Encumbered Cuba: Capital Markets and Revolt, 1878-1895

Published by EH.NET (June 2003)

Susan J. Fern?ndez, Encumbered Cuba: Capital Markets and Revolt, 1878-1895. Gainesville: University Press of Florida, 2002. xii + 203 pp. $59.95 (hardcover), ISBN: 0-8130-2564-8.

Reviewed for EH.NET by Linda K. Salvucci, Department of History, Trinity University.

Encumbered Cuba is a timely addition to the recent spate of historical works commemorating the centennial of the War of 1898 on the one hand and the latest print and broadcast analyses of “Anglobalization” by Niall Ferguson and his critics on the other. Inspired by such ongoing debates on the relationship between empire and economy, this monograph is grounded in sources from Cuba, Spain and the United States, especially the Braga Brothers Collection at the University of Florida. At issue are the very nature of late nineteenth-century Spanish colonialism and its relationship to subsequent economic growth and development in Cuba. Of course, the imperial bond between Spain and Cuba was rendered infinitely more complicated and complex, if not distorted entirely, by the pervasive influence of the United States. Indeed, for much of the nineteenth century, Cuba was a commercial and financial dependency of the United States, while remaining a political dependency of Spain (p. 47). The peculiarities of this situation make it more difficult than is often the case for historians to assess cause and effect, but Fern?ndez makes a credible effort to do so. She makes a compelling case for the significance of the period between the end of the Ten Years War (1868-1878) and the outbreak of rebellion again in 1895. During these years, she argues, Cuba should have been able to diversify its economy but did not, because Spanish colonialism had failed to foster the necessary institutions for credit and investment.

Cubanists will find this monograph an interesting prologue to Allan Dye’s Cuban Sugar in the Age of Mass Production (Stanford, 1998). Fern?ndez begins her intricate tale with an evocative description of the Columbian Exposition of 1893 and its “homage to European colonialism” (p. 1). Drawing upon the work of Spanish economic historians such as Gabriel Tortella Casares and the still useful insights of Stanley J. and Barbara H. Stein in The Colonial Heritage of Latin America (New York, 1970), she reviews the problems inherent in Spanish colonialism. Overall economic decline in the nineteenth century and the low level of technological development in the metropolis itself made for a “takeoff into sustained dependency” on the island (p. 7). Spain resisted the gold standard and free trade; the proportion of its government budget devoted to servicing debt far exceeded expenditures on infrastructure. In Cuba, railroads failed to handle all the sugar produced, let alone to stimulate industrialization or even diversification. A class of bourgeois bankers never developed to meet the significant credit needs of the sugar, tobacco, coffee and mining sectors because “personal favoritism” guided the appointment of “loyal Spaniards” to bank directorships and the subsequent granting of loans to borrowers (pp. 80, 91). In short, the Banco de Espa?ol de la Isla de Cuba (BEIC) and the Banco Hispano-Colonial (BHC) accommodated their functions to government interests and goals. For example, the BEIC alienated the elites outside Havana through its role as a designated tax collector; eventually, it found itself in the position of refusing its own notes for collection of fees to the government (p. 102). The Cuban planter class increasingly turned to the United States as the source of finance capital, paid for by ubiquitous sugar exports. All this was in evidence as early as 1866, when a crisis in Cuban money markets occurred.

Not surprisingly, the Ten Years War only exacerbated these interrelated trends and shortcomings. The impending demise of slavery in Cuba changed cash flow requirements for large producers, while freed slaves would have different credit needs as well. Added to this difficult mix were persistent currency shortages; by the early 1880s, there was not even enough currency available to pay winners of the Cuban colonial lottery. Spanish authorities and Catalan businessmen wanted the banks to stabilize the currency and to act as agencies for mobilizing private capital, but they were simply not able to do so.

During the last two decades of the nineteenth century, Spain’s need for Cuba increased while Cuba’s need for Spain decreased. Fern?ndez points out that the owners of large estates needed U.S. sugar sales and credit to survive Spanish colonialism. In short, Spain failed to provide its once “ever faithful isle” with the benefits of colonialism. The situation worsened dramatically in 1893, as economic crises occurred at other points in the Atlantic basin, most notably the United States. “Between 1893 and 1895, rebellion against Spanish colonialism in Cuba emerged from cross-class opposition to failed Spanish fiscal and monetary policies” (p. 143). Moreover, she asserts, the key element in the Cuban revolt was the perception that Spain could not lead Cuba to economic recuperation after 1894 (p. 150). Apparently, the United States, whose government knew how to recuperate from fiscal crises, could.

Or could it? The arguments of the last chapter of this book are a bit confusing, as Fern?ndez reverts back to her central premise, that the crucial moment for Cuba was not 1898, but the years between 1870 and 1895, when failure to develop adequate credit and investment institutions determined the persistence of sugar monoculture. Comparisons and contrasts with the rest of Latin America are attempted, but not fully pursued. While it is certainly true that, unlike elsewhere, domestic problems in Cuba could be blamed on colonialism (p. 164), the cause-effect relationship needs to be defined more systematically, perhaps by tracking the economic interests and political behavior of key planters and their creditors. Another way to approach this would be to propose a counterfactual: what if Cuba had become independent along with the rest of the Spanish colonies in the New World? In other words, it seems to me that the timing of Cuban independence might be as critical a variable as Spanish colonialism. Had Cuba achieved political independence in the 1810-20s, would the prospects for diversification have been significantly better? Would Cubans have put borrowed capital to better use? Or was U.S. influence already strong enough to have locked Cuba into a system of trade and borrowing that still depended upon sugar monoculture? Perhaps it is developments in the decades before the Ten Years War that proved just as decisive in the long run.

Susan Fern?ndez has tackled a complex and vital subject. While her work may be of greatest interest to specialists in nineteenth century Cuban history, she raises important questions for all who remain intrigued by the relationship between colonialism and economic development.

Linda K. Salvucci, Associate Professor of History at Trinity University in San Antonio, is working on a book project, “Ironies of Empire: The United States-Cuba Trade under Spanish Rule, 1760-1898.” With Richard J. Salvucci, she is coauthor of “Cuba and the Latin American Terms of Trade: Old Theories, New Evidence,” Journal of Interdisciplinary History, XXXI: 2 (Autumn, 2000), 197-222, which won the Conference on Latin American History Prize in 2001.