a Dutch port, complete with its population of active merchants. It must be remembered, however, that economic progress does not result automatically whenever entrepreneurs—Dutch, Ecuadorian, or otherwise—exert themselves. As economist William J. Baumol stresses in what he modestly calls “a minor expansion of Schumpeter’s theoretical model,” business activities are often productive, in the specific sense of falling into one or more of Schumpeter’s five categories. However, there are other activities that Schumpeter did not address and which Baumol characterizes as unproductive or, worse yet, destructive. Contributing nothing to overall growth and development, unproductive entrepreneurship is exemplified by the “discovery of a previously unused legal gambit” that only creates rents (as economists call the gains resulting from unproductive pursuits) for individuals and firms able to exploit the gambit. Destructive entrepreneurship, including organized crime, directly harms people and their legitimate livelihoods, so is nothing less than “parasitical.”20
Baumol extends Schumpeter’s analysis primarily with an eye toward addressing issues of public policy—for example, the ways taxes or legal rules strengthen or weaken incentives for businessmen and women to choose productive activities over unproductive or destructive alternatives. But as the same economist recognizes, these choices have multiple determinants, including geographic and historical realities of the kind that underlie the predominance of productive entrepreneurship in Guayaquil.
These realities are best understood by considering the long-term isolation of the port city from seats of governmental authority—isolation that did not truly end until many years after Vice Consul Wiener’s arrival in western Ecuador. During the colonial era, the Spanish viceroy held court in Lima, far to the south. For nearly a century after Ecuador achieved independence, a grueling ascent into the Andes on foot or perhaps on horseback was required to reach the national capital. Before a rail line into the mountains was constructed, in the early 1900s, the authorities in Quito were unable to interfere much with foreign trade and other varieties of commerce in the costa. At the same time, the trouble and expense of reaching the capital city from Guayaquil limited the appeal of trying to win favors from representatives of government.
As unrewarding as unproductive (or destructive) pursuits were, the port city’s entrepreneurs have been productively inclined, routinely putting their talents to use in the wider commercial world. They have sometimes introduced foreign buyers to Ecuadorian products previously unknown outside the country. Far more often, they have opened new markets for goods that Ecuador produces efficiently. Entrepreneurs from the western part of the country even have reorganized global markets in a few instances, always toward greater competition.
For nearly 300 years beginning in the sixteenth century, Guayaquil was the leading ship-building center on the Pacific coast, from Cape Horn to the Bering Strait, and vessels constructed in and around the city were reputed to be made of the “strongest and best” timber in the world.21 In the mid-1800s, entrepreneurs from the costa organized the production of tightly woven straw hats, which they sold to gold miners crossing the Panamanian Isthmus on their way to California. These Forty-Niners, who risked exposure to tropical diseases to avoid trekking all the way across North America, mistook the origin of their purchases. Hence, the name they gave their new headgear, Panama hats, is still used today, more than 160 years later.22 Guayaquil’s merchants played a key role in the cacao boom of the late 1800s and early 1900s.23 More recently, Ecuadorian entrepreneurs have exported shrimp and cut flowers. Local businessmen and women also have worked hard to make their country a favored destination for international tourists.
As one commercial opportunity overseas has been exploited, then another, and so on, business services that the costa formerly lacked have been introduced. For example, Juan F. Marcos built up a sizable enterprise around the turn of the twentieth century dedicated to the management of cacao estates. His approach to client recruitment was simple. An estate owner would be asked how much he or she expected to earn on his or her own, without any specialized assistance. Provided the response to this inquiry was realistic and less than 40,000 sucres per annum, which is worth about $300,000 in today’s money, Marcos would then offer to administer the property, receiving half the income in excess of the figure the owner had named and nothing else.24 This arrangement was accepted nearly every time it was proposed and, with the profits Marcos made, he founded the Sociedad General: a diversified firm that possessed a commercial bank, an insurance company (responding to a strong demand in Guayaquil, with its prevalence of flammable, wooden structures), as well as the huge El Guasmo hacienda on the outskirts of the city and several other rural properties.25
Marcos had a son, Juan X. Marcos, whose encounter with governmental authority at a tender age did little to encourage political engagement on his part, as would have been necessary for a career in rent-seeking. During violent clashes between opposing political parties in 1910, the privileged son of the founder of the Sociedad General had rushed outside the family home in central Guayaquil to investigate the commotion for himself. Nine years old at the time, he was punished for his curiosity with a sharp blow to the forehead, administered by a member of the armed forces. This left the younger Marcos with a permanent scar and, one must suppose, a lasting wariness of the rough and tumble of Ecuadorian politics. After expressing a desire at an early age to study medicine, he decided to join the family business instead.
As partners at the Sociedad General, the Marcoses offered business services in support of overseas trade, including export financing and insurance as well as the brokering of cargo space on oceangoing vessels. The Sociedad General also became the local agent for shipping companies such as Cunard White Star Line and Holland America. Simultaneously, the firm engaged in international trade on its own, exporting rice for example.
From Humble Beginnings
Many of Guayaquil’s entrepreneurs were from the costa’s leading families. This was true of the Marcoses, for instance, who could trace their ancestry to colonial times. However, Noboa’s employment at the Sociedad General and his subsequent rise into the commercial elite demonstrate that upward economic mobility was possible in the costa. The same can be said of northeastern Colombia. For example, Pepe Vives, a leading exporter of bananas from the region during the 1950s, was not “a member of any of the traditional, powerful families in the region and (was) without formal education.” Regardless, he was able to amass “a fortune with his own commercial, financial, and manufacturing businesses.”26 In no sense is the costa or northeastern Colombia egalitarian. However, the barriers to advancement are much worse in places where a land-holding gentry is in complete control, as was true in highland Ecuador well into the twentieth century. Where commerce dominates, as it does in downtown Guayaquil, lofty material aspirations are not completely unrealistic for someone with talent who is willing to work hard.
Even in rural areas, the banana business has provided opportunities for individuals whose origins were modest. One such individual was Manuel Amable-Calle, who was born in 1893 to a rural washerwoman and began his business career when he was all of ten years old. Fashioning a raft by lashing together a few pieces of wood, Amable-Calle ferried people and their goods across the Río Jubones, south of Guayaquil and not too far from Ecuador’s border with Peru. By 1920, he was able to purchase fertile land on the southern shore of the river, where he produced food for the Guayaquil market.27 A decade later, Amable-Calle was a shopkeeper and the leading resident of El Pasaje, up the Río Jubones from the coastal city of Machala. Around that time, SAFCO representatives persuaded him to raise bananas for export. Soon afterward, he planted the Gros Michel variety on his farm and convinced other growers in the area to do the same. By the late 1930s, his own harvests combined with his purchases of neighbors’ output were sizable enough for him to make weekly deliveries to the Chilean firm’s ships anchored in the river by Guayaquil.28
In July 1941, the Peruvian army invaded southern Ecuador, doing much damage in El Pasaje and a number of other towns and cities. Amable-Calle and his family had no choice other than to abandon their farm and flee. Returning home in January 1942, Amable-Calle replanted and, because
