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Bonds of Enterprise: John Murray Forbes and Western Development in America’s Railway Age

Author(s):Larson, John Lauritz
Reviewer(s):Churella, Albert J.

Published by EH.Net and H-Business (June 2002)

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John Lauritz Larson, Bonds of Enterprise: John Murray Forbes and Western Development in America’s Railway Age. Iowa City: University of Iowa Press, 2001. xxiii + 257 pp. $17.95 (paper), ISBN: 0-87745-764-6.

Reviewed for H-BUSINESS and EH.NET by Albert J. Churella, Social and International Studies Program, Southern Polytechnic State University.

Perhaps no other economic change has so consumed Americans than the emergence of big business in the 19th century. As the invisible hand of the marketplace gave way to the visible hand of management, output rose, prices fell, and the United States became an economic powerhouse. This process also fundamentally changed the nature of the relationship between business, businessmen, individual citizens, and their democratic system of governance. Big business concentrated wealth and power, and manipulated the streams of commerce in ways that seemed antithetical to the political rhetoric of Jacksonian Democracy. Technical discussions associated with the management of large, vertically integrated enterprises were thus matched with a passionate debate regarding the equitable relationship between capitalism and democracy. Railroads, the nation’s first big business, were at the center of these debates since they embodied massive concentrations of capital and constituted the lifeblood of many communities. While many scholars have studied parts of the railroad revolution, few have attempted to integrate all of the multifaceted effects of this process.

John Lauritz Larson, an associate professor of history at Purdue University, provides just such an integrated account in Bonds of Enterprise. Larson examines the career of John Murray Forbes (1813-1898), whose life spanned the very different worlds of personal, market capitalism and “visible-hand” big-business management. Like a spider at the center of a web (although Larson would probably eschew such a malevolent analogy) Forbes touched all of the varied aspects of the “railroad question.” As Larson points out, this book is not so much a biography as it is a selective depiction of Forbes’ role in developing the “bonds of enterprise” that linked both cities and competing interest groups to each other. Thomas McCraw used a similar approach in Prophets of Regulation, linking four notable individuals to the regulatory mechanisms that they hoped to create. While Bonds of Enterprise may not garner the same degree of notoriety, it is still a fascinating and important work. While still a young man, John Murray Forbes earned his fortune in the China trade. He relied heavily on the standard pillars of long-distance capitalism in the early 1800s; family connections and trust backed by an impeccable reputation. By the 1840s, Forbes settled into what he believed would be a respectable semi-retirement and he invested heavily in railroad securities.

Perhaps the pivotal moment in Forbes’ career occurred in 1846 when he acquired control of the moribund Michigan Central Railroad, a state-owned project that typified the internal improvement mania that had arisen before the Panic of 1837. Like most such rail and canal projects, the state initially envisioned the Michigan Central to be solely a trunk line designed to encourage general commercial development. Private entrepreneurs would then construct feeders to the mainline, allowing, in a very Jacksonian fashion, all of the common men equal access to the economic potential of the railway.

Forbes increasingly saw the economic function of the railroad in quite a different light. He realized that only a combined branch-and-trunkline railroad could earn a satisfactory profit, and he felt that railroad development should proceed gradually and sequentially, allowing each region of the frontier to develop before proceeding to the next. In the process, the railroad must inevitably change transportation patterns in the region that it served causing some regions-and some individuals-to prosper, and others to fail. Like many 19th century entrepreneurs, Forbes had only the haziest idea of the competitive forces that America’s first big business had unleashed. He was, however, deeply troubled by his role in this process. He had grown up in, and attained wealth by, a system of personal capitalism. He professed a life-long belief in the limitless potential of a virtuous citizen in a democratic society. Yet, like Henry Ford nearly a century later, he helped to bring about massive economic and social transformations that, within his lifetime, helped to shatter the moral principles that he held dear.

Forbes and his associates plunged into the “system-building” phase of railroading during the 1850s. No longer advocating a sequential approach to railroad expansion, Forbes increasingly saw railroads as essential to the economic development of the West. As he pieced together the Chicago, Burlington, and Quincy system, Forbes preferred to maintain the fiction of local control as long as possible, relying heavily on home-grown investors and managers. While this method allowed local entrepreneurs to assume many of the risks and enabling the Boston capitalists to expropriate all of the rewards, Larson does not see this as a stain on Forbes’ exemplary business ethics. Nor does he blame Forbes for any of the relatively mild financial machinations associated with the Burlington; these he lays at the feet of James F. Joy and other unscrupulous financiers who abused Forbes’ trust.

As farm prices fell after the Civil War, farmers in Iowa protested rate differentials and other types of “unfair” competition. They believed that a lack of competition had caused these problems, while Forbes and other system-builders increasingly understood that overbuilding and excess competition were to blame. Forbes believed that he was advancing the cause of progress by opening up the West and by increasing the general welfare through his business enterprises. He seemed genuinely astonished that the seemingly ungrateful beneficiaries of his efforts depicted him as a profit-hungry robber baron. Perhaps because Forbes’ “style of business was paternalistic, and his patient efforts to develop the Iowa country had been met with hostility,” (p. 142) he responded with a stubbornness that seemed to veer between puzzlement and outrage. For example, the Burlington deliberately inflamed the passions of westerners by raising long-haul rates to conform to Iowa rate-equalization-legislation. Forbes thought that grandstanding populist politicians like Iowa governor William Larrabee were ignorant of the fundamentals of railroad economics; Larrabee was determined to fight “a war against the arrogance of ‘experts’ who scorned the authority of popular government.” (p. 187) Forbes believed that, in the end, only railroad officials could adequately understand the complexities of rate-making, and could thus capture, or at least reduce, the deleterious effects of state and federal regulation.

Ultimately, Larson’s biographical approach strikes very near his target, but it is not quite a bullseye. The reader is left with a thorough knowledge of Forbes’ career, of the railroads that Forbes controlled, and of the regulatory problems that affected those railroads. Clearly, Forbes brought together many of the disparate threads that connected all of the institutions and all of the historical actors associated with the transformative effects of railroads on American life. But there were also many currents that swirled and eddied far from the gaze of that Boston-based Midwestern railroader. There is no doubt that Forbes was a pioneer; whether or not he was typical is another matter.

Portions of Larson’s analysis seem rather quaint and outdated. Bonds of Enterprise originally appeared in 1984, and has now been reprinted with a short additional introduction and amended bibliography. Still, this book employs scholarship that is nearly two decades old. Scholars such as Gabriel Kolko figure prominently in the original bibliography, even though their findings have been superseded by more balanced research efforts. Larson seems needlessly stereotypical in his descriptions of “the squalid poverty of the Chinese” (p. 11) and “that exquisite pride of Oriental leisure.” (p. 17-18) Nor can we be positive that “Forbes seemed to thrive on tension.” (p. 23) And, it may be giving Forbes too much credit to suggest that, “He generated a model for developing the vast interior of the United States, and he adapted or invented many of those instruments of corporate enterprise with which industrialists and financiers revolutionized American life.” (p. 169)

Larson’s obvious enthusiasm for his subject does not detract from the value of this book, however. On the contrary, Bonds of Enterprise is a beautifully written and superbly organized account of a pivotal time, and a pivotal person, in the history of American business. Historians of the 19th-century railroad industry, of business-government relations, and of entrepreneurship will not discover any startling revelations here. Certainly the work of scholars such as Naomi Lamoreaux and Colleen Dunlavy has done more to advance our knowledge of these issues. What the reader will find is an excellent overview of these issues in a form that is readily accessible to people lacking expertise in these areas, as well as to students in graduate-level, or even advanced undergraduate classes. At a time when the history profession seems inevitably destined for fragmentation, compartmentalization, and the study of minutiae, Larson is to be commended for this synthetic work.

Albert J. Churella is an assistant professor in the Social and International Studies Program at Southern Polytechnic State University in Marietta, Georgia. He is the author of From Steam to Diesel: Managerial Customs and Organizational Capabilities in the Twentieth-Century American Locomotive Industry (Princeton: The Princeton University Press, 1998).

Subject(s):Business History
Geographic Area(s):North America
Time Period(s):19th Century

Cities of Heat and Light: Domesticating Gas and Electricity in Urban America

Author(s):Rose, Mark
Reviewer(s):Castaneda, Christopher J.

CITIES OF LIGHT AND HEAT: DOMESTICATING GAS AND ELECTRICITY IN URBAN AMERICA. By Mark H. Rose. (University Park, PA: The Pennsylvania State University Press, 1995). 201 pp. + xviii, bib. essay, and index. $34.50. Reviewed by Christopher J. Castaneda, California State University, Sacramento.

By relating the development of household gas and electric utilization to theories of technology and society, Mark Rose tests a long-standing debate. Simply put, does technology shape society or does society shape technology? Rose provides a careful analysis of the gas and electric business to show that a complex interplay of social, political, and economic contexts shapes technological development.

Rose focuses his study on the urban spaces of Denver and Kansas City through the year 1940. After 1940, he generalizes on a nationwide basis although he presents much more material relating to the earlier period in the two cities. Rose’s involvement with this topic began in the mid-1970s, when he, in collaboration with John G. Clark, initiated research on the topic of energy choices in these cities while teaching at the University of Kansas. He noted the many differences between Denver and Kansas City, but the author was struck by the triumph of “urban politics, middle-class tastes, and the social-spatial composition” in both. (p. 11) In some respects, the similarities between these cities may limit our ability to extend their specific experiences to those of east and west coast locations; Rose’s observations are particularly cogent for the midwestern experience.

Certainly, in these cities as well as others in the U.S., early gas and electric firms promoted their services through a variety of methods in order to develop a customer base. It gradually became clear that electricity and gas were simply cleaner and easier to use than other domestic fuels such as coal. But what exactly was the larger social process through which the gas and electric business developed? This is the question Rose seeks to answer.

Rose tells us that “agents of diffusion” were responsible for distributing both the ideas about the new technology and the appliances themselves. These agents included teachers, architects, homebuilders, and salesmen. The most important of these were salesmen who worked for the utility entrepreneur, Henry L. Doherty. Doherty rose to prominence in his industry as an innovator in devising rates and promotional activities. His three part flexible rate structure encouraged gas consumption while his well-trained, clean, polite, and prompt salesmen sought to represent those same qualities in the electric or gas service they were selling. Rose’s account of the Doherty System is interesting and important for it brings forth the sales techniques of an early industry which offers new material for inquiry.

Doherty, later the head of Cities Service Company, was in many ways like Samuel Insull; both men controlled vast public utility holding company empires. Insull is more well known – in part because of the work of Harold Platt and Forrest McDonald – and also because of the infamous collapse of his empire. But Insull operated in Chicago, and Doherty was strong in the central United States including Kansas City and Denver. Thus, Rose has provided a valuable contribution by examining a part of the career of another public utility captain who controlled the gas and electric business in a large part of the United States.

Rose examines other less prominent though effective agents of diffusion including J. C. Nichols and Roy G. Munroe. Munroe never advanced beyond a mid-level salesmen, albeit a successful one, while Nichols became a prominent developer. Both promoted gas and electric technologies from different perspectives but to the same end. Other players in the scheme included teachers. In vocational schools, students studied the gas and/or electric facilities used to light and heat their own buildings. Many of these students would later find employment with the local utility firm. Public schools served indirectly as models for the ideal of gas and electric technology. Codes required a high level of illumination and ventilation in classrooms in order to provide a healthful and supportive learning environment for teachers and students.

In the home, appliances relieved the drudgery and heavier labor involved in domestic housekeeping, though they often created new chores, while other new technologies provided benefits to men in their work places. Ideally, irons, refrigerators, stoves, air conditioners, and heaters provided people with the ability to begin to regulate their own built environments. Rose shows how these appliances, which tended to benefit women and housekeepers, were marketed to increase the more feminine qualities of “comfort, convenience, and cleanliness” of the home. (p. xv)

The very brief analysis of the post-1940 era is not as convincing as that of the earlier one. It is essentially a cursory review of the continuing growth and promotion of gas and electric power utilization through the mid-1980s. The complex regulatory, marketing, and technological developments of the last fifty years, though, would provide fertile ground for an in-depth analysis of the social history of the light and power business during that period.

This work does elevate the scholarship of the U.S. gas and electric business. In this regard, Rose jousts with Alfred D. Chandler’s statement in The Visible Hand that electric, gas, and trolley systems of the 1920s “remained smaller and less complex than the older railroad systems.” (p. 204) Certainly, the hundreds of thousands of diverse customers dealt with on a regular basis by gas and electric employees, varying rate schedules, and a multi- level public policy suggests a higher level of complexity in those newer urban technologies than Chandler suggests.

There are integral parts of this story that deserve additional attention. The author effectively shows how coal stoves, for example, were displaced by cleaner and more easily maintained gas stoves. While Rose does distinguish between natural gas and manufactured coal gas, he might have delved further into the transition from manufactured gas to natural gas; the natural variety was significantly cleaner and more hygienic than the coal and oil based variety. How did gas companies promote this intra- industry fuel shift to their customers? In addition, did utilities market gas and electric service directly to other groups besides upper-income white families.

The author accurately describes Henry L. Doherty as a master of promotion, public relations, sales techniques, and rate structures. But Doherty may not have consciously sought to adapt the gas industry to the urban environment as much as he simply desired to find the best way to gain control over the markets which he claimed. Although this book is not about the process of bringing fuel to the cities (as opposed to how it is used in the city), Doherty was a ruthless competitor who sought to destroy and/or acquire those who tried to supply fuel to the markets he called his own. Thus, Doherty’s insight into marketing was probably influenced less by a desire to adapt his business to the consumer than a drive to show the consumer how to benefit from his product. Although the book tends to downplay the capitalistic tendencies of men like Doherty, it does describe well the social outcome of their work.

This book cuts across the disciplines of urban history, energy history, and the history of technology. It draws upon a wide variety of sources including corporate records and trade journals. The mix of biography, technical data, and descriptions of urban development make for a well composed and well written book which provides a very useful foray into the technological evolution of the 20th century home. Rose has succeeded in showing how social, political, and economic forces shaped the gas and electric business in Kansas City and Denver, and how these forces worked to domesticate energy nationwide.

Christopher J. Castaneda California State University, Sacramento cjc@saclink1.csus.edu

Subject(s):Transport and Distribution, Energy, and Other Services
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

How Innovation Works: And Why It Flourishes in Freedom

Author(s):Ridley, Matt
Reviewer(s):Coelho, Philip

Published by EH.Net (August 2020)

Matt Ridley, How Innovation Works: And Why It Flourishes in Freedom. New York: Harper Collins, 2020. 406 pp. $30 (cloth), ISBN: 978-0-06-291659-4.

Reviewed for EH.Net by Philip Coelho, Department of Economics, Ball State University.

 

 

Matt Ridley, the author of The Rational Optimist, has written another excellent book; he is an imaginative thinker and a writer of clarity. This book is very worthwhile reading; still (like any project) it is not perfect. In this review, I will try to convey what he has done and point out where I have difficulties. The book’s 12 chapters explain the histories of innovation in various economic sectors. Chapter one is devoted to energy, Two to public health, et cetera. In the Introduction, Ridley explains why and what he is doing, and what he expects to accomplish; he defines innovation as: “like evolution … a process of … discovering ways of rearranging the world … that happen to be useful. The resulting entities are the opposite of entropy: they are more ordered, less random, than their ingredients were before” (p. 2). This is a very useful, non-didactic definition; it avoids semantic arguments (whether a person was or was not an entrepreneur, and what do entrepreneurs do) that bedevil business histories. The author is borrowing from his training as an evolutionary biologist by incorporating its analytics into a history of innovation. Ridley forthrightly states that he is not attempting to explain why, when or where innovation occurred, but “telling stories” about people turning inventions into “useful innovations [that] teach us, by the examples of their successes and failures, how it happened” (p. 7).

Chapter 1, “Energy” is illustrative of his methodology. Starting in the eighteenth century Ridley examines innovations in the production of energy from non-animal sources. The basic theme, reiterated throughout the book, is that innovation is an evolutionary process; it is accretive, not the product of lonely geniuses huddled and isolated in workshops. He puts forth three candidates (Denis Papin, Thomas Savery and Thomas Newcomen) as putative innovators (“Notice I do not call him an inventor; the difference is crucial” (p.15)) of the first successful steam engine. Ridley’s distinction is crucial; it identifies an inventor as a person who first conceptualizes a process and defines innovators as the people who make the invention economically useful. In the case of steam power, Hero of Alexandria employed rudimentary steam powered devices in the first century AD; still there were people using steam power centuries before Hero, so the case for identifying the person who first conceptualized steam power is, at best, quixotic. Still steam power was not economically useful before the developments that occurred in the eighteenth century. Then a series of innovators made steam power economic; it could be employed to produce goods and services in less costly ways than had been available previously. In 1698 Thomas Savery was granted a patent for an invention for the “raising of water by the impellent force of fire” (p. 18). This introduces another theme that Ridley returns to throughout his book: that patents are more than somewhat arbitrarily rewarded and they, more often than not, impede innovation. People who used the Newcomen engine had to pay royalties to the holders of the Savery patent no matter how much they had modified it. Similarly, Ridley argues that the Watt patents were obstacles in the way of improving the efficiency of the Watt steam engine.

There is a tension between the effects that patent protection laws have in stimulating innovation and the rent-seeking obstacles to innovations that patents provide. Ridley is firmly in the camp that argues that current patent laws discourage more innovations than they promote. If you throw in copyright laws — which in theory and in practice, (e.g. the film Bambi) can be almost perpetually protected — then I am in complete agreement with Ridley. This is an economic issue: as they are currently structured, do patent protection and copyright laws promote or impede innovation? The economic basis for granting “intellectual property” a favored place in the law and in public debate should be reconsidered.

In the “Energy” chapter, Ridley reprints a plea from an 1819 edition of the magazine The Chemist asking for funds to build a monument to Watt: “He is distinguished from other public benefactors, by never having made, or pretended to make it his object to benefit the public . . . This unpretending man in reality conferred more benefit on the world than all those who for centuries have made it their especial business to look after the public welfare” (p. 26). This is a great quote and it echoes the famous “invisible hand” passage from Adam Smith’s The Wealth of Nations, yet I have not been able to track down Ridley’s source. This is typical; he is rather cavalier about sourcing. There are no footnotes, nor page citations. Each chapter has its own section in “Sources and further reading section” (pp. 375-388). But if you are trying to find a particular reference be prepared to spend some time and be frustrated. After spending 40 minutes with various search engines, I failed to find either Ridley’s source for the quotation from The Chemist or the original. In another great passage in chapter 3 (“Transport”) — where he questions the wisdom of the (self-anointed?) scientific establishment — Ridley quotes an article in the Scientific American from 1906 doubting the veracity of the Wright brothers’ claim to heavier than air flight: “If such sensational and tremendously important experiments are being conducted … is it possible to believe that the enterprising American reporter … would not have ascertained all about them … long ago?” (pp. 100-01). Well the answer to that question is yes, it is possible to believe the high Pooh-bahs of the American scientific establishment were ignorant of what the Wright brothers were doing in 1906, let alone in 1903 at Kitty Hawk. I was successful in tracking down that quotation (Scientific American 1906, vol. 94: 40), it only took 20 minutes and access to a major university’s library and search engines.

Yet Ridley does not fare so well in chapter 6 (“Communication and Computing”) where he quotes Thomas Watson of IBM in 1943 as saying that “there is a world market for maybe five computers” (p. 203). It is a nice story, but it is either totally or heavily fabricated. The only quote from Watson in the public record (appropriately from Geek History: https://geekhistory.com/content/urban-legend-i-think-there-world-market-maybe-five-computers) that mentions five computers is from an IBM’s stockholders meeting, which says: “We believe the statement that you attribute to Thomas Watson is a misunderstanding of remarks made at IBM’s annual stockholders meeting on April 28, 1953. In referring specifically and only to the IBM 701 Electronic Data Processing Machine — which had been introduced the year before as the company’s first production computer designed for scientific calculations — Thomas Watson, Jr., told stockholders that ‘IBM had developed a paper plan for such a machine and took this paper plan across the country to some 20 concerns that we thought could use such a machine. I would like to tell you that the machine rents for between $12,000 and $18,000 a month, so it was not the type of thing that could be sold from place to place. But, as a result of our trip, on which we expected to get orders for five machines, we came home with orders for 18.’” The problem is that Ridley’s work is replete with wonderful anecdotes. I have no doubt that the vast majority are accurate, but detailed citations are valuable in both verifying and falsifying historical interpretations.

Another deficiency is that Ridley’s knowledge of the literature in economic history is incomplete; he attributes the growth of the American automobile industry to Henry Ford who “revolutionized the industry after 1908” (p. 92). This statement is both incorrect and contradictory to his hypothesis that innovations and economic changes are evolutionary, not revolutionary. Robert Thomas (1969) explains just what Ford did in the era of the Model T Ford. In 1908 both: “Buick and Ford introduced into the $1,000 price class for the first time automobiles of standard design [engines in the front, French type body work, steering wheel, etc.]. These designs, the Buick Model 10 and the Ford Model T, were similar to cars being sold in the $1,500-$2,000 price class” (Thomas p. 150). What Henry Ford did that made him different from competing producers is to make virtually identical cars year after year while simultaneously lowering prices. The automobile was changing rapidly during those years (selective transmissions replacing planetary transmissions, self-starters, increased horsepower, etc.) yet the Model T remained unchanged. By 1914 the Model T was selling approximately 45% of new cars sold in the U.S., yet it was receiving only 25% of the revenue from new car sales (Thomas, p. 153). What Ford did was to produce outdated cars whose primary competitors were used cars, not new cars. Essentially Henry Ford made a fortune by producing technologically obsolete vehicles at attractive prices. As the technology of the automobile advanced, Ford could not maintain his price/marketing strategy because many (most?) of the used cars for sale in 1920 had more desirable features than the 1920 Model T. At prices that Ford could profitably sell cars, consumers preferred the typical used vehicle to the 1920 Model T. The growth of the used car market forced Ford to change strategies; subsequently the Ford company followed the industry practice of annual model changes and improvements with constant or increasing prices.

Ridley’s deficiencies aside, the insights he provides in the various chapters ((2) Public Health, (3) Transport, (4) Food, (5) Low-Technology Innovation, (6) Communications and Computing, (7) Prehistoric Innovation, (8) Innovation’s Essentials, (9) The Economics of Innovation, (10) Fakes, Frauds, Fads, and Failures, (11) Resistance to Innovation, and (12) An Innovation Famine) are very perceptive and an educational delight. Ridley frustrates any who wish to replicate his analysis without undo effort, still every chapter has multiple non-obvious insights. Focusing on a few insights does not do justice to the book, yet it must be done otherwise the review would be too burdensome to read.

A theme that Ridley repeatedly emphasizes is the conservatism of government and the establishment in reaction to innovation. Patent and copyright law as obstacles to innovation have already been mentioned, but we should not forget our own sacred cows, the intelligentsia and academia. As a graduate student in the 1960s, I remember the future Nobel Prize winner, Douglass C. North, echoing the received wisdom of the time that no more aid or development projects should be directed towards countries (particularly India and Pakistan) because they were “basket cases,” that were too overpopulated and whose only fate was starvation and death for the many. Ridley (p. 134) suggests that this opinion had its genesis in the foreign services and development agencies. If that is the case, Paul Ehrlich’s Population Bomb (1968) is not entirely his responsibility. Nevertheless, it is risible that so many academics could have been so wrong about the near-term future of food production in the late 1960s through the mid-70s. In the same vein, government agencies in India tried to suppress the introduction of the hybrid wheats that were among the first products of the Green Revolution: “Indian bureaucrats were adamant that Mexican wheats should not even be allowed in the country, let alone encouraged. The biologists warned of devastation and disease if the wheats failed. The social scientists warned of ‘irreversible social tensions’ and riots if the wheats succeeded — and caused some farmers to make more money than others” (p. 133)

Ridley devotes an entire chapter to a history of the suppression of novelty. Things that were suppressed include coffee, margarine, genetically modified organisms, herbicides, and cellular telephony. Methods of suppression include diktats, regulations, patents, copyrights, legislation, commissions, and litigation. Every change affects someone negatively; if a change can be halted or delayed the costs of the change can be eliminated or reduced. Ridley relates how “land-use” (zoning) planning has reduced the population of San Jose during the Silicon Valley boom. Another, more completely examined example is that of the European Commission, which in 2014 mandated that energy efficiency (a “good” thing to the Commissioners, not so good for energy producers) of vacuum cleaners be tested in the absence of dust or debris. It so happens that the Dyson Cyclone vacuum cleaner is much more energy efficient than vacuum cleaners with bags because the bag cleaners operated less efficiently as the bags got filled with dust and debris. The (German) manufacturers of bagged cleaners had lobbied the Commission effectively. Dyson appealed the regulations through the courts and in November of 2018 he was vindicated. Still the delay cost Dyson sales and increased those of the makers of bagged cleaners. We may not have much reason to lament a billionaire’s decreased sales, but we should deplore the erroneous information produced by public agencies that deluded consumers.

There are many cases of innovations that Ridley examines that are worthy of full-scale economic analyses. Two that particularly intrigue me are the examples of corrugated roofing and bed-nets with insecticide embedded in them. We see corrugated roofing throughout in poor, tropical countries; I typically had given them no thought other than this is how the poor live in the tropics until this book. Corrugated roofs were a substantial improvement over other types of roofing for warehouses and industrial spaces in nineteenth century Britain. In poor countries today in the tropics they are symptomatic of improved living conditions; the alternatives to tin roofs are organic (straw, mud, and wood) that are more costly (including upkeep), less effective, a haven for insects and rodents, and not very useful for channeling rain for storage or irrigation. It would be nice to know the cost/benefit analysis comparing corrugated roofing to the alternatives and what something as innocuous as roofing does.

Bed-netting infused with insecticide is an interesting story. The bed nets were treated with insecticides to see how prophylactic they were in preventing malaria carrying mosquitoes from infecting people. Since the bed nets rarely escaped holes and tears, the people conducting the study kept it going even when the bed-nets were severely damaged. The researchers found that torn bed-nets retain a substantial amount of efficacy and are still effective in reducing the mosquito-borne transmission of malaria with bed-nets accounting for approximately “70 per cent of the six million lives saved worldwide [from death by malaria]” (p. 75).

There are other examples galore; if you have an interest in innovation, how it evolves, and how and why it is obstructed, then you should read this book. I recommend it highly. True it has difficulties — the lack of adequate citations and an index that is somewhat haphazard. Still I urge you to read it; I would recommend buying the e-copy for two reasons: 1) on most e-books you can do a word search and that reduces the importance of an index; and 2) the hard-bound (cloth) copy that I purchased is nearly falling apart after one (close) reading. The binding of this book does no credit to its publisher.

Reference:

Robert Paul Thomas, “The Automobile Industry and Its Tycoon,” Explorations in Entrepreneurial History, ser.2:6:2 (1969: Winter).

 

Copyright (c) 2020 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 (August 2020). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):History of Technology, including Technological Change
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

Small and Medium Powers in Global History: Trade, Conflicts, and Neutrality from the Eighteenth to the Twentieth Centuries

Editor(s):Eloranta, Jari
Golson, Eric
Hedberg, Peter
Moreira, Maria Cristina
Reviewer(s):Straumann, Tobias

Published by EH.Net (April 2020)

Jari Eloranta, Eric Golson, Peter Hedberg, and Maria Cristina Moreira, editors, Small and Medium Powers in Global History: Trade, Conflicts, and Neutrality from the Eighteenth to the Twentieth Centuries. London: Routledge, 2018. x + 240 pp. $124 (hardcover), ISBN: 978-1-138-74454-7.

Reviewed for EH.Net by Tobias Straumann, Department of History, University of Zurich

 

History is usually written by the victors, and since military victory is often linked to troop size and economic capacity, the victors are usually great powers. As a result, our memory tends to be biased towards a narrow understanding of war and victory, leading us to underestimate the fact that even great powers need alliances with small and medium nations in order to succeed. This book, edited by Jari Eloranta, Eric Golson, Peter Hedberg, and Maria Cristina Moreira, aims at drawing a more realistic picture of the role played by weaker states during greater conflicts and thereby fostering new research. Weakness is defined by relatively low military capacity and relatively high trade openness. The ten contributions study crucial episodes of European countries, the United States, and Brazil from the eighteenth to the twentieth century. As the editors write in the introduction, the main argument of most chapters is that weak states were able to expand their trade and discover new markets, thus increasing their economic importance for belligerents.

Part I deals with the interplay of trade and conflict in the long run, with most contributions focusing on the Napoleonic Wars. Jeremy Land, Jari Eloranta, and Cristina Moreira investigate the evolution of American trade from 1783 to 1830 when the United States were not a great, but a medium power on the world stage. The authors show that the U.S. was able to expand its trade despite difficult circumstances. Silvia Marzagalli studies the U.S. case during the same period, but concentrates on the American shipping and trade in the Mediterranean, which increased enormously from 1793 to 1815. She highlights the crucial role of American neutrality, not as a clear-cut status, but as a negotiable and flexible stance towards war and the belligerent powers. Maria Cristina Moreira, Rita Martins de Sousa, and Werner Scheltjens analyze commercial relations between Portugal and Russia from 1750 to 1850 and show how conflicts, blockades, and institutional problems hampered direct trade. Rodrigo da Costa Dominguez and Angelo Alves Carrara study the effects on the Napoleonic Wars on the governance of Brazil as a part of the Portuguese empire. On the basis of fiscal sources, the authors show how the shift of the Portuguese Court from Lisbon to Rio de Janeiro in 1808 was conditioned by the introduction of the Continental Blockade in 1806 and the desire of the Portuguese authorities to maintain their neutrality during the Napoleonic Wars. Peter Hedberg and Henric Häggqvist explain the patterns of Swedish trade and tariffs from 1800 to 1920, with a special focus on the opportunities created by Swedish neutrality during the Napoleonic Wars, the Crimean War and World War I. Their data suggests that all three conflicts had a significant impact on Swedish trade and trade policy, positively as well as negatively, and that, overall, neutrality helped, but was not important enough to counteract the totality of war, especially during World War I.

Part II investigates the interaction between trade and neutrality in conflicts in the twentieth century. Eric Golson discusses the evolution of the concept of neutrality in wartime. He starts in the early 1600s, when Hugo Grotius came up with a first vague definition, explains how the Hague and Geneva Conventions in the late nineteenth and early twentieth centuries institutionalized the concept, and describes its collapse in World War I, giving way to a “new realism.” Consequently, in World War II small and medium neutrals (Portugal, Spain, Sweden, and Switzerland) were forced to make trade, labor, and capital concessions in order to preserve their territorial integrity. Knut Ola Naastad Strøm analyses how Norway coped with the western blockade of Germany during World War I. He shows how in the first half of the war neutrality and prosperity went hand in hand, while in the second half of the war the tightening of the western blockade drastically reduced Norwegian exports to Germany and imports from the UK and the U.S. Eric Golson and Jason Lennard investigate the impact of World War I on the Swedish economy by studying the history of the ball bearings manufacturer SKF. They find that World War I greatly benefited the company, as it increased its capital stock and provided a long-term dominating position in the international market for ball bearings in the 1920s. In a further chapter, both authors try to capture the macroeconomic effects of neutrality on the Nordic countries by calculating the long-term real output trend between 1900 and 1960 and measuring output gaps for the war periods. Their results suggest that the Nordic countries suffered only mildly from World War I, but significantly from World War II, while recovery was much swifter after 1945 than after 1918. Niklas Jensen-Eriksen deals with the role of neutrality in the 1950s, asking how successful the U.S. and its allies were in incorporating European neutrals (Austria, Switzerland, Sweden, Finland, Ireland) within their export control system. His survey shows that neutrals hardly resisted U.S. demands for cooperation, even if it ran against their principles of neutrality. In the early years of the Cold War, the U.S. was economically too dominant to be ignored.

Toshiaki Tamaki and Jari Ojala conclude the volume with an analytical summary and raise the question of how the historical experiences of small and medium-sized Western countries can be linked to a global history of neutrality and the contemporary reality in which larger units beyond the nation state have become increasingly more important.

Overall, the book succeeds in correcting the conventional picture of the role played by small and medium-sized states during major conflicts. The contributions which compare several countries and make analytical points provide especially valuable insights. The endorsement by Patrick O’Brien in the short foreword is highly deserved. On the other hand, as is often the case with edited volumes, the analytical level and the approaches adopted by the authors are quite diverse, and the unifying themes are not always as strongly visible as the reader would wish. Although the introduction and the concluding remarks go a long way towards bringing the contributions together, the main hypotheses remain general. Moreover, the title implying a global view overstates the range of the volume, as the focus clearly stays on the Western world with a particular emphasis on the experience of the Nordic countries. Nevertheless, the book makes a powerful contribution to a more nuanced understanding of war, trade, and neutrality, and deserves to be widely cited. Future research dealing with the economic history of the Napoleonic War and the world wars of the twentieth century should pay more attention to the importance of trade networks entertained by the great belligerent powers.

 

Tobias Straumann is Senior Lecturer of Economic History at the University of Zurich. He is the author of 1931: Debt, Crisis, and the Rise of Hitler (Oxford University Press, 2019) and Fixed Ideas of Money: Small States and Exchange Rate Regimes in Twentieth-Century Europe (Cambridge University Press, 2010).

Copyright (c) 2020 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 (April 2020). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Military and War
International and Domestic Trade and Relations
Geographic Area(s):General, International, or Comparative
Europe
Time Period(s):18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

California Greenin’: How the Golden State Became an Environmental Leader

Author(s):Vogel, David
Reviewer(s):Kanazawa, Mark

Published by EH.Net (November 2018)

David Vogel, California Greenin’: How the Golden State Became an Environmental Leader. Princeton: Princeton University Press, 2018. xi + 280 pp. $30 (hardcover), ISBN: 978-0-691-17955-1.

Reviewed for EH.Net by Mark Kanazawa, Department of Economics, Carleton College.

 
This is a highly readable broad-sweep account of California environmental history in a nutshell. But it goes way beyond mere description to advance a thesis that explains how California has attained a position of leadership among U.S. states in environmental policy, while still managing to support a vibrant economy. The argument is essentially a series of stories of how environmental policy has been shaped by competing political and economic interests. The basic thesis, stripped to its bare bones, is that three factors have made California’s enviable position possible: citizen mobilization, selective support from businesses, and a steady growth in regulatory capacity over time.

The argument progresses in a nicely-structured series of chapters that literally span the history of the state. The first substantive chapter is about gold mining, which was the main environmental issue of nineteenth century California, especially after use of the environmentally destructive process of hydraulic mining became widespread. It then proceeds to devote a chapter to each of the main environmental issues — land protection, coastal protection, water management, clean air policy, and energy policy — that the state has experienced, in a series of overlapping phases, over time. It turns out that each issue has presented a different set of challenges because of differences in factors that fostered citizen mobilization and in the economic stakes of different segments of the business community. The contrasting ways in which the politics and economics of each issue played out is used to illustrate the roles played by citizen mobilization and business stakes. The overall explanation is compelling and nuanced.

A key recurring theme is the active support for environmental protection by some businesses, not out of any sort of humanitarian concerns but rather, when it was in their own best interests. In cases where the business community was unified in opposition, it was typically difficult to enact effective environmental protection. However, when business was divided, we often observed unholy alliances between some set of businesses on the one hand, and citizens and environmental groups on the other, to enact environmental policy. This “bootleggers and baptists” coalition idea has been around since at least the early 1990s but has made surprisingly modest headway in penetrating popular debates over environmental policy, which all-too-often portray businesses as staunchly and unreservedly anti-environmental. In contrast, Vogel shows how commonly such unholy alliances have appeared in California environmental history.

Another recurring theme is the importance of the visibility and salience of environmental problems in mobilizing citizen support for environmental protection. What has often mattered in California history in rousing citizens to action has been direct experience with environmental degradation. For example, offshore oil drilling that sometimes caused damaging oil spills led irate coastal communities to effectively push for coastal protection. On the other hand, environmental problems that were out of sight — such as the famous flooding of the Hetch-Hetchy Valley to provide San Francisco with drinking water — were often out of mind and failed to provoke the necessary citizen ire to bring out sufficient support for environmental protection. On a number of occasions, physical topography was a key factor that increased the salience of a particular environmental problem. For example, the fact that the Central Valley was basically a floodplain exacerbated the environmental damages of hydraulic mining. And later on, the peculiar topography of the Los Angeles basin trapped smog at a very early date, leading to early demands for policies to control air pollution.

Much of the argument of this book will resonate with many public choice scholars, who may interpret the episodes as reflecting the imperatives of political coalition building, conditioned by perceived stakes and transaction costs of political organization. Relatively large and concentrated stakes in policy outcomes have mattered a great deal. Divisions across different business sectors have increased the political transaction costs of the business community. Citizen and environmental groups have been galvanized by environmental problems that posed clear and present dangers. Droughts, smog events, and oil spills all served to provoke demands for changes in environmental policy.

Perhaps the biggest question I have concerns the broader lessons of the California experience for environmental policy more generally, in other contexts and looking forward into the future. On one level, it is hard to argue against the ideas that direct personal experience with environmental problems galvanize popular support for policy and that ‘bootleggers and Baptists” coalitions may arise. Both of these seem clearly correct. However, given the present state of extreme political polarization and ideology-based opposition to policy actions on issues like climate change, one wonders about the explanatory limitations of a narrative that focuses on relative special interests while largely ignoring the role of ideology.

It is striking to me, for example, that except perhaps for the concluding substantive chapter on energy use and climate change, political parties are largely invisible in Vogel’s story. This is counter to a number of narratives that highlight the importance of political parties, such as Robert Kelley’s scholarship on nineteenth century hydraulic mining, and my own reading of the early historical development of California state water policy. As an economist, I would not be inclined to go on the record as arguing that ideological factors swamp economic pressures: I do not believe that they do. Indeed, there is something ironic in an economist criticizing a political scientist for not paying more attention to party politics. However, lessons from these areas and others lead me to believe that models based solely on relative economic interests, though powerful in many respects, may be too simple and perhaps misleading in enabling us to draw lessons regarding effective environmental policy for the future. Especially now in our present political climate where too many people are calling climate change a “hoax” and science is sometimes demonized by a significant portion of the population.

These concerns aside, however, this book is well worth reading for its careful, detailed, judicious, and sensible interpretation of the historical record. On the whole, this may be the best single brief overview of California environmental history that I have read. In this book, David Vogel continues to cement his well-deserved reputation as one of our leading scholars in the academic study of environmental regulation and policy.

 
Mark Kanazawa is Wadsworth A. Williams Professor of Economics at Carleton College. His recent book Golden Rules: The Origins of California Water Law in the Gold Rush was published in 2015 by University of Chicago Press.

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 (November 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):19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

A Culture of Growth: The Origins of the Modern Economy

Author(s):Mokyr, Joel
Reviewer(s):Diebolt, Claude

Published by EH.Net (November 2017)

Joel Mokyr, A Culture of Growth: The Origins of the Modern Economy. Princeton, NJ: Princeton University Press, 2017. xiv + 403 pp. $35 (cloth), ISBN: 978-0-691-16888-3.

Reviewed for EH.Net by Claude Diebolt, Department of Economics, University of Strasbourg.

 
I enjoyed this new book by Joel Mokyr, which is praiseworthy for its elegance and erudition. It tells the story of economic growth with “culture” — a mushy word for most of us — as the invisible hand. However, I regret the lack of in-depth consideration of the German language literature. Significantly more attention could also have been given to economic cycles. Werner Sombart, for example (Der moderne Kapitalismus and Der Bourgeois. Zur Geistesgeschichte des modernen Wirtschaftsmenschen), was the first to come to mind while reading this fantastic book. It also reminds me of George Akerlof and Robert Schiller’s Animal Spirits, where confidence, fear, a propensity to gamble, and follow-the-leader effect stories are presented as central to explain the decision making process. The Bourgeois Trilogy by Deirdre McCloskey is another seminal work in that spirit: ideas, not capital or institutions enriched the world. A growth theorist would probably also see strong connections between Mokyr’s latest effort and the unified growth theory initiated by Oded Galor.

The book is about the roots of the Industrial Revolution, the Great Enrichment, and radical changes in values, beliefs, and preferences. It is not about a mass movement. It is a phenomenon related to an elite: philosophers and scientists of course, but also engineers, instrument makers, and even industrialists who spawned the process. In any case, it is a minority of the population. Mokyr’s ambition is to understand and to explain how these beliefs and values emerged — why some people developed new ideas and why these ideas replaced the ones in place.

According to Mokyr, we know pretty much what happened, how it happened and where it happened, but we still do not know why it happened. Why, after thousands of years of stagnation, have a number of countries and regions of the world experienced an unprecedented increase in both the scale and speed of their economic growth? Why Europe and not China? Why England? Is it the result of happenstance? The Black Death perhaps? What about the influence of religion (Max Weber and the Protestant ethic?), of major intellectual and scientific personalities who changed the game (Martin Luther, Francis Bacon, Isaac Newton, Adam Smith, Charles Darwin)? What role should be given to natural resource saturation, innovation (the compass, gunpowder, printing) and capital accumulation, trade networks, market institutions and organizations, ideas, violence (battles, dynastic arrangements, power struggles…), women, etc.? For Mokyr, the Gordian knot is a Culture of Growth — a “Useful knowledge,” scientific and technological knowledge, the meeting of motivations and incentives, of attitudes and aptitudes toward Nature and the ability to persuade others. These are the key elements of the puzzle.

“No theory-no history! Theory is the pre-requisite to any scientific writing of history,” wrote Werner Sombart (1929) in the Economic History Review. I urge you to carefully read Joel Mokyr’s evolutionary approach to culture in the spirit of Schumpeter’s theory on Unternehmergeist. It will give you a fresh insight into one of the most fascinating questions in our field: the origins of the Great Enrichment. It will invite everyone to visit economic history with an optimistic vision for the future of the World!

 
Claude Diebolt is CNRS Research Professor of Economics at the University of Strasbourg and editor of the journal Cliometrica.

Copyright (c) 2017 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 (November 2017). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Economic Development, Growth, and Aggregate Productivity
Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):General, International, or Comparative
Europe
Time Period(s):Medieval
16th Century
17th Century
18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

The Gunpowder Age: China, Military Innovation, and the Rise of the West in World History

Author(s):Andrade, Tonio
Reviewer(s):Eloranta, Jari

Published by EH.Net (February 2017)

Tonio Andrade, The Gunpowder Age: China, Military Innovation, and the Rise of the West in World History.  Princeton: Princeton University Press, 2016. ix + 432 pp. $40 (cloth), ISBN: 978-0-691-13597-7.

Reviewed for EH.Net by Jari Eloranta, Department of History, Appalachian State University.

The Gunpowder Age is a new elaborate volume on some of the key questions in world and economic history debates, namely the development of China, and to some degree Europe, in the long run, especially in the last five hundred years. Tonio Andrade, who is a professor of history at Emory University, has written a volume that cannot be overlooked in, for example, the so-called Great Divergence debate, which began with Kenneth Pomeranz’s work almost twenty years ago. Since then, economic historians have paid increasing attention to China, producing a lot of welcome scholarship on its long-run economic and social development, as well as tons of new data. Regardless, the debate over the timing and extent of China’s decline, vis-à-vis various parts of Europe, is still going strong. Scholars like Pomeranz, R. Bin Wong, Stephen Broadberry, Robert Allen, and others have weighed in, and the picture emerging from these debates is that China’s decline was probably apparent by the eighteenth century, at least in comparisons with the more affluent parts of Europe. Of course, there was also a great deal of divergence within Europe at the time, which complicates these comparisons.

Yet, Andrade’s work not only contributes to these debates, but also another huge issue in world (and economic) history, i.e. the introduction and use of gunpowder and the development of military supremacy in the early modern period. Andrade highlights the introduction of gunpowder and the technological advances made in both China and Europe, and he argues that China in fact continued to develop gunpowder technologies throughout this period of (relative) economic decline, even as late as the eighteenth century. Why then did China fail so spectacularly during the Opium Wars of the nineteenth century? His answer is that certain conditions failed to materialize in the Chinese case, for example the lack of continuous warfare and competition, which of course Europe experienced almost annually (as shown by Charles Tilly). In some ways, Andrade argues that some of China’s decline was not as noticeable or steep as we have assumed in the past. And it is here that he makes his greatest contribution to our understanding of long-run world history: China’s military development was simply on a different trajectory than in Europe. Europeans went further in developing cannons and handheld weapons, whereas the Chinese often favored rockets and alternative types of gunpowder weapons. In Europe, this manifested itself in “tournaments,” as Philip Hoffman has recently argued in Why Did Europe Conquer the World? (Princeton: Princeton University Press, 2015). Andrade also emphasizes other historical continuities in China’s recovery of superpower status at the end of the twentieth century, pointing to this past of military experimentation and deep understanding of military strategy. (One only needs to recall Sun Tzu to appreciate the long history.)

Andrade’s book is divided into four parts, plus the appendices and other extra material. Part I provides an introduction to the early history of Chinese warfare and military development. This section is mostly deep background to the main arguments of the book, and useful as a reminder of the conflicts that built and destroyed dynasties. Part II sets up the comparison between Europe and China in the early gunpowder age, and gives us a somewhat familiar story of the technological developments in weaponry, similar to Hoffman’s work. However, Chapter 6 is particularly interesting for economic historians in revealing some of the differences between European and Chinese priorities in warfare, in particular the use of cannons. Part III is more explicitly comparative and highlights how Europeans gained dominance in naval and other military weaponry. Part IV then discusses the nineteenth century superiority of the Europeans and how China attempted (actually quite successfully) to modernize their military after the defeats. Andrade then concludes with some broader ideas of China’s military, economic, and political development on the basis of these comparisons.

In general, this book is quite well researched and written, and it is a welcome addition to the new literature on China’s history, the Great Divergence, and the military development of the last 500 years. However, I have some reservations and modest criticisms of this volume. First, the Great Divergence debate is not covered very thoroughly in this book, especially the recent contributions made by many economic historians. I find this curious, but also somewhat predictable. World historians and economic historians still do not have enough common debates and discussions, and thus we often do not experience truly inter- or even intradisciplinary debates. Discussion of the timing and extent of China’s economic decline would have enriched the comparisons in the book. Second, on the same theme, Andrade does not reference some of the more interesting work done on conflicts and the role of governments in this period, for example by Mark Dincecco or David Stasavage. Military technologies are not only the outcome of conflicts, but also the changing role of the central government as well as revenue and spending patterns. Third, while Chapter 14 does discuss European navies, the role and cost of naval warfare, which is intricately linked to the European empire building projects, should have been discussed in a wider context — after all, many world historians ascribe the destruction of the Great Fleet in 1433 and the subsequent prohibition of trade as key moment in the Great Divergence. Andrade also fails to discuss enough the importance of the extensive training received by English seamen in the use of cannons and other gunpowder weapons, which gave them an advantage in the naval battles.

Finally, I would also like to mention that while the book does not make much use of quantitative data, there is an appendix of interesting new data, collected by the author, on the numbers of conflicts in China, in comparison with Europe. Andrade also compiles a data set on instances that warfare was referenced in Ming and Qing records.  This is a clever way of making some inroads into the mindset of the rulers of those dynasties. As we already know, for example the attitudes of Song and Ming rulers on the value of military service were very different — the former saw it as a dishonorable profession, which of course reflected on the quality of recruits and ultimately performance in the battlefield. This type of data is something that will surely also interest economic historians who are interested in broad comparisons between Europe and China in the early modern period.

In general, this is a well-written and careful analysis of an important topic, and the focus is explicitly comparative. While some of the chapters do not go deep enough into the comparisons, and some of the contributions made recently by economic historians are not always referenced here, this book is a welcome and worthwhile addition to the current literature on China, Europe, the Great Divergence, and the early modern military revolution. It should yield to interesting debates among world and economic historians in the near future — hopefully such debates will be visible enough in both fields, so we can have fruitful interactions similar to what followed Pomeranz’s early work in this area.

Jari Eloranta is Editor of monograph series Perspectives in Economic and Social History (Routledge).  He has written extensively on the history of military and government spending as well as conflicts, including a recent volume Economic History of Warfare and State Formation (Jari Eloranta, Eric Golson, Andrei Markevich, and Nikolaus Wolf editors, Springer: Tokyo, 2016).

Copyright (c) 2017 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 (February 2017). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Military and War
Geographic Area(s):Asia
Europe
Time Period(s):Medieval
16th Century
17th Century
18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

Concrete Economics: The Hamiltonian Approach to Economic Growth and Policy

Author(s):Cohen, Stephen S.
DeLong, J. Bradford
Reviewer(s):Salsman, Richard M.

Published by EH.Net (December 2016)

Stephen S. Cohen and J. Bradford DeLong, Concrete Economics: The Hamiltonian Approach to Economic Growth and Policy. Boston: Harvard Business Review Press, 2016. xi + 223 pp. $28 (cloth), ISBN: 978-1-422-18981-8.

Reviewed for EH.Net by Richard M. Salsman, Program in Philosophy, Politics and Economics, Duke University.

When the U.S. has prospered most has it been due mainly to a limited state that ensures equal legal treatment and relatively free markets, or has it been due to an active, intervening state that regiments activity and protects or subsidizes favored products, firms and sectors, at the expense of others? The latter, say the authors of this brief but rather interesting volume. Take note, any remaining fans of Adam Smith, true believers in “invisible hands,” or diehard devotees of “laissez faire.”

DeLong, a professor of economics at the University of California, Berkeley and Cohen, professor emeritus and co-director of the Berkeley Roundtable in the International Economy (BRIE), deserve credit for reminding us that no economic policy is truly “hands off.” As a discipline, political economy properly recognizes and studies the unavoidable interaction of politics and markets; the latter can’t even function without some basic provision of public goods (e.g., law and order, security of private property, legal sanctity of contract). They deserve kudos also for at least stipulating that prosperity (“the wealth of nations”) is a worthy goal (as it was for Smith), for that’s surely not a key premise of today’s environmentalists, social-justice warriors, or the Pope.

But is more needed, for prosperity, than the provision of basic, rights-protecting public goods? Yes, say these authors — substantially more. In their view the state is an economy’s designer, the one institution which can (must!) identify and clear out “spaces” where entrepreneurs can then confidently operate. They believe the U.S. has suffered economic crises and stagnation since 1980 because economic policy has been too pro-business — i.e., excessively-low tax rates, free trade, deregulation, entrepreneurialism, and promotion of “zero-sum” financial activity at the expense of value-added manufacturing. They tout five prior episodes in U.S. history when “real” prosperity occurred, due (they claim) to their preferred policy mix of high income tax (and tariff) rates, heavy regulation (especially of finance), infrastructure spending, and protectionism: the 1790s and early 1800s (via “Hamiltonian” principles), the post-Civil War Gilded Age (via Lincolnian prescriptions), the progressive era (via Teddy Roosevelt’s policies), the New Deal of the 1930s (via FDR’s New Deal), and the post-WWII decades of infrastructure/aerospace buildout (a by-product of the “military industrial complex” which Eisenhower both encouraged and distrusted).

By intention, the methodology here isn’t very rigorous. No new historical database is cited or analyzed. The authors eschew careful, disciplined treatments of history, empirics, and models. They offer, unapologetically, a selective historical narrative designed mainly to corroborate their theme. They believe policy formation (and analysis) goes awry if ever animated by “ideology,” especially in free-market form. Declaring themselves “non-ideological,” they focus on what they call the “concretes,” instead of abstractions; they endorse only what “works” (“pragmatically”), not what should work (“theoretically”). But can anyone specify what “works” without reference to some criterion? The authors implicitly deny that scientific methods require hypothesizing and testing — that some theory is necessary even to know where to look in a vast empirical record.

DeLong and Cohen’s methodology — more accurately, their anti-methodology posture — is worth mentioning, because in truth they cleverly apply a specific theory in choosing their anecdotes and structuring their narrative, one which economists have variously characterized as “economic nationalism” or “industrial policy.” In this model, popularized in the 1970s and early 1980s by Robert Reich and Lester Thurow, public officials and planners are presumed to be sufficiently wise and prescient to distinguish future economic “winners and losers” and thus able to generate sustainable prosperity by fostering the former and discouraging the latter, while (somehow) also avoiding the corporatist and labor union rent-seeking such policy targeting typically invites. A more recent example of the approach is Mazzucato’s The Entrepreneurial State (2013).

When a theory doesn’t explain economic reality very well, its adherents might elect to eschew theory altogether or instead to cherry-pick the historical record, to make the dubious theory “fit.” Hedging their bets, these authors try both. As for the cherry-picking, they cite nearly every major economic innovation in the U.S. since its founding era and attribute it to the encouragement of some government policy. Thanks mainly to Washington, America has had firearms, railroads, radio, aerospace, autos, trucking, assembly lines, nuclear power, electrification, central banking, paper money, infrastructure, computers, semiconductors, the Internet (yes, they credit Al Gore), and even smart phones. If the U.S. government has ever even remotely touched these things, the authors imply, it pretty much made them possible. At the same time, they blame failed products, eroded industries, and recession-depression decades in U.S. history on overly-free markets.

Even if the claim were true, that these products and sectors were made possible by Washington, it’s worth noting that the authors find that they entail primarily spin-offs from the outlays and projects of the U.S. Department of Defense — a state function even classical liberals can heartily endorse. Are prosperity-fostering spinoffs likely to flow also from the explosion of entitlement-transfer outlays in the half-century since the start of “Great Society” schemes? U.S. federal spending on national defense is now just 12% of all outlays, down from 16% in 2000, 23% in 1980, and 50% in 1960. It’s about as likely as the authors’ more liberal sympathizers being pleased to hear what aspect of U.S. spending most boosts the economy. These Berkeley dons are in the odd position of wishing devoutly for the “military-industrial complex” Ike warned against.

A misleading aspect of the book is the authors’ insistence that theirs is “the Hamilton approach to economic growth and policy.” In truth Alexander Hamilton, the first U.S. Treasury secretary (1789-1795) wanted (and implemented) a constitutionally-limited federal government, by no means a state engaged in “industrial planning” of the kind DeLong and Cohen want (let alone “social insurance” or “redistribution”). Hamilton rejected British mercantilism, which stunted American manufacturing; and unlike his Jeffersonian-agrarian opponents (and successors), he wanted low and uniform tariffs. Hamilton also defended and implemented a gold-silver based dollar, sustained reductions in the national debt, and a limited-power, privately-owned national (nationwide) bank (not a “central bank,” as the authors claim). Also unlike DeLong and Cohen, who devote a whole chapter to denouncing what they claim is a cancer-like “hypertrophy of finance” since 1980, Hamilton saw the financial sector as productive (if left free of government influence — as it surely isn’t today), not one that displaces real and healthy economic sinews.

Two periods in U.S. economic history are particularly misrepresented in the book, to fit the author’s theme. The “Gilded Age,” the half-century between the ended of the Civil War and start of World War I — supposedly entailed “vast accumulations of conspicuous wealth” and a “confiscation of the nation’s wealth” due to “the crushing power of trusts” (p. 71). In fact that was a half-century of stupendous invention, entrepreneurship, and wage gains, due to economic freedom, not theft; it was accomplished without a central bank, a federal income tax, centralized industrial planning, or a regulatory state. The other period misrepresented is the 1930s; the authors say FDR’s heavily-interventionist New Deal revived the economy, but in fact it mainly prolonged the stagnation.

It’s reasonable to expect a book authored by fans of “industrial policy” to highlight Japan, as did Reich and Thurow in the 1980s. After all, Japan’s Ministry of International Trade and Industry (“MITI”) was heralded as the model for planning agencies globally and the progenitor of its post-war economic “miracle.” Yes, Japan’s industrial production increased nearly 10% per annum from 1950 to 1991; but since then it has shrunk at a compounded rate of 0.4% per annum. Does this quarter-century contraction reflect free market policies enacted after 1991? Hardly. Somehow “things changed,” the authors report, dead-pan. “Japan had become a solidly rich nation.” “Asset values then crashed and stayed crashed,” and “rapid growth became dishearteningly elusive. Why? We do not claim to know” (p. 133).  Herein lies the futility (and dishonesty) of historical cherry-picking: when the facts don’t fit, plead humility and ignorance; otherwise, proclaim boldly and often that every sustained economic success necessarily has flowed from astute state planning.

DeLong and Cohen deserve thanks for issuing a reminder that the humane state should facilitate prosperity and higher living standards, as that’s become a minority (but much needed) view in recent decades. The book’s more refutable parts include the claim that prosperity is achievable by actively countermanding markets, the belief that today’s burgeoning welfare-transfer state (which they condone) can spawn wealth-producing “spinoffs,” and above all, the presumption that their book has the imprimatur of a truly Hamiltonian (pro-capitalist) political economy.

Richard M. Salsman is the author of The Political Economy of Public Debt: Three Centuries of Theory and Evidence (Edward Elgar, 2017). richard.salsman@duke.edu.

Copyright (c) 2016 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 (December 2016). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Economic Planning and Policy
Geographic Area(s):North America
Time Period(s):18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII

Arresting Contagion: Science, Policy, and Conflicts over Animal Disease Control

Author(s):Olmstead, Alan L.
Rhode, Paul W.
Reviewer(s):Craig, Lee A.

Published by EH.Net (October 2016)

Alan L. Olmstead and Paul W. Rhode, Arresting Contagion: Science, Policy, and Conflicts over Disease Control. Cambridge, MA: Harvard University Press, 2015. x + 465 pp. $50 (cloth), ISBN: 978-0-674-72877-6.

Reviewed for EH.Net by Lee A. Craig, Department of Economics, North Carolina State University.

In Arresting Contagion, Alan Olmstead and Paul Rhode, both well-known economic historians, provide readers with a narrative of the history of the war on food-borne microorganisms.  It is a gory affair.  The warriors are, on the one side, veterinarians, public health officials, and U.S. Department of Agriculture scientists, and on the other, Boophilus microplus (the Texas Fever tick), Mycobacterium bovis (the source of Bovine Tuberculosis), and a few other bugs that make us sick, or even kill us, when we consume their livestock hosts.  The bugs are aided by two sets of humans: One is a group the authors call “deniers,” who deny the bugs are a major problem.  They resist eradication because of its perceived costs.  The other group is dominated by free-market economists, who resist eradication because it typically requires the all too visible hand of government.

The authors date the beginning of serious efforts at eradication and prevention with the establishment, by the U.S. Congress, of the Bureau of Animal Industry (BAI) in 1884.   Prior to that event, the hodgepodge of state laws and state and federal court rulings that covered livestock inspection allowed ranchers, shippers, and packers to pass along adulterated products.  The BAI was not an immediate panacea.  It took decades of scientific investigation, bureaucratic maneuvering, and the evolution of case law before eradication and prevention became the norms rather than anomalies.  Olmstead and Rhode give us a detailed narrative of various aspects of the history of eradication and prevention, documenting the process for several of the deadliest and most costly bugs.   To follow the scientific account of the BAI’s efforts, readers may occasionally find themselves searching for their freshman biology text (or Wikipedia on their I-phones), but the effort is rewarding.  If you’re having no trouble digesting that brisket sandwich you ate at lunch, this volume will tell you why.

Readers looking for one-stop shopping on the history of the eradication of meat- and milk-borne microorganisms should look elsewhere.  This is not an encyclopedia.  Some bugs get a few chapters, others a chapter or less, and some little more than a mention.  Rather, the authors focus on a handful of the more troublesome critters that were particularly acute in the United States.

A theme that runs through the volume is the juxtaposition between two conflicting approaches to government-enforced inspection: the public choice school and the public interest school.  Proponents of the former are represented most prominently by economists who argue that federal meat inspection initiatives were the result of bureaucratic meddling to the benefit of rent-seeking suppliers, often small-scale suppliers who found their businesses swamped by the rise of the major packers.  Proponents of the public interest view come from a broader set of academic fields and argue meat inspection was a logical, and valuable, effort to address a market imperfection.

Olmstead and Rhode are not coy when it comes to choosing between the two arguments.  They unambiguously side with the public interest folks.  In the war on bugs, the authors’ heroes are the vets, scientists and government bureaucrats who gave us (forced upon us, in the public choice view) federal meat inspection.  To support their case, the volume offers estimates of the rates of return on eradication and inspection efforts.  Even when biased downward, the figures are enormous.  For example, the authors’ estimate of the benefit-to-cost ratio of the eradication of foot-and-mouth disease is greater than 40 to 1 (p. 136).  The comparable figure for Texas Fever is between 9 and 20, depending upon the years in question (p. 273).  While these figures might seem high, the authors bias downward their estimates, and it is worth noting that in the late nineteenth-century the aggregate value of the nation’s livestock was greater than the capitalized value of its railroads (p. 9).  (Perhaps Irene Neu, George Rogers Taylor, and Carter Goodrich chose the wrong industry in the pre-dawn of the Cliometrics era.  One can only imagine the subsequent course of the discipline had they chosen to analyze livestock rather than railroads.)  By any reasonable standard the magnitude of the returns to eradication represent large net benefits.  In the authors’ view those benefits were not “led by an invisible hand.”  Indeed, near the end of the volume, the authors summarize the U.S. eradication experience: “Success in the United States required the unflinching use of police power and great expense, but the net benefits were enormous” (p. 301).  That is a good, concise summary of the volume itself.

Some EH.Net patrons will probably lament the volume’s lack of explicit cliometric rigor.  For example, the estimates of the returns to various eradication efforts are little more than back-of-the-envelope exercises, albeit relatively sophisticated back-of-the-envelope exercises.  For their part, the authors make no apologies for trying to provide a history that is accessible to an audience beyond EH.Neters.  How you feel about such efforts will help guide you toward or away from this well-written history of an important but oft-overlooked topic.

Vox populi suggests a receptive lay audience for the authors’ message.  I have taught undergraduates off and on for over thirty years and frequently poll them on their support for various public policies.  Support for free trade consistently runs about fifty-fifty; roughly a third of the students will openly denounce the minimum wage; and only a small and declining few will defend agricultural price supports; but I’ve never heard a student say meat inspection is a bad idea!

Lee A. Craig is Alumni Distinguished Professor and Head of the Department of Economics at North Carolina State University.  He is the author of Josephus Daniels: His Life and Times, Chapel Hill: University of North Carolina Press, 2013.

Copyright (c) 2016 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 2016). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Agriculture, Natural Resources, and Extractive Industries
Economic Planning and Policy
Geographic Area(s):North America
Time Period(s):19th Century
20th Century: Pre WWII

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/