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occurred; in such a case, the bene¬ts of the ¬scal saving might not have been
signi¬cant.7 These views, however, are not corroborated by the research of
Richard Garner, who has provided the most detailed economic analysis of
the period. Garner argues that in spite of the systematic increase in produc-
tion and minting of silver coins (1.4 percent per year during the eighteenth
century) there was only a slow rise in prices, especially of maize, the most
important food product of the population of New Spain. The increase was
not exceptional, averaging 0.5 percent per annum during the eighteenth
century, with sharp peaks only at the time of serious agrarian crises.8 In
other words, it would appear that in the long run, relative price stabil-
ity was maintained despite the enormous increase of silver produced and
minted in the viceroyalty. At the very end of the colonial era, there was a
signi¬cant shift upward in prices but also a decline in living conditions.
In the most detailed study of consumption in this period, the historian
Enriqueta Quiroz has demonstrated that in the decade 1800“1810 there
is clear evidence of a sharp increase in food commodities in Mexico City
and, simultaneously, a marked drop in consumption, particularly among
the poor and working classes.9
Evidently, the economic and social analysis of the impact of the exter-
nal transfer of an enormous accumulation of tax resources from colonial
Mexico over various decades remains an open question. John Coatsworth

6 An increase in production would depend on avoiding supply bottlenecks of agricultural and textiles
production, but most research on Mexico™s economy for this period do not ¬nd evidence of such
bottlenecks and demonstrate that there was a sustained increase in agricultural output and cattle
products which surpassed population growth: R. Garner and S. E. Stefanou, Economic Growth and
Change; J. C. Garavaglia and J. C. Grosso, “De Veracruz a Durango”; Las alcabalas novohispanas, 1776“
1821, Mexico, AGN, 1987; and Puebla desde una perspectiva microhist´rica; E. Van Young, Hacienda and
o
Market in Eighteenth Century Mexico and Jorge Silva, “Producci´ n agropecuaria y mercados regionales:
o
el caso de Michoac´ n en el siglo XVIII,” Ph.D. thesis, El Colegio de M´ xico, 1997.
a e
7 David Brading, “Comments on ˜the Economic Cycle in Bourbon Central Mexico,” Hispanic American
Historical Review, 69, 3 (1989), 531“538 and J. Coatsworth, Or´genes del atraso, pp. 108“109.
±
8 “Corn price levels only moved up slowly over the very long term. This suggests that in¬‚ation, as
measured by corn was not much of a threat. . . . Indeed, it can be argued that over the long term corn
prices were so low and supplies so ample that without making production more ef¬cient a (large)
producer had trouble earning a big enough pro¬t to justify or encourage investing further in grain
or food production.” R. Garner, and S. E. Stefanou, Economic Growth and Change, pp. 28“29.
9 Enriqueta Quiroz, Entre el lujo y la subsistencia: mercado, abastecimiento y prcios de la carne en la ciudad de
M´xico, 1750“1812 (M´ xico: El Colegio de M´ xico, Instituto Mora, 2005), p. 242.
e e e
Conclusions 259

has proposed estimates of the net exports of ¬scal resources at somewhere
between 5.0 and 7.5 percent of the annual gross annual product of the
viceroyalty.10 This is a big ¬gure and the drainage of this wealth from New
Spain would merit more research, especially if we consider that in ancien
regime economies annual investment rates were extremely low. In any case,
the funds sent abroad can be seen as a net export of capital without any com-
pensation or return payment. On balance, a majority of historians believe
this capital drain had a negative overall effect on New Spain™s private eco-
nomic activity. The following scenario may be a useful point for comparison:
what would happen if an independent country had to contribute the equiv-
alent value of 40 percent of its exports abroad without trading or ¬nancial
recompense, as was the case for New Spain between 1790 and 1810? It
does not seem possible that this would not have a depressing effect on the
economy.11 The economic historian Enrique C´ rdenas has recently summed
a
up the situation in a survey which argues that the Crown™s appropriation of
these resources severely prejudiced New Spain™s economic performance in
the ¬rst decades of the nineteenth century.12
The systematic and often coercive nature of the ¬scal campaigns through-
out Mexico during the ¬nal decades of the colonial regime has been a con-
stant theme through this book. Yet the relative scarcity of tax revolts in
Bourbon Mexico (with some localized exceptions) also raises many questions
regarding the social impact of imperial tax policy and practice. The contrast
with the great tax rebellions in the 1780s in the viceroyalties Peru and New
Granada is striking. This is all the more surprising since the rigorous ¬scal
and ¬nancial policies applied in New Spain were the most extensive and
ef¬cacious in Spanish America in the second half of the eighteenth century.
To all appearances, until the outbreak of rebellion in 1810, popular per-
ceptions of tax pressures in New Spain did not radically con¬‚ict with the
political and social consensus underlying this particular colonial society. In
previous chapters, we have argued that such circumstance suggests that the
majority of New Spain™s population continued to accept the legitimacy of


10 J. Coatsworth, Los or´genes del atraso (M´ xico: Alianza Mexicana, 1990), pp. 85“87 and 108“109
± e
and J. Coatsworth, “La independencia latinoamericana: hipotesis sobre los costes y bene¬cios,” in
Leandro Prados de la Escosura and S. Amaral, eds., La independencia americana: sus consecuencias econ´micas
o
(Madrid: Alianza Universidad, 1993), pp. 20“21.
11 In this regard, it seems that the arguments of R. Garner, and S. E. Stefanou, Economic Growth and
Change, Chapter 7, are conclusive.
12 With regard to exports of collected taxes and the possible effect on contemporary investment rates,
E. C´ rdenas, “Algunas cuestiones sobre la depresi´ n mexicana del siglo XIX,” in Enrique C´ rdenas,
a o a
comp., Historia econ´mica de M´xico, vol. 2 (Mexico: Fondo de Cultura Econ´ mica, 1990), p. 41,
o e o
af¬rms: “These ¬gures show fully the real size of the colonial tax burden imposed on New Spain. If
a part of this net savings had been used in productive projects, such as transport facilities, Mexico™s
economic growth model would probably have been very distinct from the one that it experienced.”
260 Bankruptcy of Empire

the viceregal government in an implicit agreement that may be called the
“¬scal constitution” of the colonial regime.13
No one explanation, however, can account for the duration of ¬scal con-
sensus in increasingly dif¬cult circumstances at the turn of the century.
Consequently, it might be suggested that future research should concen-
trate on exploring various complementary approaches to construct an his-
torically convincing interpretation of the considerable political and ¬scal
passivity in New Spain before 1810.14 Future studies of the colonial tax
system would do well to explore the intersection of three different levels “
economic, social, and ideological/religious “ that undoubtedly played an
important role in popular opinion and perceptions in New Spain before the
breakdown of consensus in 1810.
The extraordinarily complex mix of cultural and ideological factors that
in¬‚uenced the course of social discontent and insurrection between 1810
and 1820 has recently been studied in-depth by Eric Van Young: he suggests
that the many internal con¬‚icts that broke out in New Spain from 1810
must be understood in terms of a multicausal model in which the impe-
rial crisis should be linked to the agrarian and ¬scal crisis to explain the
intensi¬cation of violent social tensions that ¬nally expressed themselves
in popular mobilizations on both political and military fronts.15 Clearly,
insurgency was not caused solely by the ¬scal policies of previous decades,
but the latter certainly played an important role in gradually undermining
the legitimacy of the colonial regime.
Apart from taxes, understanding late colonial ¬nance also requires anal-
ysis of the colonial debts imposed by the royal administration. Despite the
fact that the ¬scal screws were turned ever more harshly from the 1780s,
this proved insuf¬cient for the many, exacting metropolitan demands. As
a result, treasury of¬cials in Mexico looked with increasing frequency to
the raising of donations and interest-free loans as well as to a succession
of interest-paying loans in order to obtain additional funds. The funds
obtained were sent almost in entirety to the metropolis but it was the colo-
nial administration and taxpayers who were expected to pay the service and
capital of these debts, which by 1812 surpassed thirty million pesos, a large
sum for the time.

13 We have already referred to this point in Chapter 2. The issue is also raised in Mar´a del Refugio
±
Gonz´ lez, “La intervenci´ n del Estado en la econom´a y la sociedad en M´ xico: sus or´genes y
a o ± e ±
desarrollo. Una propuesta de interpretaci´ n,” Mexican Studies, 5, 1 (1988), 25“41.
o
14 E. Van Young, La crisis del orden colonial, pp. 9“15 and 335“428, makes a number of penetrating
observations about the complex relationship between ideology and material conditions in his analysis
of the origins of the rebellions that began in 1810.
15 Eric Van Young, The Other Rebellion: Popular Violence, Ideology, and the Mexican Struggle for Independence,
1810“1821 (Stanford, CA: Stanford University Press, 2001).
Conclusions 261

Here we are confronted with a great paradox, which we have attempted
to explain but must be reemphasized: while coercion was a frequently used
instrument to obtain extraordinary resources from the viceroyalty, many
wealthy individuals and privileged corporations in New Spain openly col-
laborated with enormous sums extended to the monarchy for its war efforts.
Why they contributed remains an open question. We have suggested that
there was clearly a quid pro quo, since loans to the Crown ensured the con-
tinuity of extraordinary privilege for the wealthy in a society with great
swaths of impoverished social groups.16 But is this an entirely adequate
answer?
Our chapters analyzing the loans offered to the Crown by the great
merchants, miners, and landowners suggest the enormous concentration
of wealth in late colonial Mexico: there is no doubt that the rich, privi-
leged corporations of the viceroyalty were intent on maintaining the status
quo unchanged. Equally signi¬cant were the ¬nancial contributions of the
Catholic Church, the great ally of the state for over three centuries of colo-
nial rule. However, the application of so many extreme ¬nancial measures
affecting religious foundations and especially the Consolidation Fund in
1805“1808 gradually undermined the alliance between the church and the
Crown. It proved no surprise that many of the most severe critics of the late
colonial regime were clerics nor that the rebellions that broke out against
Spanish rule in 1810 were led by revolutionary parish priests like Miguel
Hidalgo and Jos´ Mar´a Morelos. In any case, the information presented
e ±
in this study on tax and debt policy provides a good deal of hard evidence
which can be of use to future studies that propose to explore the enormous
tensions and dif¬culties that the Mexican economy would subsequently
confront in the transition from colony to independent nation.
But, again, let us broaden our perspectives by suggesting that the analysis
of the ¬nances of Bourbon Mexico is of interest for broader comparative
purposes. For example, it is relevant to future comparative work on the
¬nances of the other Spanish American colonies, with which New Spain
had diverse and complex links. But it is also of considerable interest for the
comprehension of the ¬nancial trajectory of the Spanish monarchy itself.
In the ¬nal analysis, the de¬cits of the metropolitan government were the
root and cause of the aggressive tax and ¬nancial campaigns applied in
late colonial Mexico. The estimates we have presented in previous chapters
clearly indicate the crucial importance of the colonial remittances in the
midst of the gravest wars of the late Bourbon regime, although even such
large transfers of Mexican silver were insuf¬cient to save the Crown.

16 On this subject, also see Pedro P´ rez Herrero, “Los bene¬ciarios del reformismo borb´ nico: metr´ poli
e o o
´
versus elites novohispanas,” Historia Mexicana, xii, 2 [162] (1991), 207“264.
262 Bankruptcy of Empire

The Bankruptcy of the Spanish Monarchy and Its Consequences
The bankruptcy of the empire was even more pronounced at the core than in
the periphery. Fiscal revenues in metropolitan Spain stagnated from the late
1790s as did expenditures and public debts which increased spectacularly.
The ¬nancial crisis of the monarchy, already visible in the last years of the
eighteenth century, would deepen with remarkable rapidity in the following
decade. Studies on this subject by Pedro Tedde suggest that while the
monarchy of Charles III (1759“1788) was able to successfully meet the
challenges of reinforcement of empire, the ¬nances of the Spanish state began
to sink under Charles IV (1789“1808).17 This collapse cannot be understood
without taking into account the debilitating effects and enormous expense
of waging successive wars in the Americas and in Europe. The Napoleonic
invasion broke the back of the Spanish monarchy, but it was simply the
most devastating culmination of this period of international military strife.
Regular tax revenues had gradually increased in Spain from the 1760s
to the mid-1790s. Contributions in the shape of direct tax transfers from
Spanish America “ mainly Mexico and Peru “ were considerable but did not
generally surpass 15 percent of the ordinary income of the General Treasury
in Spain. In other words, during this period the metropolitan government
was able to pay for most of its own expenses: the main ¬scal contribution
of the colonies was to ¬nance the empire. But from the 1790s, as the
metropolitan government accumulated enormous de¬cits, colonial silver
remittances became crucial to the Treasury at Madrid. It was particularly
as a result of the war with the French Convention that expenditures and
de¬cits exploded. To make matters worse, after the outbreak of the First
Naval War with Britain in 1796, ordinary tax income collected in the
metropolis dropped more than 40 percent and remained at this low plateau
until 1808. The decline was compensated for in part by huge remittances of
of¬cial silver from Mexico and the other Spanish American colonies: we have
provided estimates of how crucial the remittances of American tax silver
became. But even these faltered after the beginning of the Second Naval
War with Britain in 1805 which caused a dramatic decline in transatlantic
shipping with Spanish America.
Yet it was not only tax trends which underlay the eventual bankruptcy
of the Crown; domestic debt policy and practice also failed in the ¬rst
years of the new century. The metropolitan treasury was not able to guar-
antee the service on the huge volume of domestic debt securities, known as
vales reales, issued to the tune of almost 2 billion reales (100 million silver
pesos or dollars) between 1782 and 1807. These debt instruments helped

´
17 Pedro Tedde, “Crisis del Estado y deuda publica a comienzos del siglo XIX,” Hacienda P´ blica
u
Espa˜ ola 26 (1987), pp. 169“195.
n
Conclusions 263

pay for extraordinary military expenditures but “ as we have seen “ their
market value fell markedly after 1797, with only a temporary recovery in
1802“1803.18 As a result, each time the government of Charles IV sought
emergency ¬nance, it reaped less and less cash and yet was committed to pay
higher interest payments.19 Worse, the debt assumed by the government
also implied a double burden since the issue of the vales reales obliged the
state treasury to assume the mortgage on the great mass of properties of the
Catholic Church that were disentailed between 1798 and 1808. As a result,
by 1807, the total debt of the Consolidation Fund in Spain surpassed 3.3
billion reales.
In addition to this huge sum, it is necessary to add the 250-million reales
(12.5 million silver pesos) of debts which we have calculated were due on the
operations carried out by the Consolidation Fund in Spanish America. These
were capital assets taken by the Crown from religious foundations in all
the colonies, and disproportionately from Mexico, which provided some 80
percent of the funds exported from Spanish America on this account to Spain.
These extortionate policies caused a virtual collapse of rural credit markets
in the viceroyalty of New Spain. It was expected that the metropolitan
treasury would return this sum eventually, but it never did so.
The treasury of Charles IV confronted less critical problems with the
foreign debts, but again, this was due to the special ¬nancial contribution
of colonial Mexico. The service on the bulk of the various loans issued in
Holland from the 1780s until 1807 was covered basically with Mexican
tax silver remittances. As may be observed in the majority of the Dutch
loan contracts taken by the Spanish crown, it was speci¬ed that debt ser-
vice would be guaranteed with bills on the Mexican royal treasuries. (See
Appendix III.3.) After the Napoleonic invasion, however, debt service on
these loans was interrupted, not to be renewed until the early 1820s.
War aggravated the ¬nancial problems of the Crown, particularly the
external demands imposed upon Charles IV by his wartime allies, which

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