Figure 1.-- The manufacture of straw hats became an important activity as a result of the California gold rush (1848-49). Some Americans made the trip around the Horn to get to California. More made the crossing across the Istmus of Panama. It was here that they encounteted the high-quality Ecuadorean hats which this became known as Panama hats. These hats became a major fashion stample for nearly a century. Here is a family hat making operation.

Ecuador has experienced many economic regimes. It was recently added to the Inca Empire at the time of the Spanish contact. The Inca economy was essentially a Communist economy and virtully the only communist society that actully worked. There are areas of the Andes that were never as productive as under the Inca. And the production was reasonbly well distributed. The Spanish colonial Empire which followed was very different. After the Pizarros destoyed the Inca Empire, Ecuador found itself located between the two viceroyalty centers (Lima and Bogotá). It first became part of the Viceroyalty of Peru and then later the the Viceroyalty of Nueva Granada. The two Viceroyalties were similar in many ways. Agriculture and thus land ownership were the heart of the economy, centered primarily in the Sierra (Andes). Ecuador was different in one respect, especially from the Viceroyalty of Peru which proved to be the source of incredible amounts of silver. There was very little mining activity in Ecuador. The land was asigned to Spanish landlords-- the Conquistadores who had participated in the Spanish Conquest. The Spanish established a feudal system called encomiend with the Native Americans turned into serfs (landless peasantry) tied to the land. The The serfs or encomenderos were called by various names. In Eduador a common term was husipungero. [Icaza] The Sierra varied, but much of it was well watered and temperate, suitable for agriculture on the colonial hacendas. The major crops became grains imported by the Spanish (barley and wheat). Native American crops (corn and potatos) were also imprtant. The coast was less well watered, but cacao became very important. Other crops included sugarcane, coconuts, tobacco, and cotton. Only in the independence period did highly perishible babanas become important. Manufacturing was of minor importance, largely becaused of Spanish colonial regulations which sought to make the colonies a market for Spanish manufacture. There was some manufacture of textiles. There were obrajes (perhaps best described as sweatshops) in the Sierra (Riobamba and Latacunga) which produced textiles for export, both woolen and cotton fabrics. Ther was a shipyard in Guayaquil drawing on the availability of timber, in short supply in Spain. Sugar mills manufactured sugar, molasses, and rum made from the molasses. Sugar cane could not be shipped, it had to be converted to its product forms. The basic Spanish economic system continued with some changes after independence (1810s-20s). The major change was that trade was possible with ither countries besides Spain. The manufacture of hats became an important activity as a result of the California gold rush (1848-49). With imprivements in maritime transport, bananas became an important crop. The modern economy is largely agricutural and the country continues to be poor. The economy of Ecuador is based mostly on exports of oil, bananas, seaffood, gold, other primary agricultural products. Bananas are important along the Pacific coast. Ecuador is the world's largest exporter of bananas and an imortant expoter of seafood (mostly shrimp). Exports of non-traditional products such as flowers and canned fish have grown in recent years. There is very little industrialization The industry is not competitive in international markets. It is oriented to servicing the domestic market. Money transfers from nearly a million Ecuadorian emigrants employed abroad, primarily in the United States, has become a major source of revenue. Oil in recent years has provided important export income. The oil income pays a substantial portion of public-sector revenue and export earnings. The decline in oil prices (2014-15) has signifucantly reduced these earnings. The country ranks very poorly in terms of economic freedom, both in world wide terms, along with Bolivia, Argentina, Venezuela, and Cuba. Ecuador is part of the Bolivarian Alliance for the Americas (ALBA), led by Communist Venezuela, and has promoted relations with Iran and China. There have been some improvement in controling coruption, but has fallen in many other areas such as the rule of law.

Incan Economy (15th Century)

The area of modern Ecuador has experienced many economic regimes. It was recently added to the Inca Empire at the time of the Spanish contact and formed the northern reaches of the Empire. The Incan Empire was operate on a system of state socialism. The Empire's output was the property of the Emperor or Inca and he distribute the food and clothing that wa produced among his subjects as he saw fit. The Inca economy was essentially a Communist economy and virtully the only communist society that actully worked. There are areas of the Andes that were never as productive as under the Inca. And the production was reasonbly well distributed. The Inca Empire had some economic institutions which were coninued by the Spanish. One such institution was Incaic traditions of extracting tribute in the form of labor. It seems very likely that ghis was a pre-Incan tradition continued by the Incas. The Inca Empire encompased much of the Andes. As far as we know, the same basic economic system was enforced throughout the Empire of which ecuador wasonly a small part.

Spanish Colonial Empire (16th-18th Centuries)

The Spanish colonial Empire which followed was very different. After the Pizarros destoyed the Inca Empire, Ecuador found itself located between the two viceroyalty centers (Lima and Bogotá). It first became part of the Viceroyalty of Peru and then later the the Viceroyalty of Nueva Granada. The two Viceroyalties were similar in many ways. Agriculture and thus land ownership were the heart of the economy, centered primarily in the Sierra (Andes). Ecuador was different in one respect, especially from the Viceroyalty of Peru which proved to be the source of incredible amounts of silver. There was very little mining activity in Ecuador. The land was asigned to Spanish landlords-- the Conquistadores who had participated in the Spanish Conquest. The Spanish established a feudal system called encomienda with the Native Americans turned into serfs, a landless Indio peasantry tied to the land. The The serfs or encomenderos were called by various names. In Eduador a common term was 'husipungero'. [Icaza] The huasipungero paid rent in the form of labor and a share of their crop. And he was able to use a small plot, the huasipungo, for subsistence farming. The Sierra varied, but much of it was well watered and temperate, suitable for agriculture on the colonial hacendas. The major crops became grains imported by the Spanish (barley and wheat). Native American crops (corn and potatos) were also important. The coast was less well watered, but cacao became very important. Other crops included sugarcane, coconuts, tobacco, and cotton. Only in the independence period did highly perishible babanas become important. Manufacturing was of minor importance, largely becaused of Spanish colonial regulations which sought to make the colonies a market for Spanish manufacture. There was some manufacture of textiles. There were obrajes (perhaps best described as sweatshops) in the Sierra (Riobamba and Latacunga) which produced textiles for export, both woolen and cotton fabrics. Ther was a shipyard in Guayaquil drawing on the availability of timber, in short supply in Spain. Sugar mills manufactured sugar, molasses, and rum made from the molasses. Sugar cane could not be shipped, it had to be converted to its product forms.

Independence (19th Century)

The basic Spanish economic system continued with some changes after independence (1810s-20s). Ecuador gained complete independence (1830). There was atill largely rural population of about 0.5 million. The economy still was based on the Spanish ecomienda system. The major change was that legal trade was possible with other coontries besides Spain. The Indio-pesastry, especially in the Sierra, lived in a sate of of peonage on the lands of the hacendado. This mean that a substantial part of the population was outside the money economy. Many did not speak Spanish or receive any formal education. A small number of families began to control much of the land, a process began in the colonial period. This changed little in the 19th century, except that the hacendado began to focus more on exportable cash crops. This made the Ecuadorean economy increasingly dependent on changing international market demands and price fluctuations, The hacindado benefitted from increasing income, but passed little on to his huasipungeros. The manufacture of straw hats became an important activity as a result of the California gold rush (1848-49). Some Americans made the trip around the Horn to get to California. More made the crossing across the Istmus of Panama. It was here that they encounteted the high-quality Ecuadorean hats which this became known as Panama hats. These hats became a major fashion stample for nearly a century. One of the crops in high demand on international markets was cacao--the principal component is chocolate. The developing European and American industrial economies increased demand. Ecuadorean cacao production trippled (second half of the 19th century). The cacao was not grown in the Sierra, but jn the voastal foothills where tropical conditions florished. Exports increased tenfold. The Sierra had been the center of Eduadorean economic activity. This changed the economic balance. The coast became inceasingly important and Guyaquil became the country's leafung commercial center. Guayaquil came to dominate dominated banking, commercial, and export-import affairs. Land ownership on the in the coastal region was not as cocentrated as in the Sierra. The landless Indio-peaanty began to move dpwn from the sierr into coastal regions. >

Mature National Era (20th Century)

Cacao exports continued to dominate the eonomy and be Ecuador's economy and the principal source of foreign exchange (1900s-10s). Other agricultural products (coffee and sugar and fish products) increased in importance. These were all coastal items. The cacao industry as a result of diseases began to decline (1930s). This had deep financial repersusions and occurred just as the Great Depression crippled economies in america and Europe. Ecuador did not begin to recover until World war II. The war created markets for Ecuadorean agricultural products in the Inited States. Government-sponsored replanting efforts led to a partial recovery of the of the cacao industry. Ecuador returned to the list of top exporters. nd even more importanly, banasa emerged as an even more importnt product. With improvements in maritime transport, bananas became an important crop (1950s). Ecuadorean farmers began to experiment with shtomp culture (1960s), leading to another major export commodity. New petroleum fields were duscovered in the Oriente (eastern region) (1967). As these fields wre developed, Ecuador was transformed into an importnt world producer of oil. This greatly increased government revenuev(neginnng in 1972). The Trans-Ecuadorian Pipeline, a 503-kilometer-long oil pipeline, enabled the oil to be shipped over the andes to the Pacific port city of Esmeraldas. A refinery also was constructed just south of Esmeraldas. Than important natural gas deposits were discovered in the Gulf of Guayaquil (1970). Increases in exports because of the oil were stunning. The country's net foreign-exchange earnings eocketed from from US$43 million (1971) to more than US$350 million (1974). And this was only the beginning. Not only did Ecuador begin producing lage quantitiesof oil, byt the orice of oil began to increase sarply at the same ime. The result was huge increases in export revenue and unprecdented nominal growth rates. The GDP increased by narly 10 percent annually (1970-77), almost double the increase during the 1960s. The manufacturing sector began to grow. Ecuador had been one of the pooret countries in South America. Ecuadoreans experenced unprecdented prosperity. There were, however, some averse side affects. Imports increased at a very rapid rate. In addition an inflationary pattern undercut the increasing income. At the same time, Ecuador's external debt balooned from a mere $0.3 billiom to about US$4.5 billion. It is difficult to see how a government which was had acquired sucg massive recune increases could have mounted such a huge debt load in so short a period of time. Notavly over the same period of time, the asian Tigers with no huge financial windfall and few natural resources, managed to turn poverty stricken countries into inustrial giants in only a genration. It is not entirely clear why this has not occuured in Latin america. One thing we do not see in Eucador , for example, is using the oil money to create a world-class education system. The Asian Tigers did this without any oil bonanza.

Modern Era (21st Century)

The modern economy is largely agricutural and the country continues to be poor. The economy of Ecuador is based mostly on exports of oil, bananas, seaffood, gold, other primary agricultural products. Bananas are imprtant along the Pacific coast. Ecuador is the world's largest exporter of bananas and an imortant expoter of seafood (motly shrimp). Exports of non-traditional products such as flowers and canned fish have grown in recent years. There is very little industrialization The industry is not competitive in international markets. It is oriented to servicing the domestic market. Money transfers from nearly a million Ecuadorian emigrants employed abroad, primarily in the United States, has become a major source of revenue. Oil since the 1970s has been a mainstay of the economy. The oil income pays a substantial portion of public-sector revenue and export earnings. As a result of the country's huge debt, the Government adopted the U.S. dollar as the official currency (2000). Popular resistance to government austerity programs after years of mismanagement resulted in the election of U.S.-trained left-wing economist, Rafael Corea. Fidel Castro can perhaps be excused for chosing Communism in the 1960s, Soviet-style Communism at the time looked like the wave of the future. It has since become clear that no country has achieved economic development with soci;ism/communism and that market capitalism has generated economic success in an increasingly long list of countries. The new generation of Ltin Anerican Communists like Corea as well as Chavez/Maduro (Venezuela) and Morales (Bolivia) can not say that there was any sucessful Communist model they could point to justify their left-wing policies. The decline in oil prices (2014-15) has signifucantly reduced Ecuador's export earnings. Ecuador is not in s bad a state asVenezuela as Corea has not attacked private business as vigorously as Chavez, but he has adopted many of the same populist policies uincuding anti business policies. he country ranks very poorly in terms of economic freedom, both in world wide terms, along with Bolivia, Argentina, Venezuela, and Cuba. Ecuador is part of the Bolivarian Alliance for the Americas (ALBA), led by Communist Venezuela, and has promoted relations with Iran and China. China had provided substantial credits and has become a major market for the contry's oil. There have been some improvement in controling coruption, but has fallen in many other areas such as the rule of law.

Sources

Icaza, George. Huasipungo Icaza's classic novel describes the continuing repression and explotaion of the Htasipungeros by the land owning Hacendados.

Created: 9:52 PM 12/16/2015
Last updated: 9:52 PM 12/16/2015