Download The Mexican-US War: A Turning Point in Mexican

The Mexican-U.S. War:
A Turning Point in Mexican Development?
Working Paper: Please do not cite.
Richard Sicotte
University of Vermont
[email protected]
and
Catalina Vizcarra
University of Vermont
[email protected]
January 2009
1
Introduction
The war between the United States and Mexico (1846-1848) figures prominently in the
historiography of both countries.
During the war, United States forces thoroughly
defeated the Mexican army, culminating in the occupation of Mexico City in September
1847. In early 1848, by the Treaty of Guadalupe-Hidalgo, Mexico ceded vast northern
territories to the U.S., most famously California.
Scholars argue that this cession had enormous consequences for both countries,
especially over the long term. Given that those territories were very sparsely populated
and under tenuous control of the government in Mexico City in the 1840s, it is debatable
exactly what were the extent of the lost opportunities to Mexico over the short and
medium terms.1 Our focus in this paper is not the cession, but rather to examine in what
other ways the war may have affected Mexican economic and political development
during nineteenth century.
Specifically, we ask whether the direct impact of the war on Mexico is visible
either in the examination of time series of Mexican economic indicators, or in its effect
on Mexican institutional change. Unfortunately, the paucity of time series data for
Mexico during much of the nineteenth century limits the types of analysis that are
possible. We follow two tacks below. First, we examine the lower frequency data that
exist in order to provide a portrait of economic performance, much of which is well
known to economic historians of Mexico. Mexican economic growth was minimal until
the latter part of the nineteenth century.2 Second, we provide econometric analyses of an
1
2
See Clay (1997) for a study of property rights in California before the war.
Haber, Maurer, Razo (2003); Coatsworth and Tortella (2007).
2
important economic time series that is available: trade flows between the United States
and Mexico. The methodology that we employ does not detect a structural break in the
time series of U.S. exports to Mexico at the time of the Mexican-U.S. war. However,
Mexican exports to the U.S. accelerated in the immediate aftermath of the war, led by
silver exports, which accounted for at least one half of Mexican exports to the U.S. over
the entire period 1825-1911. The war coincides both with a one-time negative shock to
the level of Mexican exports to the U.S., and an increase in the rate of growth. The
examination of U.S.-Mexican trade suggests deepening commercial relations between the
two countries, especially after the Mexican-U.S. war.
We then turn to a review of Mexican fiscal data, and of the performance of
Mexican debt in the London Stock Exchange. The Mexican Treasury was in a chaotic
condition during the war, but by the signing of the treaty ending the war, the U.S.
provided an indemnity payment of $15 million, alleviating the pressure somewhat, and
temporarily. The stock market data shows that the price of Mexican debt followed a
pattern consistent with Mexican fiscal conditions: the price plummeted during the war,
and recovered when the war ended and Mexico came to a re-scheduling agreement with
its foreign creditors.
We find little evidence that the U.S.-Mexican war was a major turning point in
Mexican economic history from an examination of the economic data. Its effects on
economic growth are not obvious; however, there is some evidence that it may have,
paradoxically, contributed to a deepening commercial relationship with the U.S.; and its
fiscal impact appears to have been severe, but temporary.
3
We next examine the hypothesis that the war was a turning point in the
development of Mexican economic and political institutions. Some historians have made
claims linking the war to the Reform movement of the 1850s, which culminated in a
dramatic series of liberal achievements, with the adoption of a series of “reform laws,”
and finally, the Constitution of 1857. We reinterpret these arguments in the context of
some recent work in new institutional economic history. In our view, their hypotheses
have merit. Yet, the available evidence is overwhelmingly narrative, and not definitive.
Was the Mexican-U.S. War a Turning Point? What the Economic Data Show
Gross Domestic Product Estimates
Existing estimates of Mexican GDP are available only for selected years in the
nineteenth century. The data displayed in Table 1, taken from Coatsworth (2003) and
Maddison (2001), show that GDP grew very slowly or declined until at least mid century,
and began to grow rapidly in the last quarter of the nineteenth century. The data are
sufficiently infrequent, that one cannot rule out the possibility that the Mexican-U.S. war
played a role in Mexico’s poor economic performance during this period.
Notwithstanding, scholars of Mexican economic history maintain that Mexico’s poor
growth record began during the independence struggle, and not as late as 1846
(Coatsworth, 1978; Salvucci, 1991; Cárdenas, 1997; Prados de la Escosura, 2007;
Dobado and Marrero, 2005).
From these data, the case is also weak that the war precipitated a period of
economic growth. Such a takeoff does not appear likely before 1867 or 1870. Thus,
4
either negatively or positively, the Mexican-American War is not an obvious turning
point from the perspective of GDP data.
Mexican-U.S. Bilateral Trade Flows
The growth of foreign trade often correlates closely with economic activity, and
fortunately in Mexico’s case data on trade are available. It is not unreasonable to
postulate that if the Mexican-U.S. war had a significant economic impact, it should be
visible in trade data. As Salvucci (1991) notes, the most reliable series is U.S.-Mexican
bilateral trade, a commercial relationship that one might expect to be particularly affected
by the conflict.3 Figure 1 depicts the evolution of Mexican-American trade from 18251911. The acceleration in bilateral trade is substantial over the period, so much so that
we use a logarithmic scale. Mexican exports fall from the mid 1830s until the mid 1840s,
and then begin to grow. When silver and gold are excluded from Mexican exports, the
series does not exhibit an obvious trend until at least 1850, and a steady upward
movement is only discernible from the late 1860s. In both series, trade plummets during
the Mexican-U.S. war, and also displays exceptionally erratic movements in the early
1860s. The pattern with U.S. exports to Mexico is similar, albeit with a less sustained
3
See Salvucci (1991) for a discussion of the other data series. The United Kingdom and French
series are the next most reliable. The U.K. was the second most important trading partner for
Mexico, but the series is incomplete. In the late nineteenth century, the data improve
substantially. See especially the work of Kuntz Ficker (2002). We are currently assembling the
data that exist and will include an analysis of these data in a subsequent version of the paper.
Insofar as the U.S. series, we follow Salvucci’s lead by adopting his corrections to the U.S.
exports series to account for contraband U.S. exports via Matamoros to the Confederate States of
America during the U.S. Civil War. Our series is deflated to 1860 prices using the U.S.
Consumer Price Index (David-Solar) and an index of silver prices, because Mexican exports were
normally over 50% silver.
5
decline after the mid 1830s. The negative shock of the war to commerce is clearly
visible, but it is less clear whether the war was a turning point for U.S.-Mexican trade.
In order to test more formally for the war’s effects, we conducted unit root tests
with two structural breaks in the export and import series, employing the method of BenDavid, et al (2003), and Gallo, et al (2007).4 The augmented Dickey-Fuller test is given
by
k
"y t = # + $t + %1DA1t + &1DT1t + % 2 DA2 t + & 2 DT2 t + 'y t(1 + ) "y t(i + *t
(1)
i=1
!
Where y is the volume of exports (imports), t is time. The DA are dichotomous variables
that take the value one for t > Tb, the date for the break, and the DT are variables that
take the value 1*(t-Tb) if t > Tb. The method considers all observations as possible
breaks, and selects the break sequence with the highest probability of rejecting the
hypothesis of a unit root.
We tested using two breaks in the intercept alone, as well as two breaks in the
slope and intercept; that is we tested equation (1) with and without DT1 and DT2. The
optimal number of lags was one for the export and import series. The regression results
are reported in Table 2.
For the Mexican total exports to the U.S., the method selected break years of 1846
and 1860, and in this selected model the coefficients for the intercept and the first trend
break were significant at less than the one percent level, and the coefficient on the second
4
The authors would like to thank Andrés Gallo for his generous assistance with computer code
and helpful advice. With this methodology, the number of computations required increases
exponentially with the number of breaks. An alternative procedure, developed by Bai and Perron
(2003) is not practical for the trade dataset with 100 observations, but is used below in our
discussion of bond yield spreads.
6
trend break was significant at the two percent level. The R-square was 0.97. The model
estimates a slight negative time trend in Mexican exports until 1846, followed by a large
positive increase. In other words, the model detects 1846 as a breakpoint characterized
by a reversal in the trend in Mexican exports from one that was mildly negative to one
that was strongly positive. Figure 2 displays predicted total exports and counterfactual
flows in the absence of the breaks. Note that the actual flows are not on the figure
because they mirror almost perfectly the predicted flows (as can be seen from the Rsquare of 0.97). In the graph it is clear that the econometric estimates detect a substantial
change in trend at the time of the war.5
Perhaps the war, paradoxically, created an impetus for closer commercial
relations between the two countries and the development of commercial networks.6 The
shift in the intercept in 1846 was negative, denoting the negative shock to trade that took
place during the war itself. The second breakpoint at 1860 coincides closely with major
political disruptions in both Mexico and the United States, and is both a negative shock to
the intercept and trend, although the shock to the trend is a relatively small one. The
model thus detects a slight decrease in the rate of acceleration in Mexican exports in
1860, but the trend remains positive.
5
The counterfactual flows are not to be taken literally – i.e., that in the absence of the break
during the U.S.-Mexican war, bilateral trade would have been nearly eliminated by 1910. The
proper interpretation is that the econometric procedure, limited to the detection of two breaks in
trend (three overall trends), detects one mildly negative trend prior to 1846, one strongly positive
trend from the war until 1860, and one less strongly positive trend thereafter.
6
Another possibility, which we will explore in a subsequent draft, is that changes in the U.S.
tariff policy played a role. However, given that much of the surge in Mexican exports at this
point appears to have been driven by silver, it does not seem plausible that tariff policy was
decisive. Insofar as the Mexican tariff, it was altered several times during the 19th century, but
often confusion reigned at customs houses due to different levels of taxation, import licenses,
special exemptions, and corruption. Cosio Villegas (1931), Riguzzi (2000).
7
When silver and gold are excluded from Mexican exports, the method finds
breaks in 1862 and 1868, with the latter implying a major acceleration in the rate of
growth. Prior to 1862, the time trend is small and is not statistically significant; but after
1868 it becomes much larger and significant at less than the one percent level. Taken
together, the results suggest that total Mexican exports were stagnant or slightly declining
until around the time of the Mexican-U.S. war, when silver led growth, and that around
1868 the responsibility for increasing exports shifted to other products.7
Insofar as U.S. exports to Mexico, the method pointed to break years of 1835 and
1865, but the model selected only had breaks in the intercepts (the alternative models for
exports and imports are displayed in Table A in the appendix). The model with breaks in
both trends and intercepts resulted in insignificant coefficients on the trend break, and
with break dates of 1836 and 1865 (predicted U.S. exports are graphed against
counterfactual flows in the absence of the breaks in Figure 3). Thus, this model portrays
U.S. exports to Mexico as having a steady accelerating trend, but having two large
negative shocks to the intercept around the time of the war over Texas, and after the U.S.
Civil War, and during the war in Mexico to oust the French-backed Emperor Maximilian.
Government Finance and Mexican Debt Prices
The financial impact of the war is visible both in the data from the Mexican
Treasury, and the prices of Mexican government bonds in London. Government finance
data are displayed in Figure 4. Note that the data are absent during the height of the U.S.-
7
An important avenue for further research is to investigate the extent to which the period from
the late 1840s to the late 1850s saw a surge in U.S. re-exports of Mexican silver to, for example,
China. See Schell (2001). Indeed, in a future draft we will examine carefully the evidence on
U.S. re-exports of Mexican silver and other products over the entire period of analysis.
8
Mexican war. There was chaos in financial affairs during the conflict, with Mexico
having 24 Treasury Secretaries in 21 months.8 As part of the terms of peace in 1848, the
U.S. paid a $15 million indemnity to Mexico. Yet, the data show a diminished flow of
government revenues and spending until the data are absent again in the early 1860s with
the beginning of Maximilian’s rule. The figure suggests an unstable and weak fiscal
regime from independence until at least 1867-68 when the republic was restored, a vision
sustained by the scholarship of Carmagnani (1983, 1994) and Tenenbaum (1986).9
Within a decade, government finances were growing at a rapid pace.10 From these data,
the war, if anything, is associated with a decline in government revenues and continued
fiscal instability.
The course of Mexican government finance was followed closely in international
financial markets. Mexico had floated two major sovereign bond issues in London
during the 1820s, totaling 6.4 million pounds sterling. It defaulted on both of these in
1827, and despite concluding four re-scheduling agreements between 1827 and 1850, did
not service the debt regularly until the 1880s, when the debt was converted during the
regime of Porfirio Díaz.11 We present the yield spread of Mexican debt traded in London
against the British Consol over the period 1825-1869 in Figure 5.12 At the time the war
broke out, Mexico had just concluded a new re-scheduling agreement. But the prospects
for renewed debt service evaporated with the conflict. Investors’ realized this, as is
reflected with the fact that the U.S.-Mexican war corresponds with the highest yield
8
Costeloe (2003), p. 62.
See also Carmagnani and Marichal (2001).
10
Given the dependence of Mexico’s government on customs revenues, it is not surprising that
revenues increased along with commerce. Riguzzi (2000), Coatsworth and Williamson (2004).
11
Bazant (1968), Costeloe (2003), Marichal (2002).
12
We will extend this series past 1870 in a future draft.
9
9
spreads during the entire time series.13 The spread exceeded thirty percentage points, but
fell quickly after the war.
Mexico reached a re-scheduling agreement with the
bondholders and allocated a substantial portion of the indemnity to service the debt.
Once the indemnity funds ran out, Mexico made only irregular payments, and its default
status was one factor leading to the French invasion in the early 1860s. Thus, from the
perspective of foreign debt, the U.S.-Mexican war was a short-term negative shock, but
through the indemnity provided some medium-term gains. Whether, in the absence of
war, any debt service under the 1846 rescheduling agreement would have occurred or
would have been long-lasting is impossible to know with certainty.
This overview of GDP, foreign commerce, government finance, and foreign debt
provides a picture of the evolution of the Mexican economy that confirms a period of
rapid growth beginning in the late 1860s or 1870s. Coatsworth’s GDP estimates suggest
that the Mexican economy fared worse from 1845-1860 than before, but Maddison’s are
insufficiently detailed to render judgment.
In terms of commerce, government finance and bond yields, a strong negative
shock occurred during the war itself. Nonetheless, evidence of a turning point is mixed,
at best. For Mexican exports to the U.S., we find an acceleration after the war, but no
change in trend is detected at the war for either U.S. exports to Mexico, or Mexican nonsilver exports to the U.S. For government finance, available data show lower revenues
during the 1850s than before, which could have had roots in the events of 1846-1848.
Bond yields recovered after the war with a settlement driven at least in part by the
13
The others correspond to the initial default in 1827, war with Spain in 1829, the war over Texas
and the defeat of Maximilian. We conducted a test of structural breaks using both the Bai and
Perron (1998, 2003) methodology, and the methods of Ben-David et al (2003) and Gallo (2007).
In both cases breaks were identified at the war and immediately afterward. Our results are
consistent with those reported in Téllez (1992). They will be reported in a future draft.
10
indemnity called for in the Treaty of Guadalupe-Hidalgo. We now turn our attention to
whether the war influenced the development of Mexican institutions.
Was the War a Turning Point in the Development of Mexican Institutions?
Institutional Changes in 19th Century Mexico: A Very Brief Synopsis
Mexico earned its independence from Spain in 1821, but was ruled initially by
Agustín de Iturbide, as an emperor.
When he was overthrown, Mexico adopted a
federalist constitution in 1824, which was a compromise between conservative and liberal
factions who favored independence for quite different reasons (Vázquez, 1997;
Tenenbaum, 1986). As part of the compromise, the church and the military retained
some special privileges that pre-dated independence. In addition, certain colonial-era
taxes were abolished and others turned over to the states (Carmagnani and Marichal,
2001). The central government relied heavily on customs revenues, and employed high
tariffs to that end. It was also the practice to prohibit the import of certain goods, except
when special licenses for their importation were sold by the government. Furthermore,
important elements of Spanish legal practice remained in place, such as a system of
commercial law based on the 18th century Ordenanzas de Bilbao.
This constitutional order collapsed in the mid 1830s; one of the principal causes
of which was the attempt by the liberal Vice President Gómez Farias to expropriate and
sell church holdings of land, which were quite extensive.14 This was attempted out of
fiscal exigency, and also had a clear political rationale – looking to weaken the church
that had been a source of political and financial resources for conservative politicians that
14
The President, Santa Anna, had decamped to his estate in Veracruz and left the business of
government to his Vice President (Fowler, 2007).
11
opposed liberal reforms. It had a further rationale in liberal ideology, for it was viewed
among key members of the liberal elite that the creation of more private property owners
would serve developmental goals (Hale, 1967).
The conservative regime that followed (still with Santa Anna at the lead), adopted
centralist measures aimed at circumscribing the autonomy of the states. One of the most
incendiary was putting strict limits on the militias, which were viewed as “guarantors” of
state autonomy.15 This was one of the precipitating acts of the Texas rebellion, which in
turn was closely linked to the outbreak of the Mexican-U.S. war ten years later when the
U.S. annexed Texas.
The timing of the U.S. annexation was exquisite. Mexican politics was in a
particularly acute state of disarray.16 Santa Anna had been overthrown at the end of
1844, and another rebellion ousted a successor government at the beginning of 1846. The
war began in the spring, a further change of government occurred in the late summer
bringing Santa Anna back to power, this time with the liberals. They decreed the reestablishment of the constitution of 1824. Santa Anna commanded the troops, and the
acting government was once again in the hands of Gómez Farias. The financial turmoil
accompanying the war provided the impetus for a decree in January 1847 to seize church
property. This in turn provoked a rebellion that resulted in the abrogation of the decree.
A constitutional congress, in the middle of the war, approved a new federal constitution
in May 1847. After Santa Anna’s defeat and the U.S. occupation of Mexico city in
September 1847, another government was formed. The Treaty of Guadalupe-Hidalgo
15
16
Vázquez, p. 27.
The sources for this paragraph are Vázquez (1997), and Santoni (1996).
12
was ratified in the first half of 1848. Thus, the war coincided with a period of intense
political instability, not entirely caused by the war but certainly strongly influenced by it.
Following the disruption of the Mexican-U.S. war, Mexico underwent a
convulsive period of institutional change, civil war and foreign intervention during the
1850s and 1860s. Conservatives overthrew the liberal government in the early 1850s,
which resulted in a centralist dictatorship led by Santa Anna. The Ayutla Revolt in 1854
led to yet another change of power, bringing the liberals to government in 1855 with the
promise to re-establish representative government. The victory of the liberals ushered in
the most sweeping institutional change in Mexico since independence.
The major Reform laws were undertaken from 1855 to 1857.17 Two of the most
important laws were the Ley Juarez (1855) and the Ley Lerdo (1856). The Ley Juarez
abolished the jurisdiction of military and clerical courts (fueros) over civil matters. As
such, the law was an attempt to establish equality before the law. The Ley Lerdo called
for the disentailment of corporate property (mainly church or Indian communal lands)
through sale to renters or public auction. These laws were followed by a new federal
constitution based on liberal principles, which established a federal form of government
and expanded suffrage.
The new constitution and the Reform laws provoked a rebellion that quickly
became a civil war. When the liberal forces triumphed in 1861, their conservative
opponents allied themselves with invading French troops who established an empire
headed by an Austrian archduke. The liberals continued an insurgency, which emerged
victorious in 1867.
17
This was followed by an extensive period of further liberal
Ducey (1997), Knowlton (1976), Negretto and Aguilar-Rivera (2000).
13
institution-building, leading to a Civil Code (1871), a Commercial Code (1884), a Mining
Code and Wastelands Law (1883), water rights (1889), and new tariffs (1872).18
This synopsis illustrates that the disruption in Mexican politics during the war
mirrors the disruption to government finance, commerce and bond yields presented in the
previous section. But was this disruption a one-time shock that did not alter the course of
Mexican institutional development, or was it a turning point?
A Framework for Understanding Institutional Change
Before presenting a hypothesis on that point, we first provide a simple framework
of institutional change, using insights from North, Summerhill and Weingast (2000), and
Acemoglu, Johnson and Robinson (2005).
The framework proposed by Acemoglu,
Johnson and Robinson is summarized in the following relationship:
Political Institutionst = = > De Jure Political Power
Distribution of Resourcest = = > De Facto Political Power
De Jure Political Powert & De Facto Political Powert = = >
a)
Economic institutionst = = > economic performancet & distribution
of resources t+1
b)
Political institutions t+1
That is, the current setup of political institutions determines the allocation of de
jure political power in society. But de jure political power is distinct from de facto
political power, which comprises, for example, the ability to evade, challenge or
18
Dye (2006), Riguzzi (2000).
14
manipulate existing institutions. These abilities depend upon the resources at an
individual’s or group’s disposal. The distribution of both types of political power will
impact the design, maintenance and effectiveness of economic and political institutions.
Two observations from this framework are central to the analysis that follows.
First, an exogenous shock to the distribution of resources in society is theoretically
capable of altering the path of institutional evolution. This can happen through the effect
of the distribution of resources on de facto political power. Second, the belief systems of
political actors are important in determining exactly how actors employ their resources to
influence institutions. Beliefs are not emphasized in Acemoglu, Johnson and Robinson’s
analysis but feature prominently in the work of North (1990), and in North, Summerhill
and Weingast (2000). For example, two people sharing the same objective, even an
altruistic one, would favor entirely different sets of institutions depending upon their
beliefs about the efficacy of those institutions. Yet in history there are occasionally
moments where even the truest believer has her/his beliefs shaken. From the perspective
of institutional analysis, then, the question is whether the Mexican-U.S. war provided a
sufficiently large shock to the distribution of resources or to beliefs of political actors,
that it altered the course of Mexican institutional change.
The Mexican-U.S. War and the Distribution of Resources
A key mechanism through which the war affected the distribution of resources in
Mexico was due to the fiscal emergency the war imposed on the government. As a result
of the dire straits, the financial power of moneylenders (agiotistas) increased relative to
other traditional economic actors, especially the church. Second, the central government
15
and the national army, which had fallen well short of having a monopoly of force in the
country, saw their power and prestige diminished further.
The moneylenders thesis has been developed extensively by Tenenbaum (1986).19
Since defaulting on its foreign debt in 1827, which effectively shut off the possibility of
issuing Mexican debt abroad, Mexican governments had come to rely upon moneylenders
(agiotistas) for short-term credit, often at high rates of interest, in order to finance normal
expenditures and the extensive emergency military spending associated with civil wars
and rebellions. The demands of the U.S. invasion were the most serious of Mexico’s
brief national history. The commercial disruption greatly limited tax revenues. This,
along with the defeat of Gómez Farias’ attempts to monetize church property in 1847,
only reinforced the position of the agiotistas as the government’s financial lifeline.
Indeed, Tenenbaum states that “by 1847 the agiotistas had become inseparable from the
official government.”
Thus, moneylenders, who had been on the rise prior to the war with the U.S.,
found their position consolidated through the immense demands upon their services
during the war. Tenenbaum develops the thesis that, as a result, the agiotistas extended
their operations beyond lending and real estate to mining, agriculture and textiles. As a
consequence, they began to have an interest in infrastructure and market development
that relied upon a stable government and modern legal institutions, eventually leading
them to forge an alliance with liberals during the Reform.20
19
Also see the discussion in Vázquez (1997) and Santoni (1996).
Another variant is that the fiscal exigencies, and realization of dependence on moneylenders,
led subsequent governments to sign ill-advised diplomatic conventions with Britain, France and
Spain. These conventions recognized certain claims of those citizens, provided liens on customs
revenues to pay them, and granted the foreign governments the right to declare war on Mexico if
it failed to pay back those creditors (Tenenbaum, 1996, p. 215). These conventions and the
20
16
The second mechanism through which the war affected the distribution of
resources was the realignment of military resources away from the national army toward
the units controlled at the state level.
Medina Peña (2004) explains: “The war of
1846…surprises the country, in which its highly politicized regular army [was] in full
political rebellion against Santa Anna, who gradually had stopped being the army’s
representative in political alliances.” Thus, the government decreed the creation of the
National Guard on September 11, 1846, which according to Medina Peña, constituted a
“de facto recognition of federalism, as it depends upon local resources to confront the
military crisis.” The most important effect over the long haul is the “recomposition of
forces in the Mexican political scene,” as the National Guard would later provide the
basis for sub-national alliances capable of challenging the central government.21 Guy
Thomson calls the National Guard a “key Reform institution” which, through its
emphasis on individual rights and citizen-soldiers, was responsible for liberal
expansion.22
The preoccupation of the central government with the U.S. invasion and internal
infighting also opened a political space for rebellions from disenfranchised peasant
groups, which occurred in many places in Mexico during the war. The most serious was
the outbreak of the Caste War in the Yucatán, in which the Maya rose up against
landowners.23 These peasant revolts represented a threat to the elite, both conservative
threats included in them played a key role justifying the subsequent European intervention in the
1860s. Still another variant is that Santa Anna, who despised the moneylenders as “vampires of
the Treasury,” signed the Treaty of La Mesilla (Gadsden Purchase) in order to obtain $10 million,
which was deeply unpopular with Mexicans and discredited the conservative government.
21
Medina Peña (2004), pp. 263-264.
22
Thomson (1991), pp. 279-282.
23
Reed (2001).
17
and liberal. Thus, the elite perceived the combination of domestic social unrest and
military defeat by the U.S. as a catastrophe that put at risk the future of the country.
The Mexican-U.S War and the Beliefs of Political Actors
Hale (1957, 1968) and Sinkin (1979) document ideological developments that
grew out of the Mexican-U.S. war. Whereas members of the elite shared the goals of
social stability and economic progress, they envisioned very different means of achieving
them. Sinkin states the well defined political ideologies did not exist prior to the war, yet
afterwards the positions became hardened and polarized.
A vibrant political debate ensued after the war with a proliferation of pamphlets
and newspapers. For the liberals, defeat was due to Mexico’s inferior social and political
organization compared to the United States, and thus it made clear that the adoption of
liberal democratic principles was vital to safeguard Mexico’s future. The conservatives
took a diametrically opposite lesson from the war. The Americans were the “Islamites of
the nineteenth century.”24 Mexico needed a strong central government, led by a monarch,
in order to maintain social cohesion and provide for a unified, strong defense. Sinkin
maintains that the war provided a spark that ignited ideological conflict, and initiated a
chain of events that led to the Reform. The notion is broadly consistent with the theory
of institutional change presented above: the perception by political actors that the stakes
were yet higher led them to pursue more radical policies with more vigor. Thus, the
oscillation between centralism and federalism from 1824-1846 appeared mild by
comparison to the transition from Santa Anna’s monarchy to the liberal constitution of
1857.
24
Hale (1957), pp. 171-172.
18
Conclusions
The Mexican-U.S. war provided a shock to Mexican political economy. The
distribution of resources was altered to the favor of the moneylenders, who the
government relied upon to provide it with emergency credit. Tenenbaum argues that
these moneylenders allied themselves with the liberals with whom they associated the
best chance of achieving developmental objectives. Further, in reaction to the crisis the
National Guard ascended relative to the regular army, providing an important base of
support for the proponents of federalism. Finally, the psychological impact of the war
played itself out in the ideological realm, shifting preferences toward extreme poles and
reducing the prospects for compromise.
The narrative is highly plausible but definitive proof is elusive. An important
reason why is the scarcity of reliable data on key variables with which one could test
these hypotheses.
With respect to the moneylenders, there is substantial anecdotal
evidence but no systematic survey of the resources directly under the control of agiotistas
relative to other groups at any point before or after the war, nor is one sure of how their
preferences evolved –how widespread among the group was the perception that liberal
policies were superior? How many funded conservative versus liberal forces during the
wars of the Reform, and how did their resources evolve during and after the MexicanU.S. war?
On the National Guard, quantitative studies of their sizes, resources, and political
leanings across different provinces, and comparison of these with data on units of the
regular army would be necessary to begin to test more formally this intriguing
19
hypothesis. Similarly, with respect to beliefs of political actors, no official surveys were
taken. Quantitative analyses of political actors and their preferences during this period
are almost non-existent.
Two important exceptions are Sinkin (1978) and Stevens
(1991). Both find important regional differences that might be exploited in future work,
but neither really gets at the questions of whether the belief system changed after 1848,
and whether that change made a difference.25
Even if one is to accept that the war was fundamental in leading to the Reform,
two major questions remain.
First, did the specific Reform institutions matter for
subsequent Mexican economic and political development? Second, did the war merely
accelerate the arrival of a Reform that was likely to come anyway, or did it fundamentally
tip the balance – was it a decisive turning point toward liberalism when other trends wee
favoring the conservatives?
The first question may seem like a violation of a sacrosanct principle.
Nonetheless, in their important book on the political economy of the Porfirio Díaz
regime, Haber, Maurer and Razo (2003) argue that the authorities were not terribly
bothered by constitutional rules and procedures. 26 Further, Negretto and Aguilar-Rivera
(2000) note that Díaz “came to power with promise of making real the constitution of
1857,” but by the late 1880s had relegated the legislature to “rubber stamp” status, and
constructed a system of alliances with local elites. Indeed, the commonly used Polity
indicators in political science show no change in any political structure from 1835 until
25
For example, it is widely accepted that certain geographic regions were customarily supporters
of centralism and federalism. An analysis of the evolution of the distribution of resources
regionally, perhaps through demographic studies or through analysis of state-level finances,
might be helpful in identifying a link between changes in the distribution of resources and
national political change.
26
See, for example, their discussion of the granting of monopoly rights in industry, in direct
contradiction of Article 28 of he constitution. Haber, Maurer and Razo, p. 137.
20
1866, when the score becomes more autocratic – not more democratic. From 1879, the
regime is considered to become more autocratic still.27
Thus, most historians and
political scientists would agree that Mexico far from lived up to the political ideals of the
1857 constitution. Although the liberal victories of the Reform period might have led
some to believe that Mexico would develop democratic institutions with equality under
the law, in practice this did not occur. It is difficult to reconcile this finding in the
literature with the further development of a formal institutional framework for the
economy embodied in the ostensibly liberal commercial, civil and mining codes
mentioned earlier in the paper.
Were these merely window dressing, giving Díaz’
cronyist regime a veneer of legitimacy, or did they matter more for the country’s
economic performance? What is lacking is an analytically clear link between the Reform
movement, Reform “institutions,” and the vertical political integration of Díaz’ Mexico
as described by Haber, Maurer and Razo (2003).
The second point we would like to make has to do with fundamental processes of
historical change present in the model and the perennial debate between gradualism and
catastrophism (Neal, 2000). What gradual forces were underway at the time of the
Mexican reform, and did the war create a change of course? In the context of our
analytical framework, existing economic and political institutions influence the
distribution of income, and thus the structure of institutions in future periods. Thus, there
is an endogenous evolution of institutions through time that is susceptible to outside
shocks. Future work can focus on what the key secular forces were affecting Mexico
during the 19th century: globalization and a trend toward increasing trade with the U.S.
27
Marshall and Jaggers, 2007. The polity score is a weighted average of different indicators,
such as openness of political competition, and constraints on the executive.
21
are two potential areas to examine.28 Another is the fact that the endemic political
instability was already producing a shift toward the moneylenders, and away from more
traditional actors. This shift was accelerated by the war.
We have shown that the Mexican-U.S. war provided a major short-term shock to
Mexican commerce, government finance and political economy. Some evidence also
exists to support the hypothesis that the war was a turning point in the development of
U.S.-Mexican commerce, and was a factor contributing to the major institutional changes
during the Mexican Reform of the 1850s. The arguments are plausible, and are fruitful
areas for further research.
28
See Dobado, Gómez and Williamson (2008) on globalization and de-industrialization in
Mexico.
22
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Sources for Figures:
Figure 1: Salvucci (1991); U.S. Monthly Summary of Commerce and Finance, 18991912. The June 1899 monthly summary contains the report, American Commerce:
Commerce of South America, Central America, Mexico and West Indies, with Share of
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Figure 5: Course of the Exchange, Economist.
26
Table 1: Mexican Economic Growth, 1820-1910
Year
GDP per capita (1990 GDP per capita (1990 Population
international dollars) international dollars)
(millions)
Coatsworth
Maddison
1820
566
760
6.2
1845
592
7.5
1850
668
1860
535
8.0
1867
535
8.5
1870
710
1877
642
9.7
1900
1,157
13.6
1910
1,435
15.2
Source: Coatsworth (2003); Maddison (2001).
Note: Coatsworth (2003) adopts Maddison’s figures for 1900 and 1910 GDP.
Table 2: Structural Breaks in Mexican-U.S. Trade, 1825-1911
Mexican Exports to
Mexican Exports
the U.S.
to the U.S., not
(natural log)
including silver
and gold (natural
log)
First break to the
-0.541 ***
1.229 ***
intercept
(0.203)
(0.258)
Second break to the
-0.494 ***
0.903 ***
intercept
(0.154)
(0.204)
First break to the trend 0.123 ***
-0.265 ***
(0.024)
(0.062)
Second break to the
-0.040 **
0.307 ***
trend
(0.017)
(0.063)
Time trend
-0.033 ***
0.004
(0.010)
(0.004)
Lagged Y
0.386 ***
0.421 ***
(0.097)
(0.084)
Intercept
2.666 ***
1.132 ***
(0.421)
(0.190)
U.S. Exports to
Mexico
(natural log)
-0.697 ***
(0.141)
-0.678 ***
(0.147)
0.051 ***
(0.007)
0.342 ***
(0.086)
1.185 ***
(0.174)
R-square
Observations
0.971
86
0.975
86
0.953
86
First Break Year
Second Break Year
1846
1860
1862
1868
1835
1865
27
28
29
30
31
32
Appendix
Table A: Regressions of alternative models
Mexican Exports to
the U.S.
(natural log)
-0.708 ***
(0.158)
-0.618 ***
(0.163)
Mexican Exports
to the U.S.,
excluding silver
and gold (natural
log)
-0.335 **
(0143)
-0.517 ***
(0.149)
0.041 ***
(0.006)
0.450 ***
(0.086)
1.917 ***
(0.306)
0.037 ***
(0.007)
0.536 ***
(0.082)
0.681 ***
(0.153)
-0.823 ***
(0.216)
-0.690 ***
(0.150)
-0.047
(0.030)
0.014 *
(0.008)
0.097 ***
(0.030)
0.187 *
(0.098)
1.176 ***
(0.260)
R-square
Observations
0.970
86
0.968
86
0.956
86
First Break Year
Second Break Year
1837
1843
1836
1846
1836
1865
First break to the
intercept
Second break to the
intercept
First break to the trend
Second break to the
trend
Time trend
Lagged Y
Intercept
U.S. Exports to
Mexico
(natural log)