The development of ideas over the long-term

In the aftermath of the Conquest of Mexico (1519—21), mercantilism and the experience of the Reconquista (711—1492) shaped general Spanish attitudes about the economic value of the New World, when Mexico became the jewel of Spain's empire.

So did the writings by noted Conquistadors of Mexico (e.g. Fernando Cortes and Bernal Diaz del Castillo). Columbus and Conquistadors also stressed another economic resource: native populations. The Reconquista revealed that conquered subjects could be utilized as workers (i.e. coerced labor drafts called “encomiendas”) and sources of revenue (since subjects were required to pay a head tax). From this perspective, Mexico proved to be very valuable, owing to the fact that the Aztecs were the largest sedentary civilization in the New World. Since it had limited precious metals and its Mayan kingdoms proved difficult to conquer, Central America was a backwater for most of the colonial era. Spain's economic success in Mexico inspired imitators. At the start of the seventeenth century the British Virginia Company hoped to find precious metals and large sedentary civilizations in North America.

Evolving seventeenth- and eighteenth-century mercantilist thought that highlighted the importance of manufacturing informed an economic critique of Spanish colonialism (e.g.

Spain's reforms — informed by mercantilist and liberal ideals — were contradictory, leading scholars to label them a form of “enlightened despotism.” Mercantilism informed reforms that stimulated Spanish manufacturing to achieve a favorable balance of trade. In keeping with the English model, the ideal was to make the colonies sources of raw materials for Spanish manu­facturing and also consumers of Spanish industrial goods. Colonial industries that competed with Spanish ones, e.g. wine, were prohibited, and colonial raw materials deemed useful to Spanish manufacturing industry were stimulated. This enhanced Central America's significance since its indigo and cochineal were utilized in European textile industries. This pro-industrial perspective also inspired a critique of Spain's merchants' guilds. Critics charged that monopolies favored foreign imported goods, and therefore they needed to be weakened in the quest for Spanish industrialization.

Economic liberalism informed reforms that sought to boost agricultural production. Spanish economist Gasper de Jovellanos's Informe sobre la Ley Agraria [Report about the Agrarian Law, 1795], a text influenced by Adam Smith and the Physiocrats, proved influential. Jovellanos maintained that clerical estates, entailed estates, and unoccupied public land impeded production.

During the age of independence another reformist economic discourse that had strong liberal tendencies and proved influential was Alexander von Humboldt's Political Essay on the Kingdom of New Spain, which originally appeared in French in 1811 and was quickly translated into English, Spanish, and German. The fact that his work was authoritative, encyclopedic, highly optimistic, relied on and cited New Spain authors, and appeared at a time when global interest in Spain's new world Empire was high, helps to explain Political Essay’s great popularity. In nineteenth­century Latin America, the tremendous influence of a single work is unique to Mexico. Humboldt's study was broad (covering politics, economics, defense, demography, etc.) and thus cannot be characterized as a work of political economy. Nevertheless, he focused heavily on economics and was influenced by Adam Smith, the Physiocrats, and William Petty's political arithmetic.

Humboldt depicted New Spain as favored by nature owing to its large size, fertile soil, varied climate (in which countless products could grow), and advantageous commercial location between the Atlantic and Pacific (which destined it to be a leader in world trade).

Humboldt's Political Essay influenced and stimulated classical economists' analysis (e.g. that of David Ricardo, Malthus, John Cairnes, and perhaps J.S. Mill) on the relationship between institutions, resource endowment, and development. It was also very influential in Mexico, shaping ideas about the region's potential, the importance of natural environment, economic sectors, policy, and socioeconomic analysis. Humboldt's text helps to explain the great optimism that Mexican and Central American leaders had about their nations' economic futures in the early national era.

This optimism is more surprising for Central America since in the Mexican case Humboldt merely statistically confirmed Mexicans' assumption that their nation was naturally rich. Part of Central Americans’ optimism was rooted in the idea that constructing a canal through the isthmus would bring prosperity, something Humboldt (and numerous writers before him) had promoted. Mexican Tadeo Ortiz de Ayala was strongly influenced by Humboldt. Ortiz echoed Humboldt by emphasizing Mexico’s natural advantages, and by promoting colonization (something Galvez previously championed) and the construction of a transport system to exploit Mexico’s vast agricultural potential.

In the 1830s and 1840s noteworthy liberal and conservative ideologies emerged in Mexico. Jose Maria Luis Mora articulated a liberal vision with a socio-economic component, influenced by French thought, Humboldt, and colonial antecedents. Following Humboldt, Mora conceived of Mexico as naturally rich, but identified impediments to the exploitation of wealth. Mora focused on socioeconomic issues, particularly the inequitable distribution of property, above all, the dilemma of the vast holdings of the Church and (to a lesser degree) Indian villages (Mora’s “monasteries of Indians”), socio-economic problems Jovellanos and Abad y Queipo had previously identified. Mora’s push for social equality differed from the European moderate liberals (e.g. Francois Guizot) who did not promote the interests of labor and champion equality. Scholar Jesus Reyes Heroles argues that the fact that Indians played a large role in Mexico’s war of independence helps to explain this preoccupation within equality in Mexican liberal thought.

In fact, before independence Humboldt had warned that inequality in Mexico might inspire a revolt like the 1780s Peruvian Tupac Amaru rebellion. If Humboldt influenced Mora in some ways, in others Mora departed, relying more on the abstract ideas of the “economists,” particu­larly regarding international trade. David Ricardo’s works were not prominent in Mexico. Smith, Jean Baptiste Say, and Alvaro Florez Estrada circulated far more widely, especially the latter’s Curso de Economla Politico. [Manual of Political Economy, 1828], which championed the international division of labor. From this theoretical framework Mora emphasized products that Mexico had a comparative advantage in, which discounted some of Humboldt’s laundry list of natural riches. Mora’s focus on comparative advantage, leading him to conclude industrialization was not an option, departed from Humboldt’s industrial vision.

Lucas Alaman, the leading Mexican conservative thinker of the era, articulated a competing vision. He rejected the “economists’ ” abstractions and advocated a historical and empirical per­spective. Influenced by the Spanish colonial bureaucrat Fausto de Elhuyar, he initially favored mining as the motor of the Mexican economy. But he later championed industrialization (following the eighteenth-century ideas of Spaniard Pedro Rodriguez Campomanes) for the sake of national independence, and promoted a national development bank to finance manufacturing. Despite Alaman’s critique of the liberal economists, he followed Smith in the sense that his vision stressed the division of labor and the importance of capital and labor in generating wealth.

A variant of Mora’s liberal economic vision — carried on by a new generation of leading liberal thinkers — Mariano Otero, Jose Maria Iglesias, Miguel Lerdo de Tejada, and Guillermo Prieto — won out in the 1850s, during a period known as the Mexican Reform, when Liberals confiscated and sold the Church’s landholdings, separated Church and state, passed legislation that set the stage for privatizing Indians’ villages, and attacked corporate privileges. In keeping with earlier social concerns, there was an emphasis on individual liberties (especially the freedom of labor) and equality (a yeoman farmer vision).

A parallel development took place in Central America, for around mid-century, liberals also won out, defeating their conservative opponents. Furthermore, the economic ideals of the competing sides were broadly analogous, with the liberals adhering to liberal economic theory and championing comparative advantage and conservatives promoting protectionism. There were minor differences, however. Central American conservatives sought to protect existing crafts industries rather than promote manufacturing, as was the case in Mexico. Central American liberals may not have been as committed to social liberalism as Mexican liberals.

Despite familiarity with contemporary economic thinkers (e.g. J.S. Mill), Comte's positivism, social Darwinism, and material developments proved more consequential for late nineteenth century economic discourse in Mexico and Central America than did economic theorists. Departing from classic economic liberal constructs, positivists conceived society as an evolving social organism rather than a collection of individuals. Sometimes positivist rhetoric fit with classic liberal economic goals. For example, Mexican economist Pablo Macedo justified abolishing taxes on interstate trade by asserting that different “tribute systems” within the same “social organism” resulted in “chaos.” Other times, it did not: positivists maintained that, since the civil society was weak, state tutelage, not laissez-faire, propelled the “social organism.” Another departure was a turn away from a focus on economic liberty (e.g. the ideals of Frederic Bastiat and the French Liberal School). Following the Comtean motto “order and progress,” individual rights and freedoms became less of a focus, for production for the booming export economy became the main concern. Scientific racism played a role in this shift. Elite discourse suggested that “Indians,” the main labor force, needed to be coerced to work since they did not respond to material incentives. Furthermore, social Darwinism made national material progress paramount to sovereignty.

In “Porfirian” Mexico (Porfirio Diaz ruled from 1876—1910, so the era is called the “Porfiriato”), Justo Sierra, a leading intellectual and member of the cientificos [scientists], a small but powerful political clique, proved influential. Sierra critiqued his Reform-era predecessors' economic liberalism from a Comtean angle, complaining that it was abstract and deductive, and countering that economic analysis should be inductive and empirical. Sierra was familiar with the German Historical School, and perhaps it, too, informed his critique. Positivism, Darwinism, and evolutionism influenced cientificos’ ideas about international trade and industry. True, there were adherents to the international division of labor (e.g. economists Alberto Maria Carreno and Enrique Martinez Sobral) who embraced Mexico's comparative advantages and condemned introducing “exotic” and “artificial” industries. Nevertheless, cientificos strongly promoted manu­facturing. During the “export boom” they did not reject traditional exports, but simply asserted that manufacturing was important too. This industrial ideal was rooted in evolutionism and social Darwinism more than economic theory. Cientfico Francisco Bulnes predicted that Mexico would evolve to the industrial phase (Bulnes followed the Physiocrats' stages) and maintained that manufacturing was essential to sovereignty.

Similarly, Semana Mercantil [Commercial Weekly] and El Economista Mexicano [The Mexican Economist], Mexico City's top financial weeklies, maintained manufacturing would free Mexico from dependence. Rather than rely on the market, cientificos ascribed a significant role to the state in the industrial process. Cientificos’ predilection for manufacturing was also revealed in Sierra's lament that Mexico was rich in silver rather than fossil fuels. The downgrading of silver was also a consequence of its declining international value. Silver's fall and the shortage of fossil fuels partly inspired Sierra's critique of the Humboldtean legend of riches. Sierra surveyed Mexico's physical environment and concluded that the nation was naturally poor. Further reflecting this waning optimism, cientificos had less faith in the colonization project — Mexico couldn't attract foreigners because it didn't have much to offer.

Sierra's critique complemented cientificos’ analysis of what generated wealth, an analysis rooted more in observation than theory. Cientificos, who lived in the heyday of the second industrial revolution and were enamored with science, stressed the primacy of technology in production. Some of their economic writings read like histories of technology, highlighting the ways the technological advances made by Liebig, Hellriegel, Winotradsky, and others enhanced produc­tivity. Stressing technology’s significance, cientlfico-economist Carlos l')ia∕ Dufoo countered economic theory by contending that capital trumped all other factors in the generation of wealth. Cientificos’ charge that their predecessors wrongly believed that nature created wealth also revealed the importance they placed on capital. A generation later, Mexican economist Daniel Cosio Villegas contended that l)ia∕ Dufoo was overly optimistic about technologies’ transformative power. Whatever the case may be, l)ia∕ Dufoo’s technology-driven analysis fit with cientlficos’ critique of Mexico’s natural environment: technology overcame natural obstacles and generated wealth.

Opponents of the l')ia∕ government critiqued cientlficos. A socioeconomic critique informed by social liberalism (articulated in liberal press, e.g. El Comillo Publico, El Paladin, El Hijo de Ahuizote, and Regeneration) and social Catholicism charged that cientlficos emphasized material progress but neglected social progress. European social Catholicism, especially Pope Leo XIII’s 1891 encyclical Rerum Novarum, influenced Mexican Trinidad Sanchez Santos. Sanchez Santos’s tirade against classical economic liberalism and its excessive freedoms followed the Pope, but did not accurately portray the cientlficos’ positivist-infused liberal discourse. There was also a nationalist critique, which charged that the Mexican—American War (1846—8) had been a military defeat, but now there was a “peaceful conquest” via American investment, trade, and loans. Despite this latter charge, there was a strong nationalist element in cientlficos’ discourse. Finance Minister Jose Limantour invoked sovereignty to justify the Mexicanization of American railroads.