<<

. 4
( 64 .)



>>

than a method of establishing a new public credit system.
Surprisingly, neither Spanish nor Mexican historiography has paid much
attention to the problem of colonial debt despite its importance. In a clas-
sic study of the economy of colonial Mexico in the eighteenth century,
Richard Garner stated: “The history of the colonial public debt remains

27 John Coatsworth, Los or´genes del atraso (Mexico: Alianza Mexicana, 1990); Eric Van Young, La crisis
±
del orden colonial: Estructura agraria y rebeliones populares de la Nueva Espa˜ a, 1750“1821 (Mexico,
n
Alianza Mexicana, 1992); and R. Garner and S. E. Stefanou, Economic Growth and Change in Bourbon
Mexico.
28 See E. Van Young, La crisis del orden colonial, ¬rst subtitle of Chapter 1.
Introduction 11

to be written.”29 In the present work we have attempted to remedy this
situation by providing the essential data on the royal loans issued in the
viceroyalty. The analysis of colonial loans is not only of interest for the history
of colonial Mexico, but it is also fundamental to the broader historiograph-
ical debate on the relation between state ¬nance and war in the eighteenth
century.30 In this regard, it is important to keep in mind that historians
working on the eighteenth century have devoted much time and energy to
compare the different ¬nancial policies that the two leading powers of the
era, Britain and France, adopted to deal with the huge accumulation of war
debts.31 The discussion can be enriched by consideration of the case of the
Spanish empire, which presents the peculiar case of a monarchy that raised
loans not only in the metropolis but also in the colonies for the prosecution
of wars with its rivals, especially at the end of the century.
While colonial loans increased in the early 1780s, the debt explosion
came later. The multiplication of wars in both Spain and the Caribbean
led to the transfer of almost ten million pesos per year from the treasuries
of Mexico in the 1790s. As a result of the war launched against Spain by
the revolutionary French Assembly (1793“1794), the Madrid government
faced a much graver challenge as military expenditures in the land war in
northern Spain increased exponentially. After the conclusion of this major
con¬‚ict, there came a brief peace, but by 1796, the Spanish monarchy was
at war again, with Britain, in what is known as The First Naval War (1796“
1802), causing a steep increase in expenditures in both the Atlantic and the
Caribbean.
As military expenditures and debts spiraled upward, the demands for
Mexican tax silver increased year by year, although, inevitably, the colo-
nial administration was hard-pressed to meet the growing demands of the
Crown only with ordinary tax receipts. When the regular tax resources
of Bourbon Mexico were found inadequate to ¬nance both defense in the
Americas and war in the metropolis, the Madrid government instructed
successive viceroys of New Spain “ Revillagigedo (1791“1794), Branciforte

29 R. Garner and S. E. Stefanou, Economic Growth and Change in Bourbon Mexico, p. 238.
30 Some illuminating pages can be found in the classic work by Lucas Alam´ n, Historia de M´xico, par-
a e
ticularly vol. 1 (Mexico: Fondo de Cultura Econ´ mica/Instituto Cultural Hel´ nico, 1985) [facsimile
o e
of the ¬rst edition of 1849“1852], pp. 304“344. The founding father of Mexican historiography
reviewed a few of the loans raised between 1808 and 1810, but, signi¬cantly, he did not mention
the numerous royal donations and loans obtained in New Spain between 1780 and 1808. A major
recent work that reviews many of the loans managed by the Mexico City Merchant Guild in the
eighteenth century is Guillermina del valle, “El Consulado de Comerciantes de la Ciudad de M´ xico
e
y las ¬nanzas novohispanas, 1592“1827,” Ph.D. thesis, El Colegio de M´ xico, 1997.
e
31 For a stimulating interpretation, see Jean Laurent Rosenthal, “The Political Economy of Absolutism
Reconsidered,” in Robert H. Bates et al., Analytic Narratives (Princeton, N.J.: Princeton University
Press, 1998), p. 65, which argues that “the French and British experience had their roots in the
different outcomes of domestic con¬‚icts over ¬scal policy.”
12 Bankruptcy of Empire

(1795“1797), Azanza (1798“1802), and Iturrigary (1803“1808) “ to raise
new combinations of voluntary and forced loans from the population of the
viceroyalty. Chapter 4 illustrates the fact that the ¬nancial collaboration
of the Catholic Church proved to be of special importance in the ¬nancial
campaigns both by providing great amounts of money in the way of dona-
tions and loans to the Crown and by convincing the population at large to
do so as well. Among the most important contributors to state loans were
colonial convents and monasteries, bishops and cathedral councils, and even
the ¬scal branch of the Inquisition.
The Second Naval War against Britain (1805“1808) accentuated the
¬nancial dif¬culties faced by the treasuries of the Spanish empire, par-
ticularly after the decisive naval battle of Trafalgar, as royal transatlantic
transfers hence were abruptly reduced. New, indirect methods had to be
implemented to sustain the ¬nancial machinery of the empire and avoid
total bankruptcy. Among these was a radical ¬nancial reform adopted
by the ministers of Charles IV, known as the Consolidation Fund, which led
to the ¬rst process of disentailment of church assets and properties in both
the metropolis and the colonies. Inevitably, the tensions between church
and state increased acutely.
While the intensi¬cation of the Napoleonic wars had a serious impact on
the Spanish empire, equally grave ¬nancial problems were faced by Britain
and France as the army and navy expenses of these two great contenders rose
spectacularly. Chapters 5 and 6 explain why the leaders of the two leading
powers of Europe looked to Spanish America and especially toward silver-
rich Mexico to obtain sources of hard currency with which to ¬nance war.
Napoleon Bonaparte and William Pitt each authorized a set of extraordinary
stratagems aimed at procuring Mexican silver in the midst of Atlantic war
during the years 1804“1808.
Even after the invasion of Spain by Napoleon in 1808, the colo-
nial administration in Mexico continued to send an astonishing vol-
ume of tax funds and silver loans to Spain. These ¬‚ows are analyzed
in Chapter 7. The Mexican silver was destined to support the patriot
armies and the C´ diz Parliament (1810“1812) in the prolonged strug-
a
gle against the French invaders. As a result, however, the colonial gov-
ernment in Mexico became ever more indebted. By early 1812, colonial
debts had surpassed thirty-¬ve million pesos and weighed heavily on the
local exchequer. The largest debts were owed to many of the wealthi-
est members of colonial Mexican society and to the most powerful and
privileged corporations, including the Catholic Church. Estimates of the
loans outstanding by sector presented in Chapter 8 offer new material
for researchers interested in the subject of the ¬nancial costs of colo-
nialism.
Introduction 13

The colonial debts taken between 1780 and 1810 constituted something
quite different from domestic public debts and must be considered a special
category of ¬nance since the loans raised in New Spain were not used
to cover de¬cits generated inside the viceroyalty. What took place was
different and more complex: the metropolis transferred a part of its de¬cits
to the richest colony. The Madrid government did not promise to pay
back the loans. On the contrary, Mexican tax branches were mortgaged
inde¬nitely to pay the king™s debts. The same occurred in the case of loans
raised in other viceroyalties in Spanish America, although on a smaller
scale “ all of which can be considered examples of almost pure ¬nancial
colonialism.
At the same time, it is important to keep in mind that colonial elites, led
by privileged corporations, collaborated in all the royal ¬nancial campaigns.
In this regard, it should be noted that the debt policies applied in the
Spanish American empire had no counterpart in the British colonies in
North America. In the case of the thirteen colonies, for instance, it would
have been unthinkable for the British Parliament to demand that the
colonists provide loans to cover de¬cits of the metropolis. The degree of
power exercised by the British authorities in North America was but a
pale shadow of the ¬scal control and ¬nancial in¬‚uence of the Bourbon
administration in Spanish America.

Comparative Issues in Colonial Finance in the Eighteenth Century
Exploring ¬scal and ¬nancial dynamics in the colonies can help in eval-
uating whether empires involved ¬scal costs or bene¬ts for the respective
metropolis, and vice versa.32 However, most recent historical studies on the
major European powers of the eighteenth century “ in particular Britain
and France “ have tended to focus quite strictly on success or failure in
domestic tax reforms and their impact on the ¬scal military state. According
to a large number of historians, for example, the success of ¬scal and admin-
istrative reforms put in place in Britain during the long century from 1688 to
1815 was key to the military and naval preeminence of the ¬rst industrial
nation.33 Such an approach, however, tends to leave out a signi¬cant chunk

32 A recent comparative survey focusing on the different metropolises is Patrick O™Brien and Leandro
Prados de la Escosura, “The Costs and Bene¬ts of European Imperialism,” Revista de Historia Econ´mica,
o
16, 1 (1998), 29“89.
33 The hypotheses were ¬rst advanced by P. O™Brien, “The Political Economy of British Taxation” and
J. Brewer, The Sinews of Power. For additional studies and bibliographical references, see Lawrence
Stone, ed., An Imperial State at War: Britain from 1689 to 1815 (London: Routledge, 1994) and
Leandro Prados, ed., Exceptionalism and Industrialisation: Britian and Its European Rivals, 1688“1815
(Cambridge, U.K.: Cambridge University Press, 2004).
14 Bankruptcy of Empire

of history, considering that Britain had an extensive, if quite scattered,
empire. Similarly, French historiography has devoted insuf¬cient attention
to the costs of colonial wars in the gradual weakening of the ¬nances of the
absolute monarchy during the second half of the eighteenth century.
Our study suggests that it may prove useful to add a colonial dimension to
this debate, developing comparative studies of the colonial ¬nance of Spain,
Britain, and France in the eighteenth century. One clear contrast was the
difference in tax reforms in the American colonies. British authorities faced
stiff opposition to new taxes in the thirteen colonies in North America and
to the expansion of the royal army forces there. As a result, the defense
of empire in North America proved to be a ¬scal and political burden for
Britain in the 1760s and 1770s.34 In contrast, the Spanish monarchy “
a major imperial rival of Britain in the western hemisphere “ did not have
to expend funds for overseas defenses, as these were paid for almost entirely
by colonial administrations in Spanish America. Modern historical research
demonstrates that the tax burden was, in fact, much lighter in the Anglo-
American colonies: colonial Mexicans paid perhaps ten times more per capita
than taxpayers in the thirteen colonies.35 Nonetheless, and paradoxically,
it was in the lightly taxed Anglo-American colonies that independence
would triumph ¬rst, whereas in Spanish America the royal administra-
tion applied increasing ¬scal and ¬nancial pressures until the critical year
of 1810.
But what was the ¬scal situation of colonies in other regions at the
end of the eighteenth century? The questions are numerous, and most are
still unanswered. How costly were the British colonies in the West Indies?
Did they pay their way? Similarly, one may ask: how was the colonial
administration ¬nanced in Canada in this period? Michael Bordo and Angela
Redish have provided some recent answers, but many other questions remain
open.36 And, ¬nally, how ¬scally pro¬table was British India as a colony in

34 Nonetheless, explaining the success of this tax rebellion presents a challenge to current historical
interpretations, which have drawn attention to the notable domestic success of the government in
Britain in constructing a strong ¬scal/military state during the eighteenth century. Major studies
by J. Brewer, The Sinews of Power and P. O™Brien, “The Political Economy of British Taxation” do
not fully explain social response to taxation nor do they explore the contrast with the tax revolt in
the United States.
35 The ¬rst historian to propose comparative studies in this realm was John Coatsworth, “Obstacles
to Economic Growth in Nineteenth Century Mexico,” American Historical Review, 83, 1 (1978),
80“100. Coatsworth used as one of his sources Robert Paul Thomas, “A Quantitative Approach to
the Study of the Effects of British Imperial Policy upon Colonial Welfare,” The Journal of Economic
History, 25, 4 (1965), 615“638, which provides some estimates for comparative analysis. For further
details see our estimates in Chapter 2 of this book.
36 Michael D. Bordo and Angela Redish, “The Legacy of French and English Fiscal and Monetary
Institutions for Canada,” in Michael D. Bordo and Roberto Cortes Conde, eds., Transferring Wealth
Introduction 15

the late eighteenth century? Recent monographs by Javier Cuenca-Esteban
have demonstrated that the ¬nancial contribution of India to the English
balance of payments was critical and helped avoid bankruptcy of the British
government during the Napoleonic wars, but more comparative research is
needed.37
And what of France? Its richest colony, Saint Domingue (Haiti), cer-
tainly required considerable military expenditures, particularly naval, but
there were also indirect ¬scal bene¬ts for the metropolis. Nonetheless, we
know little on this score because historians working on French ¬nance have
been perhaps overtly domestic in their research preoccupations. They have
incisively explored the rising costs of the debt of the monarchy, but only a
few historians, such as James Riley, have paid suf¬cient attention to some
of the key external causes of the de¬cits, which included colonial wars and
the great expenses of the rebuilding of the French navy in the eighteenth
century.38
Our research and that of a score of other historians who have worked on
royal ¬nances in eighteenth-century Spanish America suggests the crucial
importance of colonial taxes and loans for the resurgence of the Spanish
empire as a whole in the decades 1760“1790 and then to ¬nance the
monarchy in its ¬nal wars. It is true that despite the enormous and sus-
tained ¬nancial contributions of the colonies, these were not suf¬cient to
avoid imperial collapse. This contradictory process is precisely the subject
of the present book, which focuses on a case study of New Spain, the most
productive tax colony in the eighteenth-century world. We do so by placing
colonial Mexico in the context of the geopolitical and military con¬‚icts of
the age, as shifting alliances led the Spanish monarchy into an extraordinary
sequence of wars with, alternatively, Britain or France. In sum, analysis of
the ¬nances of the viceroyalty of New Spain in the last decades of the ancien
regime is signi¬cant for comprehension of comparative colonial history and
of contemporary imperial rivalries among the European powers. And it is
precisely for this reason that we are inclined to think that the view from
the capital of colonial Mexico or from the port of Veracruz can prove to be
singularly illuminating for an understanding of the increasingly complex
nature of war ¬nance in the age of Atlantic revolutions.


and Power from the Old to the New World: Monetary and Fiscal Institutions in the 17th through the 19th
Centuries (Cambridge, U.K.: Cambridge University Press, 2001), pp. 259“283.
37 Javier CuencaEsteban, “The British Balance of Payments, 1172“1820: India Transfers and War
Finance,” Economic History Review, 54, 1 (2001), 58“86; by the same author, “India™s Contribution
to the British Balance of Payments, 1757“1812,” unpublished paper in Session 106 of the XIV
International Economic History Conference, Helsinki, 2006.
38 J. C. Riley, The Seven Years War and the Old Regime in France.
1
Resurgence of the Spanish Empire: Bourbon
Mexico as Submetropolis, 1763“1800



When the great explorer and scientist Alexander von Humboldt visited
colonial Mexico in 1803, he was witness to one of the ¬nal and most bril-
liant periods in the history of the viceroyalty. Eloquent proof could be found
in the capital of Mexico which, with its more than 100,000 inhabitants,
was the largest city in the western hemisphere. It was also one of the most
prosperous to be judged by its many magni¬cent palaces, by the display
of luxurious carriages along its broad avenues, by the great number of
mercantile establishments, and by the activity of its popular markets. The
heart of political, ¬nancial, and social life revolved around the royal palace,
cathedral, and stores in the main square known as the zocalo. In the palace
were the grand of¬ces of the viceroy of New Spain and of many high-level
functionaries, and there they received the members of the privileged cor-
porations of colonial society: the ancient and venerable merchant guild, the
miner™s association, the great landowners, the church prelates, and military
of¬cers. But in late afternoons and evenings, the palace was also seat to a
number of social events, including games of gambling.
Behind the royal palace, there was a large building with patio which also
had enormous economic and political importance: the royal mint. In his
classic work, Political Essay on the Kingdom of New Spain, Humboldt noted

<<

. 4
( 64 .)



>>