Understanding Banana Politics

Rushikesh Sude

Adi Raghavan

O. Henry, one of the most renowned authors, is famous for the surprising plot twists in his short stories. One such story, 'The Admiral', takes place in the fictional country of Anchuria, which he describes as a "small, maritime banana republic," owing to its reliance on the cultivation and sale of bananas. However, what most readers don't know is that Anchuria was based on late 19th century Honduras. O. Henry's story gained such traction that 'The Banana Republic' transcended the realms of literature and became a popular political term.

In politics, a 'Banana Republic' is any country whose economy largely or wholly relies on the export of a singular exhaustible resource, for example, Bananas. Typically, a Banana Republic has a small oligarchy of businessman and shareholders, a part of the companies that export the commodity. It is a vast, almost always underpaid, working-class whose labor can be easily exploited. The economic conditions of a Banana Republic closely resemble that of a late-stage capitalist society, with a plutocracy of businessman controlling the country through both economic and politically avenues.  


For a Banana Republic to be established, there must be either an exhaustible commodity or a commodity whose replenishment rate is less than its percentage of consumption. Although it seems complicated to find such a commodity, it is quite readily available. Almost all agricultural products and natural resources, which roughly form at least 30% of all exported goods, are exhaustible to some degree. This is because for a particular area of land, the rate of yield, or supply, is more or less static and can only be marginally increased even with heavy investments, but the commodity's demand is ever-increasing. Other essential requirements for a Banana Republic are, as aforementioned, a wealthy ruling class of businessman and investors, a large working class, and zealous, corrupt politicians who are willing to pass legislature that makes it easier for large corporations to exploit its employees.



It will be easier to comprehend this by taking a case study: Honduras.

Latin America is one of the best locations to cultivate bananas. As such, there was often a surplus of bananas in countries like Honduras. Further, Honduras had gained independence in 1821. It now had a large body of manpower without strong leadership. Seeing this, American exporting corporations, most notable the 'United Fruit Company', 'Cuyamel Fruit Company', and 'Vaccaro Brothers and Company', invested in the country. The void left by Spanish colonizers was filled by these corporations, who formed the oligarchy. Similarly, the native Honduras population created a large working class. Along with the economic boom, the societal conditions helped establish the first 'Banana Republic'.


Once a Banana Republic is established, the Government's critical roles are almost completely occupied by corrupt politicians. Any resistance is usually met by a successful coup attempt. Thus democracy, if present earlier, inevitably fails. Hereafter, the Government passes legislation that benefits the company, most commonly in concessions and tax exemptions. Another example is if the commodity requires mining, then the Government might make the environmental protection laws less restrictive, allowing the company to save money that would have otherwise been spent on the sustainability and safety of the region's inhabitants. For example, in Botswana, whose exhaustible commodity is diamonds, the Government has not passed any environmental laws, despite the country being a sink for greenhouse gases.

In the case of Honduras, Cuyamel Fruit Company (CFC) was already heavily involved in Honduran politics, and in 1908 even supported a failed coup attempt against the then President Miguel R. Dávila. In response to this, in 1910, President Dávila granted land concessions to the Vaccaro Brothers, competitors to the CFC, for the development of infrastructure and prohibited competitors from building a competing railroad within 20 km of the Vaccaro line. Enraged by this, CFC allied itself with former President Manuel Bonilla and staged another coup attempt, which was successful, and Bonilla assumed Presidency. 

Bonilla granted generous concessions to CFC and other corporations. This caused the Honduran Government to land deep in debt, to the point where they could not perform their essential functions. In turn, the corporations stepped in. They funded Honduras' infrastructure and even changed the currency to US dollars, which benefitted the country. Now, the corporations had control over the most exported product and a monopoly over the infrastructure and amenities of the country, such as railroads, telephone lines, radio towers, ports and piers, et al.

If it is not already apparent, Banana Republics are hardly sustainable. This is because if the initial trends of exploitation continue uninterrupted, the commodity will soon exhaust itself. One might argue that more money due to exports could translate to more jobs in the economy. However, this argument is fairly unfounded since even though jobs are created, they are at the cost of other jobs. For example, let's assume that the Cuyamel Fruit Company hired fifty employees from a particular city for Honduras. Here, it seems like the corporation created fifty jobs. However, one must also realize that as corporation expanded, many small, locally owned businesses could no longer compete with them and went out of business.

Further, the corporation would also need to buy land from landowners to expand their business, who could have previously been growing a different crop on the land. It soon becomes clear that the fifty jobs created come at the cost of some forty to sixty pre-existing jobs that ceased to exist because of said organizations. Further, it must also be noted that more often than not, the employees made less money working for the corporations than they did earlier.

 Moving forward, the best-case scenario is that due to internal issues, the major companies incur losses before the commodity is exhausted, which causes them to downsize. If the commodity is replenishable, then the reduced consumption rate may save the commodity from running out. However, in this scenario, the country finds itself in large sums of debts which hampers its economy for decades, if not centuries. The worst-case scenario is that the oligarchy milks out the commodity to exhaustion, dealing a great shock to the economy, which leads to poverty. This either leads to an external armed threat or a French revolution-esque internal rebellion from the now unemployed ruling class against the aristocratic plutocracy.

To prevent these outcomes, there are a few scenarios. The first is that the oligarchs realize the unsustainability of their operations and slowly incorporate other sectors. When the commodity exhausts itself, the economy will not crumple since it can fall back on the different sectors. This is probably the most realistic option since the oligarchy does not suffer huge losses, and it continues to have a steady source of wealth. Another practical but less probable scenario is political intervention from an external, much wealthier country. However, this may cause backlash and leave a scar on the two country's bilateral relations.

A third, much less probable scenario is that before the commodity exhausts itself, the working class stages an insurgence. Although it might sound like a good idea on paper, the oligarchs almost always use their wealth to build a personal militia for their defence. Thus, any rebellion would only result in a morbid massacre.

The companies eventually had to downsize their Honduras operations since otherwise they would have exhausted the already over-exploited banana plantations. To make matters worse, unlike other Central American countries, Honduras did not have any other natural resource that it could use to bolster its economy. As such, while conditions became marginally better over time, even today, there is a large wage gap between Honduras' upper class and working class.

Although at first glance, it might seem like Banana Republics benefit none but the wealthy oligarchs, it also infinitesimally benefits the working class. As seen in the case of Honduras, the plutocracy might step in and invest in infrastructure and other amenities that benefit the country as a whole. Further, jobs are also created to establish a banana republic: from workers who extract the commodity to people hired in the militias to other miscellaneous jobs. Thirdly, the intense emphasis laid on the extraction of the commodity also leads to investments to find better extraction methods. For example, since Jute was a major crop grown in Bangladesh and Eastern India, investments were made to create a more resilient, more resilient, and better yield. These investments benefit the community as a whole.

However, the detriments of a banana republic far outweigh the benefits. The working class can't rise above their status, and they are resigned to work themselves to death just to scrape by and survive.

In recent history, the few Banana Republics that have emerged are sporadically distributed across continents, unlike earlier when they were concentrated in a small geographic area. While Honduras continues to be the paragon of Banana Republics, countries like Cuba and Botswana have also established themselves as Banana Republics to sell Sugar and Diamonds, respectively. Bangladesh may also be considered as a Banana Republic for its dependence on the export of Jute. In 1986, then Treasurer of Australia, Paul Keating, warned that Australia could soon turn into a Banana Republic in the recent future due to its reliance on exporting raw materials to other countries instead of investing and building domestic industries. However, as of the present, that does not seem to be the case anymore.

Modern interpretations of Banana Republics have deviated from the traditional definition in two ways. Firstly, some critics believe that a modern Banana Republic is any country whose economy depends largely on a single commodity instead of exporting an exhaustible commodity. Some have placed countries like the Maldives in the category of Banana Republics for their reliance on resorts.

 Secondly, political commentators have started using Banana Republics as a term synonymous with Late-Stage Capitalist countries, referring to the USA as an example of a Banana Republic. Like the Banana Republics, in a Late-Stage Capitalist society, an extremely small group of individuals own the vast majority of capital. In the USA's case, as of 2016, the top 1% owned 38.5% of the total wealth.

O' Henry may have coined the term 'Banana Republic' for 20th century Honduras. However, it is foolish to believe that it was the first instance of such a societal system. After all, a Banana Republic is the product of human ambition and selfishness. It is safe to assume that Banana Republics would have existed in the distant past, exist in the present today, and will also continue to form in the distant future.  Greed, unfortunately, is not an exhaustible good, and the wealth of our resources will suffer because of it.