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The Industrialisation of Soviet Russia Volume 7: The Soviet Economy and the Approach of War, 1937-1939

Author(s):Davies, R.W.
Harrison, Mark
Khlevniuk, Oleg
Wheatcroft, Stephen G.
Reviewer(s):Gregg, Amanda G.

Published by EH.Net (July 2019)

R.W. Davies, Mark Harrison, Oleg Khlevniuk, and Stephen G. Wheatcroft, The Industrialisation of Soviet Russia Volume 7: The Soviet Economy and the Approach of War, 1937-1939. London: Palgrave Macmillan, 2018. xxvii + 439 pp. $110 (hardcover). ISBN: 978-1-137-36237-7.

Reviewed for EH.Net by Amanda G. Gregg, Department of Economics, Middlebury College.

 
It is my pleasure to review this final volume in the seven-volume series The Industrialisation of Soviet Russia, which began with the first volume published in 1980 by R.W. Davies. The series provides a detailed account of the Soviet economy under Stalin from 1929 to 1939, a period that spans from the collectivization of agriculture to Germany’s invasion of Poland.

This final volume concentrates on the years 1937-39, and the story opens darkly with the nomenklatura purge of the older generation of political and economic officials and the mass purge that repressed a broad class of “anti-Soviet” elements. The authors’ extensive primary source work and perspective as economic historians are especially appreciated here, as the book contains a lesser-emphasized account of the disordering effect of the purges on planning and performance, arguing that “the nomenklatura purges were an important factor in the deterioration of economic performance in industry, transport, and construction” (p. 19-20). Though 1937 was largely a year of economic disorder, there was a stroke of luck in an unexpectedly good harvest, though disorder in managing the influx of grain led much of the grain to remain with collective farmers, spurring fears a resurgence of a private sector trading agricultural goods. The book goes on to describe the 1937 and 1939 censuses, the much-delayed Third Five-Year Plan, and finally, the book concludes with the buildup to the Second World War, though the development of the defense industry runs like a leitmotif through the narrative.

In particular, the chapters describing the suppressed 1937 population census and the “corrected” 1939 census include some great storytelling. The 1937 census produced a population total for the Soviet Union that far lower than acceptable estimates, partly a long-run consequence of the famines of the early 1930s. I suspect most economic historians will be stirred by the authors’ account of the ensuing “collision between demographic expertise and political authority” (p. ix).

Particularly useful to historians of this period, this volume includes snapshot chapters for each year summarizing the state of the GULAG economy, industrial growth, defense, internal trade, and external trade, with additional entries as appropriate for a given year. These chapters would be a convenient reference on the state of the economy for scholars writing on the period.

I doubt anyone has ever composed the kind of blow-by-blow economic history of these years that the authors have assembled here. The book’s impressive array of primary source material includes archival citations from the Communist Party archives (RGASPI), the State Archive of the Russian Federation (GARF), and the Russian State Archive of the Economy (RGAE) to provide a detailed account of each economic moment. In addition, the authors employ an encyclopedic secondary source bibliography.

For the most part, chapters begin with parsimonious big-picture analysis in the introduction but then allow the facts and events to speak for themselves. However, the final chapter (“The Soviet Economy: The Late 1930s in Historical Perspective”) serves as a narrative essay to collect lessons learned from this and previous volumes. The authors here address a very big question: What lessons should economists, historians, and policymakers learn from the large-scale economic planning undertaken by Stalin? Allen (2003) has argued that Russia could have never industrialized without Stalinist collectivization and forced industrialization. But the authors of this volume are more measured, reminding us that although “the Soviet economy of the 1930s shows plenty of structural change,” (p. 341) along with a movement “from farm to factory,” there was “a counter-movement from farms, factories, and offices to resettlement, to the labour camp, and to the mass grave” (p. 342).

On this point, the authors here walk a fine line: though Soviet planning achieved great transformation in the 1930s, such advances were achieved by “a coercive state in the name of a party that cast down as many as it raised up, while denying all of them any significant voice in the process” (p. 342). However, the authors are careful to note that oppression itself was not the objective. Instead, “changes of this nature that came about were typically improvised in support of a greater goal,” “to build the military and industrial capabilities of the Soviet state, making it secure and powerful at home and abroad” (p. 343).

Finally, the book includes a fifty-page appendix of data tables that will be of great use to scholars of this period. Anyone interested in these years of Soviet history might find a useful quantitative nugget in these pages. Data tables document repressions by the NKVD, including arrests by social background and numbers held in GULAG camps and colonies; capital investment and planning; industrial performance; transportation; agricultural planning and production; public finance; foreign trade; population; and comparisons of Soviet and Western estimates.

In my view the book’s main contributions are twofold: the economic historian’s analytic eye and the incredible detail contributed by the authors’ careful examination of primary sources. I suspect that some of the book’s fine-grained detail on industrial production and agricultural yields will be beyond the scope of most readers’ interests. The less specialized reader might have hoped for more of a narrative and a little help keeping track of the extensive cast of characters. Though, some of the confusing constant personnel rotation makes its own point about this period.

This series, and this volume in particular, is essential reading for scholars with an academic interest in the Soviet Union in the 1930s, particularly economic historians interested in planning, the buildup to the Second World War, and Soviet statistics. For the more general economic history reader, I would especially recommend the chapters on the 1937 and 1939 censuses and their account of the economic effects of the 1937-38 purges, which I think could be excerpted quite well.

Reference:

Allen, Robert C. From Farm to Factory: A Reinterpretation of the Soviet Industrial Revolution. Princeton, NJ: Princeton University Press, 2003.

 
Amanda Gregg is an Assistant Professor of Economics at Middlebury College. She has studied industrialization, commercial law, and finance in late Imperial Russia. She is currently working on a project on Imperial Russian corporate dynamics with Steven Nafziger, a comparative finance project with Caroline Fohlin, and several papers describing ownership, labor, and organization in Russian factories.

Copyright (c) 2019 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (July 2019). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Economic Planning and Policy
Economywide Country Studies and Comparative History
Geographic Area(s):Europe
Time Period(s):20th Century: Pre WWII

The Political History of American Food Aid: An Uneasy Benevolence

Author(s):Riley, Barry
Reviewer(s):Barrett, Christopher B.

Published by EH.Net (June 2018)

Barry Riley, The Political History of American Food Aid: An Uneasy Benevolence. New York: Oxford University Press, 2017. xxvii + 562 pp. $50 (hardcover), ISBN: 978-019-02-2887-3.

Reviewed for EH.Net by Christopher B. Barrett, School of Applied Economics and Management, Cornell University.

 
International food aid has long attracted attention from policymakers and scholars far out of proportion to its scale in the global economy. Concessional food shipments have always comprised a small share of international flows of food and a negligible increment of global food production and consumption. Yet a Google Scholar search on “food aid” and “economics” returns more than one million results. Since at least T.W. Schultz more than half a century ago, economists have written about food aid’s direct effects on the economic and nutritional well-being of recipients and, even more, on its indirect effects on outcomes as diverse as food markets and prices, agricultural producer incentives in donor and recipient countries, international trade flows, and conflict in recipient countries. In recent years, special attention has been paid to the political economy of food aid and to the distributional and efficiency effects of statutory restrictions placed on food aid donations by legislatures, especially by the United States Congress since the U.S. has long been, by far, the world’s largest food aid donor. The complex political processes behind those restrictions, however, indeed the motivations and machinations behind the very existence and scale of international food aid donations, has remained a bit of a black box.

Barry Riley has done a remarkable job filling that void. This new volume offers the definitive political history of U.S. food aid. Riley brings impeccable credentials to the task. Now retired after a long and distinguished career with various food aid agencies of the U.S. government and the World Bank, he wrote the volume while a Visiting Scholar at Stanford University. At a time when economists too commonly grab a secondary data set and quickly write about a complex topic without taking time to master essential policy details, Riley’s work stands out as firmly rooted in an immersive understanding of the topic’s finest details. And this comprehensive historical account is meticulously sourced with primary documents from government records, media accounts of the day, and even personal letters.

Riley lucidly explains how and why the U.S. became the world’s primary food aid donor. He tells the story of the constant tension between the humanitarian impulse to assist those imperiled by natural disasters or war and the conservative instinct to resist foreign entanglements and fiscal commitments beyond the nation’s borders. He skillfully explains the time-varying electoral pressures faced by elected officials confronted by agricultural and maritime interests seeking assistance in lean times and reaching for profits opportunistically. He documents both the cynical and the idealistic geopolitical aims various nineteenth and twentieth century U.S. politicians had in deploying American farm surpluses around the world. The central role of key leaders — especially Herbert Hoover, Lyndon Johnson, and Henry Kissinger — in bending others to their will comes through clearly. The case-specific drivers and outcomes of food aid donations are especially nicely illustrated in two chapters that go into particular depth on a single country: Chapter 13’s explanation of the Johnson administration’s management of food aid to India in the 1960s and Chapter 19’s analysis of the Reagan administration’s handling of the mid-1980s famine in Ethiopia.

Riley begins with late eighteenth-century Congressional debates when the framers of the Constitution and their colleagues were struggling to interpret what limits, if any, the new nation’s founding charter imposed on the federal government using scarce tax revenues to shower largesse on foreign populations. Those debates resumed periodically in response to a variety of foreign disasters of various sorts. Into the early years of the twentieth century, American food aid was episodic and modest in volume and impacts.

Riley then focuses attention on the first half of the twentieth century, when the ravages of two World Wars and the Great Depression, combined with rapid technological change in American agriculture, created a perfect storm of U.S. commodity surpluses, extended periods of depressed global demand, and acute humanitarian need. This period put the existential questions surrounding U.S. food aid to rest. Programs became permanent and expansive. That period begat the Agricultural Adjustment Acts of 1933 and 1938, which launched large-scale farm support programs that insinuated the federal government into commodity markets. This laid the foundation for 1954’s passage of the Agricultural Trade Development and Assistance Act, Public Law 480, which created the main U.S. food aid programs ever since. The program’s renaming in the Food for Peace Act of 1966 signaled the growing use of food aid as a foreign policy tool under the Kennedy, Johnson, Nixon, Ford, Carter, and Reagan administrations. The aims varied with the political leanings of the U.S. government of the day: to foster economic development and relieve world hunger, to reward foreign allies and punish those regimes that strayed too near the Soviet orbit, to advance human rights, or to promote American exports. Both Democratic and Republican administrations, however, proved overconfident in food aid’s ability to bend the world to American will.

As food aid’s ineffectiveness as a foreign policy tool and as the fiscal imperative of extracting the U.S. government from the business of propping up grain prices as a buyer of last resort both became clear, the scale of U.S. food aid relative to commercial exports and the domestic food economy has steadily declined since the 1970s. The dominant voices in recent food aid debates have thus been the international development and humanitarian organizations, as well as the agribusinesses — mainly processors, not farmers — and maritime interests that profit from Congressionally-imposed statutory restrictions on commodity and ocean freight procurement. In the twenty-first century, both Democratic and Republican administrations have consistently advocated for reforms to enhance the efficiency and timeliness of increasingly scarce humanitarian food aid. But the complex political economy that begat a permanent and briefly-generous U.S. food aid program now complicates the Congressional politics of reform. Without understanding the political history of U.S. food aid, it’s hard to make sense of the current policy debate.

In twenty-five years of studying food aid, I have probably read the vast majority of published studies on the topic. Rarely have I learned so much as from Riley’s impressive and beautifully written history. This volume is an indispensable reference for anyone studying or writing about U.S. food aid programs. U.S. food aid policy has always reflected a shifting balance among a range of objectives. Thus it has always been deeply political. The complexities of U.S. Congressional authorization and appropriations processes often make it difficult to identify the drivers of policy decisions. Thanks to Barry Riley’s lucid historical account, it is far easier for contemporary policy analysts to appreciate the history dependence of current economic policy.

 
Christopher B. Barrett is the Stephen B. and Janice G. Ashley Professor of Applied Economics at Cornell University. He has written extensively on the economics of food aid and food assistance programs and is co-author (with Daniel G. Maxwell) of Food Aid after Fifty Years: Recasting Its Role and co-editor (with Julia Steets and Andrea Binder) of Uniting on Food Assistance: The Case for Transatlantic Cooperation.

Copyright (c) 2018 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (June 2018). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Agriculture, Natural Resources, and Extractive Industries
Government, Law and Regulation, Public Finance
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII
20th Century: WWII and post-WWII

Other People’s Money: How Banking Worked in the Early American Republic

Author(s):Murphy, Sharon Ann
Reviewer(s):Goodspeed, Tyler Beck

Published by EH.Net (January 2018)

Sharon Ann Murphy, Other People’s Money: How Banking Worked in the Early American Republic. Baltimore: Johns Hopkins University Press, 2017. xii + 192 pp. $20 (paperback), ISBN: 978-1-421-42175-9.

Reviewed for EH.Net by Tyler Beck Goodspeed, Council of Economic Advisers.

 

Covering, when all is said and done, over half a millennium of American monetary history in a readable, introductory text of under two hundred pages is no mean feat. Doing so while also satisfying specialists in a relatively niche field and period of financial history is an especially daunting task. In Other People’s Money: How Banking Worked in the Early American Republic, Sharon Ann Murphy (Department of History, Providence College) has managed to achieve both.

The Bank War between Jackson and Biddle — perhaps, as Murphy notes, many students’ only encounter with antebellum American banking — provides an appropriate opening to Murphy’s account, introducing the principal cast of characters and illustrating the extent to which issues of money and banking permeated early American society, as well as the gravity with which ordinary Americans accordingly considered monetary matters.

Having thus set the stage, Murphy then proceeds through a packed “how it worked” series. Starting with the arrival of Columbus, in chapter 1, “How Money Worked,” she races through commodity money, fiat money, inflation, debt, and financing the American Revolution, contextualizing the economic concepts within the specific historical setting. In chapter 2, “How Banks Worked,” Murphy similarly catalogs the various sources of credit in colonial America, the assets and liabilities — particularly private bank notes — of colonial and antebellum banks, the incentives to incorporate, and the (First) Bank of the United States.

In chapter 3, “How Panics Worked,” we are then provided an account of the causes and dynamics of banking panics of the antebellum period that is both concise and consistent with the latest academic research. We here learn also of bimetallism, the Second Bank of the United States, and both public and private responses to panics, including public liability insurance, free banking, and clearinghouses. Chapter 4, “Experiments in Money and Banking,” expands on some of these topics, describing in greater depth the motivations and public discourse behind the movement toward both free banking and regulation, acute anxieties about fractional reserve banking generally, as well as the growing diversity of formal banking institutions. The chapter culminates with a succinct but accurate discussion of the Panic of 1857, including mention of the role of bank branching in mitigating the severity of the crisis.

Finally, and, for this reader, most interestingly, chapter 5 offers a brief but again academically sound overview of the fiscal challenges faced by the Union and Confederate governments in financing the Civil War, and how responses to those challenges intertwined with money and banking. This is perhaps the most data-intensive of the chapters, though quantitative evidence is seamlessly woven into a predominantly qualitative account. The chapter concludes with a short summary of the contours of American banking in the wake of the Civil War and, in particular, the National Bank Act.

It is important to be clear what this book is, and what it is not. It is an excellent introduction to how money and banking worked, not only in the early American republic, but in the post-Civil War national banking era as well. As such, it will likely offer a valuable companion for students of American economic and financial history, and even of early American political history, as well as informed lay-readers. It is not, and does not purport to be, an academic monograph intended for research historians or economic historians. Accordingly, footnotes are kept to a minimum, which makes for a smoother read, though at the cost of ability to investigate further. Murphy does, however, provide an extensive summary of suggested further reading, which will again be helpful for undergraduate and graduate students just beginning to explore the subject.

On the whole, Murphy has written what this financial historian considers a sound and reliable introductory or companion text to early American banking that is both engaging and easy-to-read, and at the same time broadly consistent with recent economic research on the topics covered. While students of economic and financial history generally would likely find it a useful text, my sense is that it might be of particular use to those more on the history side of economic history, than on the economic side of economic history.

My one idiosyncratic lament, which in any event may lie outside the scope of the book, is that I felt myself yearning for a more provocative embedded theme. As Murphy correctly notes throughout, many of the issues of, for example, note issuance and deposit insurance and branching and regulation may seem banal to the contemporary reader, but were intensely debated at the time. While the author addresses the political nature of these issues and responses to them, a stronger sense of the political contingency of the development of American banking would, I think, plant important questions in students’ minds. The path to 1913, or 1933, or, for that matter, 2008, was not at all linear, and a better sense of the alternative possible histories of American banking, and what may or may not have amplified the relative fragility of American banking system, would have been welcome.

Regardless, it is a fine text, made all the better by a fitting nod to Supreme Court Justice Louis Brandeis’ 1914 book by the same title, and a fascinating epilogue on the changing faces of the $20 bill.

 
Tyler Beck Goodspeed is a Senior Economist at the Council of Economic Advisers. He recently published Legislating Instability: Adam Smith, Free Banking, and the Financial Crisis of 1772, and Famine and Finance: Credit and the Great Famine of Ireland.

Copyright (c) 2018 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (January 2018). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):North America
Time Period(s):18th Century
19th Century

The Economic History of Mexico

The Economic History of Mexico

Richard Salvucci, Trinity University

 

Preface[1]

This article is a brief interpretive survey of some of the major features of the economic history of Mexico from pre-conquest to the present. I begin with the pre-capitalist economy of Mesoamerica. The colonial period is divided into the Habsburg and Bourbon regimes, although the focus is not really political: the emphasis is instead on the consequences of demographic and fiscal changes that colonialism brought.  Next I analyze the economic impact of independence and its accompanying conflict. A tentative effort to reconstruct secular patterns of growth in the nineteenth century follows, as well as an account of the effects of foreign intervention, war, and the so-called “dictatorship” of Porfirio Diaz.  I then examine the economic consequences of the Mexican Revolution down through the presidency of Lázaro Cárdenas, before considering the effects of the Great Depression and World War II. This is followed by an examination of the so-called Mexican Miracle, the period of import-substitution industrialization after World War II. The end of the “miracle” and the rise of economic instability in the 1970s and 1980s are discussed in some detail. I conclude with structural reforms in the 1990s, the North American Free Trade Agreement (NAFTA), and slow growth in Mexico since then. It is impossible to be comprehensive and the references appearing in the citations are highly selective and biased (where possible) in favor of English-language works, although Spanish is a must for getting beyond the basics. This is especially true in economic history, where some of the most innovative and revisionist work is being done, as it should be, by historians and economists in Mexico.[2]

 

Where (and What) is Mexico?

For most of its long history, Mexico’s boundaries have been shifting, albeit broadly stable. Colonial Mexico basically stretched from Guatemala, across what is now California and the Southwestern United States, and vaguely into the Pacific Northwest.  There matters stood for more than three centuries[3]. The big shock came at the end of the War of 1847 (“the Mexican-American War” in U.S. history). The Treaty of Guadalupe Hidalgo (1848) ended the war, but in so doing, ceded half of Mexico’s former territory to the United States—recall Texas had been lost in 1836. The northern boundary now ran on a line beginning with the Rio Grande to El Paso, and thence more or less west to the Pacific Ocean south of San Diego. With one major adjustment in 1853 (the Gadsden Purchase or Treaty of the Mesilla) and minor ones thereafter, because of the shifting of the Rio Grande, there it has remained.

Prior to the arrival of the Europeans, Mexico was a congeries of ethnic and city states whose own boundaries were unstable. Prior to the emergence of the most powerful of these states in the fifteenth century, the so-called Triple Alliance (popularly “Aztec Empire”), Mesoamerica consisted of cultural regions determined by political elites and spheres of influence that were dominated by large ceremonial centers such as La Venta, Teotihuacán, and Tula.

While such regions may have been dominant at different times, they were never “economically” independent of one another. At Teotihuacan, there were living quarters given over to Olmec residents from the Veracruz region, presumably merchants. Mesoamerica was connected, if not unified, by an ongoing trade in luxury goods and valuable stones such as jade, turquoise and precious feathers. This was not, however, trade driven primarily by factor endowments and relative costs. Climate and resource endowments did differ significantly over the widely diverse regions and microclimates of Mesoamerica. Yet trade was also political and ritualized in religious belief. For example, calling the shipment of turquoise from the (U.S.) Southwest to Central Mexico the outcome of market activity is an anachronism. In the very long run, such prehistorical exchange facilitated the later emergence of trade routes, roads, and more technologically advanced forms of transport. But arbitrage does not appear to have figured importantly in it.[4]

In sum, what we call “Mexico” in a modern sense is not of much use to the economic historian with an interest in the country before 1870, which is to say, the great bulk of its history. In these years, specificity of time and place, sometimes reaching to the village level, is an indispensable prerequisite for meaningful discussion. At the very least, it is usually advisable to be aware of substantial regional differences which reflect the ethnic and linguistic diversity of the country both before and after the arrival of the Europeans. There are fully ten language families in Mexico, and two of them, Nahuatl and Quiché, number over a million speakers each.[5]

 

Trade and Tribute before the Europeans

In the codices or deerskin folded paintings the Europeans examined (or actually commissioned), they soon became aware of a prominent form of Mesoamerican economic activity: tribute, or taxation in kind, or even labor services. In the absence of anything that served as money, tribute was forced exchange. Tribute has been interpreted as a means of redistribution in a nonmonetary economy. Social and political units formed a basis for assessment, and the goods collected included maize, beans, chile and cotton cloth. It was through the tribute the indigenous “empires” mobilized labor and resources. There is little or no evidence for the existence of labor or land markets to do so, for these were a European import, although marketplaces for goods existed in profusion.

To an extent, the preconquest reliance on barter economies and the absence of money largely accounts for the ubiquity of tribute. The absence of money is much more difficult to explain and was surely an obstacle to the growth of productivity in the indigenous economies.

The tribute was a near-universal attribute of Mesoamerican ceremonial centers and political empires. The city of Teotihuacan (ca. 600 CE, with a population of 125,000 or more) in central Mexico depended on tribute to support an upper stratum of priests and nobles while the tributary population itself lived at subsistence. Tlatelolco (ca 1520, with a population ranging from 50 to 100 thousand) drew maize, cotton, cacao, beans and precious feathers from a wide swath of territory that broadly extended from the Pacific to Gulf coasts that supported an upper stratum of priests, warriors, nobles, and merchants. It was this urban complex that sat atop the lagoons that filled the Valley of Mexico that so awed the arriving conquerors.

While the characterization of tribute as both a corvée and a tax in kind to support nonproductive populations is surely correct, its persistence in altered (i.e., monetized) form under colonial rule does suggest an important question. The tributary area of the Mexica (“Aztec” is a political term, not an ethnic one) broadly comprised a Pacific slope, a central valley, and a Gulf slope. These embrace a wide range of geographic features ranging from rugged volcanic highlands (and even higher snow-capped volcanoes) to marshy, humid coastal plains. Even today, travel through these regions is challenging. Lacking both the wheel and draught animals, the indigenous peoples relied on human transport, or, where possible, waterborne exchange. However we measure the costs of transportation, they were high. In the colonial period, they typically circumscribed the subsistence radius of markets to 25 to 35 miles. Under the circumstances, it is not easy to imagine that voluntary exchange, particularly between the coastal lowlands and the temperate to cold highlands and mountains, would be profitable for all but the most highly valued goods. In some parts of Mexico–as in the Andean region—linkages of family and kinship bound different regions together in a cult of reciprocal economic obligations. Yet absent such connections, it is not hard to imagine, for example, transporting woven cottons from the coastal lowlands to the population centers of the highlands could become a political obligation rather than a matter of profitable, voluntary exchange. The relatively ambiguous role of markets in both labor and goods that persisted into the nineteenth century may perhaps derive from just this combination of climatic and geographical characteristics. It is what made voluntary exchange under capitalistic markets such a puzzlingly problematic answer to the ordinary demands of economic activity.

 

[See the relief map below for the principal physical features of Mexico.]

image1

http://www.igeograf.unam.mx/sigg/publicaciones/atlas/anm-2007/muestra_mapa.php?cual_mapa=MG_I_1.jpg

[See the political map below for Mexican states and state capitals.]

image2

 

 

Used by permission of the University of Texas Libraries, The University of Texas at Austin.

 

“New Spain” or Colonial Mexico: The First Phase

Mexico was established by military conquest and civil war. In the process, a civilization with its own institutions and complex culture was profoundly modified and altered, if not precisely destroyed, by the European invaders. The catastrophic elements of conquest, including the sharp decline of the existing indigenous population, from perhaps 25 million to fewer than a million within a century due to warfare, disease, social disorganization and the imposition of demands for labor and resources should nevertheless not preclude some assessment, however tentative, of its economic level in 1519, when the Europeans arrived.[6]

Recent thinking suggests that Spain was far from poor when it began its overseas expansion. If this were so, the implications of the Europeans’ reactions to what they found on the mainland of Mexico (not, significantly in the Caribbean, and, especially, in Cuba, where they were first established) is important. We have several accounts of the conquest of Mexico by the European participants, of which Bernal Díaz del Castillo is the best known, but not the only one. The reaction of the Europeans was almost uniformly astonishment by the apparent material wealth of Tenochtitlan. The public buildings, spacious residences of the temple precinct, the causeways linking the island to the shore, and the fantastic array of goods available in the marketplace evoked comparisons to Venice, Constantinople, and other wealthy centers of European civilization. While it is true that this was a view of the indigenous elite, the beneficiaries of the wealth accumulated from numerous tributaries, it hardly suggests anything other than a kind of storied opulence. Of course, the peasant commoners lived at subsistence and enjoyed no such privileges, but then so did the peasants of the society from which Bernal Díaz, Cortés, Pedro de Alvarado and the other conquerors were drawn. It is hard to imagine that the average standard of living in Mexico was any lower than that of the Iberian Peninsula. The conquerors remarked on the physical size and apparent robust health of the people whom they met, and from this, scholars such as Woodrow Borah and Sherburne Cook concluded that the physical size of the Europeans and the Mexicans was about the same. Borah and Cook surmised that caloric intake per individual in Central Mexico was around 1,900 calories per day, which certainly seems comparable to European levels.[7]

Certainly, the technological differences with Europe hampered commercial exchange, such as the absence of the wheel for transportation, metallurgy that did not include iron, and the exclusive reliance on pictographic writing systems. Yet by the same token, Mesoamerican agricultural technology was richly diverse and especially oriented toward labor-intensive techniques, well suited to pre-conquest Mexico’s factor endowments. As Gene Wilken points out, Bernardino de Sahagún explained in his General History of the Things of New Spain that the Nahua farmer recognized two dozen soil types related to origin, source, color, texture, smell, consistency and organic content.  They were expert at soil management.[8] So it is possible not only to misspecify, but to mistake the technological “backwardness” of Mesoamerica relative to Europe, and historians routinely have.

The essentially political and clan-based nature of economic activity made the distribution of output somewhat different from standard neoclassical models. Although no one seriously maintains that indigenous civilization did not include private property and, in fact, property rights in humans, the distribution of product tended to emphasize average rather than marginal product. If responsibility for tribute was collective, it is logical to suppose that there was some element of redistribution and collective claim on output by the basic social groups of indigenous society, the clans or calpulli.[9] Whatever the case, it seems clear that viewing indigenous society and economy as strained by population growth to the point of collapse, as the so-called “Berkeley school” did in the 1950s, is no longer tenable. It is more likely that the tensions exploited by the Europeans to divide and conquer their native hosts and so erect a colonial state on pre-existing native entities were mainly political rather than socioeconomic. It was through the assistance of native allies such as the Tlaxcalans, as well as with the help of previously unknown diseases such as smallpox that ravaged the indigenous peoples, that the Europeans were able to place a weakened Tenochtitlan under siege and finally defeat it.

 

Colonialism and Economic Adjustment to Population Decline

With the subjection first of Tenochtitlan and Tlatelolco and then of other polities and peoples, a process that would ultimately stretch well into the nineteenth century and was never really completed, the Europeans turned their attention to making colonialism pay. The process had several components: the modification or introduction of institutions of rule and appropriation; the introduction of new flora and fauna that could be turned to economic use; the reorientation of a previously autarkic and precapitalist economy to the demands of trade and commercial exploitation; and the implementation of European fiscal sovereignty. These processes were complex, required much time, and were, in many cases, only partly successful. There is considerable speculation regarding how long it took before Spain (arguably a relevant term by the mid-sixteenth century) made colonialism pay. The best we can do is present a schematic view of what occurred. Regional variations were enormous: a “typical” outcome or institution of colonialism may well have been an outcome visible in central Mexico. Moreover, all generalizations are fragile, rest on limited quantitative evidence, and will no doubt be substantially modified eventually. The message is simple: proceed with caution.

The Europeans did not seek to take Mesoamerica as a tabula rasa. In some ways, they would have been happy to simply become the latest in a long line of ruling dynasties established by decapitating native elites and assuming control. The initial demand of the conquerors for access to native labor in the so-called encomienda was precisely that, with the actual task of governing be left to the surviving and collaborating elite: the principle of “indirect rule.”[10] There were two problems with this strategy: the natives resisted and the natives died. They died in such large numbers as to make the original strategy impracticable.

The number of people who lived in Mesoamerica has long been a subject of controversy, but there is no point in spelling it out once again. The numbers are unknowable and, in an economic sense, not really important. The population of Tenochtitlan has been variously estimated between 50 and 200 thousand individuals, depending on the instruments of estimation.  As previously mentioned, some estimates of the Central Mexican population range as high as 25 million on the eve of the European conquest, and virtually no serious student accepts the small population estimates based on the work of Angel Rosenblatt. The point is that labor was abundant relative to land, and that the small surpluses of a large tributary population must have supported the opulent elite that Bernal Díaz and his companions described.

By 1620, or thereabouts, the indigenous population had fallen to less than a million according to Cook and Borah. This is not just the quantitative speculation of modern historical demographers. Contemporaries such as Jerónimo de Mendieta in his Historia eclesiástica Indiana (1596) spoke of towns formerly densely populated now witness to “the palaces of those former Lords ruined or on the verge of. The homes of the commoners mostly empty, roads and streets deserted, churches empty on feast days, the few Indians who populate the towns in Spanish farms and factories.” Mendieta was an eyewitness to the catastrophic toll that European microbes and warfare took on the native population. There was a smallpox epidemic in 1519-20 when 5 to 8 million died. The epidemic of hemorrhagic fever in 1545 to 1548 was one of the worst demographic catastrophes in human history, killing 5 to 15 million people. And then again in 1576 to 1578, when 2 to 2.5 million people died, we have clear evidence that land prices in the Valley of Mexico (Coyoacán, a village outside Mexico City, as the reconstructed Tenochtitlán was called) collapsed. The death toll was staggering. Lesser outbreaks were registered in 1559, 1566, 1587, 1592, 1601, 1604, 1606, 1613, 1624, and 1642. The larger point is that the intensive use of native labor, such as the encomienda, had to come to an end, whatever its legal status had become by virtue of the New Laws (1542). The encomienda or the simple exploitation of massive numbers of indigenous workers was no longer possible. There were too few “Indians” by the end of the sixteenth century.[11]

As a result, the institutions and methods of economic appropriation were forced to change. The Europeans introduced pastoral agriculture – the herding of cattle and sheep – and the use of now abundant land and scarce labor in the form of the hacienda while the remaining natives were brought together in “villages” whose origins were not essentially pre- but post-conquest, the so-called congregaciones, at the same time that the titles to now-vacant lands were created, regularized and “composed.”[12] (Land titles were a European innovation as well). Sheep and cattle, which the Europeans introduced, became part of the new institutional backbone of the colony. The natives would continue to rely on maize for the better part of their subsistence, but the Europeans introduced wheat, olives (oil), grapes (wine) and even chickens, which the natives rapidly adopted. On the whole, the results of these alterations were complex. Some scholars argue that the native diet improved even in the face of their diminishing numbers, a consequence of increased land per person and of greater variety of foodstuffs, and that the agricultural potential of the colony now called New Spain was enhanced. By the beginning of the seventeenth century, the combined indigenous, European immigrant, and new mixed blood populations could largely survive on the basis of their own production. The introduction of sheep lead to the introduction and manufacture of woolens in what were called obrajes or manufactories in Puebla, Querétaro, and Coyoacán. The native peoples continued to produce cottons (a domestic crop) under the stimulus of European organization, lending, and marketing. Extensive pastoralism, the cultivation of cereals and even the incorporation of native labor then characterized the emergence of the great estates or haciendas, which became a characteristic rural institution through the twentieth century, when the Mexican Revolution put an end to many of them. Thus the colony of New Spain continued to feed, clothe and house itself independent of metropolitan Spain’s direction. Certainly, Mexico before the Conquest was self-sufficient. The extent to which the immigrant and American Spaniard or creole population depended on imports of wine, oil and other foodstuffs and textiles in the decades immediately following the conquest is much less clear.

At the same time, other profound changes accompanied the introduction of Europeans, their crops and their diseases into what they termed the “kingdom” (not colony, for constitutional reasons) of New Spain.[13] Prior to the conquest, land and labor had been commoditized, but not to any significant extent, although there was a distinction recognized between possession and ownership.  Scholars who have closely examined the emergence of land markets after the conquest—mainly in the Valley of Mexico—are virtually unanimous in this conclusion. To the extent that markets in labor and commodities had emerged, it took until the 1630s (and later elsewhere in New Spain) for the development to reach maturity. Even older mechanisms of allocation of labor by administrative means (repartimiento) or by outright coercion persisted. Purely economic incentives in the form of money wages and prices never seemed adequate to the job of mobilizing resources and those with access to political power were reluctant to pay a competitive wage. In New Spain, the use of some sort of political power or rent-seeking nearly always accompanied labor recruitment. It was, quite simply, an attempt to evade the implications of relative scarcity, and renders the entire notion of “capitalism” as a driving economic force in colonial Mexico quite inexact.

 

Why the Settlers Resisted the Implications of Scarce Labor

The reasons behind this development are complex and varied. The evidence we have for the Valley of Mexico demonstrates that the relative price of labor rose while the relative price of land fell even when nominal movements of one or the other remained fairly limited. For instance, the table constructed below demonstrates that from 1570-75 through 1591-1606, the price of unskilled labor in the Valley of Mexico nearly tripled while the price of land in the Valley (Coyoacán) fell by nearly two thirds. On the whole, the price of labor relative to land increased by nearly 800 percent. The evolution of relative prices would have inevitably worked against the demanders of labor (Europeans and increasingly, creoles or Americans of largely European ancestry) and in favor of the supplier (native labor, or people of mixed race generically termed mestizo). This was not of course what the Europeans had in mind and by capture of legal institutions (local magistrates, in particularly), frequently sought to substitute compulsion for what would have been costly “free labor.” What has been termed the “depression” of the seventeenth century may well represent one of the consequences of this evolution: an abundance of land, a scarcity of labor, and the attempt of the new rulers to adjust to changing relative prices. There were repeated royal prohibitions on the use of forced indigenous labor in both public and private works, and thus a reduction in the supply of labor. All highly speculative, no doubt, but the adjustment came during the central decades of the seventeenth century, when New Spain increasingly produced its own woolens and cottons, and largely assumed the tasks of providing itself with foodstuffs and was thus required to save and invest more.  No doubt, the new rulers felt the strain of trying to do more with less.[14]

 

Years Land Price Index Labor Price Index (Labor/Land) Index
1570-1575 100 100 100
1576-1590 50 143 286
1591-1606 33 286 867

 

Source: Calculated from Rebecca Horn, Postconquest Coyoacan: Nahua-Spanish Relations in Central Mexico, 1519-1650 (Stanford: Stanford University Press, 1997), p. 208 and José Ignacio Urquiola Permisan, “Salarios y precios en la industria manufacturer textile de la lana en Nueva España, 1570-1635,” in Virginia García Acosta, (ed.), Los precios de alimentos y manufacturas novohispanos (México, DF: CIESAS, 1995), p. 206.

 

The overall role of Mexico within the Hapsburg Empire was in flux as well. Nothing signals the change as much as the emergence of silver mining as the principal source of Mexican exportables in the second half of the sixteenth century. While Mexico would soon be eclipsed by Peru as the most productive center of silver mining—at least until the eighteenth century—the discovery of significant silver mines in Zacatecas in the 1540s transformed the economy of the Spanish empire and the character of New Spain’s as well.

 

 

 

Silver Mining

While silver mining and smelting was practiced before the conquest, it was never a focal point of indigenous activity. But for the Europeans, Mexico was largely about silver mining. From the mid- sixteenth century onward, it was explicitly understood by the viceroys that they were to do all in their power to “favor the mines,” as one memorable royal instruction enjoined. Again, there has been much controversy of the precise amounts of silver that Mexico sent to the Iberian Peninsula. What we do know certainly is that Mexico (and the Spanish Empire) became the leading source of silver, monetary reserves, and thus, of high-powered money. Over the course of the colonial period, most sources agree that Mexico provided nearly 2 billion pesos (dollars) or roughly 1.6 billion troy ounces to the world economy. The graph below provides a picture of the remissions of all Mexican silver to both Spain and to the Philippines taken from the work of John TePaske.[15]

page16

Since the population of Mexico under Spanish rule was at most 6 million people by the end of the colonial period, the kingdom’s silver output could only be considered astronomical.

This production has to be considered in both its domestic and international dimensions. From a domestic perspective, the mines were what a later generation of economists would call “growth poles.” They were markets in which inputs were transformed into tradable outputs at a much higher rate of productivity (because of mining’s relatively advanced technology) than Mexico’s other activities. Silver thus became Mexico’s principal exportable good, and remained so well into the late nineteenth century.  The residual claimants on silver production were many and varied.  There were, of course the silver miners themselves in Mexico and their merchant financiers and suppliers. They ranged from some of the wealthiest people in the world at the time, such as the Count of Regla (1710-1781), who donated warships to Spain in the eighteenth century, to individual natives in Zacatecas smelting their own stocks of silver ore.[16] While the conditions of labor in Mexico’s silver mines were almost uniformly bad, the compensation ranged from above market wages paid to free labor in the prosperous larger mines  of the Bajío and the North to the use of forced village  labor drafts in more marginal (and presumably less profitable) sites such as Taxco. In the Iberian Peninsula, income from American silver mines ultimately supported not only a class of merchant entrepreneurs in the large port cities, but virtually the core of the Spanish political nation, including monarchs, royal officials, churchmen, the military and more. And finally, silver flowed to those who valued it most highly throughout the world. It is generally estimated that 40 percent of Spain’s American (not just Mexican, but Peruvian as well) silver production ended up in hoards in China.

Within New Spain, mining centers such as Guanajuato, San Luis Potosí, and Zacatecas became places where economic growth took place rapidly, in which labor markets more readily evolved, and in which the standard of living became obviously higher than in neighboring regions. Mining centers tended to crowd out growth elsewhere because the rate of return for successful mines exceeded what could be gotten in commerce, agriculture and manufacturing. Because silver was the numeraire for Mexican prices—Mexico was effectively on a silver standard—variations in silver production could and did have substantial effects on real economic activity elsewhere in New Spain. There is considerable evidence that silver mining saddled Mexico with an early case of “Dutch disease” in which irreducible costs imposed by the silver standard ultimately rendered manufacturing and the production of other tradable goods in New Spain uncompetitive. For this reason, the expansion of Mexican silver production in the years after 1750 was never unambiguously accompanied by overall, as opposed to localized prosperity. Silver mining tended to absorb a disproportional quantity of resources and to keep New Spain’s price level high, even when the business cycle slowed down—a fact that was to impress visitors to Mexico well into the nineteenth century. Mexican silver accounted for well over three-quarters of exports by value into the nineteenth century as well. The estimates vary widely, for silver was by no means the only, or even the most important source of revenue to the Crown, but by the end of the colonial era, the Kingdom of New Spain probably accounted for 25 percent of the Crown’s imperial income.[17] That is why reformist proposals circulating in governing circles in Madrid in the late eighteenth century fixed on Mexico. If there was any threat to the American Empire, royal officials thought that Mexico, and increasingly, Cuba, were worth holding on to. From a fiscal standpoint, Mexico had become just that important.[18]

 

“New Spain”: The Second Phase                of the Bourbon “Reforms”

In 1700, the last of the Spanish Hapsburgs died and a disputed succession followed. The ensuring conflict, known as the War of Spanish Succession, came to an end in 1714. The grandson of French king Louis XIV came to the Spanish throne as King Philip V. The dynasty he represented was known as the Bourbons. For the next century of so, they were to determine the fortunes of New Spain. Traditionally, the Bourbons, especially the later ones, have been associated with an effort to “renationalize” the Spanish empire in America after it had been thoroughly penetrated by French, Dutch, and lastly, British commercial interests.[19]

There were at least two areas in which the Bourbon dynasty, “reformist” or no, affected the Mexican economy. One of them dealt with raising revenue and the other was the international position of the imperial economy, specifically, the volume and value of trade. A series of statistics calculated by Richard Garner shows that the share of Mexican output or estimated GDP taken by taxes grew by 167 percent between 1700 and 1800. The number of taxes collected by the Royal Treasury increased from 34 to 112 between 1760 and 1810. This increase, sometimes labelled as a Bourbon “reconquest” of Mexico after a century and a half of drift under the Hapsburgs, occurred because of Spain’s need to finance increasingly frequent and costly wars of empire in the eighteenth century. An entire array of new taxes and fiscal placemen came to Mexico. They affected (and alienated) everyone, from the wealthiest merchant to the humblest villager. If they did nothing else, the Bourbons proved to be expert tax collectors.[20]

The second and equally consequential change in imperial management lay in the revision and “deregulation” of New Spain’s international trade, or the evolution from a “fleet” system to a regime of independent sailings, and then, finally, of voyages to and from a far larger variety of metropolitan and colonial ports. From the mid-sixteenth century onwards, ocean-going trade between Spain and the Americas was, in theory, at least, closely regulated and supervised. Ships in convoy (flota) sailed together annually under license from the monarchy and returned together as well. Since so much silver specie was carried, the system made sense, even if the flotas made a tempting target and the problem of contraband was immense. The point of departure was Seville and later, Cadiz. Under pressure from other outports in the late eighteenth century, the system was finally relaxed. As a consequence, the volume and value of trade to Mexico increased as the price of importables fell. Import-competing industries in Mexico, especially textiles, suffered under competition and established merchants complained that the new system of trade was too loose. But to no avail. There is no measure of the barter terms of trade for the eighteenth century, but anecdotal evidence suggests they improved for Mexico. Nevertheless, it is doubtful that these gains could have come anywhere close to offsetting the financial cost of Spain’s “reconquest” of Mexico.[21]

On the other hand, the few accounts of per capita real income growth in the eighteenth century that exist suggest little more than stagnation, the result of population growth and a rising price level. Admittedly, looking for modern economic growth in Mexico in the eighteenth century is an anachronism, although there is at least anecdotal evidence of technological change in silver mining, especially in the use of gunpowder for blasting and excavating, and of some productivity increase in silver mining. So even though the share of international trade outside of goods such as cochineal and silver was quite small, at the margin, changes in the trade regime were important. There is also some indication that asset income rose and labor income fell, which fueled growing social tensions in New Spain. In the last analysis, the growing fiscal pressure of the Spanish empire came when the standard of living for most people in Mexico—the native and mixed blood population—was stagnating. During periodic subsistence crisis, especially those propagated by drought and epidemic disease, and mostly in the 1780s, living standards fell. Many historians think of late colonial Mexico as something of a powder keg waiting to explode. When it did, in 1810, the explosion was the result of a political crisis at home and a dynastic failure abroad. What New Spain had negotiated during the Wars of Spanish Succession—regime change– provide impossible to surmount during the Napoleonic Wars (1794-1815). This may well be the most sensitive indicator of how economic conditions changed in New Spain under the heavy, not to say clumsy hand, of the Bourbon “reforms.”[22]

 

The War for Independence, the Insurgency, and Their Legacy

The abdication of the Bourbon monarchy to Napoleon Bonaparte in 1808 produced a series of events that ultimately resulted in the independence of New Spain. The rupture was accompanied by a violent peasant rebellion headed by the clerics Miguel Hidalgo and José Morelos that, one way or another, carried off 10 percent of the population between 1810 and 1820. Internal commerce was largely paralyzed. Silver mining essentially collapsed between 1810 and 1812 and a full recovery of mining output was delayed until the 1840s. The mines located in zones of heavy combat, such as Guanajuato and Querétaro, were abandoned by fleeing workers. Thus neglected, they quickly flooded.

At the same time, the fiscal and human costs of this period, the Insurgency, were even greater.[23] The heavy borrowings in which the Bourbons engaged to finance their military alliances left Mexico with a considerable legacy of internal debt, estimated at £16 million at Independence. The damage to the fiscal, bureaucratic and administrative structure of New Spain in the face of the continuing threat of Spanish reinvasion (Spain did not recognize the Independence of Mexico (1821)) in the 1820s drove the independent governments into foreign borrowing on the London market to the tune of £6.4 million in order to finance continuing heavy military outlays. With a reduced fiscal capacity, in part the legacy of the Insurgency and in part the deliberate effort of Mexican elites to resist any repetition Bourbon-style taxation, Mexico defaulted on its foreign debt in 1827. For the next sixty years, through a serpentine history of moratoria, restructuring and repudiation (1867), it took until 1884 for the government to regain access to international capital markets, at what cost can only be imagined. Private sector borrowing and lending continued, although to what extent is currently unknown. What is clear is that the total (internal plus external) indebtedness of Mexico relative to late colonial GDP was somewhere in the range of 47 to 56 percent.[24]

This was, perhaps, not an insubstantial amount for a country whose mechanisms of public finance were in what could be mildly termed chaotic condition in the 1820s and 1830s as the form, philosophy, and mechanics of government oscillated from federalist to centralist and back into the 1850s.  Leaving aside simple questions of uncertainty, there is the very real matter that the national government—whatever the state of private wealth—lacked the capacity to service debt because national and regional elites denied it the means to do so. This issue would bedevil successive regimes into the late nineteenth century, and, indeed, into the twentieth.[25]

At the same time, the demographic effects of the Insurgency exacted a cost in terms of lost output from the 1810s through the 1840s. Gaping holes in the labor force emerged, especially in the fertile agricultural plains of the Bajío that created further obstacles to the growth of output. It is simply impossible to generalize about the fortunes of the Mexican economy in this period because of the dramatic regional variations in the Republic’s economy. A rough estimate of output per head in the late colonial period was perhaps 40 pesos (dollars).[26] After a sharp contraction in the 1810s, income remained in that neighborhood well into the 1840s, at least until the eve of the war with the United States in 1846. By the time United States troops crossed the Rio Grande, a recovery had been under way, but the war arrested it. Further political turmoil and civil war in the 1850s and 1860s represented setbacks as well. In this way, a half century or so of potential economic growth was sacrificed from the 1810s through the 1870s. This was not an uncommon experience in Latin America in the nineteenth century, and the period has even been called The Stage of the Great Delay.[27] Whatever the exact rate of real per capita income growth was, it is hard to imagine it ever exceeded two percent, if indeed it reached much more than half that.

 

Agricultural Recovery and War

On the other hand, it is clear that there was a recovery in agriculture in the central regions of the country, most notably in the staple maize crop and in wheat. The famines of the late colonial era, especially of 1785-86, when massive numbers perished, were not repeated. There were years of scarcity and periodic corresponding outbreaks of epidemic disease—the cholera epidemic of 1832 affected Mexico as it did so many other places—but by and large, the dramatic human wastage of the colonial period ceased, and the death rate does appear to have begun to fall. Very good series on wheat deliveries and retail sales taxes for the city of Puebla southeast of Mexico City show a similarly strong recovery in the 1830s and early 1840s, punctuated only by the cholera epidemic whose effects were felt everywhere.[28]

Ironically, while the Panic of 1837 appears to have at least hit the financial economy in Mexico hard with a dramatic fall in public borrowing (and private lending), especially in the capital,[29] an incipient recovery of the real economy was ended by war with the United States. It is not possible to put numbers on the cost of the war to Mexico, which lasted intermittently from 1846 to 1848, but the loss of what had been the Southwest under Mexico is most often emphasized. This may or may not be accurate. Certainly, the loss of California, where gold was discovered in January 1848, weighs heavily on the historical imaginations of modern Mexicans. There is also the sense that the indemnity paid by the United States–$15 million—was wholly inadequate, which seems at least understandable when one considers that Andrew Jackson offered $5 million to purchase Texas alone in 1829.

It has been estimated that the agricultural output of the Mexican “cession” as it was called in 1900, was nearly $64 million, and that the value of livestock in the territory was over $100 million. The value of gold and silver produced was about $35 million. Whether it is reasonable to employ the numbers in estimating the present value of output relative to the indemnity paid is at least debatable as a counterfactual, unless one chooses to regard this as the annuitized value on a perpetuity “purchased” from Mexico at gunpoint, which seems more like robbery than exchange.  In the long run, the loss may have been staggering, but in the short run, much less so. The northern territories Mexico lost had really yielded very little up until the War. In fact, the balance of costs and revenues to the Mexican government may well have been negative.[30]

Whatever the case, the decades following the war with the United States until the beginning of the administration of Porfirio Díaz (1876) are typically regarded as a step backward. The reasons are several. In 1850, the government essentially went broke. While it is true that its financial position had disintegrated since the mid-1830s, 1850 marked a turning point. The entire indemnity payment from the United States was consumed in debt service, but this made no appreciable dent in the outstanding principal, which hovered around 50 million pesos (dollars).  The limits of debt sustainability had been reached: governing was turned into a wild search for resources, which proved fruitless. Mexico continued to sell of parts of its territory, such as the Treaty of the Mesilla (1853), or Gadsden Purchase, whose proceeds largely ended up in the hands of domestic financiers rather than foreign creditors’.[31] Political divisions, if anything, terrible before the war with the United States, turned catastrophic. A series of internal revolts, uprisings and military pronouncements segued into yet another violent civil war between liberals and conservatives—now a formal party—the so-called Three Years’ War (1856-58). In 1862, frustrated by Mexico’s suspension of foreign debt service, Great Britain, Spain and France seized Veracruz. A Hapsburg prince, Maximilian, was installed as Mexico’s second “emperor.” (Agustín de Iturbide was the first). While only the French actively prosecuted the war within Mexico, and while they never controlled more than a very small part of the country, the disruption was substantial. By 1867, with Maximillian deposed and the French army withdrawn, the country required serious reconstruction. [32]

 

Juárez, Díaz and the Porfiriato: authoritarian development.

To be sure, the origins of authoritarian development in nineteenth century Mexico were not with Porfirio Díaz, as is often asserted. Their beginnings actually went back several decades earlier, to the last presidency of Santa Anna, generally known as the Dictatorship (1853-54). But Santa Anna was overthrown too quickly, and now for the last time, for much to have actually occurred. A ministry for development (Fomento) had been created, but the Liberal revolution of Ayutla swept Santa Anna and his clique away for good. Serious reform seems to have begun around 1870, when the Finance Minister was Matías Romero. Romero was intent on providing Mexico with a modern Treasury, and on ending the hand-to- mouth financing that had mostly characterized the country’s government since Independence, or at least since the mid-1830s. So it is appropriate to pick up with the story here. Where did Mexico stand in 1870?[33]

The most revealing data that we have on the state of economic development come from various anthropometric and cost of living studies by Amilcar Challu, Aurora Gómez Galvarriato, and Moramay López Alonso.[34] Their research overlaps in part, and gives a fascinating picture of Mexico in the long run, from 1735 to 1940. For the moment, let us look at the period leading up to 1867, when the French withdrew from Mexico. If we look at the heights of the “literate” population, Challu’s research suggests that the standard of living stagnated between 1750 and 1840. If we look at the “illiterate” population, there was a consistent decline until 1850. Since the share of the illiterate population was clearly larger, we might infer that living standards for most Mexicans declined after 1750, however we interpret other quantitative and anecdotal evidence.

López Alonso confines her work to the period after the 1840s. From 1850 through 1890, her work generally corroborates Challu’s. The period after the Mexican War was clearly a difficult one for most Mexicans, and the challenge that both Juárez and Díaz faced was a macroeconomy in frank contraction after 1850. The regimes after 1867 were faced with stagnation.

The real wage study of by Amilcar Challu and Aurora Gómez Galvarriato, when combined with the existing anthropometric work, offers a pretty clear correlation between movements in real wages (down) and height (falling). [35]

It would then appear growth from the 1850s through the 1870s was slow—if there was any at all—and perhaps inferior to what had come between the 1820s and the 1840s. Given the growth of import substitution during the Napoleonic Wars, roughly 1790-1810, coupled with the commercial opening brought by the Bourbons’   post-1789 extension of “free trade” to Mexico, we might well see a pattern of mixed performance (1790-1810), sharp contraction (the 1810s), rebound and recovery, with a sharp financial shocks coming in the mid-1820s and mid -1830s (1820s-1840s), and stagnation once more (1850s-1870s). Real per capita output oscillated, sometimes sharply, around an underlying growth rate of perhaps one percent; changes in the distribution of income and wealth are more or less impossible to identify consistently, because studies conflict.

Far less speculative is that the foundations for modern economic growth were laid down in Mexico during the era of Benito Juárez. Its key elements were the creation of a secular, bourgeois state and secular institutions embedded in the Constitution of 1857. The titanic ideological struggles between liberals and conservatives were ultimately resolved in favor of a liberal, but nevertheless centralizing form of government under Porfirio Diáz. This was the beginning of the end of the Ancien Regime. Under Juárez, corporate lands of the Church and native villages were privatized in favor of individual holdings and their former owners compensated in bonds. This was effectively the largest transfer of land title since the late sixteenth century (not including the war with the United States) and it cemented the idea of individual property rights. With the expulsion of the French and the outright repudiation of the French debt, the Treasury was reorganized along more modern lines. The country got additional breathing room by the suspension of debt service to Great Britain until the terms of the 1825 loans were renegotiated under the Dublán Convention (1884). Equally, if not more important, Mexico now entered the railroad age in 1876, nearly forty years after the first tracks were laid in Cuba in 1837. The educational system was expanded in an attempt to create at least a core of literate citizens who could adopt the tools of modern finance and technology. Literacy still remained in the neighborhood of 20 percent, and life expectancy at birth scarcely reached 40 years of age, if that. Yet by the end of the Restored Republic (1876), Mexico had turned a corner. There would be regressions, but the nineteenth century had finally arrived, aptly if brutally signified by Juárez’ execution of Maximilian in Querétaro in 1867.[36]

Porfirian Mexico

Yet when Díaz came to power, Mexico was, in many ways, much as it had been a century earlier. It was a rural, agrarian nation whose primary agricultural output per person was maize, followed by wheat and beans. These were produced on haciendas and ranchos in Jalisco, Guanajuato, Michoacán, Mexico, Puebla as well as Oaxaca, Veracruz, Aguascalientes, Chihuahua and Sonora. Cotton, which with great difficulty had begun to supply a mechanized factory regime (first in spinning, then weaving) was produced in Oaxaca, Yucatán, Guerrero and Chiapas as well as in parts of Durango and Coahuila. Domestic production of raw cotton rarely sufficed to supply factories in Michoacán, Querétaro, Puebla and Veracruz, so imports from the Southern United States were common. For the most part, the indigenous population lived on maize, beans, and chile, producing its own subsistence on small, scattered plots known as milpas. Perhaps 75 percent of the population was rural, with the remainder to be found in cities like Mexico, Guadalajara, San Luis Potosí, and later, Monterrey. Population growth in the Southern and Eastern parts of the country had been relatively slow in the nineteenth century. The North and the center North grew more rapidly.  The Center of the country, less so. Immigration from abroad had been of no consequence.[37]

It is a commonplace to see the presidency of Porfirio Díaz (1876-1910) as a critical juncture in Mexican history, and this would be no less true of economic or commercial history as well. By 1910, when the Díaz government fell and Mexico descended into two decades of revolution, the first one extremely violent, the face of the country had been changed for good. The nature and effect of these changes remain not only controversial, but essential for understanding the subsequent evolution of the country, so we should pause here to consider some of their essential features.

While mining and especially, silver mining, had long held a privileged place in the economy, the nineteenth century had witnessed a number of significant changes. Until about 1889, the coinage of gold, silver, and copper—a very rough proxy for production given how much silver had been illegally exported—continued on a steadily upward track. In 1822, coinage was about 10 million pesos. By 1846, it had reached roughly 15 million pesos. There was something of a structural break after the war with the United States (its origins are unclear), and coinage continued upward to about 25 million pesos in 1888. Then, the falling international price of silver, brought on by large increases in supply elsewhere, drove the trend after 1889 sharply downward. By 1909-10, coinage had collapsed to levels previously unrecorded since the 1820s, although in 1904 and 1905, it had skyrocketed to nearly 45 million pesos.[38]

It comes as no surprise that these variations in production corresponded to sharp changes in international relative prices. For example, the market price of silver declined sharply relative to lead, which in turn encountered a large increase in Mexican production and a diversification into other metals including zinc, antinomy, and copper. Mexico left the silver standard (for international transactions, but continued to use silver domestically) in 1905, which contributed to the eclipse of this one crucial industry, which would never again have the status it had when Díaz became president in 1876, when precious metals represented 75 percent of Mexican exports by value. By the time he had decamped in exile to Paris, precious metals accounted for less than half of all exports.

The reason for this relative decline was the diversification of agricultural exports that had been slowly occurring since the 1870s. Coffee, cotton, sugar, sisal and vanilla were the principal crops, and some regions of the country such as Yucatán (henequen) and Durango and Tamaulipas (cotton) supplied new export crops.

 

Railroads and Infrastructure

None of be of this would have occurred without the massive changes in land tenure that had begun in the 1850s, but most of all, without the construction of railroads financed by the migration of foreign capital to Mexico under Díaz. At one level, it is a well-known story of social savings, which were substantial in Mexico because the terrain was difficult and the alternative modes of carriage few. One way or another, transportation has always been viewed as an “obstacle” to Mexican economic development. That must be true at some level, although recent studies (especially by Sandra Kuntz) have raised important qualifications. Railroads may not have been gateways to foreign dependency, as historians once argued, but there were limits to their ability to effect economic change, even internally. They tended to enlarge the internal market for some commodities more than others. The peculiarities of rate-making produced other distortions, while markets for some commodities were inevitably concentrated in major cities or transshipment points which afforded some monopoly power to distributors even as a national market in basic commodities became more of a reality. Yet, in general, the changes were far reaching.[39]

Conventional figures confirm conventional wisdom. When Díaz assumed the presidency, there were 660 km (410 miles) of track. In 1910, there were 19,280 km (about 12,000 miles). Seven major lines linked the cities of Mexico, Veracruz, Acapulco, Juárez, Laredo, Puebla, Oaxaca. Monterrey and Tampico in 1892. The lines were built by foreign capital (e.g., the Central Mexicano was built by the Atchison, Topeka and Santa Fe), which is why resolving the long-standing questions of foreign debt service were critical. Large government subsidies on the order of 3,500 to 8,000 pesos per km were granted, and financing the subsidies amounted to over 30 million pesos by 1890. While the railroads were successful in creating more of a national market, especially in the North, their finances were badly affected by the depreciation of the silver peso, given that foreign liabilities had to be liquidated in gold.

As a result, the government nationalized the railroads in 1903. At the same time, it undertook an enormous effort to construct infrastructure such as drainage and ports, virtually all of which were financed by British capital and managed by “Don Porfirio’s contactor,” Sir Weetman Pearson.  Between railroads, ports, drainage works and irrigation facilities, the Mexican government borrowed 157 million pesos to finance costs.[40]

The expansion of the railroads, the build-out of infrastructure and the expansion of trade would have normally increased output per capita. Any data we have prior to 1930 are problematic, and before 1895, strictly speaking, we have no official measures of output per capita at all. Most scholars shy away from using levels of GDP in any form, other than for illustrative purposes.  Aside from the usual problems attending national income accounting, Mexico presents a few exceptional challenges. In peasant families, where women were entrusted with converting maize into tortilla, no small job, the omission of their value added from GDP must constitute a sizeable defect in measured output. Moreover, as the commercial radius of Mexican agriculture expanded rapidly as railroads, roads, and later, highways spread extensively, growth rates represented increased commercialization rather than increased growth. We have no idea how important this phenomenon was, but it is worth keeping in mind when we look at very rapid growth rates after 1940.

There are various measures of cumulative growth during the Porfiriato. By and large, the figure from 1900 through 1910 is around 23 percent, which is certainly higher than rates achieved during the nineteenth century, but nothing like what was recorded after 1940. In light of declining real wages, one can only assume that the bulk of “progress” flowed to the recipients of property income. This may well have represented a reversal of trends in the nineteenth century, when some argue that property income contracted in the wake of the Insurgency[41].

There was also significant industrialization in Mexico during the Porfiriato. Some industry, especially textiles, had its origins in the 1840s, but its size, scale and location altered dramatically by the end of the nineteenth century. For example, the cotton textile industry saw the number of workers, spindles and looms more than double from the late 1870s to the first decade of the nineteenth century. Brewing and its associated industry, glassmaking, became well established in Monterrey during the 1890s. The country’s first iron and steel mill, Fundidora Monterrey, was established there as well in 1903. Other industries, such as papermaking and cigarettes followed suit. By the end of the Porfiriato, over 10 percent of Mexico’s output was certainly industrial.[42]

 

From Revolution to “Miracle”

The Mexican Revolution (1910-1940) began as a political upheaval provoked by a crisis in the presidential succession when Porfirio Díaz refused to leave office in the wake of electoral defeat after signaling his willingness to do so in a famous pubic interview of 1908.[43] It was also the result of an agrarian uprising and the insistent demand of Mexico’s growing industrial proletariat for a share of political power. Finally, there was a small (fewer than 10 percent of all households) but upwardly mobile urban middle class created by economic development under Díaz whose access to political power had been effectively blocked by the regime’s mechanics of political control. Precisely how “revolutionary” were the results of the armed revolt—which persisted largely through the 1910s and peaked in a civil war in 1914-1915—has long been contentious, but is only tangentially relevant as a matter of economic history. The Mexican Revolution was no Bolshevik movement (of course, it predated Bolshevism by seven years) but it was not a purely bourgeois constitutional movement either, although it did contain substantial elements of both.

From a macroeconomic standpoint, it has become fashionable to argue that the Revolution had few, if any, profound economic consequences. It seems as if the principal reason was that revolutionary factions were interested in appropriating rather than destroying the means of production. For example, the production of crude oil peaked in Mexico in 1915—at the height of the Revolution—because crude oil could be used as a source of income to the group controlling the wells in Veracruz state. This was a powerful consideration.[44]

Yet in another sense, the conclusion that the Revolution had slight economic effects is not only facile, but obviously wrong. As the demographic historian Robert McCaa showed, the excess mortality occasioned by the Revolution was larger than any similar event in Mexican history other than the conquest in the sixteenth century. There has been no attempt made to measure the output lost by the demographic wastage (including births that never occurred), yet even the effect on the population cohort born between 1910 and 1920 is plain to see in later demographic studies.  [45]

There is also a subtler question that some scholars have raised. The Revolution increased labor mobility and the labor supply by abolishing constraints on the rural population such as debt peonage and even outright slavery. Moreover, the Revolution, by encouraging and ultimately setting into motion a massive redistribution of previously privatized land, contributed to an enlarged supply of that factor of production as well. The true impact of these developments was realized in the 1940s and 1950s, when rapid economic growth began, the so-called Mexican Miracle, which was characterized by rates of real growth of as much as 6 percent per year (1955-1966). Whatever the connection between the Revolution and the Miracle, it will require a serious examination on empirical grounds and not simply a dogmatic dismissal of what is now regarded as unfashionable development thinking: import substitution and inward-oriented growth.[46]

The other major consequence of the Revolution, the agrarian reform and the creation of the ejido, or land granted by the Mexican state to rural population under the authority provided it by the revolutionary Constitution on 1917 took considerable time to coalesce, and were arguably not even high on one of the Revolution’s principal instigators, Francisco Madero’s, list of priorities. The redistribution of land to the peasantry in the form of possession if not ownership – a kind of return to real or fictitious preconquest and colonial forms of land tenure – did peak during the avowedly reformist, and even modestly radical presidency of Lázaro Cárdenas (1934-1940) after making only halting progress under his predecessors since the 1920s. From 1940 to 1965, the cultivated area in Mexico grew at 3.7 percent per year and the rise in productivity in basic food crops was 2.8 percent per year.

Nevertheless, the long-run effects of the agrarian reform and land redistribution have been predictably controversial. Under the presidency of Carlos Salinas (1988-1994) the reform was officially declared over, with no further land redistribution to be undertaken and the legal status of the ejido definitively changed. The principal criticism of the ejido was that, in the long run, it encouraged inefficiently small landholding per farmer and, by virtue of its limitations on property rights, made agricultural credit difficult for peasants to obtain.[47]

There is no doubt these are justifiable criticisms, but they have to be placed in context. Cárdenas’ predecessors in office, Alvaro Obregón (1924-1928) and Plutarco Elías Calles (1928-1932) may well have preferred a more commercial model of agriculture with larger, irrigated holdings. But it is worth recalling that one of the original agrarian leaders of the Revolution, Emiliano Zapata, had an uneasy relationship with Madero, who saw the Revolution in mostly political terms, from the start and quickly rejected Madero’s leadership in favor of restoring peasant lands in his native state of Morelos.  Cárdenas, who was in the midst of several major maneuvers that would require widespread popular support—such as the expropriation of foreign oil companies operating in Mexico in March 1938—was undoubtedly sensitive to the need to mobilize the peasantry on his behalf. The agrarian reform of his presidency, which surpassed that of any other, needs to be considered in those terms as well as in terms of economic efficiency.[48]

Cárdenas’ presidency also coincided with the continuation of the Great Depression. Like other countries in Latin America, Mexico was hard hit by the Great Depression, at least through the early 1930s.  All sorts of consumer goods became scarcer, and the depreciation of the peso raised the relative price of imports. As had happened previously in Mexican history (1790-1810, during the Napoleonic Wars and the disruption of the Atlantic trade), in the medium term domestic industry was nevertheless given a stimulus and import substitution, the subsequent core of Mexico’s industrialization program after World War II, was given a decisive boost. On the other hand, Mexico also experienced the forced “repatriation” of people of Mexican descent, mostly from California, of whom 60 percent were United States citizens. The effects of this movement—the emigration of the Revolution in reverse—has never been properly analyzed. The general consensus is that World War II helped Mexico to prosper. Demand for labor and materials from the United States, to which Mexico was allied, raised real wages and incomes, and thus boosted aggregate demand. From 1939 through 1946, real output in Mexico grew by approximately 50 percent. The growth in population accelerated as well as the country began to move into the later stages of the demographic transition, with a falling death rate, while birth rates remained high.[49]

 

From Miracle to Meltdown: 1950-1982  

The history of import substitution manufacturing did not begin with postwar Mexico, but few countries (especially in Latin America) became as identified with the policy in the 1950s, and with what Mexicans termed the emergence of “stabilizing development.” There was never anything resembling a formal policy announcement, although Raúl Prebisch’s 1949 manifesto, “The Economic Development of Latin America and its Principal Problems” might be regarded as supplying one. Prebisch’s argument, that a directed change in the composition of imports toward capital goods to facilitate domestic industrialization was, in essence, the basis of the policy that Mexico followed. Mexico stabilized the nominal exchange rate at 12.5 pesos to the dollar in 1954, but further movement in the real exchange rate (until the 1970s) were unimportant. The substantive bias of import substitution in Mexico was a high effective rate of protection to both capital and consumer goods. Jaime Ros has calculated these rates in 1960 ranged between 47 and 85 percent, and between 33 and 109 percent in 1980. The result, in the short to intermediate run, was very rapid rates of economic growth, averaging 6.5 percent in 1950 through 1973. Other than Brazil, which also followed an import substitution regime, no country in Latin America experienced higher rates of growth. Mexico’s was substantially above the regional average. [50]

[See the historical graph of population growth in Mexico through 2000 below]

page39

Source: Essentially, Estadísticas Históricas de México (various editions since 1999; the most recent is 2014)

http://dgcnesyp.inegi.org.mx/ehm/ehm.htm (Accessed July 20, 2016)

 

But there were unexpected results as well. The contribution of labor to GDP growth was 14 percent. Capital’s contribution was 53 percent, and the remainder, total factor productivity (TFP) 28 percent.[51] As a consequence, while Mexico’s growth occurred through the accumulation of capital, the distribution of income became extremely skewed. The ratio of the top 10 percent of household income to the bottom 40 percent was 7 in 1960, and 6 in 1968. Even supporters of Mexico’s development program, such as Carlos Tello, conceded that it probable that it was the organized peasants and workers experienced an effective improvement of their relative position. The fruits of the Revolution were unevenly distributed, even among the working class.[52]

By “organized” one means such groups as the most important labor union in the country, the CTM (Confederation of Mexican Workers) or the nationally recognized peasant union, the CNC, both of which formed two of the three organized sectors of the official government party, the PRI, or Party of the Institutional Revolution that was organized in 1946. The CTM in particular was instrumental in supporting the official policy of import substitution, and thus benefited from government wage setting and political support. The leaders of these organizations became important political figures in their own right. One, Fidel Velázquez, as both a federal senator and the head of the CTM from 1941 to his death in 1997. The incorporation of these labor and peasant groups into the political system offered the government both a means of control and a guarantee of electoral support. They became pillars of what the Peruvian writer Mario Vargas Llosa famously called “the perfect dictatorship” of the PRI from 1946 to 2000, during which the PRI held a monopoly of the presidency and the important offices of state. In a sense, import substitution was the economic ideology of the PRI.[53]

Labor and economic development during the years of rapid growth is, like many others, a debated subject. While some have found strong wage growth, others, looking mostly at Mexico City, have found declining real wages. Beyond that, there is the question of informality and a segmented labor market. Were workers in the CTM the real beneficiaries of economic growth, while others in the informal sector (defined as receiving no social security payments, meaning roughly two-thirds of Mexican workers) did far less well? Obviously, the attraction of a segmented labor market model can address one obvious puzzle: why would industry substitute capital for labor, as it obviously did, if real wages were not rising? Postulating an informal sector that absorbed the rapid influx of rural migrants and thus held nominal wages steady while organized labor in the CTM got the benefit of higher negotiated wages, but in so doing, limited their employment is an attractive hypothesis, but would not command universal agreement. Nothing has been resolved, at least for the period of the “Miracle.” After Mexico entered a prolonged series of economic crises in the 1980s—here labelled as “meltdown”—the discussion must change, because many hold that the key to relative political stability and the failure of open unemployment to rise sharply can be explained by falling real wages.

The fiscal basis on which the years of the Miracle were constructed was conventional, not to say conservative.[54] A stable nominal exchange rate, balanced budgets, limited public borrowing, and a predictable monetary policy were all predicated on the notion that the private sector would react positively to favorable incentives. By and large, it did. Until the late 1960s, foreign borrowing was considered inconsequential, even if there was some concern on the horizon that it was starting to rise. No one foresaw serious macroeconomic instability. It is worth consulting a brief memorandum from Secretary of State Dean Rusk to President Lyndon Johnson (Washington, December 11, 1968) –to get some insight into how informed contemporaries viewed Mexico. The instability that existed was seen as a consequence of heavy-handedness on the part of the PRI and overreaction in the security forces. Informed observers did not view Mexico’s embrace of import-substitution industrialization as a train wreck waiting to happen. Historical actors are rarely so prescient.[55]

 

Slowing of the Miracle and Echeverría

The most obvious problems in Mexico were political. They stemmed from the increasing awareness that the limits of the “institutional revolution” had been reached, particularly regarding the growing democratic demands of the urban middle classes. The economic problem, which was far from obvious, was that import substitution had concentrated income in the upper 10 per cent of the population, so that domestic demand had begun to stagnate. Initially at least, public sector borrowing could support a variety of consumption subsidies to the population, and there were also efforts to transfer resources out of agriculture via domestic prices for staples such as maize. Yet Mexico’s population was also growing at the rate of nearly 3 percent per year, so that the long term prospects for any of these measures were cloudy.

At the same time, growing political pressures on the PRI, mostly dramatically manifest in the army’s violent repression of student demonstrators at Tlatelolco in 1968 just prior to the Olympics, had convinced some elements in the PRI, people like Carlos Madrazo, to argue for more radical change. The emergence of an incipient guerilla movement in the state of Guerrero had much the same effect. The new president, Luis Echeverría (1970-76), openly pushed for changes in the distribution of income and wealth, incited agrarian discontent for political purposes, dramatically increased government spending and borrowing, and alienated what had typically been a complaisant, if not especially friendly private sector.

The country’s macroeconomic performance began to deteriorate dramatically. Inflation, normally in the range of about 5 percent, rose into the low 20 percent range in the early 1970s. The public sector deficit, fueled by increasing social spending, rose from 2 to 7 percent of GDP. Money supply growth now averaged about 14 percent per year. Real GDP growth had begun to slip after 1968 and in the early 1970s, in deteriorated more, if unevenly. There had been clear convergence of regional economies in Mexico between 1930 and 1980 because of changing patterns of industrialization in the northern and central regions of the country.  After 1980, that process stalled and regional inequality again widened. [56]

While there is a tendency to blame Luis Echeverria for all or most of these developments, this forgets that his administration coincided with the First OPEC oil shock (1973) and rapidly deteriorating external conditions. Mexico had, as yet, not discovered the oil reserves (1978) that were to provide a temporary respite from economic adjustment after the shock of the peso devaluation of 1976—the first change in its value in over 20 years. At the same time, external demand fell, principally transmitted from the United States, Mexico’s largest trading partner, where the economy had fallen into recession in late 1973. Yet it seems reasonable to conclude that the difficult international environment, while important in bring Mexico’s “miracle” period to a close, was not helped by Echeverría’s propensity for demagoguery, of the loss of fiscal discipline that had long characterized government policy, at least since the 1950s. The only question to be resolved was to what sort of conclusion the period would come. The answer, unfortunately, was disastrous.[57]

 

Meltdown: The Debt Crisis, the Lost Decade and After

In contemporary parlance, Mexico had passed from “stabilizing” to “shared” development under Echeverría. But the devaluation of 1976 from 12.5 to 20.5 pesos to the dollar suggested that something had gone awry. One might suppose that some adjustment in course, especially in public spending and borrowing, would have occurred. But precisely the opposite occurred. Between 1976 and 1979, nominal federal spending doubled. The budget deficit increased by a factor of 15. The reason for this odd performance was the discovery of crude oil in the Gulf of Mexico, perhaps unsurprising in light of the spiking prices of the 1970s (the oil shocks of 1973-74, 1978-79), but nevertheless of considerable magnitude. In 1975, Mexico’s proven reserves were 6 billion barrels of oil. By 1978, they had increased to 40 billion. President López Portillo set himself to the task of “administering abundance” and Mexican analysts confidently predicted crude oil at $100 a barrel (when it stood at $37 in current prices in 1980). The scope of the miscalculation was catastrophic. At the same time, encouraged by bank loan pushing and effectively negative real rates of interest, Mexico borrowed abroad. Consumption subsidies, while vital in the face of slowing import substitution, were also costly, and when supported by foreign borrowing, unsustainable, but foreign indebtedness doubled between 1976 and 1979, and even further thereafter.

Matters came to a head in 1982. By then, Mexico’s foreign indebtedness was estimated at over $80 billion dollars, an increase from less than $20 billion in 1975. Real interest rates had begun to rise in the United States in mid-1981, and with Mexican borrowing tied to international rates, debt service rapidly increased. Oil revenue, which had come to constitute the great bulk of foreign exchange, followed international crude prices downward, driven in large part by a recession that had begun in the United States in mid-1981. Within six months, Mexico, too, had fallen into recession. Real per capital output was to decline by 8 percent in 1982.  Forced to sharply devalue, the real exchange rate fell by 50 percent in 1982 and inflation approached 100 percent. By the late summer, Finance Minister Jesus Silva Herzog admitted that the country could not meet an upcoming payment obligation, and was forced to turn to the US Federal Reserve, to the IMF, and to a committee of bank creditors for assistance. In late August, in a remarkable display of intemperance, President López Portillo nationalized the banking system. By December 20, 1982, Mexico’s incoming President, Miguel de la Madrid (1982-88) appeared, beleaguered, on the cover of Time Magazine framed by the caption, “We are in an Emergency.”  It was, as the saying goes, a perfect storm, and with it, the Debt Crisis and the “Lost Decade” in Mexico had begun. It would be years before anything resembling stability, let alone prosperity, was restored. Even then, what growth there was a pale imitation of what had occurred during the decades of the “Miracle.”

 

The 1980s

The 1980s were a difficult decade.[58]  After 1981, annual real per capita growth would not reach 4 percent again until 1989, and in 1986, it fell by 6 percent. In 1987, inflation reached 159 percent. The nominal exchange rate fell by 139 percent in 1986-1987. By the standards of the years of stabilizing development, the record of the 1980s was disastrous. To complete the devastation, on September 19, 1985, the worst earthquake in Mexican history, 7.8 on the Richter Scale, devastated large parts of central Mexico City and killed 5 thousand (some estimates run as high as 25 thousand), many of whom were simply buried in mass graves. It was as if a plague of biblical proportions had struck the country.

Massive indebtedness produced a dramatic decline in the standard of living as structural adjustment occurred. Servicing the debt required the production of an export surplus in non-oil exports, which in turn, required a reduction in domestic consumption. In an effort to surmount the crisis, the government implemented an agreement between organized labor, the private sector, and agricultural producers called the Economic Solidarity Pact (PSE). The PSE combined an incomes policy with fiscal austerity, trade and financial liberalization, generally tight monetary policy, and debt renegotiation and reduction. The centerpiece of the “remaking” of the previously inward orientation of the domestic economy was the North American Free Trade Agreement (NAFTA, 1993) linking Mexico, the United States, and Canada. While average tariff rates in Mexico had fallen from 34 percent in 1985 to 4 percent in 1992—even before NAFTA was signed—the agreement was generally seen as creating the institutional and legal framework whereby the reforms of Miguel de la Madrid and Carlos Salinas (1988-1994) would be preserved. Most economists thought its effects would be relatively larger in Mexico than in the United States, which generally appears to have been the case. Nevertheless, NAFTA has been predictably controversial, as trade agreements are wont to be. The political furor (and, in some places, euphoria) surrounding the agreement have faded, but never entirely disappeared. In the United States in particular, NAFTA is blamed for deindustrialization, although pressure on manufacturing, like trade liberalization itself, was underway long before NAFTA was negotiated. In Mexico, there has been much hand wringing over the fate of agriculture and small maize producers in particular. While none of this is likely to cease, it is nevertheless the case that there has been a large increase in the volume of trade between the NAFTA partners. To dismiss this is, quite plainly, misguided, even where sensitive and well organized political constituencies are concerned. But the legacy of NAFTA, like most everything in Mexican economic history, remains unsettled.  As a result, the agreement was subject to a controversial renegotiation in 2018, largely fueled by protectionist sentiment in the Trump administration. While the intent was to increase costs in the Mexican automobile industry so as to price labor in the United Stats back into the industry, the long
term effect of the measure—not to say its ratification—remains to be seen.

 

Post Crisis: No Miracles

Still, while some prosperity was restored to Mexico by the reforms of the 1980s and 1990s, the general macroeconomic results have been disappointing, not to say mediocre. The average real compensation per person in manufacturing in 2008 was virtually unchanged from 1993 according to the Instituto Nacional De Estadística  Geografía e Informática, and there is little reason to think the compensation has improved at all since then. It is generally conceded that per capita GDP growth has probably averaged not much more than 1 percent a year. Real GDP growth since NAFTA according to the OECD has rarely reached 5 percent and since 2010, it has been well below that.

 

 

Source: http://www.worldbank.org/en/country/mexico (Accessed July 21, 2016). The vertical scale cuts the horizontal axis at 1982

 

For virtually everyone in Mexico, the question is why, and the answers proposed include virtually any plausible factor: the breakdown of the political system after the PRI’s historic loss of presidential power in 2000; the rise of China as a competitor to Mexico in international markets; the explosive spread of narcoviolence in recent years, albeit concentrated in the states of Sonora, Sinaloa, Tamaulipas, Nuevo León and Veracruz; the results of NAFTA itself; the failure of the political system to undertake further structural economic reforms and privatizations after the initial changes of the 1980s, especially regarding the national oil monopoly, Petroleos Mexicanos (PEMEX); the failure of the border industrialization program (maquiladoras) to develop substantive backward linkages to the rest of the economy. This is by no means an exhaustive list of the candidates for poor economic performance. The choice of a cause tends to reflect the ideology of the critic.[59]

Yet it seems that, at the end of the day, the reason why post-NAFTA Mexico has failed to grow comes down to something much more fundamental: a fear of growing, embedded in the belief that the collapse of the 1980s and early 1990s (including the devastating “Tequila Crisis” of 1994-1995, which resulted in a another enormous devaluation of the peso after an initial attempt to contain the crisis was bungled)  was so traumatic and costly as to render event modest efforts to promote growth, let alone the dirigisme of times past, as essentially unwarranted. The central bank, the Banco de México (Banxico) rules out the promotion of economic growth as part of its remit—even as a theoretical proposition, let alone as a goal of macroeconomic policy– and concerns itself only with price stability. The language of its formulation is striking. “During the 1970s, there was a debate as to whether it was possible to stimulate economic growth via monetary policy.  As a result, some governments and central banks tried to reduce unemployment through expansive monetary policy.  Both economic theory and the experience of economies that tried this prescription demonstrated that it lacked validity. Thus, it became clear that monetary policy could not actively and directly stimulate economic activity and employment. For that reason, modern central banks have as their primary goal the promotion of price stability” (translation mine). Banxico is not the Fed: there is no dual mandate in Mexico.[60]  This may well change during the new presidential administration of Andrés Manuel López Obrador (known colloquially in Mexico as AMLO).

The Mexican banking system has scarcely made things easier. Private credit stands at only about a third of GDP. In recent years, the increase in private sector savings has been largely channeled to government bonds, but until quite recently, public sector deficits were very small, which is to say, fiscal policy has not been expansionary. If monetary and fiscal policy are both relatively tight, if private credit is not easy to come by, and if growth is typically presumed to be an inevitable concomitant to economic stability for which no actor (other than the private sector) is deemed responsible, it should come as no surprise that economic growth over the past two decades has been lackluster.  In the long run, aggregate supply determines real GDP, but in the short run, nominal demand matters: there is no point in creating productive capacity to satisfy demand that does not exist. And, unlike during the period of the Miracle and Stabilizing Development, attention to demand since 1982 has been limited, not to say off the table completely. It may be understandable, but Mexico’s fiscal and monetary authorities seem to suffer from what could be termed, “Fear of Growth.” For better or worse, the results are now on display. After its current (2016) return to a relatively austere budget, it remains to be seen how the economic and political system in contemporary Mexico handles slow economic growth.

The response of the Mexican public to a generation of stagnation in living standards, as well as to rising insecurity and the perception of widespread public corruption, was the victory of AMLO in the presidential election of July 2018.

AMLO had previously run for President with a different party. After two unsuccessful attempts, he started a new one, called MORENA. He then proceeded to win 53 percent of the vote, virtually obliterating the opposition parties, the incumbent PRI, and the PAN. MORENA also won majorities in both houses of Congress. To most observers, this signified that AMLO would be a potentially strong president, assuming his congressional party remained loyal to him. His somewhat checkered “leftist” past guaranteed that not everyone was thrilled at the prospect of a strong AMLO presidency.

Expectations for AMLO’s presidency are thus high, perhaps unrealistically so. While his initial budget has been generally well received by the financial markets, there is little question as to where AMLO’s priorities lie. He has advocated increases in spending on infrastructure, has moved to restore the real minimum wage to its level in 1994, and pledged to revitalize domestic agriculture. Whether these and a number of other reforms that AMLO has somewhat paradoxically labelled “Republican Austerity” will restore the country to its pre-1982 growth path now constitutes one of the most watched economic experiments in Latin America. [61]

[1] I am grateful to Ivan Escamilla and Robert Whaples for their careful readings and thoughtful criticisms.

[2] The standard reference work is Sandra Kuntz Ficker, (ed), Historia económica general de México. De la Colonia a nuestros días (México, DF: El Colegio de Mexico, 2010).

[3] Oscar Martinez, Troublesome Border (rev. ed., University of Arizona Press: Tucson, AZ, 2006) is the most helpful general account in English.

[4] There are literally dozens of general accounts of the pre-conquest world. A good starting point is Richard E.W. Adams, Prehistoric Mesoamerica (3d ed., University of Oklahoma Press: Norman, OK, 2005). More advanced is Richard E.W. Adams and Murdo J. Macleod, The Cambridge History of the Mesoamerican Peoples: Mesoamerica. (2 parts, New York: Cambridge University Press, 2000).

[5] Nora C. England and Roberto Zavala Maldonado, “Mesoamerican Languages” Oxford Bibliographies http://www.oxfordbibliographies.com/view/document/obo-9780199772810/obo-9780199772810-0080.xml

(Accessed July 10, 2016)

[6] For an introduction to the nearly endless controversy over the pre- and post-contact population of the Americas, see William M. Denevan (ed.), The Native Population of the Americas in 1492 (2d rev ed., Madison: University of Wisconsin Press, 1992).

[7] Sherburne F Cook and Woodrow Borah, Essays in Population History: Mexico and California (Berkeley, CA: University of California Press, 1979), p. 159.

[8]Gene C. Wilken, Good Farmers Traditional Agricultural Resource Management in Mexico and Central America (Berkeley: University of California Press, 1987), p. 24.

[9] Bernard Ortiz de Montellano, Aztec Medicine Health and Nutrition (New Brunswick, NJ: Rutgers University Press, 1990).

[10] Bernardo García Martínez, “Encomenderos españoles y British residents: El sistema de dominio indirecto desde la perspectiva novohispana”, in Historia Mexicana, LX: 4 [140] (abr-jun 2011), pp. 1915-1978.

[11] These epidemics are extensively and exceedingly well documented. One of the most recent examinations is Rodofo Acuna-Soto, David W. Stahle, Matthew D. Therrell , Richard D. Griffin,  and Malcolm K. Cleaveland, “When Half of the Population Died: The Epidemic of Hemorrhagic Fevers of 1576 in Mexico,” FEMS Microbiology Letters 240 (2004) 1–5. (http:// femsle.oxfordjournals.org/content/femsle/240/1/1.full.pdf, accessed July 10, 2016.) See in particular the exceptional map and table on pp. 2-3.

[12] See in particular, Bernardo García Martínez. Los pueblos de la Sierrael poder y el espacio entre los indios del norte de Puebla hasta 1700 (Mexico, DF: El Colegio de México, 1987) and Elinor G.K. Melville, A Plague of Sheep: Environmental Consequences of the Conquest of Mexico (New York: Cambridge University Press, 1997).

[13] J. H. Elliott, “A Europe of Composite Monarchies,” Past & Present 137 (The Cultural and Political Construction of Europe): 48–71; Guadalupe Jiménez Codinach, “De Alta Lealtad: Ignacio Allende y los sucesos de 1808-1811,” in Marta Terán and José Antonio Serrano Ortega, eds., Las guerras de independencia en la América Española (La Piedad, Michoacán, MX: El Colegio de Michoacán, 2002), p. 68.

[14] Richard Salvucci, “Capitalism and Dependency in Latin America,” in Larry Neal and Jeffrey G. Williamson, eds., The Cambridge History of Capitalism (2 vols.), New York: Cambridge University Press, 2014), 1: pp. 403-408.

[15] Source: TePaske Page, http://www.insidemydesk.com/hdd.html (Accessed July 19, 2016)

[16]  Edith Boorstein Couturier, The Silver King: The Remarkable Life of the Count of Regla in Colonial Mexico (Albuquerque, NM: University of New Mexico Press, 2003).  Dana Velasco Murillo, Urban Indians in a Silver City: Zacatecas, Mexico, 1546-1810 (Stanford, CA: Stanford University Press, 2015), p. 43. The standard work on the subject is David Brading, Miners and Merchants in Bourbon Mexico, 1763-1810 (New York: Cambridge University Press, 1971) But also see Robert Haskett, “Our Suffering with the Taxco Tribute: Involuntary Mine Labor and Indigenous Society in Central New Spain,” Hispanic American Historical Review, 71:3 (1991), pp. 447-475. For silver in China see http://afe.easia.columbia.edu/chinawh/web/s5/s5_4.html (accessed July 13, 2016). For the rents of empire question, see Michael Costeloe, Response to Revolution: Imperial Spain and the Spanish American Revolutions, 1810-1840 (New York: Cambridge University Press, 1986).

[17] This is an estimate. David Ringrose concluded that in the 1780s, the colonies accounted for 45 percent of Crown income, and one would suppose that Mexico would account for at least about half of that. See David R. Ringrose, Spain, Europe and the ‘Spanish Miracle’, 1700-1900 (New York: Cambridge University Press, 1996), p. 93; Mauricio Drelichman, “The Curse of Moctezuma: American Silver and the Dutch Disease,” Explorations in Economic History 42:3 (2005), pp. 349-380.

[18] José Antonio Escudero, El supuesto memorial del Conde de Aranda sobre la Independencia de América) México, DF: Universidad Nacional Autónoma de México, 2014) (http://bibliohistorico.juridicas.unam.mx/libros/libro.htm?l=3637, accessed July 13, 2016)

[19] Allan J. Kuethe and Kenneth J. Andrien, The Spanish Atlantic World in the Eighteenth Century. War and the Bourbon Reforms, 1713-1796 (New York: Cambridge University Press, 2014) is the most recent account of this period.

[20] Richard J. Salvucci, “Economic Growth and Change in Bourbon Mexico: A Review Essay,” The Americas, 51:2 (1994), pp. 219-231; William B Taylor, Magistrates of the Sacred: Priests and Parishioners in Eighteenth Century Mexico (Palo Alto: Stanford University Press, 1996), p. 24; Luis Jáuregui, La Real Hacienda de Nueva España. Su Administración en la Época de los Intendentes, 1786-1821 (México, DF: UNAM, 1999), p. 157.

[21] Jeremy Baskes, Staying AfloatRisk and Uncertainty in Spanish Atlantic World Trade, 1760-1820 (Stanford, CA: Stanford University Press, 2013); Xabier Lamikiz, Trade and Trust in the Eighteenth-century Atlantic World: Spanish Merchants and their Overseas Networks (Suffolk, UK: The Boydell Press., 2013). The starting point of all these studies is Clarence Haring, Trade and Navigation between Spain and the Indies in the Time of the Hapsburgs (Cambridge, MA: Harvard University Press, 1918).

[22] The best, and indeed, virtually unique starting point for considering these changes in their broadest dimensions   are the joint works of Stanley and Barbara Stein: Silver, Trade, and War (2003); Apogee of Empire (2004), and Edge of Crisis (2010), All were published by Johns Hopkins University Press and do for the Spanish Empire what Laurence Henry Gipson did for the First British Empire.

[23] The key work is María Eugenia Romero Sotelo, Minería y Guerra. La economía de Nueva España, 1810-1821 (México, DF: UNAM, 1997)

[24] Calculated from José María Luis Mora, Crédito Público ([1837] México, DF: Miguel Angel Porrúa, 1986), pp. 413-460. Also see Richard J. Salvucci, Politics, Markets, and Mexico’s “London Debt,” 1823-1887 (NY: Cambridge University Press, 2009).

[25] Jesús Hernández Jaimes, La Formación de la Hacienda Pública Mexicana y las Tensiones Centro Periferia, 1821-1835  (México, DF: El Colegio de México, 2013). Javier Torres Medina, Centralismo y Reorganización. La Hacienda Pública Durante la Primera República Central de México, 1835-1842 (México, DF: Instituto Mora, 2013). The only treatment in English is Michael P. Costeloe, The Central Republic in Mexico, 1835-1846 (New York: Cambridge University Press, 1993).

[26] An agricultural worker who worked full time, 6 days a week, for the entire year (a strong assumption), in Central Mexico could have expected cash income of perhaps 24 pesos. If food, such as beans and tortilla were added, the whole pay might reach 30. The figure of 40 pesos comes from considerably richer agricultural lands around the city of Querétaro, and includes as an average income from nonagricultural employment as well, which was higher.  Measuring Worth would put the relative historic standard of living value in 2010 prices at $1.040, with the caveat that this is relative to a bundle of goods purchased in the United States. (https://www.measuringworth.com/uscompare/relativevalue.php).

[27]The phrase comes from Guido di Tella and Manuel Zymelman. See Colin Lewis, “Explaining Economic Decline: A review of recent debates in the economic and social history literature on the Argentine,” European Review of Latin American and Caribbean Studies, 64 (1998), pp. 49-68.

[28] Francisco Téllez Guerrero, De reales y granos. Las finanzas y el abasto de la Puebla de los Angeles, 1820-1840 (Puebla, MX: CIHS, 1986). Pp. 47-79.

[29]This is based on an analysis of government lending contracts. See Rosa María Meyer and Richard Salvucci, “The Panic of 1837 in Mexico: Evidence from Government Contracts” (in progress).

[30] There is an interesting summary of this data in U.S Govt., 57th Cong., 1 st sess., House, Monthly Summary of Commerce and Finance of the United States (September 1901) (Washington, DC: GPO, 1901), pp. 984-986.

[31] Salvucci, Politics and Markets, pp. 201-221.

[32] Miguel Galindo y Galindo, La Gran Década Nacional o Relación Histórica de la Guerra de Reforma, Intervención Extranjera, y gobierno del archiduque Maximiliano, 1857-1867 ([1902], 3 vols., México, DF: Fondo de Cultura Económica, 1987).

[33] Carmen Vázquez Mantecón, Santa Anna y la encrucijada del Estado. La dictadura, 1853-1855 (México, DF: Fondo de Cultura Económica, 1986).

[34] Moramay López-Alonso, Measuring Up: A History of Living Standards in Mexico, 1850-1950 (Stanford, CA: Stanford University Press, 2012);  Amilcar Challú and Auroro Gómez Galvarriato, “Mexico’s Real Wages in the Age of the Great Divergence, 1730-1930,” Revista de Historia Económica 33:1 (2015), pp. 123-152; Amílcar E. Challú, “The Great Decline: Biological Well-Being and Living Standards in Mexico, 1730-1840,” in Ricardo Salvatore, John H. Coatsworth, and Amilcar E. Challú, Living Standards in Latin American History: Height, Welfare, and Development, 1750-2000 (Cambridge, MA: Harvard University Press, 2010), pp. 23-67.

[35]See Challú and Gómez Galvarriato, “Real Wages,” Figure 5, p. 101.

[36] Luis González et al, La economía mexicana durante la época de Juárez (México, DF: 1976).

[37] Teresa Rojas Rabiela and Ignacio Gutiérrez Ruvalcaba, Cien ventanas a los países de antaño: fotografías del campo mexicano de hace un siglo) (México, DF: CONACYT, 2013), pp. 18-65.

[38] Alma Parra, “La Plata en la Estructura Económica Mexicana al Inicio del Siglo XX,” El Mercado de Valores 49:11 (1999), p. 14.

[39] Sandra Kuntz Ficker, Empresa Extranjera y Mercado Interno: El Ferrocarril Central Mexicano (1880-1907) (México, DF: El Colegio de México, 1995).

[40] Priscilla Connolly, El Contratista de Don Porfirio. Obras públicas, deuda y desarrollo desigual (México, DF: Fondo de Cultura Económica, 1997).

[41] Most notably John Tutino, From Insurrection to Revolution in Mexico: Social Bases of Agrarian Violence, 1750-1940 (Princeton, NJ: Princeton University Press, 1986). p. 229. My growth figures are based on the INEGI, Estadísticas Historicas de México, 2014) (http://dgcnesyp.inegi.org.mx/cgi-win/ehm2014.exe/CI080010, Accessed July 15, 2016).

[42] Stephen H. Haber, Industry and Underdevelopment: The Industrialization of Mexico, 1890-1940 (Stanford, CA: Stanford University Press, 1989); Aurora Gómez-Galvarriato, Industry and Revolution: Social and Economic Change in the Orizaba Valley (Cambridge, MA: Harvard University Press, 2013).

[43] There are literally dozens of accounts of the Revolution. The usual starting point, in English, is Alan Knight, The Mexican Revolution (reprint ed., 2 vols., Lincoln, NE: 1990).

[44] This argument has been made most insistently in Armando Razo and Stephen Haber, “The Rate of Growth of Productivity in Mexico, 1850-1933: Evidence from the Cotton Textile Industry,” Journal of Latin American Studies 30:3 (1998), pp. 481-517.

[45]Robert McCaa, “Missing Millions: The Demographic Cost of the Mexican revolution,” Mexican Studies/Estudios Mexicanos 19:2 (Summer 2003): 367-400; Virgilio Partida-Bush, “Demographic Transition, Demographic Bonus, and Ageing in Mexico, “ Proceedings of the United Nations Expert Group Meeting on Social and Economic Implications of Changing Population Age Structures. (http://www.un.org/esa/population/meetings/Proceedings_EGM_Mex_2005/partida.pdf) (Accessed July 15, 2016), pp. 287-290.

[46] An implication of the studies of Alan Knight, and of Clark Reynolds, The Mexican Economy: Twentieth Century Structure and Growth (New Haven, CT: Yale University Press, 1971).

[47] An interesting summary of revisionist thinking on the nature and history of the ejido appears in Emilio Kuri, “La invención del ejido, Nexos, January 2015.

[48]Alan Knight, “Cardenismo: Juggernaut or Jalopy?” Journal of Latin American Studies, 26:1 (1994), pp. 73-107.

[49] Stephen Haber, “The Political Economy of Industrialization,” in Victor Bulmer-Thomas, John Coatsworth, and Roberto Cortes-Conde, eds., The Cambridge Economic History of Latin America (2 vols., New York: Cambridge University Press, 2006), 2:  537-584.

[50]Again, there are dozens of studies of the Mexican economy in this period. Ros’ figures come from “Mexico’s Trade and Industrialization Experience Since 1960: A Reconsideration of Past Policies and Assessment of Current Reforms,” Kellogg Institute (Working Paper 186, January 1993). For a more general study, see Juan Carlos Moreno-Brid and Jaime Ros, Development and Growth in the Me3xican Economy. A Historical Perspective (New York: Oxford University Press, 2009). A recent Spanish language treatment is Enrique Cárdenas Sánchez, El largo curso de la economía mexicana. De 1780 a nuestros días (México, DF: Fondo de Cultura Económica, 2015). A view from a different perspective is Carlos Tello, Estado y desarrollo económico. México 1920-2006 (México, DF, UNAM, 2007).

[51]André A. Hoffman, Long Run Economic Development in Latin America in a Comparative Perspective: Proximate and Ultimate Causes (Santiago, Chile: CEPAL, 2001), p. 19.

[52]Tello, Estado y desarrollo, pp. 501-505.

[53] Mario Vargas Llosa, “Mexico: The Perfect Dictatorship,” New Perspectives Quarterly 8 (1991), pp. 23-24.

[54] Rafael Izquierdo, Política Hacendario del Desarrollo Estabilizador, 1958-1970 (México, DF: Fondo de Cultura Económica, 1995. The term stabilizing development was itself termed by Izquierdo as a government minister.

[55]See Foreign Relations of the United States, 1964-1968. Mexico and Central America http://2001-2009.state.gov/r/pa/ho/frus/johnsonlb/xxxi/36313.htm (Accessed July 15, 2016).

[56] José Aguilar Retureta, “The GDP Per Capita of the Mexican Regions (1895:1930): New Estimates, Revista de Historia Económica, 33: 3 (2015), pp. 387-423.

[57] For a contemporary account with a sense of the immediacy of the end of the Echeverría regime, see “Así se devaluó el peso,” Proceso, November 13, 1976.

[58] The standard account is Stephen Haber, Herbert Klein, Noel Maurer, and Kevin Middlebrook, Mexico since 1980 (New York: Cambridge University Press, 2008). A particularly astute economic account is Nora Lustig, Mexico: The Remaking of an Economy (2d ed., Washington, DC: The Brookings Institution, 1998).  But also Louise E. Walker, Waking from the Dream. Mexico’s Middle Classes After 1968 (Stanford, CA: Stanford University Press, 2013).

[59] See, for example, Jaime Ros Bosch, Algunas tesis equivocadas sobre el estancamiento económico de México (México, DF: El Colegio de México, 2013).

[60] La Banca Central y la Importancia de la Estabilidad Económica  June 16, 2008.  (http://www.banxico.org.mx/politica-monetaria-e-inflacion/material-de-referencia/intermedio/politica-monetaria/%7B3C1A08B1-FD93-0931-44F8-96F5950FC926%7D.pdf, Accessed July 15, 2016.). Also see Brian Winter, “This Man is Brilliant: So Why Doesn’t Mexico’s Economy Grow Faster?” Americas Quarterly (http://americasquarterly.org/content/man-brilliant-so-why-doesnt-mexicos-economy-grow-faster) (Accessed July 21, 2016)

[61]   For AMLO in his own words, see his A New Hope For Mexico: Saying No to Corruption, Violence, and Trump’s Wall. Translated by Natascha Uhlman (New York: O/R Books, 2018).

Citation: Salvucci, Richard . “Mexico: Economic History” EH.Net Encyclopedia, edited by Robert Whaples. December 27, 2018. URL http://eh.net/encyclopedia/the-economic-history-of-mexico/

 

Ecclesiastical Lordship, Seigneurial Power and Commercialization of Milling in Medieval England

Author(s):Lucas, Adam
Reviewer(s):Slavin, Philip

Published by EH.Net (September 2015)

Adam Lucas, Ecclesiastical Lordship, Seigneurial Power and Commercialization of Milling in Medieval England. Farnham, UK: Ashgate, 2014. xxii + 414 pp. $165 (hardcover), ISBN: 978-1-4094-2196-2.

Reviewed for EH.Net by Philip Slavin, School of History, University of Kent.

Although the topic of medieval mills and milling has received scholarly attention, chiefly in excellent studies by John Langdon, much still remains to be done, to fill some gaps in our knowledge and understanding. Adam Lucas’s study of the place of mills and milling on ecclesiastical (primarily monastic) estates in high- and late-medieval England is an important step in this direction. The importance of the topic cannot be overstated: on the eve of the Black Death, the Church controlled about 43 percent of all the powered mills (about 5,200 of 12,000 or so).

Overall, this is a fascinating study and, indeed, important contribution to the fields of late-medieval economic, social and monastic history. As such, it would undoubtedly be of great interest to scholars from several field and disciplines. The clear exposition, convincing analysis and well-balanced arguments add to the virtue of the study. The bulk of the discussion and analysis is based primarily on monastic cartularies: a source relatively under-utilized by economic historians (partially, because charters tend to be overshadowed by manorial court rolls and accounts). Three main and recurrent aspects form the basis of the book: (a) mill acquisition, (b) mill management and (c) mill income. On the basis of his source material, Lucas debunks three perpetuated myths, related to milling in the later Middle Ages: (a) the omnipresent seigneurial extraction through the suit of mill (the tenants’ obligation to grind their grain at their lord’s mill); (b) the proliferation of water-mills from the late twelfth-century onward; (c) and monastic technological innovations.

Chapter 1 provides a general overview of social and economic foundations of English monasticism throughout the Middle Ages, and the place of mills in a wider context of lord-tenant relationships. Chapter 2 looks at seigneurial milling monopolies. In the course of the twelfth century, many lords shifted from direct management to leasing out of estates: a process, which entailed, in many cases, the loss of suit of mill. Chapter 3 deals with the process of commercialization of English milling in the course of the thirteenth and the early fourteenth centuries; this process was reversed by the population decline and economic slump of the post-Black Death era. Chapter 4 concerns mills on episcopal estates, which in part were directly managed by bishops and in part passed into tenants’ hands. Chapter 5 studies Benedictine mills, focusing on four houses. As Lucas shows, the income from mills was determined in many cases by whether or not the houses managed to acquire/retain/reclaim suit of mill. The topic of Augustinian mills is explored in Chapter 6. Unlike the Benedictines, the Augustine canons were a relatively young order, with fewer mills, lower rents and incomes and rare instances of suits of mill. Hence, Augustinian mill enterprise tended to be, overall, much less extractive, compared to the Benedictines. The Cistercians (Chapter 7), on the other hand, did their best to extract as much revenue from their mills as possible. Chapter 8 surveys the fortunes of mills on the estates of “minor” monastic orders. Chapter 9 is concerned with the legal side of seigneurial milling, through the prism of disputes over various issues, including the suit of mill, mill tithes and ownership or shared ownership of mills. These disputes are to be regarded within a wider context of property encroachments, especially in the thirteenth and the early fourteenth centuries. Chapter 10 nicely wraps up the conclusions of the book in a more theoretical manner. Here Lucas admonishes us against blindly accepting some perpetuated myths: the monks were neither philanthropic nor technologically innovative — in many instances, the Benedictine and Cistercians were as oppressive as lay lords (even though he duly concedes that other orders were much less extractive), and not very keen on investing and building new powered mills. At the end of the book, Lucas supplies five appendices related to mill income and expenses, as well as disputes over mill rights.

Despite many merits of the monograph, it suffers from several minor shortcomings. First, only male monasteries are treated throughout the study, while nunneries are left out. It is a pity that the author did not examine the contrast between male and female houses of the same orders — especially, the Cistercians or Benedictines. Second, the overall approach of this book is institutional, while the exogenous (environmental) aspect is almost entirely left out. What impact did the environment have on trends and fortunes of milling? For instance, the Great Famine of 1315-17 is mentioned only in passing and there is no appropriate discussion of its impact on the depression of mill income (because of the scarcity of the available grains for grinding). Third, Lucas relies exclusively on printed material, rather than archival material. Fourth, most of Lucas’s statistical examples (with the exception of three notable exceptions), presented in different figures throughout the book, are, in effect, snapshots based on one or several sampled cases, rather than chronological graphs, based on long runs of accounts. One other (and to some frustrating) issue is Lucas’s organization of his figures. No sources are indicated below the tables and charts, leaving readers to browse various footnotes and guess which sources were used for this or that figure. Also, the costs are given in pence, rather than shillings of pounds; thus, Chart 6.1 has costs represented in hundreds of thousands of pence, rather than hundreds of pounds. This makes the reader’s reckoning rather difficult. Finally, the printed font is frustratingly small (and this point is directed towards the publisher, rather than the author).

Nevertheless, notwithstanding those (to my mind insignificant) methodological and “cosmetic” drawbacks, this is a first-rate book, which adds greatly to our knowledge and appreciation of late-medieval mills and milling. Perhaps, now it is time for someone to write a complementary monograph on mills on lay estates.

Philip Slavin is the author of Bread and Ale for the Brethren: The Provisioning of Norwich Cathedral Priory, c.1260-1536 (University of Hertfordshire Press, 2012).

Copyright (c) 2015 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (September 2015). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Agriculture, Natural Resources, and Extractive Industries
Industry: Manufacturing and Construction
Markets and Institutions
Geographic Area(s):Europe
Time Period(s):Medieval

Institutions, Innovation, and Industrialization: Essays in Economic History and Development

Editor(s):Greif, Avner
Kiesling, Lynne
Nye, John V. C.
Reviewer(s):Margo, Robert A.

Published by EH.Net (May 2015)

Avner Greif, Lynne Kiesling, and John V. C. Nye, editors, Institutions, Innovation, and Industrialization: Essays in Economic History and Development.  Princeton, NJ: Princeton University Press, 2015. v + 430 pp.  $49.50 (cloth), ISBN: 978-0-691-15734-4.

Reviewed for EH.Net by Robert A. Margo, Department of Economics, Boston University.

Although it would be difficult to prove conclusively I believe the level of social capital in the economic history profession is very high, absolutely and relative to other fields in economics.  Because the field is small, new entrants are quickly integrated into the fold.   Senior scholars take their mentoring responsibilities seriously, and not just to their own students.  On the back end, there is a very strong tradition of Festschriften, the formal honoring of distinguished individuals by research conferences and requisite commemorative volumes.   For economic historians who have produced many more successful PhDs in their career than the average number of chapters in an edited volume, the decision of whom to include in the published Festschrift (as opposed to the conference) is a delicate challenge.   As the co-editors note in their introductory remarks, this certainly was the case with the volume under review, honoring as it does Joel Mokyr, one of our most prodigious scholars and certainly one of the most prolific in replenishing the profession with new PhDs over the past several decades.  The co-editors are all well-known Mokyr students.  Avner Grief is the Bowman Family Endowed Professor in Humanities and Sciences at Stanford University; Lynne Kiesling is Associate Professor of Instruction in the Department of Economics at Northwestern University; and John V. C. Nye is the Frederic Bastiat Chair in Political Economy and Professor of Economics at George Mason University.

The book is divided into four sections.  The first without title or number presents the co-editors’ introductory remarks; and two chapters, one by Cormac Ó Gráda (“Neither Feast nor Famine: England before the Industrial Revolution”) and a second by Joel Mokyr (“Progress, Useful Knowledge, and the Origins of the Industrial Revolution”).  The second section (“Institutions”) contains four chapters by Grief (“Coercion and Exchange: How did Markets Evolve?”); Gergely Baics (“Meat Consumption in Nineteenth Century New York:  Quantity, Distribution, and Quality, or Notes on the ‘Antebellum Puzzle’”; Mauricio Drelichman and Hans-Joachim Voth (“Funding Empire: Risk, Diversification, and the Underwriting of Early Modern Sovereign Loans”); and Noel D. Johnson, Mark Koyama, and Nye (“Establishing a New Order: The Growth of the State and the Decline of Witch Trials in France”).   The third, (“Innovation”) has four chapters by Fabbio Braggion, Narly R.D. Dwarkasing, and Lyndon Moore (“Increasing Market Concentration in British Banking, 1885 to 1925”); Peter B. Meyer (“The Catapult of Riches: The Airplane as a Creative Macroinvention”); Karine van der Beck (“England’s Eighteenth Century Demand for High-Quality Worksmanship: Evidence from Apprentice, 1710-1770”); and Rick Szostak (“A Growth Agenda for Economic History”).  The fourth and final section (“Industrial Revolution”) is the longest with five chapters by Hoyt Bleakley, Louis Cain, and Joseph Ferrie (“Amidst Poverty and Prejudice: Black and Irish Civil War Veterans”); Ralf R. Meisenzahl (“How Britain Lost its Competitive Edge: Competence in the Second Industrial Revolution”); Carolyn Tuttle and Simone A. Wegge (“Regulating Child Labor: The European Experience”); Joyce Burnette (“Decomposing the Wage Gap: Within- and Between-Occupation Gender Wage Gaps at a Nineteenth Century Textile Firm”); and Eric Jones (“The Context of English Industrialization.”   Most of the authors are former doctoral students of Mokyr; others are long-time colleagues or professional associates (Cain, Jones, Ferrie).

Due to the eclectic nature of the book and space constraints being what they are, I shall hit the highlights as I see them and make some general observations.  Joel Mokyr’s chapter is a very effective summary of a forthcoming Princeton University Press book on the question near and dear to his heart: Why England? The Baics chapter provides an abundance of fresh quantitative data on the “antebellum puzzle,” showing that meat consumption appears to have declined in New York City in the late 1830s and early 1840s.  Karine van der Beek creatively uses archival records of apprentices subject to the stamp tax to study how the demand for certain types of skilled labor changed during the Industrial Revolution.   The Bleakley, Cain and Ferrie chapter uses unique data from the Early Indicators project collected by Mokyr’s cross-town colleague, the late Robert Fogel, to provide new insights into economic mobility experienced by Civil War veterans, by race and ethnicity.

The blurbs on the back cover of the book tout the “cutting-edge” (Harold James) and “pioneering and provocative” (Stephen Haber) nature of the chapters, but that is not how I see them for the most part.  As practiced today in the United States economic history is mostly indistinguishable in style and technique from other branches of applied economics.   Absent a few passing references to game theory here and there, and some simple algebra in Peter Meyer’s chapter, there is no formal modeling in this book.  When on display (and not often) the econometrics would be right at home in any 1980s issue of Explorations in Economic History.  There is some unevenness in substance and execution across the chapters, not uncommon in Festschrift.  I could have done without the Szostak chapter and its unnecessary eleven-step “program” of recommended behavior for today’s economic historians (“Focus on economic growth.  Focus some more.”)  It reminded me of sterile debates over the “New Economic History” that consumed far too much time (and journal space) back in the 1960s and 1970s and which are irrelevant today, in my personal experience.

What the essays do possess collectively is a studied, patient eye for historical context and clarity of exposition that has always been part and parcel of Joel Mokyr’s work, traits that he has most effectively transmitted to his students.   There is also an abundance of deep respect and affection for the dedicatee that shines through in every chapter.   Social capital runs very high in the Mokyr extended family, as this volume effectively demonstrates.

Robert A. Margo is the current President of the Economic History Association.  His most recent books are Human Capital and History: The American Record (co-edited with Leah Boustan and Carola Frydman) and Enterprising America: Businesses, Banks and Credit Markets in Historical Perspective (co-edited with William Collins), both published by the University of Chicago Press.

Copyright (c) 2015 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (May 2015). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Development of the Economic History Discipline: Historiography; Sources and Methods
Economic Development, Growth, and Aggregate Productivity
Economywide Country Studies and Comparative History
History of Technology, including Technological Change
Labor and Employment History
Markets and Institutions
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative
18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

Calamities and the Economy in Renaissance Italy: The Grand Tour of the Horsemen of the Apocalypse

Author(s):Alfani, Guido
Reviewer(s):Caferro, William

Published by EH.Net (October 2014)

Guido Alfani, Calamities and the Economy in Renaissance Italy: The Grand Tour of the Horsemen of the Apocalypse.  Translated by Christine Calvert.  New York: Palgrave MacMillan, 2013.  xii + 257 pp. $110 (hardcover). ISBN: 978-1-137-28976-6.

Reviewed for EH.Net by William Caferro, Department of History, Vanderbilt University.

The economic history of sixteenth century Italy has not received its scholarly due. Guido Alfani seeks in his new book to ameliorate the unfortunate historiographical status quo through careful examination of the “calamities” of the era. He situates his study in terms of two conflicting interpretations: that of Carlo M. Cipolla, who emphasized the catastrophic effects of the Italian Wars on the peninsula, and Fernand Braudel, who stressed the resiliency of Italy and new economic opportunities presented by crisis. Alfani debates the merits of the two famous theses. He ultimately stresses the primacy of population and demographic trends, for which he has constructed a considerable database.

The author’s approach is laudably broad and integrated. He examines in turn each “calamity,” giving, as his subtitle suggests, “a grand tour” of the “apocalyptic horseman” of the era. Alfani’s celestial cavalry consists of war, famine and plague. Alfani devotes separate chapters to each (chapters one to three), carefully assessing their effects on Italy. Although he deals with them individually, Alfani emphasizes the fact that they did not occur in isolation and can only be properly understood in terms of each other. The statement corresponds to recent scholarship on the fourteenth century and is a welcome corrective to the largely rhetorical stances of Cipolla and Braudel, which have remained unchallenged owing only to a lack of research. Alfani follows his discussion of the horsemen with an assessment of “winners and losers” (chapter four) on the peninsula. The chapter emphasizes the redistributive effects of the calamities: how some regions and cities emerged in good shape, while others were more badly damaged. Alfani ends with a final chapter devoted to population trends, in which he deploys his archival material to reassess prevailing views as well as his own earlier arguments. A brief conclusion restates his main points and looks out briefly on the seventeenth century.

The strength of the book is the author’s overall assessment of the various crises that struck Italy and his treatment of the peninsula as a whole. This is no small feat given the regional nature of studies of pre-modern Italy, which tend to focus on a single city or state. Unlike other works, Alfani carefully distinguishes between rural and urban areas, the mountains and the low lying places and the north and the south. The distinctions are critical to understanding the overall economic circumstance of Italy. Alfani adds an interesting micro study of the town of Nonantola, an “average” sized community a few kilometers from Modena. He uses it as a case study for both the devastating effects of population loss and the ability of towns to recover rapidly.

Alfani’s well-considered assertions are largely speculative in nature. They are aimed at making scholars think more about their imbedded assumptions. A basic problem with the book, however, is following its argument. The volume is a translation from Italian and it does not appear that the translator has done justice to the work. The writing is imprecise, redundant and, indeed, often hard to understand. There are sentences (e.g., “The health authorities of the Peninsula in the seventeenth century reached levels of absolute excellence…” p. 175), which fall flat to the ears of English speakers. Words like “plague,” “war,” “republic,” “empire” and “peninsula” are curiously capitalized. Chapter one, on war, restates the theses of the current scholarship on the fourteenth century, without attribution of those scholars, whose work Alfani neglects to cite. In so doing, the author unwittingly proves the wide gap separating those who study the sixteenth century from their earlier counterparts — a gap that Alfani specifically seeks to bridge with his book.

Nevertheless, the chapters on famine (chapter two) and plague (chapter three) offer the reader a great deal to think about. It is in the chapter on famine that Alfani first integrates into his analysis his data on population, culled primarily, though not exclusively, from baptismal records. He provides new statistical evidence of the effects of famine on population. He shows, among other things, that it struck forcefully in the plains, in the Po valley, but largely spared mountainous regions such as the Apennines. The discrepancy touched off migratory patterns, which Alfani explores at some length. These patterns are further explored in the next chapter on plague, which contains the most rigorous treatment of the overall historiography.

The fourth chapter stresses the redistributive effects of the sixteenth century crises against what Alfani sees as the tendency of scholars to focus only on their “destructive” nature (p. 135). Here Alfani takes Cipolla to task for his narrow view. He steers clear, however, from overall conclusions. These are stated more directly in the fifth chapter, which looks closely at population trends. Alfani here stresses the role of population in measuring the state of the Italian economy. In the process, he pointedly downplays the actions of “economic actors” and institutions, which Cipolla had accused of failing to respond adequately to the crises.

The chapters contain many wonderful details, innovative juxtapositions and comparisons. Alfani is particularly sensitive to regional differences and the paradoxes that sometimes existed therein. The Milanese were leaders in “modern” agriculture technique, but their northern counterparts in the Canavese region remained archaic in their practice (p. 155). For all his critique of Cipolla and Braudel, Alfani ultimately finds elements of truth in the conflicting interpretations. His book is really a call for a new more nuanced methodology for study of sixteenth century Italy that places demography at its center.

William Caferro is author of “Warfare and Economy in Renaissance Italy, 1350-1450,” Journal of Interdisciplinary History (2008)

Copyright (c) 2014 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (October 2014). All EH.Net reviews are archived at http://www.eh.net/BookReview

Subject(s):Economywide Country Studies and Comparative History
Historical Demography, including Migration
Military and War
Geographic Area(s):Europe
Time Period(s):16th Century

Wrong: Nine Economic Policy Disasters and What We Can Learn from Them

Author(s):Grossman, Richard S.
Reviewer(s):Rockoff, Hugh

Published by EH.Net (March 2014)

Richard S. Grossman, Wrong: Nine Economic Policy Disasters and What We Can Learn from Them. New York: Oxford University Press, 2013. xxi + 266 pp. $28 (hardcover), ISBN: 978-0-19-932219-0.

Reviewed for EH.Net by Hugh Rockoff, Department of Economics, Rutgers University.

Richard S. Grossman, professor of economics at Wesleyan University, has written a splendid book about the history of economic policy making. Grossman summarizes nine famous economic policy mistakes, anchoring his discussion in the literature that economic historians have developed, and draws some important generalizations for policy makers and for the professors, journalists, and ordinary citizens who hope to influence policy makers. In each case he explains why a policy was adopted, what it consisted of, and the short and long-term consequences. Grossman does not try to expand the scholarly frontier for any of these cases separately; He relies on his fellow economic historians to get the individual stories right. (Full disclosure: Richard is an old friend, and we are now doing some joint work.) The novelty is in the attempt to draw some broad generalizations. Inevitably, of course, scholars who are specialists on one of these cases will have some bones to pick. But unlike the efforts of some popular writers to draw lessons from economic history, Grossman has mastered the scholarly literature for the cases he chooses. The closest analog that I can think of is Michael J. Oliver and Derek H. Aldcroft’s Economic Disasters of the Twentieth Century, which enlisted nine outstanding economic historians to study nine major economic disasters.

All of Grossman’s examples will be familiar to economic historians. 1) The British decision to strengthen the Navigation Acts shortly before the Revolution; 2) the U.S. decisions to wind up the First and Second Banks of the United States; 3) The British decision to limit aid to Ireland during the potato famine; 4) the decision by the Allies to impose stiff reparations on Germany after World War I; 5) the British decision to return to the gold standard at the prewar parity after World War I; 6) the U.S. decision to raise rates in the Smoot-Hawley tariff; 7) the real estate boom and bust in Japan and the decision to allow Japanese banks to carry bad assets on their books for a prolonged period of time in the 1990s; 8) the decision to adopt the Euro; and 9) the U.S. subprime mortgage crisis.

Grossman’s main conclusion is that ideology played an important role in these policy mistakes, and that a greater willingness to base decisions on “cold, hard economic analysis” might have led policy makers to avoid them. In the case of the British decision to strengthen the Navigation Acts, Grossman sees the ideology of mercantilism at work. The Second Bank of the United States was done in by Andrew Jackson’s anti-bank ideology. Ireland’s great hunger resulted in part from British adherence to a laissez-faire economic ideology. In the case of Britain’s return to the gold standard, the ideology was simply a faith in the rightness of the nineteenth century gold standard. The subprime mortgage crisis, Grossman finds, was partly the result, again, of adherence to a free market ideology that undermined necessary regulation of the financial sector. Grossman, in other words, has provided abundant additional evidence to confirm Keynes’s famous comment (which Grossman uses as the epigraph for his book) that “the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood.” And his conclusion that we would be better served if policy makers would rely less on ideology and more on economic analysis is hard to dispute.

Grossman does not, I hasten to add, adopt a monocausal explanation of these mistakes. Often special interests must share the blame. This comes out clearly in the Smoot-Hawley tariff when each member or Congress fought for an increase in the tariff that would help producers in his or her district. Sometimes a lack of sympathy for people who were different in terms of culture, religion, or nationality played a role, as in the British failure to aid Ireland during the potato famine and the decision by the Allies to impose harsh penalties on Germany after World War I. Sometimes simple bad luck played a part. Perhaps, Grossman suggests, Keynes simply had an off-night when Churchill gave him a chance to make the case against returning to gold at the prewar parity. Nevertheless, Grossman’s point that adherence to mistaken ideologies played a major role in these mistakes comes through powerfully.

Conclusion: I have great admiration for this book. Grossman addresses an important question and his judgments are uniformly well reasoned and balanced. He is also an outstanding teacher of economics. To explain Keynes’s critique of the Britain’s decision to return to gold at the prewar parity after World War I Grossman constructs a simple, easily understood, numeric example to get to the heart of Keynes’s analysis. And in describing why the Smoot-Hawley Tariff was a bad idea, Grossman goes back to the theory of comparative advantage and explains it in a way that non-economists could actually understand – no easy task. For this reason, the book would also make a good text for an undergraduate course. Each week or so a new problem could be considered, and students could choose the event that most interested them for their papers. Students would learn a great deal of economics without realizing that they were being taught. Few economic historians can write as well as Grossman. But more of those who can write well should follow his example and write for policy makers and for the general public. If not economic historians, then who?

Comment: While I find Grossman’s central argument convincing, his discussion raises some additional questions for me; a sign of a challenging book. One is whether it is always possible to distinguish ideology from “cold, hard economic analysis” ex ante. His analysis of the problems of the Eurozone is a case in point. In hindsight, perhaps, it is obvious that the Eurozone was not an optimum currency area, and that even if it managed to survive, the Eurozone was likely to suffer many needless troubles. Some economists recognized this at the time the Eurozone was established. But one of the key supporters of the Euro was Robert Mundell, the brilliant Nobel Prize economist who invented the idea of optimum currency areas. Indeed, Mundell can also be considered the father of the Euro. (If you don’t believe me, try typing “Who is the father of the Euro?” into Google. At least this worked on February 12. 2014.) Mundell believed that adopting the Euro would set the Eurozone on the path to becoming an optimum currency area. When I was in graduate student at the University of Chicago I had the good fortune to take courses from both Mundell and Milton Friedman, who would become a staunch critic of the Euro. I can attest that they were both possessed dazzling intellects, and that both could construct economic arguments that would be hard for mere mortals to demolish.

That brings me to my second question: why do policy makers, and those who hope to advise them, rely so much on ideology when so often ideology leads them astray? I think the reason is that ideology also plays a positive role in economic policy making. It helps policy makers reach decisions when economic science simply does not provide clear guidance. An analogy with medicine will help make my point. When medical science provides a clear answer most practitioners will give the same advice. Someone who is diagnosed with malaria will be given one of a number of drugs that have been shown to be effective. But there are cases where medical science does not provide such clarity: for example, an elderly man diagnosed with a slowly growing prostate cancer. The medical researcher is free to say “I don’t know what the best treatment is; more research is needed.” But the practicing physician may feel obligated to advise the patient. Here ideology, or in the case of medicine let’s say philosophy, plays a useful role. There are conservative physicians who are impressed by the natural tendency of the body to heal itself and of the danger of unintended side effects from medical interventions, who will advise a wait-and-see approach.  But there are also “liberals” who believe that the body is an imperfect machine and that an aggressive interventionist policy is more likely to prove effective.  Of course, when advising a patient a physician will take more into account than just medical science and medical philosophy. The patient’s willingness to gamble on a risky intervention must be considered. And, of course, interest groups influence medical policies just as they influence economic policies. In the prostate cancer example we have the recommendation based on data analysis by the United States Preventive Services Task Force that routine screening PSA tests not be done. But this recommendation has been widely challenged in part, it has been alleged, because it would negatively impact the interests of certain groups of physicians and hospitals. Nevertheless, even the best intentioned physician must often fall back on his or her medical philosophy simply because medical science has not reached a clear consensus.

In the same way, economic policy makers who must make decisions about raising and lowering taxes, raising or lowering the minimum wage, increasing or decreasing Federal Reserve asset purchases, confirming or not confirming free trade agreements, and so on, cannot wait until economic science has reached a clear answer on the right policy. Instead, policy makers must inevitably rely on their economic ideologies to guide them.

Hugh Rockoff is the author of America’s Economic Way of War: War and the U.S. Economy from the Spanish-American War to the Persian Gulf War (Cambridge University Press, 2012).

Copyright (c) 2014 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (March 2014). All EH.Net reviews are archived at http://www.eh.net/BookReview

Subject(s):Economic Planning and Policy
Financial Markets, Financial Institutions, and Monetary History
Military and War
International and Domestic Trade and Relations
Macroeconomics and Fluctuations
Geographic Area(s):North America
Time Period(s):18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

English Poor Laws

George Boyer, Cornell University

A compulsory system of poor relief was instituted in England during the reign of Elizabeth I. Although the role played by poor relief was significantly modified by the Poor Law Amendment Act of 1834, the Crusade Against Outrelief of the 1870s, and the adoption of various social insurance programs in the early twentieth century, the Poor Law continued to assist the poor until it was replaced by the welfare state in 1948. For nearly three centuries, the Poor Law constituted “a welfare state in miniature,” relieving the elderly, widows, children, the sick, the disabled, and the unemployed and underemployed (Blaug 1964). This essay will outline the changing role played by the Poor Law, focusing on the eighteenth and nineteenth centuries.

The Origins of the Poor Law

While legislation dealing with vagrants and beggars dates back to the fourteenth century, perhaps the first English poor law legislation was enacted in 1536, instructing each parish to undertake voluntary weekly collections to assist the “impotent” poor. The parish had been the basic unit of local government since at least the fourteenth century, although Parliament imposed few if any civic functions on parishes before the sixteenth century. Parliament adopted several other statutes relating to the poor in the next sixty years, culminating with the Acts of 1597-98 and 1601 (43 Eliz. I c. 2), which established a compulsory system of poor relief that was administered and financed at the parish (local) level. These Acts laid the groundwork for the system of poor relief up to the adoption of the Poor Law Amendment Act in 1834. Relief was to be administered by a group of overseers, who were to assess a compulsory property tax, known as the poor rate, to assist those within the parish “having no means to maintain them.” The poor were divided into three groups: able-bodied adults, children, and the old or non-able-bodied (impotent). The overseers were instructed to put the able-bodied to work, to give apprenticeships to poor children, and to provide “competent sums of money” to relieve the impotent.

Deteriorating economic conditions and loss of traditional forms of charity in the 1500s

The Elizabethan Poor Law was adopted largely in response to a serious deterioration in economic circumstances, combined with a decline in more traditional forms of charitable assistance. Sixteenth century England experienced rapid inflation, caused by rapid population growth, the debasement of the coinage in 1526 and 1544-46, and the inflow of American silver. Grain prices more than tripled from 1490-1509 to 1550-69, and then increased by an additional 73 percent from 1550-69 to 1590-1609. The prices of other commodities increased nearly as rapidly — the Phelps Brown and Hopkins price index rose by 391 percent from 1495-1504 to 1595-1604. Nominal wages increased at a much slower rate than did prices; as a result, real wages of agricultural and building laborers and of skilled craftsmen declined by about 60 percent over the course of the sixteenth century. This decline in purchasing power led to severe hardship for a large share of the population. Conditions were especially bad in 1595-98, when four consecutive poor harvests led to famine conditions. At the same time that the number of workers living in poverty increased, the supply of charitable assistance declined. The dissolution of the monasteries in 1536-40, followed by the dissolution of religious guilds, fraternities, almshouses, and hospitals in 1545-49, “destroyed much of the institutional fabric which had provided charity for the poor in the past” (Slack 1990). Given the circumstances, the Acts of 1597-98 and 1601 can be seen as an attempt by Parliament both to prevent starvation and to control public order.

The Poor Law, 1601-1750

It is difficult to determine how quickly parishes implemented the Poor Law. Paul Slack (1990) contends that in 1660 a third or more of parishes regularly were collecting poor rates, and that by 1700 poor rates were universal. The Board of Trade estimated that in 1696 expenditures on poor relief totaled £400,000 (see Table 1), slightly less than 1 percent of national income. No official statistics exist for this period concerning the number of persons relieved or the demographic characteristics of those relieved, but it is possible to get some idea of the makeup of the “pauper host” from local studies undertaken by historians. These suggest that, during the seventeenth century, the bulk of relief recipients were elderly, orphans, or widows with young children. In the first half of the century, orphans and lone-parent children made up a particularly large share of the relief rolls, while by the late seventeenth century in many parishes a majority of those collecting regular weekly “pensions” were aged sixty or older. Female pensioners outnumbered males by as much as three to one (Smith 1996). On average, the payment of weekly pensions made up about two-thirds of relief spending in the late seventeenth and early eighteenth centuries; the remainder went to casual benefits, often to able-bodied males in need of short-term relief because of sickness or unemployment.

Settlement Act of 1662

One of the issues that arose in the administration of relief was that of entitlement: did everyone within a parish have a legal right to relief? Parliament addressed this question in the Settlement Act of 1662, which formalized the notion that each person had a parish of settlement, and which gave parishes the right to remove within forty days of arrival any newcomer deemed “likely to be chargeable” as well as any non-settled applicant for relief. While Adam Smith, and some historians, argued that the Settlement Law put a serious brake on labor mobility, available evidence suggests that parishes used it selectively, to keep out economically undesirable migrants such as single women, older workers, and men with large families.

Relief expenditures increased sharply in the first half of the eighteenth century, as can be seen in Table 1. Nominal expenditures increased by 72 percent from 1696 to 1748-50 despite the fact that prices were falling and population was growing slowly; real expenditures per capita increased by 84 percent. A large part of this rise was due to increasing pension benefits, especially for the elderly. Some areas also experienced an increase in the number of able-bodied relief recipients. In an attempt to deter some of the poor from applying for relief, Parliament in 1723 adopted the Workhouse Test Act, which empowered parishes to deny relief to any applicant who refused to enter a workhouse. While many parishes established workhouses as a result of the Act, these were often short-lived, and the vast majority of paupers continued to receive outdoor relief (that is, relief in their own homes).

The Poor Law, 1750-1834

The period from 1750 to 1820 witnessed an explosion in relief expenditures. Real per capita expenditures more than doubled from 1748-50 to 1803, and remained at a high level until the Poor Law was amended in 1834 (see Table 1). Relief expenditures increased from 1.0% of GDP in 1748-50 to a peak of 2.7% of GDP in 1818-20 (Lindert 1998). The demographic characteristics of the pauper host changed considerably in the late eighteenth and early nineteenth centuries, especially in the rural south and east of England. There was a sharp increase in numbers receiving casual benefits, as opposed to regular weekly pensions. The age distribution of those on relief became younger — the share of paupers who were prime-aged (20- 59) increased significantly, and the share aged 60 and over declined. Finally, the share of relief recipients in the south and east who were male increased from about a third in 1760 to nearly two-thirds in 1820. In the north and west there also were shifts toward prime-age males and casual relief, but the magnitude of these changes was far smaller than elsewhere (King 2000).

Gilbert’s Act and the Removal Act

There were two major pieces of legislation during this period. Gilbert’s Act (1782) empowered parishes to join together to form unions for the purpose of relieving their poor. The Act stated that only the impotent poor should be relieved in workhouses; the able-bodied should either be found work or granted outdoor relief. To a large extent, Gilbert’s Act simply legitimized the policies of a large number of parishes that found outdoor relief both less and expensive and more humane that workhouse relief. The other major piece of legislation was the Removal Act of 1795, which amended the Settlement Law so that no non-settled person could be removed from a parish unless he or she applied for relief.

Speenhamland System and other forms of poor relief

During this period, relief for the able-bodied took various forms, the most important of which were: allowances-in-aid-of-wages (the so-called Speenhamland system), child allowances for laborers with large families, and payments to seasonally unemployed agricultural laborers. The system of allowances-in-aid-of-wages was adopted by magistrates and parish overseers throughout large parts of southern England to assist the poor during crisis periods. The most famous allowance scale, though by no means the first, was that adopted by Berkshire magistrates at Speenhamland on May 6, 1795. Under the allowance system, a household head (whether employed or unemployed) was guaranteed a minimum weekly income, the level of which was determined by the price of bread and by the size of his or her family. Such scales typically were instituted only during years of high food prices, such as 1795-96 and 1800-01, and removed when prices declined. Child allowance payments were widespread in the rural south and east, which suggests that laborers’ wages were too low to support large families. The typical parish paid a small weekly sum to laborers with four or more children under age 10 or 12. Seasonal unemployment had been a problem for agricultural laborers long before 1750, but the extent of seasonality increased in the second half of the eighteenth century as farmers in southern and eastern England responded to the sharp increase in grain prices by increasing their specialization in grain production. The increase in seasonal unemployment, combined with the decline in other sources of income, forced many agricultural laborers to apply for poor relief during the winter.

Regional differences in relief expenditures and recipients

Table 2 reports data for fifteen counties located throughout England on per capita relief expenditures for the years ending in March 1783-85, 1803, 1812, and 1831, and on relief recipients in 1802-03. Per capita expenditures were higher on average in agricultural counties than in more industrial counties, and were especially high in the grain-producing southern counties — Oxford, Berkshire, Essex, Suffolk, and Sussex. The share of the population receiving poor relief in 1802-03 varied significantly across counties, being 15 to 23 percent in the grain- producing south and less than 10 percent in the north. The demographic characteristics of those relieved also differed across regions. In particular, the share of relief recipients who were elderly or disabled was higher in the north and west than it was in the south; by implication, the share that were able-bodied was higher in the south and east than elsewhere. Economic historians typically have concluded that these regional differences in relief expenditures and numbers on relief were caused by differences in economic circumstances; that is, poverty was more of a problem in the agricultural south and east than it was in the pastoral southwest or in the more industrial north (Blaug 1963; Boyer 1990). More recently, King (2000) has argued that the regional differences in poor relief were determined not by economic structure but rather by “very different welfare cultures on the part of both the poor and the poor law administrators.”

Causes of the Increase in Relief to Able-bodied Males

What caused the increase in the number of able-bodied males on relief? In the second half of the eighteenth century, a large share of rural households in southern England suffered significant declines in real income. County-level cross-sectional data suggest that, on average, real wages for day laborers in agriculture declined by 19 percent from 1767-70 to 1795 in fifteen southern grain-producing counties, then remained roughly constant from 1795 to 1824, before increasing to a level in 1832 about 10 percent above that of 1770 (Bowley 1898). Farm-level time-series data yield a similar result — real wages in the southeast declined by 13 percent from 1770-79 to 1800-09, and remained low until the 1820s (Clark 2001).

Enclosures

Some historians contend that the Parliamentary enclosure movement, and the plowing over of commons and waste land, reduced the access of rural households to land for growing food, grazing animals, and gathering fuel, and led to the immiseration of large numbers of agricultural laborers and their families (Hammond and Hammond 1911; Humphries 1990). More recent research, however, suggests that only a relatively small share of agricultural laborers had common rights, and that there was little open access common land in southeastern England by 1750 (Shaw-Taylor 2001; Clark and Clark 2001). Thus, the Hammonds and Humphries probably overstated the effect of late eighteenth-century enclosures on agricultural laborers’ living standards, although those laborers who had common rights must have been hurt by enclosures.

Declining cottage industry

Finally, in some parts of the south and east, women and children were employed in wool spinning, lace making, straw plaiting, and other cottage industries. Employment opportunities in wool spinning, the largest cottage industry, declined in the late eighteenth century, and employment in the other cottage industries declined in the early nineteenth century (Pinchbeck 1930; Boyer 1990). The decline of cottage industry reduced the ability of women and children to contribute to household income. This, in combination with the decline in agricultural laborers’ wage rates and, in some villages, the loss of common rights, caused many rural household’s incomes in southern England to fall dangerously close to subsistence by 1795.

North and Midlands

The situation was different in the north and midlands. The real wages of day laborers in agriculture remained roughly constant from 1770 to 1810, and then increased sharply, so that by the 1820s wages were about 50 percent higher than they were in 1770 (Clark 2001). Moreover, while some parts of the north and midlands experienced a decline in cottage industry, in Lancashire and the West Riding of Yorkshire the concentration of textile production led to increased employment opportunities for women and children.

The Political Economy of the Poor Law, 1795-1834

A comparison of English poor relief with poor relief on the European continent reveals a puzzle: from 1795 to 1834 relief expenditures per capita, and expenditures as a share of national product, were significantly higher in England than on the continent. However, differences in spending between England and the continent were relatively small before 1795 and after 1834 (Lindert 1998). Simple economic explanations cannot account for the different patterns of English and continental relief.

Labor-hiring farmers take advantage of the poor relief system

The increase in relief spending in the late-eighteenth and early-nineteenth centuries was partly a result of politically-dominant farmers taking advantage of the poor relief system to shift some of their labor costs onto other taxpayers (Boyer 1990). Most rural parish vestries were dominated by labor-hiring farmers as a result of “the principle of weighting the right to vote according to the amount of property occupied,” introduced by Gilbert’s Act (1782), and extended in 1818 by the Parish Vestry Act (Brundage 1978). Relief expenditures were financed by a tax levied on all parishioners whose property value exceeded some minimum level. A typical rural parish’s taxpayers can be divided into two groups: labor-hiring farmers and non-labor-hiring taxpayers (family farmers, shopkeepers, and artisans). In grain-producing areas, where there were large seasonal variations in the demand for labor, labor-hiring farmers anxious to secure an adequate peak season labor force were able to reduce costs by laying off unneeded workers during slack seasons and having them collect poor relief. Large farmers used their political power to tailor the administration of poor relief so as to lower their labor costs. Thus, some share of the increase in relief spending in the early nineteenth century represented a subsidy to labor-hiring farmers rather than a transfer from farmers and other taxpayers to agricultural laborers and their families. In pasture farming areas, where the demand for labor was fairly constant over the year, it was not in farmers’ interests to shed labor during the winter, and the number of able-bodied laborers receiving casual relief was smaller. The Poor Law Amendment Act of 1834 reduced the political power of labor-hiring farmers, which helps to account for the decline in relief expenditures after that date.

The New Poor Law, 1834-70

The increase in spending on poor relief in the late eighteenth and early nineteenth centuries, combined with the attacks on the Poor Laws by Thomas Malthus and other political economists and the agricultural laborers’ revolt of 1830-31 (the Captain Swing riots), led the government in 1832 to appoint the Royal Commission to Investigate the Poor Laws. The Commission published its report, written by Nassau Senior and Edwin Chadwick, in March 1834. The report, described by historian R. H. Tawney (1926) as “brilliant, influential and wildly unhistorical,” called for sweeping reforms of the Poor Law, including the grouping of parishes into Poor Law unions, the abolition of outdoor relief for the able-bodied and their families, and the appointment of a centralized Poor Law Commission to direct the administration of poor relief. Soon after the report was published Parliament adopted the Poor Law Amendment Act of 1834, which implemented some of the report’s recommendations and left others, like the regulation of outdoor relief, to the three newly appointed Poor Law Commissioners.

By 1839 the vast majority of rural parishes had been grouped into poor law unions, and most of these had built or were building workhouses. On the other hand, the Commission met with strong opposition when it attempted in 1837 to set up unions in the industrial north, and the implementation of the New Poor Law was delayed in several industrial cities. In an attempt to regulate the granting of relief to able-bodied males, the Commission, and its replacement in 1847, the Poor Law Board, issued several orders to selected Poor Law Unions. The Outdoor Labour Test Order of 1842, sent to unions without workhouses or where the workhouse test was deemed unenforceable, stated that able-bodied males could be given outdoor relief only if they were set to work by the union. The Outdoor Relief Prohibitory Order of 1844 prohibited outdoor relief for both able-bodied males and females except on account of sickness or “sudden and urgent necessity.” The Outdoor Relief Regulation Order of 1852 extended the labor test for those relieved outside of workhouses.

Historical debate about the effect of the New Poor Law

Historians do not agree on the effect of the New Poor Law on the local administration of relief. Some contend that the orders regulating outdoor relief largely were evaded by both rural and urban unions, many of whom continued to grant outdoor relief to unemployed and underemployed males (Rose 1970; Digby 1975). Others point to the falling numbers of able- bodied males receiving relief in the national statistics and the widespread construction of union workhouses, and conclude that the New Poor Law succeeded in abolishing outdoor relief for the able-bodied by 1850 (Williams 1981). A recent study by Lees (1998) found that in three London parishes and six provincial towns in the years around 1850 large numbers of prime-age males continued to apply for relief, and that a majority of those assisted were granted outdoor relief. The Poor Law also played an important role in assisting the unemployed in industrial cities during the cyclical downturns of 1841-42 and 1847-48 and the Lancashire cotton famine of 1862-65 (Boot 1990; Boyer 1997). There is no doubt, however, that spending on poor relief declined after 1834 (see Table 1). Real per capita relief expenditures fell by 43 percent from 1831 to 1841, and increased slowly thereafter.

Beginning in 1840, data on the number of persons receiving poor relief are available for two days a year, January 1 and July 1; the “official” estimates in Table 1 of the annual number relieved were constructed as the average of the number relieved on these two dates. Studies conducted by Poor Law administrators indicate that the number recorded in the day counts was less than half the number assisted during the year. Lees’s “revised” estimates of annual relief recipients (see Table 1) assumes that the ratio of actual to counted paupers was 2.24 for 1850- 1900 and 2.15 for 1905-14; these suggest that from 1850 to 1870 about 10 percent of the population was assisted by the Poor Law each year. Given the temporary nature of most spells of relief, over a three year period as much as 25 percent of the population made use of the Poor Law (Lees 1998).

The Crusade Against Outrelief

In the 1870s Poor Law unions throughout England and Wales curtailed outdoor relief for all types of paupers. This change in policy, known as the Crusade Against Outrelief, was not a result of new government regulations, although it was encouraged by the newly formed Local Government Board (LGB). The Board was aided in convincing the public of the need for reform by the propaganda of the Charity Organization Society (COS), founded in 1869. The LGB and the COS maintained that the ready availability of outdoor relief destroyed the self-reliance of the poor. The COS went on to argue that the shift from outdoor to workhouse relief would significantly reduce the demand for assistance, since most applicants would refuse to enter workhouses, and therefore reduce Poor Law expenditures. A policy that promised to raise the morals of the poor and reduce taxes was hard for most Poor Law unions to resist (MacKinnon 1987).

The effect of the Crusade can be seen in Table 1. The deterrent effect associated with the workhouse led to a sharp fall in numbers on relief — from 1871 to 1876, the number of paupers receiving outdoor relief fell by 33 percent. The share of paupers relieved in workhouses increased from 12-15 percent in 1841-71 to 22 percent in 1880, and it continued to rise to 35 percent in 1911. The extent of the crusade varied considerably across poor law unions. Urban unions typically relieved a much larger share of their paupers in workhouses than did rural unions, but there were significant differences in practice across cities. In 1893, over 70 percent of the paupers in Liverpool, Manchester, Birmingham, and in many London Poor Law unions received indoor relief; however, in Leeds, Bradford, Newcastle, Nottingham and several other industrial and mining cities the majority of paupers continued to receive outdoor relief (Booth 1894).

Change in the attitude of the poor toward relief

The last third of the nineteenth century also witnessed a change in the attitude of the poor towards relief. Prior to 1870, a large share of the working class regarded access to public relief as an entitlement, although they rejected the workhouse as a form of relief. Their opinions changed over time, however, and by the end of the century most workers viewed poor relief as stigmatizing (Lees 1998). This change in perceptions led many poor people to go to great lengths to avoid applying for relief, and available evidence suggests that there were large differences between poverty rates and pauperism rates in late Victorian Britain. For example, in York in 1900, 3,451 persons received poor relief at some point during the year, less than half of the 7,230 persons estimated by Rowntree to be living in primary poverty.

The Declining Role of the Poor Law, 1870-1914

Increased availability of alternative sources of assistance

The share of the population on relief fell sharply from 1871 to 1876, and then continued to decline, at a much slower pace, until 1914. Real per capita relief expenditures increased from 1876 to 1914, largely because the Poor Law provided increasing amounts of medical care for the poor. Otherwise, the role played by the Poor Law declined over this period, due in large part to an increase in the availability of alternative sources of assistance. There was a sharp increase in the second half of the nineteenth century in the membership of friendly societies — mutual help associations providing sickness, accident, and death benefits, and sometimes old age (superannuation) benefits — and of trade unions providing mutual insurance policies. The benefits provided workers and their families with some protection against income loss, and few who belonged to friendly societies or unions providing “friendly” benefits ever needed to apply to the Poor Law for assistance.

Work relief

Local governments continued to assist unemployed males after 1870, but typically not through the Poor Law. Beginning with the Chamberlain Circular in 1886 the Local Government Board encouraged cities to set up work relief projects when unemployment was high. The circular stated that “it is not desirable that the working classes should be familiarised with Poor Law relief,” and that the work provided should “not involve the stigma of pauperism.” In 1905 Parliament adopted the Unemployed Workman Act, which established in all large cities distress committees to provide temporary employment to workers who were unemployed because of a “dislocation of trade.”

Liberal welfare reforms, 1906-1911

Between 1906 and 1911 Parliament passed several pieces of social welfare legislation collectively known as the Liberal welfare reforms. These laws provided free meals and medical inspections (later treatment) for needy school children (1906, 1907, 1912) and weekly pensions for poor persons over age 70 (1908), and established national sickness and unemployment insurance (1911). The Liberal reforms purposely reduced the role played by poor relief, and paved the way for the abolition of the Poor Law.

The Last Years of the Poor Law

During the interwar period the Poor Law served as a residual safety net, assisting those who fell through the cracks of the existing social insurance policies. The high unemployment of 1921-38 led to a sharp increase in numbers on relief. The official count of relief recipients rose from 748,000 in 1914 to 1,449,000 in 1922; the number relieved averaged 1,379,800 from 1922 to 1938. A large share of those on relief were unemployed workers and their dependents, especially in 1922-26. Despite the extension of unemployment insurance in 1920 to virtually all workers except the self-employed and those in agriculture or domestic service, there still were large numbers who either did not qualify for unemployment benefits or who had exhausted their benefits, and many of them turned to the Poor Law for assistance. The vast majority were given outdoor relief; from 1921 to 1923 the number of outdoor relief recipients increased by 1,051,000 while the number receiving indoor relieve increased by 21,000.

The Poor Law becomes redundant and is repealed

Despite the important role played by poor relief during the interwar period, the government continued to adopt policies, which bypassed the Poor Law and left it “to die by attrition and surgical removals of essential organs” (Lees 1998). The Local Government Act of 1929 abolished the Poor Law unions, and transferred the administration of poor relief to the counties and county boroughs. In 1934 the responsibility for assisting those unemployed who were outside the unemployment insurance system was transferred from the Poor Law to the Unemployment Assistance Board. Finally, from 1945 to 1948, Parliament adopted a series of laws that together formed the basis for the welfare state, and made the Poor Law redundant. The National Assistance Act of 1948 officially repealed all existing Poor Law legislation, and replaced the Poor Law with the National Assistance Board to act as a residual relief agency.

Table 1
Relief Expenditures and Numbers on Relief, 1696-1936

Expend. Real Expend. Expend. Number Share of Number Share of Share of
on expend. as share as share relieved Pop. relieved pop. paupers
Year Relief per capita of GDP of GDP (Official) relieved (Lees) relieved relieved
(£s) 1803=100 (Slack) (Lindert) 1 000s (Official) 1 000s (Lees) indoors
1696 400 24.9 0.8
1748-50 690 45.8 1.0 0.99
1776 1 530 64.0 1.6 1.59
1783-85 2 004 75.6 2.0 1.75
1803 4 268 100.0 1.9 2.15 1 041 11.4 8.0
1813 6 656 91.8 2.58
1818 7 871 116.8
1821 6 959 113.6 2.66
1826 5 929 91.8
1831 6 799 107.9 2.00
1836 4 718 81.1
1841 4 761 61.8 1.12 1 299 8.3 2 910 18.5 14.8
1846 4 954 69.4 1 332 8.0 2 984 17.8 15.0
1851 4 963 67.8 1.07 941 5.3 2 108 11.9 12.1
1856 6 004 62.0 917 4.9 2 054 10.9 13.6
1861 5 779 60.0 0.86 884 4.4 1 980 9.9 13.2
1866 6 440 65.0 916 4.3 2 052 9.7 13.7
1871 7 887 73.3 1 037 4.6 2 323 10.3 14.2
1876 7 336 62.8 749 3.1 1 678 7.0 18.1
1881 8 102 69.1 0.70 791 3.1 1 772 6.9 22.3
1886 8 296 72.0 781 2.9 1 749 6.4 23.2
1891 8 643 72.3 760 2.6 1 702 5.9 24.0
1896 10 216 84.7 816 2.7 1 828 6.0 25.9
1901 11 549 84.7 777 2.4 1 671 5.2 29.2
1906 14 036 96.9 892 2.6 1 918 5.6 31.1
1911 15 023 93.6 886 2.5 1 905 5.3 35.1
1921 31 925 75.3 627 1.7 35.7
1926 40 083 128.3 1 331 3.4 17.7
1931 38 561 133.9 1 090 2.7 21.5
1936 44 379 165.7 1 472 3.6 12.6

Notes: Relief expenditure data are for the year ended on March 25. In calculating real per capita expenditures, I used cost of living and population data for the previous year.

Table 2
County-level Poor Relief Data, 1783-1831

Per capita Per capita Per capita Per capita Share of Percent Share of
relief relief relief relief Percent of Recipients of land in Pop
spending spending spending spending population over 60 or arable Employed
County (s.) (s.) (s.) (s.) relieved Disabled farming in Agric
1783-5 1802-03 1812 1831 1802-03 1802-03 c. 1836 1821
North
Durham 2.78 6.50 9.92 6.83 9.3 22.8 54.9 20.5
Northumberland 2.81 6.67 7.92 6.25 8.8 32.2 46.5 26.8
Lancashire 3.48 4.42 7.42 4.42 6.7 15.0 27.1 11.2
West Riding 2.91 6.50 9.92 5.58 9.3 18.1 30.0 19.6
Midlands
Stafford 4.30 6.92 8.50 6.50 9.1 17.2 44.8 26.6
Nottingham 3.42 6.33 10.83 6.50 6.8 17.3 na 35.4
Warwick 6.70 11.25 13.33 9.58 13.3 13.7 47.5 27.9
Southeast
Oxford 7.07 16.17 24.83 16.92 19.4 13.2 55.8 55.4
Berkshire 8.65 15.08 27.08 15.75 20.0 12.7 58.5 53.3
Essex 9.10 12.08 24.58 17.17 16.4 12.7 72.4 55.7
Suffolk 7.35 11.42 19.33 18.33 16.6 11.4 70.3 55.9
Sussex 11.52 22.58 33.08 19.33 22.6 8.7 43.8 50.3
Southwest
Devon 5.53 7.25 11.42 9.00 12.3 23.1 22.5 40.8
Somerset 5.24 8.92 12.25 8.83 12.0 20.8 24.4 42.8
Cornwall 3.62 5.83 9.42 6.67 6.6 31.0 23.8 37.7
England & Wales 4.06 8.92 12.75 10.08 11.4 16.0 48.0 33.0

References

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Citation: Boyer, George. “English Poor Laws”. EH.Net Encyclopedia, edited by Robert Whaples. May 7, 2002. URL http://eh.net/encyclopedia/english-poor-laws/

Thomas Robert Malthus

David R. Stead, University of York

The Reverend Thomas Robert Malthus (1766-1834) is famous for his pessimistic prediction that humankind would struggle to feed itself. Born in Wotton, Surrey, Robert Malthus (he preferred his second name) was the sixth child of Daniel and Henrietta, members of the English country gentry. After graduating from Jesus College, Cambridge University, Malthus entered the Church of England as curate of Okewood, Surrey. In 1798 he published his seminal An Essay on the Principle of Population. It contended that population has the potential to expand in a geometric progression (e.g. 1, 2, 4, 8, 16, 32…) but that food supplies can only increase in an arithmetic progression (e.g. 1, 2, 3, 4, 5, 6…), probably because of diminishing returns to producing food on the limited available amount of farmland. Since the supply of food cannot keep pace with the burgeoning numbers of people, the population will be reduced by the “positive checks” of war, disease and starvation. Malthus argued that the best means of escaping what has subsequently been called “the Malthusian trap” was for people to adopt the “preventive check” of limiting their fertility by marrying later in life. Malthus himself married Harriet Eckersall at the age of 38 (late for the period) in 1804, a year after he became rector of Walesby, Lincolnshire. The couple had three children.

First published anonymously, An Essay on Population scandalized many but quickly established Malthus as one of the leading economists in England. Appointed professor of political economy at the East India College, Hertfordshire, in 1805, Malthus wrote about a variety of economic issues, including the theory of rent and the Corn Laws. Ironically, at about the time Malthus published his pessimistic view, want of food no longer appears to have provided a serious check to English population growth. Malthus’ predictions proved inaccurate chiefly because he failed to foresee the enormous impact that science and technology was to have in squeezing increasing amounts of food out of each hectare of land. In the two centuries since the publication of An Essay on Population, other writers have similarly forecast mass famines – including Paul Ehrlich’s The Population Bomb of 1968 – but human ingenuity, together with falling birth rates in many parts of the world, has meant that food production has more than kept pace with population growth. The malnutrition present today is largely a result of an inadequate distribution of food, not insufficient production.

Bibliography

Ehrlich, Paul R. The Population Bomb. New York: Ballantine Books, 1968.Hollander, Samuel. The Economics of Thomas Robert Malthus. Toronto: University of Toronto Press, 1997.James, Patricia. Population Malthus: His Life and Times. London: Routledge & Kegan Paul, 1979.

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Citation: Stead, David R. “Thomas Robert Malthus”. EH.Net Encyclopedia, edited by Robert Whaples. December 19, 2003. URL http://eh.net/encyclopedia/thomas-robert-malthus/