The standard story behind the divergence in the Anglo settler colonies and former Iberian colonies is of institutions. Broadly speaking, after genociding the natives mostly out of the way, settler colonies like Australia, Canada, or the Northern United states then proceeded to build relatively inclusive societies. The initial wave of colonization was mostly driven by resources, such as wheat in the North, timber in Canada, or wool in Australia. As individuals interacted with markets that connected back to England, this led to high levels of literacy-90% in New England (though this was probably partially due to religion) and 70% in Pennsylvania and Virginia by the time of the revolution. They built governments that broadly represented the (white, male) population, and were responsive to its needs. Thus, they mostly avoided the resource curse, leading to broad gains among the entire population. When industrialization came, free land on the frontier (again, free after the indigenous were genocided out of the way) pushed up wages in cities, as factory bosses had to pay people well enough they didn’t just leave. This, in turn, led to high levels of capital investment in labor-saving technology, which the highly literate population was well placed to create. Free land and high salaries led to further immigration, including technicians and mechanics who would create the machinery, as well as workers and farmers for the factories and frontiers.

On the other hand, in Iberian colonies, outside of a few exceptions such as Argentina, a small white elite ruled over a much larger population of natives, blacks, and mixed people. They ran a highly extractive regime, whether in mining precious minerals, where natives were forced to work and the elites captured the profit; or in farming, where massive plantations were set up, with a small settler population capturing most of the gains. This elite became extraordinarily wealthy but had no incentive to invest in their population: it didn’t matter whether a serf on a hacienda could read, they just needed to work. The bulk of the population didn’t interact directly with markets, and lacking the Puritan demand to read the bible, didn’t learn to read. In Mexico, perhaps 20% of the population, largely white, was literate at independence, and by the mid 1900s, literacy was perhaps only 50%, lower than New England centuries earlier. The government that came out of this society was highly reflective of elite interests, dominated by elites who ran the Latin American countries with little regard for the bulk of the population. When industrialization came, resources became more expensive while manufactured goods became cheaper. Rather than trying to industrialize, the elite could become even wealthier by selling resources to the industrialized core, thus they tended to oppose tariffs, under-invest in education or transportation, and so on. What industry existed couldn’t compete with British manufacturers and went under, and Latin America was pulled into the agricultural periphery.

In this framework, the American South is the exception that proves the rule. Set up as a highly unequal slave society, dominated by elite landed interests, the South was also pulled into the agricultural periphery. Southern manufacturers were few and far between, and Southern interests tended to oppose steps that would improve their industry, opposing tariffs, internal improvements, educational institutions such as technical universities, and so on. This was because tariffs would make the manufactures they import more expensive, while not making them money as they didn’t manufacture anything themselves. Even after the destruction of slavery, the South remained highly unequal, and poorer than the North for generations, only when investing in their people and taking advantage of cheap labor to out-compete Northern manufacturing did the South start to converge.