemned to a life of poverty. Many of them, fed up with their situation, migrated east to Honduras and to urban areas, hoping to find a better life (Fagen 76). Furthermore, the revenue generated from coffee exportation at this time expanded the wealth of the tiny group of El Salvadoran elites while worsening the living conditions of the poor who remained in El Salvador. The elites earned vast revenues from coffee, which they used to build lavish estates and to send their children to Europe for schooling. Meanwhile, the poor owned less than ten percent of the land in the country, earned very little income, and lived in extreme poverty. Their children could not receive the same educational benefits of the elites, thereby setting in stone the inter-generational transfer of poverty in El Salvador; the poor had little opportunity to breach the gap between impoverished and wealthy (Kruass 60-61).
Another significant factor in El Salvador's troubles with inequality stems from its violent history. El Salvador became troubled with war and violence once again in the early twentieth century, not long after the first major revolts from 1872 to 1898. In 1931, Arturo Araujo was elected president by the El Salvadoran populace, but was quickly overthrown by the military. In January of the following year, the peasants revolted, but the military quelled the rebellion with a massacre, known as la matanza, spanning several weeks and costing over 30,000 peasant lives (Fagen 76).
In 1983 a civil war erupted in full force and put a damper on the nation's economy. El Salvador suffered $600 million in damages to its infrastructure during the war. Even with the massive damage the economy had to bear, much of the country's loss can be traced back to capital flight, which may have been caused by the instability caused by the conflict. Much of the U.S. aid was transferred back to the U.S. economy to buy luxuries and increase the Oligarchy's foreign bank accounts (Barry and Preusch 215).
El Salvador has had a long history of poverty and inequality, which has been rooted in the corruption of its Oligarchy, the Oligarchy's failure to properly implement reform policies, and constant violence in the nation. With the Oligarchy forcefully taking over land and exploiting it and the natives for labor to grow agricultural exports like cacao, indigo, coffee, and cotton, the peasantry and natives found themselves landless, poor, and suffering with disease. To make matters worse, El Salvador was a nation of nearly constant violence. Revolts and civil war was common, and the government even turned to committing a massacre of 30,000 natives in 1931. When a nation is under the leadership of such a corrupt and abusive authority and simultaneously has to worry about violence, it is no wonder that inequality and poverty has been and continues to be such a significant problem in El Salvador with seemingly no end.
Works Cited
Barry, Tom and Deb Preusch. The Central America Fact Book. New York: Grove Press, Inc., 1986.
Cohen, Isaac and Gert Rosenthal. “The Dimensions of Economic Policy Space in Central America.†The Future of Central America. Eds. Richard R. Fagen and Olga Pellicer. Stanford: Stanford University Press, 1983. 15-34.
Fagen, Richard R. Forging Peace. New York: Basil Blackwell, Inc., 1987.
Krauss, Clifford. Inside Central America. New York: Summit Books, 1991.
Montgomery, Tommie Sue. "El Salvador: The Roots of Revolution." Central America: Crisis and Adaptation. Eds. James A. Morris and Steve C. Ropp. Albuquerque, NM: University of New Mexico Press, 1984. 67-118. Print.