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M PRA Munich Personal RePEc Archive Representation without taxation, taxation without consent; the legacy of Spanish colonialism in America Alejandra Irigoin Economic History Department, London School of Economics 15. December 2015 Online at https://mpra.ub.uni-muenchen.de/68639/ MPRA Paper No. 68639, posted 4. January 2016 14:20 UTC Economic History Working Papers No: 227/2015 Representation without taxation, taxation without consent The legacy of Spanish colonialism in America Alejandra Irigoin London School of Economics Economic History Department, London School of Economics and Political Science, Houghton Street, London, WC2A 2AE, London, UK. T: +44 (0) 20 7955 7084. F: +44 (0) 20 7955 7730 LONDON SCHOOL OF ECONOMICS AND POLITICAL SCIENCE DEPARTMENT OF ECONOMIC HISTORY WORKING PAPERS NO. 227 - DECEMBER 2015 Representation without taxation, taxation without consent The legacy of Spanish colonialism in America Alejandra Irigoin London School of Economics [email protected] +44 (0)20 7955 7068 Abstract The essay examines Spain’s colonial legacy in the long run development of Spanish America. It surveys the fiscal and constitutional outcomes of independence and assesses the relative burden imposed by colonialism. Constitutional asymmetries between revenue collecting and spending agents constrained de facto governments’ power to tax. Inherent disparities embedded in colonial fiscal system worsened with vaguely defined representation for subjects and territories and troubled their aggregation into a modern representative polity. Governments with limited fiscal capacity failed to deliver public goods and to equitably distribute costs and benefits of independence. Growing indirect taxes, debt and money creation allowed them to transfer the fiscal burden to other constituents or future generations. Taxpayers realised the asymmetry between private contributions and public goods and hence favoured a low but regressive taxation. Comparisons with trajectories in the metropolis and the US are offered to qualify this legacy. Acknowledgements: Financial support from The British Academy (grant SG 113363) is gratefully acknowledged. Keywords: Colonial legacy- institutions- long run development - Spanish America, Spain US, fiscal, monetary, constitutional history. JEL Codes: N, N1, N10,N16, N2,N20, N4, N40 Thispapertakesissuewithinstitutionalistmodelstodiscussthenotionofcoloniallegacy insettingthedevelopmentpathofLatinAmerica1.Itconverselydigsinthehistoryof colonialSpanishAmericasearchingforotherpossiblesetofinstitutionswhichmightwell explainLatinAmericaeconomicdevelopment.Itbuildsonpreviousresearchonthe politicaleconomy,taxationandgovernanceoftheSpanishEmpireandechoesother assessmentsoftheregion’seconomicperformanceinthepost‐independence.Thusit revisitsthenotionofSpanishcolonialismcurrentintheinstitutionalistliterature. Followingtheirrationaleitaddresseshowwasthat–ifthecolonialrulewassoprejudicial fordevelopmentwhyindependencedidnotchangethepath?Towhatextentthisisa historyofbadcolonialismifitwasthecasethatthemetropolissufferedverymuchofthe samemalaise–formostofthe19thcenturyatleast–andtowhatextentfundamentalsof thecolonialpoliticaleconomyremainedinplaceaftertheendofSpanishrule.Insodoing ananalyticalargumentisofferedonthechannelsandmechanismsofpersistence;main aspectoftheinstitutionalistinterpretation. SectionIbrieflydescribesthegovernance,theeconomicbasisandworkingsofthecolonial statewhichpermittedtheterritorialexpansionoftheempire,andorganizedtheeconomy underitscontrol.SectionIIdiscussestheexogenousshockresultingfromtheNapoleonic occupationofSpainin1808,whichinflictedafatalblowforthecontinuationoftheruleand triggeredmajorreformsinbothSpainandthecoloniesonitswake.Itdiscusses interpretationsofthecolonialfiscalburden–anditsrelease‐asthelegacyofIndependence. SectionIIIofferssomefirstestimatesofthesubsequentfiscalburdenandsurveysthe institutionalchangesontaxationandrepresentationwhichtransformedthepolitical fundamentalsoftheSpanishrule.FocusedonthechangesopenedwiththeCadiz’ constitutionof1812itcomparesfiscalandfinancialdevelopmentsinthecoloniesandthe metropolistopointoutthedebatablenatureofacoloniallegacysincebothsufferedvery similarproblems–andsoughtverysimilarsolutions.SectionIVanalysesinstitutionsof taxationandpoliticalrepresentationintheUSbeforeandaftertheRevolutiontohighlight thedifferencesinfiscalandpoliticalmatterswithSpanishAmerica‐makingtheUSa problematicyardsticktoassesscomparativelytheinstitutionaldeterminantsoflongrun development.Thepaperconcludeswithanotherinstitutionalargument–differentfrom thecolonialorigins‐pointingatanothertypeoflegacythatshapedthelongruneconomic performanceofSpainandherformercolonies:thatistheinconsistencybetweentaxation andrepresentationintheconstitutionalsettingimplementedinthe19thcenturywhich ultimatelyengenderedpersistentmacroeconomicinstabilitywithdetrimental consequencesvisibletodate. 1 Broadlythisreferstowell‐knownresearchbyAcemoğlu,JohnsonandRobinsonandEngermanandSokoloff (variousdates). 2 I Acursorycharacterizationoftheeconomyinthissectionqualifiessomeclaimsmadeon thenatureofSpanishcolonialism.Asshownelsewhere,thegovernancethatSpain establishedintheNewWorldreliedheavilyonlocalagencyfromco‐optedsubject, individualsandcorporate.TheeconomicstructureorganizedbySpaniardsreliedona disproportionatelyhighland/labourratioexacerbatedbythecollapseofnative populationinthe16thcentury,ademographicshortfallroughlythreetimesmoredramatic thantheonecausedbytheBlackDeath.Populationtookmorethantwocenturiesto reboundtopre‐conquestlevelsasrecoverywasconstantlycheckedoutbyepidemics.By 1800frontierregionsasNorthernMexico,Chile,VenezuelaandtheRiverPlatepopulated atfasterrateandwerethefastestgrowingregionsatthetimetogetherwithCuba–which withincreasingAfricanlabourconstitutedanotherdynamicfrontierintheempire. Agreatdealoflocalautonomyinthegovernanceofcolonialcitiesandvillagesreplicated Spain’sinstitutionalorderandstructureofrepresentationfoundedinpueblosandtowns (Quijada2008).Citizenrywaslocalandthecommonwealthorganizedinacorporateorder ledbylocalnotables.Spanishrulereliedonoverlappingandcompetingauthorities,secular andreligious,administrativeandjudicial,locallyappointed(orpurchased)andconfirmed bytheKing,whichcheckedeachotherout.Theconstantbargainingamongbodiesand individuals,i.e.thegovernorandthebishop,thebishopandthereligiousorders,the governorandthecourts(audiencias),madetheKinginSpainHispaniarumetIndiarumRex theauthorityoflastresort;heconcededlegalitytocontractsandwastheultimatearbiter inthedisputesamongsubjects,cities/townsandcorporations2.Byincorporating traditionalinstitutionsofauthorityandconflictresolutionindigenouspeopleorpueblos (lit.towns)enjoyedequalstatusthanEuropeansbeforethekingthoughwereseparatedby theirownjudicialfreedoms.Astheecclesiastics,themilitary,theguildsofmerchantsand miners,theindigenouspueblosenjoyedjudicialandfiscalprivilegesfuerosandwerethus unequalbeforethetreasury3.Thisdidnotmakethecolonialsocietymoreequal;itisjust thatdistinctionwerenotpurelyestablishedbycolour. Bythemid‐18thcenturytaxesonexternalanddomestictradeprovidedmostoffiscal revenues.Miningassuchwasneverthemainsourceofroyalincome,asitwasaprivate ventureandburdenfromdirecttaxesweresomewhatoffsetbyroyalsubsidieson quicksilver.(GrafeandIrigoin2006).Asignificantamountofrevenuewasredistributed withintheterritorytonearandfardistantsettlementslikeCuba,California,Concepcion 2FromLatinarbiter,judge,supremerulerinuseinMedievalFranceandEngland. 3UnlikeintheUS,beingblackdidnotmeantobeanecessarilyaslaveandthefirstminorityeverywherewas freepeopleofmixedraces.Thesefeatureschallengethetriplecolourdivisionofthecolonialpopulationin Sokoloff,K.andS.Engerman(2000)."Institutions,FactorEndowmentsandPathsofDevelopmentintheNew World."JournalofEconomicPerspectives14(3):217‐232. table3 3 andManila.Thisprovidedworkingcapitaltoneweconomicactivitiesandattractedtrade totheports;itfinancedtheexpansionoftheEmpireandsustainedthegrowthofexisting citiesandoftheprivateminingenterprise.UnlikeotherEuropeanempires,thiswasself– andabundantly‐financedeconomy,whichcontinuedstretchingovertheterritorysince earlyinthe16thcentury. Elsewherethisstatehasbeencharacterizedas‘developmentalist’asitwasdeeply embeddedinthelocaleconomyandoriginatedsignificantre‐distributiveeffectsinits expansion(GrafeandIrigoin2012);Centralormetropolitancontrolwasratherlimitedas wasitsrateoffiscalextractiontoSpain.Abroadlydefined‘revenuesfromtheIndies’,never mademorethanafifthofmetropolitanrevenuesinthe18thcentury.Yettheseamounts palewhencomparedwiththemoneycollectedintheEmpire,asshowningrapha.The proportiondirectlyappropriatedbytheSpanishKingrepresentedafewpercentagepoints oftherevenuegeneratedinthecolonies.Onlythelackofacomparisonofrelativevalues couldgivetheimpressionthattherewasanysizable‘extraction’ofrevenues.Suchwasthe wealthoftheSpanishAmericaneconomy. Figure1ContributionfromtheIndiestotheSpanishTreasury,andtotalandnetrevenues inmainlandAmerica–inthousandssilverpesos Thousands From Indies America Gross Rev 1811 1809 1807 1805 1803 1801 1799 1797 1795 1793 1791 1789 1787 1785 1783 1781 1779 1777 1775 1773 1771 1769 1767 1765 1763 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 ‐ From Spain America Net Rev exc all transfers Source:data‘fromIndies’and‘fromSpain’(Marichal2008)table1.1Appendix;Americagrossand netrevenuesfromGrafe&Irigoin(2006,2012)table1.Conversionratebetweenrealsdevellonand theSpanishAmericansilverpesowas20:1asindicatedbyMarichal. 4 Colonialadministrationwasinprivatehands;extendedsaleofofficeplustaxcollectionand spendingoutsourcedtomerchantsorminersguilds,localpriests,andtaxfarmersall resultedinthenearprivatizationoffiscalfunctionsontheonehand,andthesupplyof publicgoodsbythechurchontheother,allofwhichplacedasignificantcontrolofthestate businessesinlocals’hands.LittleEuropeanmigrationwentdirectlytonewerremoteareas; ratheroldsettlementswerethespringboardsfromwherepopulationandcapitalwere raisedtomovefurtherinland.ThisSmithiantypeofgrowthexpandedtheprivateeconomic activitiesengagedintheproductionandtradeofnaturalresourcesintensivegoods.Inso doingthecolonialstatewasalsoexpandingitsfiscalbasewiththeprogressivecreationof treasurydistricts.UnliketheprocessofaggregationormergersintheEuropean(andUS’) pathtostateformation,revenuecollectionpointsmultipliedovertimeinSpanishAmerica. Thisprocessacceleratedinthe18thCwithpopulationgrowth‐hencethefiscalsubdivision ofMexicoandtheRiverPlate‐afeaturethatqualifiesthenotionofBourbons’greater centralization.Spendingwastoocontrolledbylocalsasimperialdefencewasorganized andrunbylocallyorganizedmilitias(GrafeIrigoin,2012). Theextractionbythecolonialstateshouldnotbeequatedtotheeconomicexploitationthat SpaniardsimposedontheNewWorld;Spanishcolonialismwasindeedahighlyprivate enterprise,locallyrunandheavilysubsidizedbythecolonialtreasury.Sincetheearly16th centurythebulkofthespeciesenttoSpainwasmadeofprivatetreasure,eg‘emigrants remittances,savingsofpassengersandthebulkofitfromthebalanceoftrade’(Hamilton 1929)(463).Theproportionincreasedtogetherwithmoreminingandtrade.Nochartered companywasestablishedtotradewithAmericainthefashionoftheotherEuropean companies–untilverylateandtolittleeffect4,nomonopolyexploitedtheproductionof silverwithinoritsexportoutsideAmerica;thesingledirectroyalstakeinthemining economywastheprovisionofquicksilvercrucialfortheamalgamationofsilver;norhad capitaltoberaisedinthemetropolistoestablishaviableeconomicprofitinthecolonies‐ unlikemostofotherEuropeanimperialventuresaspointedoutbyAdamSmith.Indeed, thiswasaverydifferentpoliticaleconomythanwhatinstitutionalistsconceive Bythe1800ssuchdistributionofrevenueswithinwasassistingthefastgrowingnew regions.AspointedbySummerhill(Summerhill2008),fiscaltransferencesdidincrease outputbecauserevenueswereflowingfromlowerproductivityareastoareaswith potentiallyhigherproductivityaswasthecaseofCubaandtheRiverPlate.Throughout, exportsdiversifiedbeyondsilvertowardsmorelandintensivecommoditieslikewheat, copper,indigo,cochineal,tobacco,sugar,cacaoandhides;andpopulation–and 4TheCasadeContratacióndidnotownships;itwasrathermoreashippingagencyfortheprivatefleet convoyedovertheAtlantic.TheRealCompañiadelaHabanabrieflyenjoyedthemonopolyoftradewithCuba from1740to1790,althoughitsdeclinewasnoticeablesince1763.ABasquetradingcompanywaschartered forthetradewithCaracasin1728;itwastransformedintheRealCompañiadeFilipinasin1785.In1776 tradeatCaracaswasliberalised. 5 particularlyurban‐wasgrowingfast5.Customsyieldsinbothcoloniesforinstance increased10foldsbetween1778and1805,andthisshouldbeconsideredalowestbound forgrowthofcommercesincetradewith‘neutrals’andcontrabandwasthenorm.Both colonies‘percapitaGDPin1800washigherthantheUS’(Coatsworth1998)andhigher thananyotherSpanishsettlementatthetime.Itisachallengetobothendowmentsand institutionalmodelstodisentanglehowcoloniesofthesameempirewithsuchadifferent setofendowments,freeavailablelandandlowpopulationinthetemperateriverPlateand tropicalagriculturewithslavelabourinCuba,couldbothstandout.Economichistorians haveadheredtotheideaoftradeopenness,whichsomewhatcharacterisedbothexport economies.Butbothwerealsomainrecipientsoflargerevenuestransferfromother treasuries,whichoughttolowertherelativecostofcapitallocally.Mapsbelowshowthe relativeimportanceoftheintra‐colonialtransfersasproportionofnetrevenuesineach fiscaldistrict. Figure2a:NewSpain1796‐1800 5Cuba’sslavepopulationgrewat3.7%andfreepopulationat2%peryearbetween1774and1792.(Grafe Irigoin2006259).AnnualgrowthratesinBuenosAireswererespectively1.8%to3.2%Johnson,L.(1979). "EstimacionesdelapoblacióndeBuenosAiresen1744,1778y1810"DesarrolloEconómico19(73(Apr.‐ Jun.,1979)):107‐119 6 Figure2b:Peru,UpperPeru,ChileandRiverPlate,1796‐1800 WhenotherEuropeanpowersthreatenedthecoloniesinthe1760sinvestmentsfor defencedemandedagreatertaxtakefromtheeconomy;Withoutacentralized administrativestructureandbarelycontrolofitsbureaucracy,furtherspendingrequired greaterstateautonomywithwhichtoextractmore–ie.greaterstatecapacity.Inorderto extractmorethemetropolitangovernmenthadtogaincontrolovercollectionfromvested interestsorfindnewsources6.Ittriedboth.ThisisinanutshellwhatthesocalledBourbon reformssoughtandtowhichtheestablishmentofmonopolieswasdecisive:theextension ofmonopoliesonpriceinelasticgoodsastobaccointhe1760s,substantiallyincreased revenuesindistrictssuchasMexico,Puebla,Guanajuato,Havana,Manila,SantiagodeChile, Caracas,SantoDomingo,Quito.Start‐upcapitalfortheproductionanddistributionof tobaccoatimperialscaleoriginatedinMexico’treasurytransfers.Thisimprovement howeverdidnotstopthedissipationofrevenuesintoprivatehands.Runningcostsof Mexico’tobaccofactoryconsumed50%ofitsincome((DeansSmith1992)p54). Between1730and1780thenumberoffiscaldistrictsdoubledfrom36to71–atleastin theregioncoveredbyTePaske&Kleinsample.Anexcisetax,thealcabala,wasextendedto 6Alreadyin1787CarlosIIIfelthopelessabouttheresistancetothe(failed)implementationthe1749’Unica ContribuciónlevyinSpain.Citedin(Fontana,1987p2) 7 productsandtaxpayersformerlyexempted;theratewasincreasedtoo,butitscollection remainedfarmedtoindividualsandlocalcorporationsliketheCabildoinPueblaorthe Consuladoincolonialcapitalcities.Constrainedbythevery(unwritten)constitutional structureandcenturiesof–inpractice‐limitedgovernment,imperialrivalriesironically pushedtheSpanishKingtogreaterdependencyfromhiswealthycolonialsubjects. Colonialtreasuriesborrowedheavilyfromlocalsubjects–invariousways‐particularly fromthe1780s(Marichal2008,GrafeIrigoin2012,(Grieco2014).Marichal(2008)argues thatcolonials’contributiontometropolitanfinancesbankruptedtheMexicantreasury.He isnotconclusivehoweverinthedegreebywhichlocalvestedinterestsmighthaveprofited fromsuch‘extraction’.UnderCharlesIIItreasuriesextractedalargeramountofrevenues; butatthesametimeexpensesincreasedevenfurther;andeveniftheywereonlypartly appropriatedbycolonialstakeholdersthe‘reforms’broughtlocalssubstantial opportunitiestocreamoffthenewlyexpandedfiscalcapacity.Abackontheenvelope calculationintable1–consideringthepartialnatureofthedata‐showstheimpressive growthoffiscalincomeandofspendingthroughoutthe18thcentury. Table1totalrevenue,expensesandtransferencestoSpainandAmerica,annualgrowthin selectedyearsinpesos total revenue 1691‐ 95 43,195,438 1729‐ 33 50,394,431 1785‐ 89 255,194,445 1796‐ 800 413,710,965 % 0.4 2.9 4.5 totalexpenses 43,219,682 52,145,319 220,817,011 384,517,409 % 0.5 2.56 5.17 toAmerica 13,059,053 13,854,670 92,207,404 124,655,854 % toSpain % 5,047,838 0.2 3.4 2.8 5,548,888 11,791,137 21,591,802 Source(GrafeIrigoin,2012) ItseemsparadoxicalthatintracolonialtransfersskyrocketedatthetimewhenMadrid stiffenedmetropolitancontrol;theyrepresentedathirdofthetotalmoneycollectedand theproportionvariedwithinthedistricts.Expensesgrewevenfasterthanrevenues;and despitethegrowthintheroyalremittancestoSpain(itdoesnotaccountforprivate monies7)theinitiallowlevelsmaketheirimportanceinthetotaltaxtakerelative.Like 7Pradosestimatesprivatesilverin1782‐1807around16,000,000pesosanamountslightlylowerthanthat ofSpain’commercialdeficitPradosdelaEscosura,L.(1993).LaperdidadelImperioysusconsecuencias economicas.LaIndependenciaAmericana:consecuenciaseconomicas.S.AmaralandL.PradosdelaEscosura. Madrid,Alianza:253‐300. pp263‐64). 8 2.66 1.4 5.7 CubaandBuenosAires,someregionsbenefitedgreatlyattheexpenseofothersaccording totheirparticipationintheprivate‐publicpartnershipthatmanagedthetransfers(andthe treasuries)inAmerica.Thediversionofincomefrommorepopulated(moreconsumers) regionstocoastal(tradingoverseas)andadministrativecentresisvisibleintable3below. Thusdisproportionbetweencostsandbenefitsamongcolonieswasinbuiltinthesystem anditwouldinevitablycreateregionalinequalitiesoncethesystemfailed. II Thishappenedin1808whenNapoleonforcedtheabdicationofKingCharlesIVand imprisonedhisheir,futureFerdinandVII.ThepopulationrejectedtheFrenchsurrogate kingwithcrucialinstitutionalconsequences.Themanoeuvrewaspreventingthelegitimate rulertorule;withoutapropersuccessionmechanismasthesovereignwasstillalive,the rejectiontoan‘illegitimate’ruleopenedanunprecedentedconstitutionalcrisis;Spain wagedtheirown‘WarofIndependence’inEurope.Representativesofallpartsofthe Spanishmonarchy‐includingthecoloniesonequalfootingthanthatofmetropolitan Spaniards‐assembledinCadiztoestablishaprovisionalgovernmentofsorts.Thiscongress hurriedaconstitutionin1812alteringthenatureofthepoliticalregimetowardsa somewhatrepresentativeconstitutionalmonarchy,thoughthecompletetransitiontookthe restofthecentury. InAmericaelectionsofdeputiestotheCadizCongressgavewaytoprovisional governmentsineverysizableurbancentre–mostofthemalsotreasurysites.Inneedsto establishanewsovereigntyandsomeformofgovernanceanumberofpoliticaland constitutionalexperimentsdeveloped(Dye2006).Between1808and1830fifteenfuture nationsinSouthAmericasanctioned46constitutions8.By1825mostofthemhadturned intoarepublicanformofgovernment,somestructuredinafederalorconfederalform, otherscentralized,butforthemostthesewerejustdesignsonpaper.Thusacentrifugal processofterritorialfragmentationtriggeredthepolitical,fiscalandfinallymonetary disintegrationoftheempireandthesystemofintra‐colonialtransfersdisappeared altogether.Thereafter,competitionforrevenuesandresourcesprejudicedfurthertheloss ofincomefrommissingtransfers;regionaldisparitiesevolvedintocivilwar. Whatweretheeconomicconsequencesofsuchexogenousshock?Maddisondatashowsa sharpfallonpercapitaGDPafter1820,whichhelpstoexplainLatinAmericanfalling behindinthepost‐independence(Coatsworth1998).Prados(PradosdelaEscosura2009) challengesthisnotionashearguesthatregiongrewmoderatelyonaverageandinthis 8Numbersdonotincludechartersatsubnationallevel.SourcepoliticaldatabaseEAWSchoolofForeign ServiceGeorgetownUniversityhttp://sfs.georgetown.edu/accessedDecember2014 9 periodoutperformedotherpartsoftheworldwithwhichacomparisonismorerealistic thanusingtheUSasyardstick9.Twootherargumentsheposedtherereferneatlytothe legacyofSpanishcolonialism.Namely1)thatnetbenefitsfromthereleaseofthefiscaland tradeburdenimposedbythemetropoliswereoffsetbythecostsofestablishingan independentpoliticalregimeand,alesssurprisingone,thatb)locationandendowments prejudicedtheefficientdistributionoftheexpectedgainsfroma‘lesscostly’integration intotheworldeconomy.Thesetwoissueshaveacoreonthefiscaldevelopmentsresulting fromtheendofthecolonialruleandarecentraltotheargumentofthispaper. Pradosisnotconclusiveabouttheextenttowhichthedisappearanceofthetaxburden mighthavebroughtrelieftothecolonies.Representinga35%oftotalforeigntrade between1783and1810,Spain’lossofhercoloniesdidnotmeanamajorsetbackforher economicactivity10.Marichal(2008,54)estimatesthattheburdentheempirelaidwiththe Mexicantaxpayerwas50%higherthanwhatwaspaidbymetropolitansubjects;3.6pesos percapitainAmericanagainst2.5inSpain.Inanearlierarticle(Coatsworth1978)table2) calculatedthatthelossesforMexicofromSpanishrestrictivepoliciesamountedto5to7.5 %ofGDPmadebyatradeburdenof3%ofgdpor1.20pesospercapitaandafiscal burdenof1.68pesospercapita‐equivalentto4.2percentofGDP.Thismadetheburden oftheSpanishcolonialism‘35timesgreaterthanthatofBritain’;yetthethirteenBritish coloniesembarkedinafiscalrebellionagainstthemetropolisin1770sasaresultandyet noequivalentreactionwaseverrecordedinSpanishAmerica. Alltheseauthorsexpectthatthereleaseofsuchburdenshouldbringeconomicadvantages totheindependentgovernments.AsMarichal(2008,257)states ‘Iftheexternaltransfers(taxtransferstothemetropolisandtootherSpanishAmerican colonies)hadnotbeenrealized,NewSpain’sannualtaxburdenwouldhavebeenreduced… Thisincome,inthehandsofthetaxpayers,wouldcertainlyhavegeneratedgreater consumption,butmightalsohaveincreasedsavings..Withregardtosavings,itmaybe presumedthatwealthiergroupswouldhaveincreasedtheirsilverholdingsorinvested themintradeorenterprise’. ThequalityofcomparableGPDdataforalldistrictsisveryunevensoadifferentestimate hasbeenconstructedwhererobustpopulationdataisavailable.Table2showsestimates forpercapitanetrevenuesandnetexpenditures,ieexclusiveofallremittancesto 9 WithoutasystematicassessmenttheargumentisrepeatedforsomeparticularcasesLLopis,E.andC. Marichal(2009).LatinoamericayEspanatraslaindependencia,1821‐1870.Uncrecimientoeconomiconada excepcional.Madrid,MarcialPons‐InstitutoMora. 10Pradosconcludesthat‘fiscalinsufficiencyfromaweakfiscalbasetogetherwiththeweaknessofSpanish manufacturingatthetimemayexplainthecriticaleconomicsituationfollowingthelossoftheempirein mainlandAmerica’(Prados1993,pp284)mytranslation. 10 neighbouringtreasuriesandtoSpainfortheregionswhichwouldbetheindependent republics. Table2Grossandnetapercapitarevenuesandexpenditureby19thCentury’political aggregates Net Revenue Revenue Netreva Netreva Expend Expend Net a 1785‐ 1796‐ 1785‐ 1796‐ Exp Expa 1785‐89 1796‐ 89 800 89 800 1785‐ 1796‐ 800 89 800 Mexico 7.90 11.60 6.13 9.15 5.62 11.14 2.57 6.94 Chile 1.71 5.25 1.21 5.11 1.40 2.80 1.28 2.78 River 6.90 8.42 3.16 4.29 5.38 7.67 4.87 7.16 Plate Bolivia 5.47 6.25 4.31 4.33 3.85 4.14 1.85 1.73 Peru 5.39 3.51 4.49 2.28 3.80 3.09 2.98 2.00 Spain 3.17b 2.77 5.59 Source:Grafe,Irigoin(2012)table1Notesa)NetoftransferencetoSpainandothercolonies;b) datafor1800 BytheendofthecenturythefiscalburdenhadincreasedinMexico;butpercapitanet expenditure–exclusiveoftransfers‐grewevenmore.Largelyprivatelymanaged, substantialremittancestoCuba,otherCaribbeanpostsandterritoriesintodayUS,oughtto rendereconomicbenefittosome(ifnottotheaverage)Mexicans.Thereisplentyof qualitativeevidenceshowingtheparticipationofMexicanmerchantsinthemanagement, transportandapportioningoftheseremittances:thefinancingoftheTobaccoroyal monopolyisagreatexample(MarichalandGrafenstein2012),(IrigoinandGrafe2008).So ifgainswerenoevenlydistributedisitfairtoassumethatthepercapitaburdenwaseven? Beforeaddressingthispointaclarificationabouttheroleoftransfersisdue. Thepercapitataxtakecannotcapturethefiscalburdenfullyifequivalentamountswere ploughedbackinthedistrictbymeansofspending.Colonialtreasuriesrarelyperformedin deficitasexpenditures,totalandnetpercapita,alwaysmatchedrevenues.Thisisaresult oftheverynatureofthedata,iereportsofthestateoftreasurytotheKing.Itisthus anachronistictointerprettheflowoftransfersintermsofdeficitsorsurpluses.Indeed treasuriesspentwhattheygotasrevenues–cashflowneedsweresourcedfromlocal lendingwhilewaitingfortheremittancestoclearthedebts.Thisdoesnotmeanthat treasuriesdidnotborrow–assuggestedbyabsenceofinterestbearingloansinthe accounts;theydiditbyothermeans,andheavilyaswillbeseenbelow. Moreimportantlythesetransfersmeantasizabledisparityintheburdenofthe contributionAmericansubjectstotheroyalpurse.Asseenintable3theRiverPlate, 11 BuenosAiresandMontevideo,could(anddid)spendwellabovetheirgenuineincome– andinasubstantialdisproportionoftheirincome;converselyinmostofBolivian treasuries:revenueswerenotspentlocally,ieonlyhalforlessremainedinvestedinthe samedistrict.Peruasawholeinthe1780saffordeda50%ofextraspendingovertheir genuinemeanswhichwasshoulderedbytaxpayerselsewhere.Overalllocallyraised revenuesmadeonlyhalfofwhattreasuriesspentintheregionbeforetransfers,so arguablytheregionaldistributionofthefiscalburdenwasindeedveryuneven. Table3.Regionalvariationoftaxburden,percapitarevenuesandexpenditures,and transfersselectedtreasuriesc.1800. Arequipa(Peru) Cuzco(Peru) Huamanga(Peru) Lima(Peru) Trujillo(Peru) Guayaquil(Ecuador) LaPaz(Bolivia) Potosi(Bolivia) Concepcion(Chile) Chiloe(Chile) Mendoza(Chile) Santiago(Chile) BuenosAires(RiverPlate) Montevideo(RiverPlate) Paraguay(RiverPlate) Salta(RiverPlate) SantaFe(RiverPlate) Durango(Mexico) Guadalajara(Mexico) Guanajuato(Mexico) Merida(Mexico) Mexico(Mexico) Oaxaca(Mexico) Puebla(Mexico) SLPotosi(Mexico) Veracruz(Mexico) Zacatecas(Mexico) NetRevpc NetExppc @1800 @1800 5.39 12.15 6.80 5.24 18.13 4.06 12.32 18.29 5.23 4.38 4.61 9.26 16.40 40.31 1.03 4.58 0.07 2.95 1.57 2.36 1.06 24.41 0.92 1.36 2.83 14.35 9.04 3.87 7.56 4.49 8.87 12.15 3.53 3.47 17.03 2.76 4.50 1.46 4.28 28.44 49 1.07 3.98 1.63 0.24 0.20 0.15 0.62 24.85 0.09 0.46 0.16 20.54 4.58 Transferpc population 1796‐1800 annualavg ‐3.34 37,721 ‐5.17 32,082 ‐5.03 25,970 6.67 201,259 ‐10.22 17,700 n.a 39,045 ‐5.72 40,000 4.75 35,000 n.a 105,114 n.a 26,703 ‐0.16 8,765 n.a 203,732 19.85 72,165 7.32 14,093 0.27 100,000 n.a 13,528 ‐0.11 12,600 ‐2.54 157,970 ‐1.21 623,572 ‐1.74 511,616 n.a 460,620 ‐2.81 1,495,140 ‐0.51 528,860 ‐0.09 821,277 ‐2.68 311,503 2.29 154,286 ‐4.91 151,749 Notes:Shadecorrespondstotherespectivelargecolonialadministrativeunit,ie.Viceroyalties;In bracketsthecorresponding19threpublic,Source:OwnestimatesfromGrafeIrigoin(2012) 12 Withoutuniformityintaxratesandexemptionsandwithoutasinglecentralizedfiscal authoritythetaxburden‐measuredbythepercapitaamountstransferredandreceivedin eachdistrict‐variedgreatlywithinthesamelargerregion11.Infactregionalinequalities wereembeddedinthesystem.IndigenoustributeinBoliviarangedbetween6and13.6 pesospercapita(Klein1993)table3.15),sotheaverageof4.30pesosforBoliviaasa wholemasksasubstantialdispersionintheburdenofcolonialtaxation.Table3alsoshows theredistributiveeffectsoftheintracolonialtransfersthroughout.Itdistinguishesthose whogained:thecapitalandtheports,fromthosewhopaidinto;inMexicoforinstance,the bigminingtownsDurango,Guanajuato,Guadalajara,SanLuisPotosiandZacatecas,orthe populousindigenousdistrictsofSouthPeru.TheobservednegativesignforMexicoCityis compensatedbysurplusesreceivedinVeracruz–orAcapulcoforwhichthereisno populationdataavailable.FromtheseportsrevenuesweresenttoCuba,Spainandto Manilaandworkedascapitalforprivatetrade. Thisdoesnotmeanthatminingrevenuesweredirectlyextractedhowever.Collectionof indirecttaxesontradeandconsumptionfosteredbysilverdisseminationwithinexplains themultiplicationoftreasuriesintheinterior‐connectingminingtownsandpopulated consumercentreswithcoastaltradingports.ThisstructurepersistedafterIndependence andgavewaytoanumberofinternalcustomswithineachnewrepublic–distorting whateverbenefitfromfreertrade.Hencepost‐independence‘free’tradelegislationinitially loweredthetariffattheports,butinternalcustomsstilltaxedgoodsmovinginland. Alcabalaasanoverlandtradetaxleviedondomesticorforeigngoodsintransitpersisted wellintothe19thC;whereasinSpainitwasabolishedonlyin1845.Mexicanslivinginthe capitalhadtopayanadditional15%‘introduction’surtaxonconsumergoodsenteringthe cityafter1821(SanchezSantiro2009)sobenefitsfromthe‘releaseofthetradeburden’ werelostinthepoorintegrationofdomesticmarkets.Thuscolonialtaxationbecamethe institutionallegacywhichdissipatedanygainstoexpectfromgreateropennesstothe internationaleconomy. III Economichistoriansexplainingthe1820‐1870’slumppointatpolitical‐institutional causes:instability,warfare,fiscalandfinancialdisorder.ForPrados(2009)the‘costsof self‐government’andthe‘costsofadministeringpoliticalunits’ofasuboptimalsize increasedtransactioncoststhatoffsetanybenefitsfromthereleaseofcolonial–tradeand fiscal‐burdens.Yet,earlierscholarshiphadfoundpositiveexternalitiesfrom‘moreliberal’ 11TherewasneitherasinglefiscaljurisdictionnorwasthereasingleconstituencyinSpain.Taxeswere particulartoindividualterritories.Treasuryreliedontaxfarmingandencabezamientosorcontributions madebytheayuntamientos–towncouncil‐inproportiontothepopulation.Attemptstocentralizethe collectionoftaxesstartedin1742insomeAndalusianandCastilianbigtownswithoutsuccess.(Fontana 1987p22‐26) 13 policiesfollowedbyBuenosAiresorCubaforexample,whichdistinguishedthemas successfulexporteconomiesfromthemorebackwards‘closed’economiesinthemainland. Somecountriesweremoreeffectivethanothersatcreating‘modern’institutionsthat betterprotectedprivatepropertyrights(BordoandCortesConde2001)–awayfrom predatorycaudillos‐(Amaral1993);orweremoreableinsettingmarket‐friendlier institutions(Coatsworth1993).Exportgrowthandaccesstointernationalcapitalmarkets mirrortheirinstitutionalsuccess. Indeednearlyallthestatesthatemergedafter1808inSpanishAmerica–andinthe metropolis‐dealtwiththeconstitutionalcrisiswithsimilarinstitutionaldesigns.In Americathiswascueforautonomyfromneighbouringcolonialauthoritiesratherthanfor independencefromSpainsincede‐facto,themetropolishadverylittlecontrolovertheir resources12;However,notallthecolonieshadenjoyedthebenefitsofbeingpartofthe samepoliticalcompactinthesamewayasseenintable3.Itisthusnotsurprisingthatthe PlandeGobiernodelaJuntaTuitivaofLaPaz(Bolivia)earlyin1809manifestedtheir decisiontoceasesendingmoneytoBuenosAires;whilerenewingtheirallegiancetothe imprisonedking(Roca2007)p20).Eachproclamationinthecoloniesfollowingthese eventsechoesthisissuesomewhat–evenamongthosewhichinitiallyremainedloyalto theKing.AutonomyfromcolonialauthoritiesnotindependencefromSpainwastheissue. Regionswithfewertreasurydistrictsandmorehomogenoussizewererelativelyspared fromthesetensions,likeChileorEcuador(AlexanderRodriguez1992). BothmetropolisandcoloniessoughtaninstitutionalsolutionintheCortesofCadiz.With colonialrepresentationtheCortessanctionedaconstitutiontobethefoundationfora provisionalgovernmentfor‘lasEspañas’.Thecharterconceivedrepresentationof‘both hemispheres’intheCortesandinthe7‐members’governmenttoprovisionallyreplacethe king[art7,10].Population‐asonesingleconstituency‐wastoberepresented‘in proportion’erasingthehistoricalterritorialjurisdictions,eg.onedeputyevery70,000 peopleaccordingthe1797censusforSpainhowevertherewasnocountingforpopulation inAmerica[art31].Thisthresholdleftthemajorityofmediumandsmallsizetowns,the majorityoftreasurydistricts,withoutrepresentation[art32‐33]andconferredthe politicalcontroltobigcolonialcities.Moreover,citizenshipaspoliticalrightswasgranted toallmalewhowere‘notbrokeorservant,norunemployedorafelon’;asameanto incorporateindividualsubjectstoasingleconstituency–abrogatingprivilegesiefueros– wasequallyambiguous.Therewerenopropertyrestrictionstosuffrageandliteracywas tobecomearequirementonlyafter1830[art25].Themitaandpersonaltributewere abolished.Tothis,firstconstitutionaltextsinAmericaaddedtheendofslavetradeand 12Itmaybeslightlyinaccuratetoassignto1808thedriveforIndependenceinthecolonies.Conservative policiesoftherestorationgovernmentsinin1814precipitatedsuchreactionwhichendedupwiththe separation,formally,by1820andthe‘liberal’revolutioninSpain. 14 emancipationofslaves.FamouslythePlandeIgualain1821Mexicorecognizedall inhabitants,Europeans,Africansandindigenousalikeascitizens‘withoutdistinction’(art 12)andlikemostearlychartersincorporatedthevastmajorityofmalecitizensintoan inclusivebutvaguelydefinednation‐state.Similarliberalityaboutofpoliticalandcivil rightsappearinearlyconstitutionalchartsasVenezuela(1811),Antioquia(1812),orPeru (1821)(PerezHerrero2015/2009). OnthesebasesforrepresentationtheCortesfilledinthelegitimacyvacuum.The1812text wasmostlyconcernedwiththeconstitutionalroleofthekingandoftheCortes.Thenew formofgovernmentwasadefinedas“moderatemonarchy”(art14)andrepresentationof theconstituentswasconsistentwithSpanishtradition(Guerra1994).Directelectionwas themeanstoappointnewlegitimateauthorities.Politicalhistorianshaveconvincingly shownthatelectionswereawidespreadpracticeofthelate18thcenturypoliticalculture (Benson1946;Posada‐Carbó1996).Thuswiththe1808crisisandacrossofSpanish Americanowcontestedelectionsrepeatedinviceregalcapitalsaswellasinpueblosde indiosorsmalltowns(Warren1996;Caplan2003),(Echeverri2015;Ternavasio2015), and(Sartorious2015)forCuba’exceptionalcase)andthe1812charterorganizedthe templateforpopularsovereigntyandtherecognitionofequalpoliticalrightstoallcitizens (EastmanandSobrevillaPerea2015).TheBuenosAiresconstitutionof1821granted universalmalesuffrage–whichwasreplicatedlaterinotherprovinces(Annino1995).In someplacesparticipationwasinitiallyhigh–egSantiago,Bogota,BuenosAires‐but turnoutsteadilyreducedovertime13.Between1812and1854Mexicoonlysanctioned35 electorallawsandstatuesthatreformedmechanismofelectionsmakingproceduresmore arbitraryandplacingevermorestringentrestrictions–eg.wealth,property,age,literacy‐ tofranchise(GarciaOrozco1978).ThispointsoutthattheexclusionarycharacterofLatin Americanpoliticsisnotadirectlegacyofcolonialism;butratheranoutcomeof19th centurypolitics.Nonethelesselectionsrepeatedatirregularintervals;theysystematically occurredrightafterarevolutiontoinvestlegalitytotheneworder,thusdevelopingmorea perfunctoryroleoflegitimizationex‐post(Fowler2010),(HalperinDonghi1979).Thusthe natureoftheSpanishmonarchy,formerlybasedinprivilegesandhierarchiesofcorporate subjectsandhistoricalterritoriesarbitratedbytheKingwasalteredforanill‐defined popularsovereigntyinaterritorialcompactwhoseconstituentswerenowindividualsall equalbeforethetreasury.Yetthefiscalbasistosustainsuchstateremainedde‐facto unchanged.Ambiguitiesregardingterritorialandindividualrepresentationinfiscal mattersareonemajorinstitutionallegacyoftheSpanishAncienRegimeandcolonialism. 13Turnoutin1820sBogotawasaround15%Deas(1996).TheRoleoftheChurch,theArmyandthePolicein ColombianElections,c.1850‐1930.Elections...,.E.Posada‐Carbó:163‐180. The1824MexicanConstitutionestablishedbiannualelectionsforCongress,However,between1821 and1855therewere22elections.AguilarRivera,J.,Ed.(2010).LasEleccionesyelGobiernoRepresentativo enMexico(1810‐1910).Mexico,CFE‐IFE. P13 15 Thechapterontaxationisveryshort:only17ofatotalof371articles,andisparticularly ambiguousaboutsourcesofrevenuesandprerogativesofthestatetocollecttaxes.Cortes tobeelectedwastoestablishor‘confirmtaxes,directorindirect,provincialormunicipal’in thefuture.Inpracticethecharterallowedforthecontinuationoftheexistingtaxes‘until newlevieswereestablished’.Consistentwiththeliberalrhetorictaxesweretobeborneby allSpanishin‘proportionoftheirfacultades’andtheking’sprerogativetograntprivileges andexemptionstoindividualsandcorporatebodieswasabrogated.Thisaimedtoestablish auniform–andwider‐fiscalbasebutsaidnothingaboutparticularfiscalregimesinthe peninsulaliketheBasqueorNavarra’s,normadeanyspecialreferencetothetransfers among(oroutof)thecolonies.Article11listedtheterritoriescomprising‘Spainin America,AsiaandEurope’andpostponed‘thedivisionofthisterritorybyaconstitutional lawforaconvenienttimepoliticalcircumstancespermitting’.Notablyarticle340 establishedthat‘taxesweretobeproportionaltoexpenditures’disregardingthe identityprinciplethattreasuriesneedtocollectinordertospend14.Territoriesweretobe subjecttoanunspecifieddirectcontribution‘contribucióndirecta’tobeapportioned amongtheprovinces‘accordingtotheirwealth’withoutanyindicationofitssourceor mechanismtoassessit. Aimingforgreatercentralizationonegeneraltreasurywastobecreatedatthetopof similarsingletreasuryineachoftheunspecifiedprovinces;however,collectionremained inthehandsofthetowns,ieayuntamientosandcabildos[art321‐323].Revenuesshould thereafterbesenttothemaintreasurydistrictswhereauthoritiesdecidedovertheir spending.Thisadditionallackofidentitybetweenagentswhospentandwhocollected revenueswastobecrucialthereafter.Article354abolishedallCustoms‘otherthan maritimeandattheborders’,buttheborderswerenotdefined[art11];soinAmerica internalcustomsappearedbetweenformertreasurydistricts‐nowautonomous‐andthe fiscalautonomyofhistoricalterritoriesinthemetropolispersisted.Thecharteradmitted thatthepublicdebtwas‘amatterofthefirstorderimportance’(particularlyafterthefailed consolidationofthevalesreales)howeveritdidnotearmarkrevenuesforasinkingfund‐ ormadeanyeffectivedecisiononthedebtthatmattered.Notablyasperarticle131the Corteswastodeterminethevalue,weight,finenessanddenominationofthecoins,without amintorabankwithwhichtoimplementit.Afinalveryshortchapteroneducationwith6 articles[366‐371]promisedfreeaccesstoprimaryschoolsandevenallowedforthe creationofuniversitiesbutwithoutindicationofthemeanswithwhichtodoit. Buttwomajorconstitutionalissueswerenotresolved:therepresentationandthe aggregationofterritoriesandsubjectsconstituentsofthisstateandthemeanstofundit accordingly.Thisdoubleambiguitymeantanunsurmountablelimitationtothefiscal 14Officialbudgetsin1840sSpainstillconceivednearlya50%deficitwithoutanyprovisiontomeetthegap. (Tedde,1994p32‐33) 16 sovereigntyofthestatewhichonlyexacerbatedtheongoinginstitutionalcrisis:Existing economicandfiscaldisparitiesamongdistrictsmadeevenlessfeasibletoincorporatethem intonewsovereignpolities.Deeplocalrootsofthestructureoftaxationfrompervasivetax farming,saleofofficeandprivilegeswereaformidableobstacletoanynegotiation thereafteraboutsometerritorialintegrationoftreasuries.Withlocalautonomy–and withoutaclearsovereign‐thefiscalcompactdisintegrated.Lackinglegitimacy,public propertyrightstotaxationdisappearedandwithouttransfersfromotherdistricts governments’incomeeverywherereducedsharply.Legitimacytoruleandtotaxwasput intoquestionandanysuccessivepoliticalaggregationatabroaderregionalscalelikethe GranColombia,theCentralAmericaConfederationandtheProvinciasUnidasdelRiodela Plata,failedsoon. Thesewerethecostsofindependence;butfocusingonthedisintegrationoftheempirehas overshadowedthatthepoliticalandfiscalhistoryofthemetropolisisverycomparable: theretootheprocessofpolitical‘aggregation’andfiscalconstitutionofapopular sovereigntyprovedashaphazard.Thefailureofeverypoliticalcompromiseledtowar overresourcesandrevenues;andmilitaryspendingfuelledpublicdeficitsandmounting debts.Butwaranddisorderhavenotbeenanimpedimentforthemakingofstrongstates‐ andsuccessfuleconomicdevelopment‐astheliteratureonthefiscalmilitarystatesin modernEuropeattests.Unabletopayforallegianceorrecruitsrevolutionarygovernments inAmericaofferedverygenerousentitlementstolargesectorsofthepopulation.Tax exemptions,tariffreductions,andentitlements,ieawidedefinitionofcitizenrytoall Americans,eliminationoftribute,emancipationofslaves,directelectionstoappointarmy officials,etcnotalwaysgaveimmediateyieldtothetreasurybuthelpedouttomobilize supportwithoutmoney.Theyalsocreatedasignificantifconfusesetofrights–civil,social andpolitical‐availabletoallindividualsintheirowntransitionfromsubjectsoftheKingto citizensoftherepublicanstates. IV Representationwithouttaxation Seekingtobroadenthefiscalbaseoftherepublicanstate,governmentsinthe1820stried tomoveawayfromindirecttradeandconsumptiontaxestomoredirectcontributions‐ echoingtherhetoricaboutrepresentationofthe1812charter.Probablythemostdramatic reformprogramwasGeneralSucre’sinBolivia,whichabolishedthemita,thetobacco monopolyandthealcabalatogetherwiththeindigenoustribute;Instead,itdeviseda direct,universallevyoneveryBolivian–thenon‐descriptcontribucióndirecta‐whichwas 17 rejectedbyallpartiesaffectedandwasabolishedwithinthreeyears.15UnderSpanishrule indigenouspeoplepaidtributebuthadbeenexemptedfromalcabala;therestwhite,free blacksandmestizosalikepaidthissaletaxbutdidnotpayanyheadtaxes.InMexico,the 1821FederalConstitutionabolishedthetributeandgrantedthelevyofdirecttaxestostate (provincial)governments;howeverregionalelitesrejectedthenewtaxationandbythe 1830smoststateshadincreasedfurthertheindirectcontributionslikealcabalasand monopolies.FewpopulousstateslikeOaxacaandYucatancontinuedtheindigenous capitationandthetithefromwhichtheyobtainedthebulkoftheirincomewellintothe 1840s(SerranoOrtega2007).TributewasalsoabolishedinEcuadorin1823‐tobere‐ establishedwithinthreeorfouryears–andinPerubythe1821reformstogetherwiththe alcabala.Yettributedidnotceasecompletelyuntil1895(Contreras2006).Thiscontrast betweenMexicoandPeruisexplainedbythegreatercommercialorientationofthe Mexicanindigenouseconomy.TherelativegreaterdispersionofsilvermininginMexico mayalsoexplainthechoiceforthepersistenceofthealcabalauntilthe1857constitution (inpaper)andbeyond,until1896inpractice16.Inanycasethisfeature,whichtroubledthe integrationofthedomesticeconomy,mirrorsthedifferentdegreeofcentralizationthan PeruenjoyedoverMexico‐andtherespectivepathintheirconstitutionaldesigns17. The1820sfiscalreformsinLatinAmerica‐e.gRivadavia’sinBuenosAires,SanMartin’sin Peru(Anna1974),Santander’sinColombia(Bushnell1953/1970),SucreinBolivia (Lofstrom1970)‐failedonthreemainissues:toestablishdirecttaxation,toincrease revenuescollectionandtobuildfiscalcapacity.Thesamehappenedwiththe1813reform inSpain.Paradoxicallythefailurereinforcedcentralgovernments’dependenceonCustoms andonmonopoliesevenfurther(Centeno2002).Tariffinthehandsofcentral governmentscontinuouslyincreasedthroughout.Taxesmainlyleviedonimportsmadeat leasthalfoftherevenuesasinMexicoand80%ofrevenuesinmostothercountries.With thecontinuationofthecolonialalcabalathefiscalburdenfellsquarelyonconsumers.Few likePeruobtainedsimilarincomefromtaxesonGuanoexportsafter1850orChile,later, withsimilarnearmonopolisticpositionintheproductionofnitrates.Formostofthe 15Itconsistedofavaguelydefinedpersonalorheadtax,partlyapropertytax,andpartlyanincometax. IndigenousvillagesrejectedthemtokeepownershipofcommunallandsSanchezAlbornoz,N.(1978).Indios yTributosenelAltoPeru.Lima,InstitutodeEstudiosPeruanos. ,Platt,T.(1982).Estadobolivianoyaylluandino:TierraytributoenelnortedePotosı́.LaPaz, InstitutodeEstudiosPeruanos. 16Jauregui,L.(2010)."Mexico:laexperienciadelasparticipacionesfederalesenelsigloXIX."IllesImperis13: 137‐157. 17Republicangovernmentsinbothcasesreplacedtheminingtithe–whichwascollectedbythechurch‐fora 3%tax.Contreras,C.(1999).LaMineriaHispanoamericanadespuésdelaIndependencia.Estudio comparativodeBolivia,Chile,MéxicoyPeru.Dosdecadasdeinvestigaciónenhistoriaeconomicacomparada enAmericaLatina,homenajeaCarlosS.Assadourian.M.Bornemann.Mexico. . 18 periodinChileandMexicothecolonialtobaccomonopolystillmadefor60%ormoreof totalrevenues(Tenenbaum1986).Togetherwiththesaltmonopolyitformed60%of revenuesinColombiauntilthe1850s.Elsewherelandsales,eitherpublicasintheRiver PlateorexpropriatedtothechurchasinBoliviaortoIndigenousvillagesasinColombia (Halperin1979),(Abendroth1990;Kalmanovitz2006)occasionallyrenderedadditional revenues. Yetthepercapitataxtakeofrepublicangovernmentswaslowerthanwhatthecolonial treasuryhadextracted.Assemblinginformationfromapatchworkofsourcesfor populationandrevenuestable4showstheestimatedfiscalburdenforcomparabledistricts inyearsforwhichdataareavailable.Cautionisonorderasrobustnessoftheindicatorsis debatablesorealvaluesarenomorethanamakeshift18.Theseareallnominalvaluesbut pricedataisevenpaltrier;possiblythebestavailableestimateof19thcenturyliving standardsisPeru’s(Gootenberg1990)whichbasicallycountsforpricesinLimaonly.Yet comparingwithestimatesdisplayedintable2thegovernment’staxtakehadreduced dramaticallyintheMexicanFederation,Chile,PeruandBolivia,andthisrepeatswhen comparingthecolonialfiscalburdenatdistrictlevelshownintable3above.Veracruz’ dramaticfallmirrorstheendoftheintra‐colonialtransfers;otherMexicanstates governmenthadlosthalformoreoftheirnominalvaluein1800inspiteofthatpopulation remainedstableormigratedtolargercities. Table4Estimatedpercapitafiscalburden,SpanishAmerica1820‐1850. Gross revenue Chile 1800 1835 2003421 1843 3063568 Mexico1800 1825 8567954 1827 15173469 1830 17776870 1831 16040591 1834 17737883 1842 18865148 1844 22194712 1841‐44 19262682 pop 1010332 1038801 6500000 8000000 7996000 6382284 7734292 7015509 7000000 7015509 Percapita revenue 5.11* 1.98 2.94 9.15* 1.31 1.89 2.22 2.51 2.29 2.68 3.17 2.74 Realpc revenue ** 11.64 1.51 2.36 2.22 3.48 2.7 3.63 4.46 18Unlikecolonialdatausedintable3,table4datastatesindiscriminatelygrossrevenueandincludes carryoversandfinancialincomeofallsorts.Systematiccountingofthepopulation–itselfameasureofstate capacity‐startedonlyinthesecondhalfofthecenturyinmostrepublics. 19 BuenosAires Bolivia Peru Mexican states Durango Mexico Guanajuato Jalisco/ Guadalajara Puebla S.LuisPotosi Veracruz Zacatecas 1800 1819 1829 1800 1827 1846 1800 1826 1830 1831 1846 1850 2782669a 2408242b 7915579 1867041 2363034 3346032 3003489 3526148 5515591 7029112 72615 125000 153000 1100000 1378896 1500000 1249723 1373736 1373736 2001123 1800 1825‐26 1833 1826‐27 1833‐34 1800 1829 1831 1800 312479 391091 892130 728270 733444 654853 120157 139081 829458 1039758 442916 494823 2.95* 2.60 2.81 1.07 0.70 2.36* 1.65 1.32 1.57* 1830 1831 1834 1800 1825 1800 1828 1830 1830 1800 1825 1826 1830 1832 614858 505443 532600 405618 470050 448500 241659 620018 689032 844049 1476757 656881 660595 680000 584358 297593 310196 242658 247295 272901 274537 314121 0.93 0.76 0.78 1.36* 0.69 2.83* 1.57 1.44 0.99 9.04* 2.50 2.52 3.07 4.70 38.55* 19.26 51.73 4.33* 1.69 1.71 2.28* 2.23 2.40 2.56 4.01 3.51 38.55 19.26 13.90 1.73 1.98 2.40 2.65 4.93 4.28 Notes:*datafromannualaverage‘netpercapitarevenues’1796‐1800Ibidtable2;**Mexico adjustedbyannualCPIvalueinsilvergrainsindexfrom(ChalluandGomezGalvarriato2015),*** Peru:adjustedbyannualinflationindexfrom(Gootenberg1990table3);a)Annualaveragenetper 20 capitarevenueforBuenosAiresonly,b)datafor1822(Burgintable7)*M.Burgin,TheEconomic AspectsofArgentineFederalism,1820‐1850(Cambridge,1947)p53 Backin1989JacobsenhadestimatedthatpercapitacollectionofrevenuesinPeruhad fallenfrom“28.9realsinthemid‐1790sto23.3realsin1850”.Thisnearly20%reduction inthenominalvalueofthecollectionrepresentedabout43%inrealtermsasheassumed “a30%inflationratefortheperiod1800sand1850s”(Jacobsen1989)p315).Morerecent datashowssuccessivecyclesofdeflationandinflationasresultoflowerlevelsofsilverin circulationandinflationaryfinancingofwarsbeforetheGuanoboom(Gootenberg1990, 28‐30).Thisexplainstherelativelyhighertaxburdenofthe1840s.Otherwise,likein Mexicothetaxtakeoftherepublicangovernmentwasafractionofthecolonialburdenin spiteofmoderatepriceinflation(ChalluGomezGalvarriato2015). InSpain,theMonSantillan1843‐45reforms–togetherwithanewconstitution‐abolished internalcustomsbythediscontinuationofalcabalas;exemptionsandtaxfarmingstillin handsofthechurchandindividualsceasedgrantingaslightlygreatercontroltothecentral government(Serrano2015/2009).Yetstillinthe1850sthebulkofrevenuesoriginatedin Custom,monopoliesandaotherconsumptiontaxes(YunCasalilla,O'Brienetal.2012).A newdirecttax‘contribuciónterritorial’didnotyield;thisill‐definedlevyonlandproperty (notonincomeorcapital)leftthevaluationandcollectionoftaxesinthehandsof ayuntamientos.VariousdisentailmentsofroyalandChurchrealestate(1811,1836‐37, 1841,1855)topayforolddebtsorpaidwithdepreciatedscripprovidedsomeoccasional income.ButasinSpanishAmericalargesalesoflandsdistortedlandmarketsandfostered concentrationofassets. Everywhere‘LiberalsandAbsolutist’(orconservative)governmentsalikefacedthesame fiscalproblemsandresolvedthemverymuchinthesamefashion:repeatedinsolvency, furtherindebtednessandfurtherindirecttaxes19.Thiswasnotamatterofpoliticsor ideologies.InBuenosAiresforinstancethesameindividualManuelGarciawasresponsible oftheFinancesforfifteenyearsandservedunderdiametricallydifferentgovernments–in theeyesofpoliticalhistorians‐thatofRivadaviaandRosas(Irigoin2000).Yetfrequent changeofgovernmentsinbothformercoloniesandmetropolisareasymptomof protractedinstability.ButchangesintheresponsibleoftheTreasuryintimatethatthiswas farfromalegacyofcolonialism.Between1827and1855Mexicohad49different governmentsand119ministersoffinance,wholastedinofficeanaverageof4monthsif thegovernmentwasconstitutionallyappointed,orbarely3weeksinthefactoregimes.In 19InSpainthegovernmentunilaterallyrestructuredthedebtasin1818,repudiated(partly)itin1828, defaultedornearlydefaultedin1836and1847. 21 themetropolis,betweentheFrenchwithdrawalin1814andthe1868revolution,there were54cabinetsand92differentministersofFinances20. IndeedbothSpanishandSpanishAmericangovernmentsbecameinsolventinthewakeof thecrisisfollowingtheNapoleonicoccupationofSpain;andtheircommercialandfiscal deficitscontinuedsternly(Comin1988).Bothcoloniesandmetropolisamassedhuge domesticdebtsandborrowedheavilyinEuropeancapitalmarkets;cashstrappedSpanish AmericanrepublicsfoundreadymoneyinLondoninthe1820s–andappliedfreshfundsto makethereformsviable;withinfewyearsallthemdefaultedandremainedsealedofffrom furtherforeignborrowingforthenextfortyyears(Marichal1989).Onlywhengovernments couldrestoresomesoundnesstotheirtreasuries,theybecameagaincredibleborrowersin London.Spanishgovernmentscoulddoslightlybetter:theyrepeatedlydefaultedor repudiatedthedomesticdebt(1836,1840)(TeddedeLorcaandMarichal1994)p64). SpaintoocouldborrowinLondoninthe1820s–andinFranceintheearly1830s;adding thisdebttothearrearsfromtheDutchloansofthe1800s(CangaArguelles1833)‐butlost directaccesstoforeignfinanceinthelate1830s(Platt1983)p124).Thereafterthe governmentcouldonlysurvivewithshortrunlendingfromthehouseofRothschild–butat asignificantfiscalcost:thelossofrevenuesfromoneoftheworld’smostimportant quicksilverdeposits21. Taxationwithoutconsent Inthe1820smostoftherepublicsalsoconsolidatedthedebt–includingarrearsfromold colonialclaims.InMexicoby1816itrepresented120%ofthetotalrevenuesofthe Mexicantreasuryinthebountifulyearsof1800s;theproportionwas300%forLimain 1821and150%inBuenosAires22.Thethreetreasurieshadbeenlargerecipientsof transfersbefore1810sowithouttheseextra‐revenuesthedebtburdenwasseveraltimes largerinthe1820s[GrafeIrigoin2012p629].Aspartofthereformssomerepublican governmentslaunchedtheirfirstpublicdebtissues.EarlyonBuenosAireschartereda privatebankofissueandestablishedaStockExchangeasmarketplaceforpublicfundsand 20Numberscounttheministers,someindividualnamesrepeatedinthepost.ForMexicoStevens,D.(1991). OriginsofInstabilityinEarlyRepublicanMexico.Durhan,DukeUniversityPress. forSpain:UrquijoGoitia,JRDiccionarioBiograficodelosministrosespanolesenlaedad contemporanea(1808‐2000)www.ih.csic.es/lineas/jurg/diccionario/index_dic.htmaccessedJanuary2015 21In1835Almaden’mineswereleasedtoRothschild.Mercurywasacriticalinputfortherefiningofsilver andthehousecontrolledtherefiningofpreciousmetalsinParisandLondonwhichmadeitdominantinthe exchangebusinessinEurope.LopezMorell,M.(2013).TheHouseofRothschildinSpain,1812‐1941. Burlington,Ashgate. ,p83fig.12.10) 22Theamountofthecertifieddebtwas21.6millionpesosinMexico,21.7millionsinPeruand4millionin BuenosAires(GrafeIrigoin2012).UsingCoatsworth’1998GDPdatathesestandat10%ofMexicanGDP, 50%ofPeru’sGDPand16%ofArgentina’GDP.Spain’amountedto13,120millionrealsbut60%ofitwas repudiatedbythegovernmentin1828(Tedde1994p12) 22 foreignexchange.Thefundeddebtin1821amountedtotwiceasmuchastheyearly treasuryrevenueatthetime.By1840ithadmultipliedten‐foldasithelpedtofundthe CustomsshortfallfromEuropeanblockadestotheport.Unsurprisinglybondsasfinancial resourcevanished;a20timesincreaseinthevolumeofthefiduciarycurrencyissuedby thebankandasubsequentdepreciationoftheexchangeratetogoldthatfellfrom17to 370pesosinthesameperiodannihilatedthedomesticmarketforgovernmentdebt (Irigoin2000). Spain’sdomesticdebtby1821–whichincludedtheprincipalandarrearsofthefailed ValesReales‐representedaboutthesameamountthatannualrevenues(Tedde1999,12, Prados1993,Table10).Thenthemetropolishadlostthefiscalreturnsfromre‐exportsof otherEuropeangoodstothecoloniesandrevenuesfromtradeserviceshadcollapsed. Spaincouldstillborrowabroadforawhile.After1834shorttermbills–mainlyfrom France‐multipliedthenominalvolumeofexternaldebt.Itwasalready20timeslarger thanin1821anditgrew50%furtherinthesubsequentfifteenyears(Sardá Dexeus1948) p60,90).Establishedin1829ontheremainsofthefailedBancodeSanCarlos,theBanco deSanFernando‐withlimitedlargeoperationsconfinedtoMadrid‐issuednotestolendto thegovernmentwithoutbuildingequivalentmetallicreserves.(Tedde,1994,30,Sarda, 1948,32).ThebankassistedthegovernmentduringtheCarlistawarandithelpedfurther withanextraordinaryexpansionofnoteswithoutreserves–asfiduciarymoneyin1844‐ 47(Tedde1994table1.4,Sarda,1948,94).ItwasmergedwiththeBancodeIsabelIIin 1847whichhadmultiplieditsissuesevenmore.Fundingthegovernmentdebtrepresented 60‐70%ofthebank’sassetsandcrippledthepeculiarbankingsystemofthecountryas Teddehaspainstakinglydescribed.Unsurprisinglylendingtoprivatebusinesswas minimal.Yet,thefinancialreformandcreationofBancodeEspañainthe1850sdidnotend therecoursetofinancedebtbymonetarymeans;itwillturnintoopeninflationaryfinance policylaterin1883withtheinconvertibilityofthepeseta(MartinAcena1981). Thus,recurrentdeficitswereincreasinglyfinancedwithdebt(whichwasoftenre‐ structured)ormoneycreationwhenbothforeignanddomesticlendersexhausted;Insome countriesthelastresorteventuallywasmoneycreationbymeansofriggingthebankslike in1840sSpain,debasingthecurrencyasin1830sMexicoor1850sBoliviaorjustprinting fiatmoneyasinBuenosAiressince1826(Mitre1986);(Tedde1999;Irigoin2000;Centeno 2002),(TorresMedina1998).Thisalsotriggeredaremarkablechangeinmonetarypolicy withlastingimpact:theexpansionofcurrencytomeetfiscaldisequilibriumopenedan earlydoortogovernmentstousemoneyasafiscalinstrument.Hencedepreciated exchangeratesprovidedalsoadditionalprotectionandstimulatedtheproductionofsome exports–especiallywheninternationalpriceswerefalling‐despitescholarinsistenceon theimportanceoftariffsthroughoutthe19thcentury(CoatsworthandWilliamson2004). 23 Effectsfromthemonetizationofthedeficitfurtherdisintegratedmoneymarketsand exacerbatedregionalandpoliticaltensionswithinaformerlyintegratedmonetaryunion. AccordingtoSpanishmonetaryhistoriansa‘contradictory’monetarypolicyparticularly after1823failedtoattractspecietothemint(Sarda,1948),imposingsubstantial deflationaryeffectstotheSpanisheconomy((Sardá Dexeus1947),(Nogues‐Marco 2005)foraqualification).Throughoutasystematic–butunexplained‐overvaluationofthe silverdrovespecieoutofcirculation;e.g,thegold/silverexchangeratewas1:15.2inUK, 15.5inFranceand16.5even16.7inSpain,so‘Spanishcoinswerehencehoardedor exportedenmasse’.Thusinsufficientcirculatingmediumsustaineddemandforlesser qualityFrenchcoinsfordecades.Liberalgovernmentshopedtorevertthisearlyinthe 1820swithoutsuccess.The1824Restoration’monetarypolicywasnotoriouslyprejudicial andtheflight‘ofpesosdurosorfuertes’continueddespitelargeforeignloans.Deflationwas significantupto1830butcontinuedthroughthe1840s(Carreras2005)(Table16.9p 1288‐90)despitethereopeningoftheBarcelonamintandrenewedcoinageinMadrid (Sarda,194880‐88).Thenevenotherforeigncoins,MexicansandPortuguese,enteredin circulationforgreaterdisorder.However,withoutmeansgovernmentswereunlikelyto runeffectivelyamintoranypolicyonforeignexchange,solowcoinageitisnowonder. YetitisunclearwhichweretheSpanishsilvercoinsthatweredominantincirculation; accordingtoSarda(p67)thesewerepesos‘fuertesofduros’withhigherintrinsicsilver valuethanFrenchcoins,andweremostlikelygoodSpanishAmericanpesos.AsinPeru, andelsewhere,fromthemid‐1820stothemid‐1830sgoodsilvercoinsweresiphonedoff giventheirappreciationinFrance,BritainandevenmoresointhetraditionalAsian markets.Deflationwasacommontraitintheseeconomies(Gootenberg1990).Insome silverrichcountriesseveralmintsappearedandcutcoinsofvariousqualities–someof whichreasonablyshouldhaveendedinSpain(Irigoin2009).Incirculationalongwiththe francesas,Greshameffectsoccurredandarguablyresultedindeflationaryconsequencesas thosedescribedbySarda.NotablytheexchangerateofsterlingandtheFrenchfranc remainedrelativelystablethroughouttheperiod1821‐1855–withexceptionalblipsin 1847(Tedde1999tableV‐2andXI‐3),(PradosdelaEscosura1986)app7.Asthebanking systemwas,themarketsformoneyandexchangewerehighlyfragmentedaddingfurther transactioncoststothealreadyweakintegrationoftheSpanishdomesticeconomy (Nogues‐Marco2015). ResearchonthemacroeconomicsituationofSpaininthisperiodisstillaworkinprogress butevidencefromverydetailednarrativespresentstheproblemsofSpainverysimilarin naturetothoseofherformercolonies.WhereasinsomepartsofSpanishAmericainflation wasanoptimalsolutiontodebtfinancesintimesofwar(BordoandVegh2002);it continuedbeingasourceinpeacefultimesandforeconomieswithverydifferent 24 endowmentsandinstitutions–likeBoliviaorBuenosAiresstillbythe1850s(Irigoin 2009).Thelackofconsensusabouttheformofthestate,aboutthesourcesofrevenuesand theliablesubjects,andthedisassociationbetweentaxcollectorsandbearers,all contributedtoaverylowcollectionrate,ashallowfiscalbaseandultimatelytoinsufficient revenues.Inapoliticalregimeinwhichrepresentationborenorelationwithtaxation, governmentsbecameinsolvent;lackingfiscalcapacityorlegitimacy(oftenboth),taxation oughttohappenwithoutconsent. Anotherlegacy InstitutionalistinterpretationsofLatinAmericanlongrundevelopmentcustomarilyassess herperformanceagainsttheUnitedStates’.However,thepoliticalandfiscaltrajectoriesof Spain’sandBritain’sformercoloniesaftertheirIndependencewerehardlycomparable.As historianMaxEdling(Edling2003)rightlyexplains,therevolutionintheBritishcolonies was‘inthefavourofgovernment’,not‘againstthegovernment’aspreciselywasthecasein theSpanishcolonies.Thisdifferencemakesthecomparisonoftheirrespectiveinstitutional pathsquiteproblematic.MoreoverconsideringthatbothSpainandherformercolonies wereinsimilarpredicamentafterIndependenceitisdifficulttoassignitasaprejudice fromthecoloniallegacy.UnderBritishruleNorthAmericancolonieswerealsoseparated fiscalandpoliticalunits;buttheywerefinancedbyametropoliswhichtookonitsdefence andminimalgovernmentexpenses.UnliketheSpanishsettlements,wherethechurch providedmostofpublicgoodswithsubstantialfundingfromtheroyalpurse,theBritish coloniesfundedpublicgoodssuchaseducationwithdirecttaxesraisedlocally.Whenthe FrenchIndianWarinthe1750sand1760sdemandedfurtherrevenues–ortothecolonies tobearpartofthefiscalcosts‐Parliamentmetfierceresistancetofurther(indirect) consumptiontaxesrequiredfromthecolonists23.Thisasymmetrybetweentaxationand representationthatthecolonieshadinparliamenttriggeredtheAmericanRevolutionand taxresistancecontinueduntilthe1790s. TheBritishlevieddirecttaxesoncolonialpropertyandfacultyfromasearlyas166024; howevernocomparabletaxeswerechargedinthemetropoliswheredirecttaxesincreased onlyafter1792.InparliamentaryEnglandsourcesofdirecttaxation–mainlyland‐had beeninrelativedeclinesincethe1690s.Formostofthe18thcenturycustomandexcise madethebulkofherrevenues(Ashworth2003).Apparentlythefiscalburdenwaslowin 23TheTownshendActfollowedthe(repealed)StampAct,theSugarActandotherssoughttoraiserevenuein thecoloniesforself‐maintenance.ItculminatedwiththeTeaActof1773andprotestsinBoston. 24Facultytaxeswereleviedonthefacultyorearningcapacityorpersonsfollowingcertaintradesorhaving certainskills.G.Fisher,HistoryofPropertyTaxesintheUS.http://Eh.net/encyclopedia/history–of‐property‐ taxes‐in‐the‐united‐statesaccessedon3rdJanuary2015 25 theBritishcolonies–andcertainlymuchlowerthaninthemetropolis.However,asZolt shows‘representationcameatacost’toindependentUS:from1792to1811thepercapita taxtakeincreased10timesfromwhattheEmpirehadchargedin1765‐1775.(Zolt,2009, 455).Directtaxescollectedbylocalgovernmentdidnotceasewiththerevolutionandtheir incomerepresentedasubstantialpartoftherevenuesavailabletothenewstate governments.By1825thetotaltaxtakeoftheUSgovernmentwas$4.33perpersonof which54%correspondedtoincomeappropriatedbythestateandlocalgovernments(Zolt, 2009table1).Itjumpedto$8.86in1855,whichmeantmorethandoubleinrealtermsof the1825value25.Thisburdenwascertainlymuchhigherthanthepercapitacontribution bornebySpanishAmericansasseenintable426. ThisgrowthincludestheextraordinaryfiscalexpansionoftheFederalistperiod.Onlyin 1787‐89thePhiladelphiaConventionincorporatedtheformercoloniesintoafederal UnitedStatestransformingtheequalrepresentationofstatesintheContinentalCongress fortheproportionalrepresentationofcitizensintheHouseofRepresentatives.This politicalexperiment,theConfederationinwhichCongresstookthegoverningroletheKing, hadcollapsedunderthecompoundofinsolvencyandcurrencyinflationin1782‐8827 (Edling2014).AspartoftheFederalistfiscalprogramthefederalgovernmentassumedthe debtoftheindividualstatesandpaidthematparwithnewfederalpublicbonds;this significantlyrelievedthestategovernmentsofthecostofthetransitiontoanewpolitical order.In1790,seventyfourmilliondollars’worthofdomesticandforeigndebt–about 30%ofGNP28‐wereconsolidatedinlongterminterestbearingbondswhichthefederal governmentservicedregularlywithrevenuesfromtradetaxes.Havingbeenpartofthe fiscalburdenleviedbytheBritish,theUSgovernmentappropriatedwhatformerly belongedtotheempire.Thetariffwasaprerogativethestatessurrenderedtothefederal governmentbytheImpostActsof1790.Togetherwithsomelowexcisetaxesonalcohol, tobaccoandsugar,thetariffthereaftermade70‐80%ofthefederalincomeintheperiod. Customsrevenuesamountedto$4.6millionin1792(about2%ofGNP)or$1.36per capita;innominaltermstheydoubledby1800,tripledby1805andfurtherquadrupledby 1820.By1850,thetariffat$39million–or$1.98percapita‐stillmade82%ofthefederal revenues(Finances1870). 25AccordingtotheUSdollarpurchasingpowerwww.measuringworth.com/uscompare/reativevalue.php accessedFeb6th2015.Theannualisedinflationrateintheperiodwas‐0.45% 26TheUSdollarandtheSpanishAmericansilverpesoremainedlegaltenderatparuntil1856. 27TheConstitutionalConventionalienatedtherightstocoinorprintmoneyfromthestateandgavethe powertocointothefederalgovernmentin1792.Italsochangedthestates’forproportionalrepresentation inCongress. 28Ofthe$74million,$12to$22millioncorrespondedtothestatesdebt.GNPandDebtdatafromBordo,M. andC.Vegh(2002)."WhatifAlexanderHamiltonhadbeenArgentinean?Acomparisonoftheearlymonetary experiencesofArgentinaandtheUnitedStates."JournalofMonetaryEconomics49(3):459‐494. . 26 WhatsetstheFederalistandRepublicanprogramsapartfromtheLatinAmericanfiscal reforms‐andfromthepreviousdisastrousexperienceoftheConfederation‐isthe extraordinarycapacitythefederalstatehadtoservicetheinterestandprincipalofitsdebt (Wallis2000).ThiscapacitytotaxwasnotavailabletogovernmentsinSpanishAmerica– norinSpain‐notbecauseofthetypeoflevies,butbecausegovernmentstherecouldnot establishataxationsystemthatworked.NorthAmericanseventuallyagreedtoshoulder heaviertaxesthanunderBritishrule(Edling,2003,156).Thepercapitaburdencalculated bytaxtakeofthethreelevelsofgovernmentcombinedhaddoubledin1855fromtheper capitacontributionof1820,meanwhilepopulationhadtripled.(Zolt,2009p458).Soeven iftheUS,likeLatinAmericanrepublics,reliedonCustomstoservicethedebttheargument aboutthecolonialfiscalburdeninthecaseofSpanishAmericaneedssomecloserscrutiny tosubstantiate. Prados(2009)explainstheextremelydifferentsuccessofthefinancialoriginofrepublics intheAmericasbytherecurrenceofdeficits.LatinAmericanalreadyweakgovernments werefurtherprejudicedbyviciouscirclesofinsolvency,debtandinflation.Indeedthe problemwastheimpossibilitytoraisedebtbecausetheywerenocrediblepayers29.Butby lookingsolelyatthefederallevelscholarstendnottoseetherealsizeofthefiscalburden bornebytheUStaxpayer.Consideringthatthefederalburdenwashalforlessofwhatthe threelevelsofgovernmenttakewas,itmeansthattherewasasignificantamountofmoney stillappropriatedbylocalandstatetreasuries.Thisincomewasoriginatedindirecttaxes and,moreimportantly,itwasspentoneducationandinfrastructure;somethingwhichno fiscaldistrictinSpanishAmericawasremotelyabletodreamofastheoverwhelmingshare ofexpenseswenttowar(Centeno2002) SpanishAmerican(aspiring)governmentsincapitalcitieswerechargingtaxpayers elsewherewithindirecttradetaxes;thelatterhadnotvoteorsayonthespendingofthese revenues;northerewerechannelsforredistributionasthetransfersthathadformerly allowedtheco‐optationofregionalelites‐evenifformarginallyproductiveventures. Indirecttaxationwithoutrepresentationwasthemeansthatrepublicangovernmentshad toestablishtheirauthorityatthecentreandatthetopofthepolityinSpanishAmerica.For taxpayerstheburdenwasgreaterifagovernmentelsewherecontrolledtheCustomhouse attheportorthetobaccomonopoly–asinlandlockedcapitalslikeBogota,Mexicoand SantiagodeChile.Relieffromcolonialtaxburdenwasnoneforthepeopleoverall–ifanyit wasappropriatedbyelitesatthecapitalcitieswhoincreasinglyrestrictedpolitical representationofterritoriesandindividuals.Unsurprisinglyfiscalfederalismfailed. 29TheEmpireofBraziladdsaninterestingtwisttoinstitutionalexplanationsabouttheroleoflimited governmentandpoliticalinstitutionsinprovidingsecurepropertyrightsandhencegrowth.Summerhill,W. (2015(forthcoming)).Ingloriousrevolution:politicalinstitutions,sovereigndebt,andfinancial underdevelopmentinimperialBrazil.NewHaven,YaleUniversityPress. 27 WhereasinthefederalUSsomestateseveninvestedinbanks,turnpikeandcanals constructionthroughprivatepublicpartnershipandtaxedprofitsfrombanksand insurancecompaniesandcapitalgainsonthesestocks(Sylla1999)266.Thussomestates managedtofundupto60%oftheirexpensesandparticipatedofthegreaterfiscalcapacity ofthefederalstatewhichrelievedthemfromtheolddebts.Thefederalgovernmentalso sharedrevenuesfromlandsalesandtaxesonbusinesses.FurthermoreinNewEngland theserevenuesweresufficienttoenablesomereductionoreliminationofstateproperty taxesearlyon. Scholarshaveshowntheimportanceofstaterevenuesfortheprovisionofpubliceducation intheUS(GoandLindert2007);by1820theCommonSchoolachievedthebestliteracy rateintheworldthankstoincomefromdirecttaxesinvestedineducationservingabroad population.Thereweresignificantregionalvariationsamongstateshowever.Zoltargues thatthisexplainsthedifferenttypeoftaxeschosentosupportpubliceducationspending, andhenceinequalitylevelswithintheUS(Zolt,2009(Lindert2004)).ElsewhereSokoloff andZolthaverelatedthistothecontemporaryextensionofthefranchiseintheUS (SokoloffandZolt2006)179).Theythusexplainthedifferentgrowthperformancein SouthandNorthAmericaintheprovisionofeducationresultantfromthelegacyof inequalitythattaxationimposedineachpartofthecontinent.Thechannel,theyargue,was suffrageinstitutions.Thus,allegedlyNorthAmericanshadalessrestrictedfranchise, greaterturnoutattheballotsandavigorousprimaryeducationfundedbydirecttaxation. LatinAmericans,ontheotherhand,increasinglyhadmorerestrictedfranchise,lower turnoutanddidnot–andcouldnot‐investineducationtoaccountfor(Curvaleand Przeworski2008).However,onlytheFifteenthAmendmenttotheConstitutionin1870 grantedallUSmalecitizenstherighttovote;andmostblackswereyetdisenfranchised, bannedordiscriminatedattheballotsuntiltheVotingRightsActof1965madesuffrage universal.Ironicallyuntil1964fivesouthernstatesusedthepaymentofpolltaxas requirementtovote,whichwasrepealedbytheTwentyFourthAmendment–yeteight stateshavenotratifiedittodate. Notwithstanding,SpanishAmericanswerenotoriginallyprecludedfromvotingandhad significantmeansforinvestingineducationattheirdisposal–attheratetheycontrolled thecolonialtreasuries.Furthermoreeveryearlyconstitutionaltextaimedatit.However asymmetriesbetweenagentsdecidingcollectionandspendingofrevenuesfrommainly indirecttaxesrenderedpaltryyieldstotheTreasury.DirecttaxationintheUSprovedalso anadvantageformoreequal,bettereducated,societies(insomestates)becauseasZolt pointsout‘wherethemedianvoterhaslessincomethanthemean,themedianvoterwill favourincometaxregimesunderwhichhershareoftaxeswillbelessthantheirshareof governmentbenefitsupportedbythetaxrevenue’(2009,449).Thistheoremmaynotwork ifthemedianvoterpaysindirecttaxesofwhichmoreoverratesaredecidedelsewhereand 28 revenuesaredisinvestedfrompublicgoodstoservicedebtorerodedbyinflation.Thiswas thesituationinrepublicanSpanishAmerica,whereasubstantialprovisionofpublicgoods wasdonebyprivatesourceslikethechurchandcharitiesandsonotperceivedasreturn fortaxation.Similarlyanumberofprivategoodswereprovidedbypublicsourceswhich madethe‘developmentalism’ofthecolonialstate;thusemployment,foodsecurityanda hostofsubsidiestoprivateactivitieswerethenunderstoodasentitlements30.Inthiscase themedianvoterwoulddissociatetheidentitybetweenrevenueandexpenditureandmay unreasonablypreferlowertaxationtofundlowerexpenditure–iftherewerenoreal redistributiveeffectstohopefor. Conclusions Weakenedgovernmentscouldnottax,withoutincometheycouldnotlastandtheyyethad tospendevermoretoremaininpower.Politicalinstabilitywasrootedinthefiscalfragility ofthestateandeverynewconstitutionfalteredasfastasthepreviousone.Paradoxicallyin SpanishAmerica,insteadofrelievingtheburdenfromthecolonialtaxation,Independence weakenedyetmorethecapacities–fiscal,legalandadministrative‐oftherepublicanstate andunderminedthepoliticalinstitutionsthatitorganized.Overtime–becauseofinelastic expensesfrompoliticalturmoilontopofgrowingdemandsonfutureincomefromdebt andprejudicesfrommonetarydisorder‐allcompoundedinchronicfiscaldeficitsand brokengovernments.Fiscalbasiswereshallowandshrinkingascountrieslostimportor consumptioncapacityfromexchangerateproblemsanddisintegratingdomesticmarkets. Borrowingfurtheratshortertermsandhigherinterestratesledgovernmentssuchasof Mexico’storealbankruptcywithin30years(Tenembaun1996,Irigoin,2009).Other governmentswithevenlowerfiscalcapacityinflatedtheirdebtsbymonetaryexpansion likeBolivia’s,orsufferedfromtheimpossibilitytoexecuteanymonetarypolicy,asSpainor Peruuntilthe1850s.Thelackofconsensusabouttheformofthestate,aboutitsfiscalbasis andthedisassociationbetweentaxcollectorsandbearersultimatelyunderminedthe capacitiesofthe(any)state.Theincidenceofregressivetaxationonproducers(exporters) andconsumersoriginatedlargeredistributioneffectswhichfurtheraggravatedcentrifugal tensions. WithoutfiscalcapacityneitherdebtservicenortaxsmoothingwaspossibleforLatin Americangovernments.Lackoffiscalcapacityandregressivetaxationhadpersistent implicationsinthemakingoftherepublicanstate.ForinstancethefirstMexican 30The‘developmentalist’stateinSpanishAmericaisexplainedin(GrafeIrigoin2012).Itdifferssubstantially fromthedevelopmentalstateconceivedbyRobinson,J.andS.Pincus(2015)."WarsandStateMaking Reconsidered:TheRiseoftheDevelopmentalState."AnnalesHistoire,SciencesSociales. 29 constitutionof1824devisedamechanismtoincorporateformerlyseparate19treasury districtsintoafederalrepublic.Itwasmeanttobeacompromisebetweenstatesand ayuntamientostofundthefiscalreorganizationofthenewfederation.ReplicatingCadiz’ article340theMexicancongressapportionedeachstatecontributionbyapoorlydefined combinationofpopulationsizeandconsumption,ie.TheContingente.Thepolitical bargainingwasextremelydifficultandreturnsfounderedshortly:theymade24%of federalrevenuesin1824andoriginatedinthesameminingregionsthathadformerly transferredlargesharesoftheirrevenuestothecolonialcapital,butwithoutvoteorvoice (Arroyo2006).Itfelltoa10%inthefollowingyearsandcollapsedfurtherto3%in1831 whencontributionsceased;meanwhiletotalrevenuesofthefederalgovernmentnearly halved.Conversely,intheUSwheninneedsforwarexpensesasin1812thefederal governmentcouldtemporarilyraiseanextraordinaryfederalpropertytaxamongthe statesonthebasisofpopulationtogreateffect.UnderpinningthefailureofMexicanfiscal federalism–comparabletootherexperimentsinSpanishAmerica‐wastheprotracted conflictaboutthesourcesofnationalrevenuesandtheformofthestate. Intheprocess,restrictionstosuffragemountedwithwealthandliteracyrequirements throughoutSpanishAmerica;electionsevolvedintoaformofproclamationofeverynew governmentmorethanactuallyanorganizedandfaircompetitionforpower.Theearly opencontestforthepopularwillranoutoffundssoon;henceforthgovernmentstraded entitlementsforsupport.Politicalstrifemovedfromtheballotstothebattleground,and furthertothestreets.Suffragelostitsnature.Withanhocelectionsrepresentative democracyinSpanishAmericamovedonesteptowardswhatscholarscallsa‘Delegative Democracy’(O'Donnell1994)asopposedtoarepresentativeone.Inthisenvironment therewerenoeffectivemeanstofundgovernanceandfarlesstodelivertheconstitutional promisesofpubliceducation.Asgovernmentsresortedtoevenmoreperversemeansto defrayexpenses,likesellingmassivelylandsatoncewhenrelativeitspricewasrisingfrom greaterlabourratiosandhigherpricesforlandintensivecommoditiesfromglobalization, theyonlyacceleratedalreadyhighlevelsofinequality.Thusin19thcenturySpanish America–andinSpain‐inequalityistheby‐productofanotherinstitutionallegacyother thancolonialstatus.Elitesontheotherhandmanagedtodeterbothgreaterfiscal extractionfromgovernmentsandinstitutionaldemandsforpoliticalredistributionfrom fellowcitizens.Fiscalreformswereineffectualornullandrepresentationwasincreasingly morerestrictive.Lowtaxationwasintheirinterestastheycouldacquirepublicgoods privately.Forthemassestheexpectation–andexperience‐ofpublicprovisionofprivate goodsputgovernmentsinthepositionofcontinuouspatronageinordertobuyouttheir legitimacy,irrespectiveofthefinancialmeansavailable.Insolvency,inflationandinstability arelongtermfeaturesinthesecountries,togetherwithregressivefiscalpolicies.Placing thefiscalburdenonothersorinthefuturebroughtelitesandmassestogetherina perversecombinationoflowtaxationandrepresentation.Thisintertemporaltrapofthe 30 peculiarLatinAmericanpoliticalandmacroeconomic(dis)equilibriumseemstobeindeed morealegacyofthe19thcentury. 31 Bibliography Abendroth,H.(1990).FinanzasPublicasyEstructuraSocialenBolivia,1825‐1872. 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