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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.
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