The Mexican Economy, 1870-1930: Essays on the Economic History of Institutions, Revolution, and Growth (review)

In their introductory essay the editors of this exceptionally consistent and mutually complementary collection of essays claim that, because of its experience of abrupt changes of policy and conditions, Latin America provides an extraordinarily appropriate testing ground for historians working within the New Institutionalist paradigm. The essays that follow deal with financial systems, foreign trade, and labor relations. Carlos Marichal explains that the key to understanding the Mexican banking system in the period in question is the foundation of the Banco Nacional de Mexico (Banamex) in 1884. It emerges, however, that short-term interests of government and financiers were at the forefront in the design and operations of Banamex. In different ways the authors of the next two chapters spell out the implications of this situation for the wider economy, concluding that the special privileges granted to Banamex were not justified, as was promised, by its assuming a central bank role that would stabilize the banking system. Worse, the excessive focus of the entire system on satisfying government credit requirements limited the availability of finance to others, with loans available (in the textile sector, at least) only to those with personal links to the banks, a set no more productive than their less well-connected competitors.

Foreign trade is the concern in Sandra Kuntz Ficker and Edward Beatty's chapters. Together, they explain how a measure of general liberalization from the mid-1880s, made possible by a gradual reduction in government reliance on import duties, was combined with increasing levels of effective protection for selected import-substituting industries, such as textiles and brewing, through the introduction of a cascading tariff structure favoring producers of final goods and their local suppliers.

In a final section, attention turns to the position of labor. Jeffrey Bortz shows how, following the revolution, the political power of industrial workers was converted into laws and regulations that left mills in private hands while severely constraining the ability of capitalists to control workers or the production process. Aurora Galvarriato measures the extent to which rents were diverted from owners to workers in one of the largest Mexican textile mills between 1900 and 1930, arguing that an ultimately doomed solution to the contradiction between rising real wages and falling productivity was found in the collusion of mill owners and state officials to impose ever higher levels of protection.

Haber draws the conclusion from these consistently persuasive and well-supported essays that long-term (though hardly sustainable) growth was achieved in Mexico without increased productivity in the economy as a whole by the use of state power to redirect rents to selected groups. The vulnerability of this strategy was exposed in the early years of the twentieth century, as growth gave birth to new interests (chief among them a new industrial working class) that could not be satisfied without upsetting the existing distribution of rents and the political consensus it had secured. The main consequence of the subsequent revolution, Haber claims, was to achieve the incorporation of organized labor into what would long remain a rent-seeking economy, doomed to fall ever further behind that of the United States, notwithstanding sustained growth, until the debt crisis of 1983 prompted radical reconsideration of the model.

Methodologies make no permanent ideological alliances, it seems, and it is intriguing to see work within what many would term a neoliberal tradition providing support for the old dependentista claim about the failure of Latin America to develop along the lines anticipated by classical Marxism. They demonstrate very cogently just why and how both the industrial bourgeoisie and the working class were split in Mexico, some cleaving to the state while others were excluded, making class consciousness and effective political action by either...