Mexico lagged behind Chile, Brazil, or Argentina because of its cycle of civil wars and foreign invasions was more severe and protracted, while its economy and topography were more resistant to commercial penetration.
Alan Knight, 200874
The early optimism concerning Mexico’s economy soon turned to despair as Mexico found itself in a downward spiral. The lack of capital, foreign or domestic, presented a seemingly insurmountable obstacle to growth. Without growth, the government would remain weak, so it could not defend itself from internal or external attack. This inability to defend the nation exacerbated the very conditions that retarded growth. Between 1800 and 1850, the per capita GDP declined at an average rate of 0.7 percent.75
The reestablishment of a sound legal climate was long delayed. The ponderous and exacerbating colonial judicial system was a model of efficiency compared with the process following independence. The break with Spain destroyed many of the institutions that provided credible commitments to rights and property within the Spanish empire. The wealthy preferred to keep their wealth in cash, or export it, rather than investing it where property rights were insecure. Some of the laws that would have stimulated investment were simply not on the books. For example, only in the 1890s did the government pass legislation permitting the formation of a limited liability corporation.76
The Mexican economy suffered from losing its sophisticated colonial financial markets, especially those based on Church lending. With interest rates on government loans generally fluctuating between 30 and 200 percent, capital was siphoned away from long-term productive investment. As was the case in most of Latin America, through the middle of the century Mexico was plagued by a lack of banking institutions and the non-existence of formal stock markets.77
Railroads would have lowered transport costs and created a national market. However, the attempts at railroad building only indicated the ineffectiveness of both government and private enterprise. In 1837, the government granted Veracruz merchant Francisco Arrillaga the first concession to build a railroad from Veracruz to Mexico City. It canceled this concession in 1840, since he had failed to lay a single mile of track. A new concession was granted in 1842 and was then canceled in 1849 since only three miles of track had been laid. By the time another decade had passed, only fifteen miles of track had been completed.78
In the early nineteenth century, the British were the world’s supreme industrial power and the only naval power. Backed by this strength, the British Foreign Office often used its power to support British businessmen in Mexico, usually at the expense of Mexican development. While Mexicans considered building factories, British consuls situated at ports encouraged smuggling. When the Mexican government urged the creation of a national bank, British merchants actively opposed the measure so they could continue lending to the Mexican government. Such loans and the diplomatic power to enforce their repayment weakened Mexico’s fragile fiscal structure. The British willingness to utilize all means at their disposal compromised the weak political system even further. As historian Barbara Tenenbaum concluded, “The British in Mexico, therefore, in pursuit of riches for themselves, only made Mexico poorer and more powerless.”79
Early nineteenth century Mexico underwent little environmental change. The ecological equilibrium of the late colonial period continued through the first half of the nineteenth century. This ecological balance resulted from the lack of large enterprises and the reliance on traditional technology rather than from environmental awareness. Most labor continued to be performed with simple hand tools.
Some enterprises, however, proved to be highly destructive. Operators of the Real del Monte Mine, for example, cut so much wood that it became necessary to fell trees as far as twenty miles away to obtain fuel and timbers. In 1848, the company’s three steam engines were burning 2,600 350-pound loads of wood a month. This reliance on wood to fire boilers highlights yet another problem facing Mexico at the time—its lack of industrial fuels.80
Mexico’s economic experience during the early nineteenth century differed sharply from that of the United States. As historian Leandro Prados de la Escosura noted, the economic performance of the United States should not be used to judge Mexico, since the United States was exceptionally well endowed with natural resources and enjoyed economic growth that exceeded that of most other nations of the period.81
In addition to its natural resources, the United States enjoyed economic diversity—shipbuilding, farming, and some manufacturing—which stimulated internal trade. Such trade moved along the Atlantic Coast, along a rapidly expanding network of canals, and along the Mississippi and its tributaries. This trade, unhindered by the alcabala, allowed the integration of regional markets into a national market.82
The United States also enjoyed a vastly greater agricultural endowment than Mexico. Mexico’s entire agricultural area covered about 15 percent of its territory, or an area about the size of Kansas. Millions of English, Scots, Irish, and Germans emigrated to the United States before its Civil War, accelerating development, while Mexico lacked immigrants. Capital from abroad, not available to Mexico after its default, also spurred U. S. development. In the 1830s, Europeans held nearly two-thirds of U. S. state and municipal bonds, and as late as 1853, Europeans still owned more than a third of America’s public debt. In that year, the U. S. Treasury estimated total foreign investment in the United States at $222 million.83
Although U. S. independence preceded Mexican independence by less than half a century, the United States found much more favorable circumstances. The British recognized U. S. independence in 1783, which allowed the new nation to concentrate on economic growth, not defending itself from its former colonizer. Conflict in Europe during the two decades following the French Revolution in 1789 created an insatiable demand for U. S. goods. As a neutral, the United States could supply all nations. This allowed the U. S. merchant fleet to expand and enabled the United States to become the sixth industrial power of the developed world, with a nearly fifty-fold increase in manufacturing by 1830. The invention of the cotton gin gave the United States an added stimulus. During the 1820s, cotton mill production in the northeast United States increased by 600 percent.84
When Mexico became independent, not only had wartime demand ended but Europe was importing far less than it had in previous decades, especially after 1826 market crash in London. Rather than finding a ready market for exports as the United States had during its first years of independence, Mexico’s first years of independence saw both Europe and the United States attempting to flood Mexico with their own manufactured goods.85
The years before 1850 had a marked influence on Mexico’s subsequent economic relationship with the United States and other North Atlantic nations. In 1700, Mexico’s per capita income was 43 percent greater than that of the thirteen British colonies that would form the United States. By 1800, it was only 55 percent of the U. S. per capita income, and by 1850 it was only 33 percent. Since then, Mexico has grown at roughly the same rate as the United States, but it has never been able to close the income gap that opened up before 1850.86
World History
