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aptly phrased by Leandro Prados de la Escosura; other Spanish historians
who contributed to ideas in this book are Pedro Tedde, Francisco Com´n, ±
˜
Nicol´ s S´ nchez Albornoz, Pablo Mart´n Acena, Gabriel Tortella, Albert
aa ±
Carreras, Josep Mar´a Fradera, and Jordi Maluquer de Motes, whom I thank
±
for their collaboration in many things, large and small. At the same time,
my research was nurtured by the research of a broad cohort of cosmopolitan
historians who have contributed to the great edi¬ce of historiography on
Bourbon Mexico and Spanish America: among those who provided initial
guidance on colonial ¬nance and economy were Pedro P´ rez Herrero, Juan
e
Carlos Garavaglia, and our dear and lamented friend, Juan Carlos Grosso.

xiii
xiv Acknowledgements

Also fundamental have been the contributions of Herbert Klein, Jos´ Carlos
e
Chiaramonte, John Coatsworth, Richard Garner, Richard Salvucci, Linda
Arnold, John TePaske, Stanley Stein, Eric Van Young, and David Brading “
through both their writings and intellectually stimulating visits to Mexico.
Among the many persons who provided assistance in archives and
libraries, I wish to single out Juan Manuel Herrera, Armando Rojas, and
Eutiquio Franco at the Archivo General de la Naci´ n, Teresa Tortella, direc-
o
˜
tor of the archives of the Banco de Espana, Micaela Ch´ vez, and the personnel
a
of the library of El Colegio de M´ xico, who have assisted me consistently for
e
many years. In addition, I must thank the collaboration of Carlos Rodr´guez
±
Venegas who assisted me in many stages of the research; Irasema Infante
who helped with tables and ¬gures; Anthony Tillet who swiftly translated
¬rst versions of Chapters 3, 5, 6, and 7; and Lorena Murillo who translated
Chapter 4. I am also grateful to the editors of diverse academic journals
in which preliminary research of this volume appeared, as well as for the
permission to translate previous versions of materials contained in a work
published by the Fideicomiso de las Am´ ricas at El Colegio de Mexico,
e
whose director, Alicia Hern´ ndez Ch´ vez, is a dynamic promoter of the
a a
comparative history of Latin America.
Finally, I wish to thank the professional and enthusiastic support of
Herbert Klein, general editor of Cambridge Latin America Studies, the cour-
teous attention of editor Frank Smith and his assistant Kate Queram, as
well as the two anonymous readers from Cambridge University Press for
their penetrating observations. Last, but certainly not least, my thanks go
to Navdeep Singh and his team in Delhi who have done the work on the
electronic version of the manuscript that was necessary to transform virtual
reality into the physical book!
Introduction




From before the time of Gibbon, historians with a global perspective have
been discussing the rise and fall of empires. Today political scientists fre-
quently speak of hegemonic states. If we review some of the best-known
studies conducted over the last forty-odd years, it is possible to identify
a variety of theoretical approaches adopted by those working on the his-
tory of imperial or hegemonic states. The literature is vast and includes
traditional geopolitical studies with a focus on the roots of military supe-
riority,1 the sweeping propositions of the world-system school,2 as well as the
interpretations of historical sociologists who offer explanations based on
the changing capacities of states to exercise power through manipulation
of capital and coercion.3 While all raise important questions, these quite
general approaches do not necessarily provide convincing answers to the
issue of explaining the speci¬c reasons for the rise and/or decline of a given
state or empire.4
Fortunately, in recent years, numerous historians have adopted a more
focused approach, analyzing speci¬c features of the historical evolution
of states that can be studied in considerable depth, both empirically and

1 The number of historical studies on the role of the military in the evolution of great powers is legion.
Two classics are William H. McNeill, The Pursuit of Power: Technology, Armed Force and Society since a.d.
1000 (Chicago: University of Chicago Press, 1982) and Paul Kennedy, The Rise and Fall of British
Naval Mastery (London: Macmillan, 1983). A more recent and widely read contribution is that of
Nial Fergusson, Empire: The Rise and Demise of the British World Order (New York: Basic Books, 2002).
2 Standard works of this school include Immanuel Wallerstein and Christopher Chase-Dunn, Rise and
Demise: Comparing World Systems (Boulder, Colo.: Westview Press, 1997).
3 A pioneering collective work is Charles Tilly, ed., The Formation of Nation States in Western Europe
(Princeton, N.J.: Princeton University Press, 1975). A subsequent study is Charles Tilly, Coercion,
Capital and European States, a.d. 900“1990 (Cambridge, U.K.: Basil Blackwell, 1990).
4 More satisfactory and informative than some of these historically applied social science models are
diverse classic historical studies. For example, on the rise of the Spanish empire in the sixteenth
century, two superb examples are Fernand Braudel, La M´diterran´e et le Monde M´diterran´an a l™Epoque
e e e e`
de Philippe II (Paris: Armand Colin, 1949) and John H. Elliott, Imperial Spain, 1469“1716 (New York:
Mentor, 1963). The most recent contribution of Elliott is the magni¬cent Empires of the Atlantic World,
Britain and Spain in America, 1492“1830 (New Haven, Conn.: Yale University Press, 2004).


1
2 Bankruptcy of Empire

theoretically. One of the most fruitful of these is the analysis of the ¬scal
and ¬nancial structures of ancien regime monarchies and/or empires as well
as modern states. The advantage of such an approach is that it allows for
major insights into the speci¬c links between economy and polity. This
is because the resources made available by taxes and credit have always
constituted the basis of long-standing military and hence political power.
The study of ¬scal organization and dynamics can therefore contribute to
clarify key aspects of the different anatomies and trajectories of states (whether
imperial or not) under consideration.
Particularly illuminating has been the work of a generation of contem-
porary scholars who have carried out studies and provoked debates on the
historical origins of the ¬scal and military bases of modern states in Europe,
prior to the nineteenth century. Comparative analysis of ¬scal history for
the medieval and modern eras became possible from the 1980s and 1990s as
a result of the construction of long series of tax data by more than a score of
European historians “ a selection of their work published in a set of volumes
edited by Richard Bonney.5 But perhaps the most innovative discussion has
centered on the relation between the rise of the modern tax state and the
consolidation of the military and naval power of Great Britain in the eigh-
teenth century, put forth forcefully by Patrick O™Brien and John Brewer.6
Their hypotheses galvanized a broad set of ongoing historical debates on
great powers, focusing primarily on the comparison of the relative ¬scal,
¬nancial, and military success of Britain as opposed to the more problematic
experience of France during that same century.7
Among the provocative hypotheses to emerge from this debate was the
proposition that parliamentary regimes, such as that of Great Britain,
could prove more effective at systematically raising taxes: in a semi-
nal study, Philip Hoffman and Kathryn Norberg explicitly argued that
“representative institutions, not absolute monarchy, proved superior in
revenue extraction.”8 Other researchers focused on public debt policies,


5 See Richard Bonney, ed., Economic Systems and State Finance (Oxford: Oxford University Press/The
European Science Foundation, 1995) and Richard Bonney, ed., The Rise of the Fiscal State in Europe
c.1200“1815 (Oxford: Oxford University Press, 1999).
6 John Brewer, The Sinews of Power: War, Money and the English State, 1688“1783 (London: Unwin
Hyman, 1989); Patrick O™Brien, “The Political Economy of British Taxation, 1600“1815,” Economic
History Review, 2nd series, 41 (1988), 1“32; Patrick O™Brien, “Power with Pro¬t: The State and the
Economy, 1688“1815,” Inaugural Lecture, University of London, 1991.
7 See, for example, Hilton L. Root, The Fountain of Privilege: Political Foundations of Markets in Old
Regime France and England (Berkeley: University of California Press, 1993) and, more recently, David
Stasavage, Public Debt and the Birth of the Democratic State: France and Great Britain, 1688“1789 (New
York: Cambridge University Press, 2003).
8 Philip T. Hoffman and Kathryn Norberg, eds., Fiscal Crises, Liberty and Representative Governments,
1450“1789 (Stanford, Calif.: Stanford University Press, 1994), pp. 306“310.
Introduction 3

explaining in detail the relation between ¬nancial and political revolution
in late-seventeenth-century England and its lasting consequences.9 Barry
Weingast and Douglass North published a much-cited essay based on a
variety of historical monographs to demonstrate that the establishment
of credible public debt policies contributed notably to institutional reform
and the creation of deep and stable capital markets: “the ¬nancial revolution
played a critical role in England™s long-run success.”10
But was Britain so singular? The debates have deepened as a result of a
full-scale research campaign to reevaluate the history of taxes, credit, and
debt under the French absolute monarchy, on which there now exists a broad
range of studies that reveal the extraordinary complexity of ancien regime
¬nance.11 On the one hand, a thorough revision of the policies of French
¬nance ministers during the eighteenth century reinforced the contrast
between relatively stagnant revenues and the rising costs of war.12 Yet, as
Eugene White has argued in a series of incisive essays, there was nothing
inevitable about the ¬nancial collapse of the monarchy, and it is possible to
identify major mistakes that contributed to the buildup of a deadly de¬cit
before the outbreak of revolution in 1789.13 On the other hand, a number of
researchers began to reconstruct French ¬scal and debt policies by focusing
on regional estates, revealing that provincial parliaments played a signi¬cant
role in the ¬nances of the Bourbon regime, in contrast to the traditional
view of virtual centralization of the absolutist state.14 Nonetheless, there
is consensus that the costs of war and of rapidly rising debt surpassed the
¬scal and ¬nancial capacities of the French monarchy and impelled its ¬nal
bankruptcy and downfall.
While the ensuing discussions have been vigorous and stimulating,
they would appear to follow in the path of the traditional Britain/France
dichotomy which has been prevalent in the discussion of power politics dur-
ing the apogee and ¬nal crisis of the European old regime. Such a markedly

9 The pioneering and still indispensable study is P. G. M. Dickson, The Financial Revolution in England,
a Study in the Development of Public Credit, 1688“1756 (New York: Macmillan, 1967).
Douglass C. North and Barry R. Weingast, “Constitutions and Commitment: The Evolution of
10
Institutions Governing Public Choice in Seventeenth Century England,” The Journal of Economic
History, 44, 4 (December 1989), 803“832.
For a detailed overview, see Richard Bonney, “What™s New about the New French Fiscal History,”
11
The Journal of Modern History, 70, 3 (September 1998), 639“667.
Two representative studies are James C. Riley, The Seven Years War and the Old Regime in France: The
12
Economic and Financial Toll (Princeton, N.J.: Princeton University Press, 1986) and Robert D. Harris,
“French Finances and the American War, 1777“1783,” The Journal of Modern History, 48, 2 (June
1976), 233“258.
See, for example, Eugene Nelson White, “The French Revolution and the Politics of Government
13
Finance, 1770“1815,” The Journal of Economic History, 55, 2 (June 1995), 227“255.
Marc Potter and Jean Laurent Rosenthal, “Politics and Public Finance in France: The Estates of
14
Burgundy, 1660“1790,” The Journal of Interdisciplinary History, 27, 4 (Spring 1997), 577“612.
4 Bankruptcy of Empire

binary focus has the disadvantage of leaving out most discussion of the
parallel trajectories of other rival, imperial states, most notably Spain and
Portugal, which continued to govern vast territories on a world scale during
the eighteenth century.15
Indeed, it is important to recall that before the Napoleonic wars, the
Spanish imperial state remained the third most important state in Europe
in terms of ¬scal income and naval power, and ¬rst in size of territorial
empire.16 Due, in good measure, to the rise in colonial ¬scal income during
the second half of the eighteenth century, the Spanish monarchy was able
to compete actively with its principal and more powerful rivals, Britain
and France, and succeeded in building a fairly centralized ¬scal-military
administration throughout its extensive empire. This allowed it to regain
stature as a colonial and naval power, participating in naval wars against
Great Britain in 1762, 1779“1783, 1796“1802, and 1805“1808, while it
also engaged in a major land war against France in 1793“1795 before the
devastating invasion and occupation of the Iberian peninsula by Napoleon™s
armies from 1808 to 1814.
Surprisingly, in the western hemisphere, the Spanish empire proved more
resilient “ in many ways “ than the colonial regimes of Great Britain or
France. The French lost effective control of Canada and the vast territory of
Louisiana after 1763 and of their richest Caribbean colony, Haiti, in 1803.
The British were forced to let go their most important North American
colonies (the United States) in 1783. In contrast, the huge Spanish American
empire remained in place until the wars of independence, 1810“1825.
This resiliency “ in an era of revolution and war in the Atlantic world “
undoubtedly merits more historical analysis and debate in the future. In
any case, it bespeaks the capacity of the Spanish Bourbon administration
in transforming the tax structure in the colonies into an effective engine of
imperial defense.
This book focuses on the viceroyalty of New Spain, because in terms of
colonial tax productivity, it is hard to ¬nd examples in history that surpass
Mexico in the eighteenth century. Mexican tax silver not only covered the
costs of its colonial administration and military forces but also served to
¬nance de¬cits of Spain itself and of large parts of the empire. As the richest
tax colony of the eighteenth century, the viceroyalty of New Spain served as

15 A broader approach can be found in R. Bonney, ed., Economic Systems and State Finance and in the
recent compilation by Manuel Lucena Giraldo, “Las tinieblas de la memoria: una re¬‚exi´ n sobre los
o
imperios en la Edad moderna” Debates y Perspectivas, Cuadernos de Historia y Ciencias Sociales, vol. 2
(Madrid, Fundaci´ n MAPFRE, Instiuto de Cultura), September 2002, which compares the Spanish,
o
Portuguese, British, French, Dutch, and Ottoman empires.
16 A recent major work is Stanley J. Stein and Barbara H. Stein, Apogee of Empire: Spain and New Spain
in the Age of Charles III, 1759“1789 (Baltimore: The Johns Hopkins Press, 2003).
Introduction 5

a ¬scal submetropolis that assured the capacity of the imperial state to defend
itself in a time of successive international con¬‚icts.
But how did the Spanish crown coerce or convince its colonies to pay
for the empire? The analysis of Bourbon tax policy in Spanish America
provides us with a striking example of the successful rebuilding of a ¬s-
cal military state without a parliamentary government. A combination of
coercion, ¬scal and administrative ef¬ciency, and colonial pacts allowed
for an extraordinary tax revolution in the Spanish empire. The success
in imposing a highly extractive tax regime in Bourbon Mexico contrasts
markedly with the failure of the British government in establishing new
taxes in the thirteen colonies in North America after 1765. In this case, the
European historical debate on political regimes and ¬nance in the eighteenth
century is turned upside down: legislatures in colonial British America
impeded tax reforms, while in colonial Mexico absolutist policy success-
fully rebuilt a formidable ¬scal machine that ¬nanced not only the defense
of the viceroyalty but also of other colonies of the Spanish Caribbean as
well as the metropolis itself in a time of a succession of international
wars.
Taxes, however, were not the only factor in this story. In colonial Mexico
ordinary revenues provided much of the money required by the Bourbon
monarchy to revitalize its defenses and yet were not suf¬cient to cover all the
extraordinary expenses provoked by each new war. At the behest of Madrid,
the viceregal administration turned increasingly to raising loans and dona-
tions. As metropolitan de¬cits skyrocketed, especially from the 1790s,
taxes were increasingly complemented with a policy of indebtedness “
including an extraordinary succession of loans and forced contributions “

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