[WalterBright]

This doesn't explain at all why industrialization happened in the US and not in South America.

The answer is free markets. The industrial revolution happened in free market countries.

BTW, gold and silver extracted from the New World doesn't explain it.

1. Gold and silver are not economic wealth - Spain (the main recipient of it) experienced inflation.

2. Spain did not become the dominant power in Europe, though it should have if exploiting the New World was the key.

3. The IR happpened in the US starting around 1800. The US was not extracting gold/silver from elsewhere, had no empire, had no banking system to speak of, was a nation of subsistence farmers, had no great cities, etc.

[nhaehnle]

Maybe the answer isn't so much free market as a lack of alternatives. Note that the US did not industrialize equally - notably, consider the part where slavery-based agriculture was profitable, and the resulting civil war.

In a similar vein, I was quite surprised to learn how industrial early 19th century Peru was, until they decided to screw development and just exploit the land.

(Though I think the internal comparison of different parts of the US is more relevant, since they operated under the same political and economic frameworks, yet developed quite differently. Maybe a relatively free market is a necessary condition for industrial revolution, but it sure as hell isn't sufficient.)

[WalterBright]

> Note that the US did not industrialize equally - notably, consider the part where slavery-based agriculture was profitable

That's an astute observation. The slave based southern economy did not industrialize. Slavery is not a free market. I do not know of a free market economy that failed to industrialize.

As for slavery being profitable, one of the big drivers of the Civil War was it was becoming unprofitable, and the South needed to protect its inefficient economy. Separating itself from the North meant it could enact protectionist trade barriers (which were not allowed by the Constitution).

Like so many things in human history, the end of slavery came about less because of a moral awakening, and more because it didn't pay anymore.