The purpose of colonization was to serve as a source of inexpensive labor and natural resources. The outcome of these colonies was never intended, culture development. This led to large trade enterprises and economical benefits for colonial powers. To continue with these monopolistic privileges, the colonial powers forcibly shaped the social and economical factors of the colonies.
As a result of the agrarian structure during this time, which created a hierarchy of power and wealth, resulted in a situation of inequality, poverty and all sorts of deprivation for the majority of the society. All this contributing to the large cycle many South American countries are facing, low productivity and the unfair flow of wealth. The development of a country comes at the expense of the underdevelopment of the colonized. Production in the colony would be determined by the colonial power’s demands. Colonial power and the colony not only destroy the opportunity of industrialization, but also damage the benefits of any competition.
Historically the colonization process left the colonies economically lower and disabled. However, depending on how and if a cultural society is established, can result a different outcome.
In the table above, a list of the former colonies GDP in South America are shown in America dollars. A low Gini number indicates a more equal distribution of wealth. By comparison, the US has a Gini coefficient of about .40, while many social democratic European countries are in the .20s.
Latin America has shown economic growth, although with the social structure imposed colonialism has been continued. The province is extremely imbalanced, with one of the worst income distributions of the world. Poverty and inequality hindered the making of a fair and distributed economic system.
The geography gave encouraged easy trade for natural resources, shaping the population of a colony. Latin American countries still rely heavily on trade with other countries, repeating old economic patterns. Inexpensive labor is once more a relative advantage in international trade, but now referred as “competitive” costs in the globalized world.