PORFIRIAN ECONOMICS: MATERIAL GAINS

I. PORFIRIAN ECONOMIC DEVELOPMENTALISM

A. THE PROGRAM (FORMULA):

STATE INITIATIVE + FOREIGN CAPITAL = INDUSTRIAL CAPITALISM

B. STATE INITIATIVE: CREATE ENVIRONMENT ATTRACTIVE TO FOREIGN INVESTORS

1. LIP SERVICE TO LAISSEZ-FAIRE LIBERALISM, BUT RELIES UPON STATE INTERVENTION/DIRECTION FOR ECONOMIC GROWTH (WEAK MEXICAN ENTREPRENEURIAL CLASS)

2. PORFIRIAN DEVELOPMENTISM:

a. PROMOTION/PUBLICITY

(1) MINISTRY OF FOMENTO (DEVELOPMENT)

(2) FAIRS--EXPOS--PUBLICATIONS

b. DIRECT INVESTMENT:

(1) MEX. GOVT. INVESTED 14% OF CAPITAL IN 170 LARGEST CORPORATIONS IN PORFIRIATO

(2) SUPPORTED ENTERPRISES--RAILROADS TO STEEL MILLS

c. GOVERNMENT CONCESSIONS:

(1) TAX BREAKS/SUBSIDIES

(2) EXAMPLE OF THOMAS KINNEL IN 1892: $2 MILLION INVESTMENT IN ORIZABA JUTE MILL/GETS TAX EXEMPTION OF IMPORTS FOR 3 YRS/10 YR EXEMPTION ON FEDERAL TAXES

d. LAW & ORDER:

(1) PROTECTION FOR PRIVATE PROPERTY/CONTAIN WORKING CLASS/PEASANT PROTEST

(2) SUMMARY FROM PROMOTIONAL BROCHURE: "MEXICO THROWS ITS DOORS WIDE OPEN TO THE MEN OF ENTERPRISE AND TENDERS TO THEM ITS NATURAL RESOURCES UNDER THE PROTECTION OF AN UNALTERNABLE PEACE."

C. FOREIGN INVESTMENT (77% OF CAPITAL IN 170 LARGEST CORPORATIONS)

1. DRAWN BY HIGH PROFITS/OPPORTUNITIES V. 'MATURE' ECONOMIES IN WESTERN EUROPE & THE US

a. TEXTILE INDUSTRY, 1895-1900: 20%-25% ANN.

b. MINING: 150% ANN.

2. MOST PLAUSIBLE/RAPID MEANS TO DEVELOP MEXICAN RESOURCES QUICKLY

3. ADVANTAGES FOR MEXICAN ELITE (ONLY 9% OF CAPITAL IN 170 LARGEST CORPORATIONS): (model for accumulation of wealth by Porfirian Elites)

a. FUNCTION AS INTERMEDIARIES--PROVIDE FOREIGNERS WITH ACCESS TO MEXICAN RESOURCES

(1) USE INFLUENCE IN MEXICAN GOVT. TO OBTAIN NECESSARY LICENSES, CONCESSIONS, ETC.

(2) SELL LAND, RESOURCES TO FOREIGNERS

b. FOREIGNERS MAKE DIRECTIVE INVESTMENTS IN THE ECONOMY--FARMS, FACTORIES, RANCHES, MINES, RAILROADS, REFINERIES, ETC.

(1) FOREIGNERS TAKE RISKS

(2) MEXICAN ELITE GET SECURE PROFITS AS LAWYERS, LOBBYISTS, AGENTS, DIRECTORS, ETC./PICK UP REMAINS OF FAILURES (PREDOMINANT ROLE OF CIENTIFICOS IN PORFIRIAN MEXICO)

II. SUCCESSES OF PORFIRIAN DEVELOPMENTALISM

A. QUANTITATIVE ECONOMIC GROWTH:

1. FASTEST ECO. GROWTH RATES IN MEXICAN HISTORY: 2.3%/YR

2. GNP QUADRUPLES, 1876-1910:

1877 $435 MILLION (PESOS OF 1900)

1895 $903 MILLION (PESOS OF 1900)

1910 $1,600 MILLION (PESOS OF 1900)

3. PC/GNP DOUBLES, 1876-1910:

1877 $45

1910 $106

B. QUALITATIVE ECONOMIC GROWTH: ECO-STRUCTURE CHANGED

1. FIRST MODERN/LARGE-SCALE INDUSTRIES: ISI

a. TEXTILES

b. FOOD-PROCESSING

c. STEEL (first in Latin America)

2. BANKING & FINANCE

3. RAILROADS/COMMUNICATIONS : 15,000 miles largest in Latin America

4. AGRO-BUSINESS: sugar, cotton, hennequen

5. MINING & RAW MATERIALS EXPORTS: silver, petroleum

III. WHY DEVELOPMENT PROGRAM SUCCESSFUL IN GENERATING ECONOMIC GROWTH

A. ELIMINATED HISTORIC BARRIERS TO ECONOMIC GROWTH (Coatsworth Thesis)

B. CONSTRUCTED MODERN PHYSICAL & INSTUTIONAL INFRASTRUCTURE ESSENTIAL TO ECONOMIC GROWTH

1. INSTITUTIONAL INFRASTRUCTURE: NEW COMMERCIAL CODES, BANKING LAWS, MINING CODES, REFORMED JUDICIARY

2. PHYSICAL INFRASTRUCTURE

a. 15,000 MILES OF RAILROADS ELIMINATED HIGH TRANSPORT COSTS, CREATED NATIONAL MARKET, MADE EXPORT TRADE FEASIBLE

b. COMPLEMENTARY CONSTRUCTION OF PORT FACILITIES, PUBLIC WORKS, ETC.

C. ACCIDENTAL FORCES/PROCESSES

1. U.S. TARIFF POLICY (INCREASED TARIFFS ON MINERAL ORES)

2. FALL OF SILVER: DEVALUATION

IV. PROBLEMS OF PORFIRIAN DEVELOPMENTALISM

A. COSTS AND BENEFITS NOT EQUALLY SHARED

1. INCOME DISTRIBUTION MORE SKEWED

2. MANY INDIVIDUALS AND GROUPS PREJUDICED BY DEVELOPMENTS:

a. INDIAN VILLAGE COMMON LANDS LOST PROTECTION IN 1856/IMPACT NOT IMMEDIATELY FELT

b. RISING LAND VALUES WITH COMING OF RAILROADS

c. LOSS OF LAND BY VILLAGERS:

(1) AS PART OF RAILROAD CONCESSIONS

(2) TO SURVEY COMPANIES AS "BALDIOS"

(3) DENOUNCED/AUCTIONED UNDER REFORM LAW

3. EXAMPLES:

a. PEASANT REVOLTS & RAILROAD CONSTRUCTION IN 1880S

b. SUGAR HACIENDAS TAKE VILLAGE LANDS IN MORELOS

c. YAQUI LAND TAKEN IN SONORA/GUERRILLA WAR

4. MOST BENEFITS TO MEXICAN ELITES/FOREIGN INVESTORS; MOST COSTS TO LOWER CLASS PEASANTS/SMALL-SCALE PRODUCERS

B. PRIORITIES OF FOREIGN INVESTORS NOT ALWAYS CONSISTENT WITH POLITICAL REQUIREMENTS OR THE NEEDS OF NATIONAL ECONOMIC DEVELOPMENT

1. FOREIGN OWNED MONOPOLIES DOMINATED SOME SECTORS:

a. GUGGENHEIM MONOPOLIZED SMELTING & REFINING

b. RUINED SMALL-SCALE MEXICAN MINERS & REFINERS

c. LAID OFF WORKERS OR SUSPENDED OPERATIONS WHEN SUITED ASARCO INTERESTS

d. NO APPRECIATION FOR POLITICAL CONSEQUENCES OF ITS ACTIONS: SHUTDOWN CREATE WIDESPREAD UNEMPLOYMENT (POLITICAL UNREST)/HIRING PREFERENCES/PAY FAVORITISM TO FOREIGN WORKERS & ADMINISTRATORS CAUSED NATIONALIST BACKLASH

2. RAILROADS ORIENTED ECONOMY TO EXTERIOR/U.S. MARKETS

a. DID NOT ALWAYS INTEGRATE INTERNAL MARKETS/MARGINALIZED AREAS AWAY FROM MAINLINES (I.E. MAINLINES RUN N.-S.)

b. FRICTION OVER FARE/FREIGHT SCHEDULES--RATE STRUCTURE FAVORED MINING/EXPORT INDUSTRIES/RAW MATERIALS EXPORTS/DISTORTED ECONOMY

3. INVESTORS WANT PROFITS/UNCONCERNED WITH SOCIAL PROBLEMS THEIR ENTERPRISES MAY CREATE

C. EXACERBATED ELITE CONFLICT BETWEEN CENTER AND PERIPHERY

1. CENTER ELITES (CIENTIFICOS) REAP BENEFITS FROM ROLES AS INTERMEDIARIES/FEW OPPORTUNITIES FOR CONFLICT WITH FOREIGN ENTERPRISES

2. REGIONAL ELITES

a. FEW POSSIBILITIES FOR PROFIT FROM FOREIGN INTRUSIONS

b. USUALLY SITUATED IN COMPETITIVE, NOT COMPLEMENTARY ROLE IN REGARDS TO FOREIGN ENTERPRISES

c. STRAIN GREATEST WHERE REGIONAL ELITES HAVE RESTRICTED POLITICAL INPUTS/POWER

3. EXAMPLE OF LIMANTOUR/MARTINEZ DEL RIO V. MADEROS

a. LIMANTOUR/MARTINEZ DEL RIO AT CENTER OF CIENTIFICO GROUP: FAME AND FORTUNE AS REPRESENTATIVES FOR FOREIGN CORPORATIONS

b. MADEROS:

(1) PURGED FROM POLITICS IN 1880S

(2) TURNED TO PROMOTION OF FAMILY BUSINESSES-- AGRI- BUSINESS-- MINING--MANUFACTURING--FINANCE--ETC.

(3) COMPETITION WITH FOREIGN ENTERPRISES:

(A) AGRICULTURE--COMPETED AS COTTON GROWERS WITH BRITISH TLAHUILILO COMPANY--BITTER CONFLICT TO CONTROL NAZAS RIVER WATER

(B) RUBBER--GUAYULE NEW GROWTH INDUSTRY ATTRACTS ATTENTION OF STANDARD OIL- ROCKEFELLERS IN AMERICAN RUBBER COMPANY/CONTEST FOR LANDS, MARKETS, INTERNATIONAL CARTEL INTRIGUE

(C) MINING--ASARCO (GUGGENHEIM)

(D) FINANCE--FOREIGN/CIENTIFICO BANKS

(E) FOOD PROCESSING--NEW AMERICAN CO.

D. AUTHORITARIANISM

1. INSTITUTIONAL INFRASTRUCTURE CREATED IN 1880-90 FOR LARGE-SCALE OPERATIONS-- GIANT CORPORATIONS, AGRI-BUSINESS ENTERPRISES, ETC--LAWS BIASED AGAINST SMALL BUSINESSMEN, FARMERS, ARTISANS, ETC.

2. RAILROAD & DEVELOPMENT OF EXPORT INDUSTRIES INTERRUPTED DISINTEGRATION OF LARGE ESTATES/LAND CONCENTRATION INCREASED AS LARGE-SCALE OPERATORS REINVEST IN LAND/NO OPPORTUNITY FOR MIDDLE SECTOR IN ECONOMIC ARENA--SMALL-SCALE PRODUCERS CANNOT COMPETE WITH BIG BUSINESS

3. MEXICAN GOVT. SENSATIVE TO NEEDS OF FOREIGN INVESTORS & LARGE-SCALE OPERATORS BECAUSE CRITICAL TO ECONOMIC DEVELOPMENT/ SMALL-SCALE OPERATORS ARE ECONOMICALLY IRRELEVANT AND SO POLITICALLY IRRELEVANT/MEXICAN GOVT. PREFERENCE TO INVEST IN PHYSICAL INFRASTRUCTURE MEANT HUMAN RESOURCES REMAINED UNDEVELOPED

4. DEMOCRATIC PLURALISM UNLIKELY TO DEVELOP UNDER THAT SET OF CIRCUMSTANCES/COMPARISON WITH U.S. MODEL-- SIMULTANEOUS DEVELOPMENT OF LAISSEZ-FAIRE ECONOMY/POLITICAL INSTITUTIONS

E. ECONOMIC DEPENDENCY

1. FOREIGN CAPITALISTS OWN MEXICAN ECONOMY BY 1910

a. 25 OF 32 LARGEST INDUSTRIAL FIRMS FOREIGN-OWNED

b. 85% OF INDUSTRY FOREIGN-OWNED--'HIGH GROUND'-- HIGHLY CAPITALIZED SECTORS--TEXTILES, CONSTRUCTION, MINING, ELECTRIC, OIL, TRANSPORT

2. MEXICAN ECONOMY DEPENDENT ON WORLD MARKET CONDITIONS/ FOREIGN ENTERPRISE MANAGEMENT

a. DIAZ ADMINISTRATION LOST ABILITY TO MANAGE ECONOMY TO GUARANTEE POLITICAL STABILITY

b. FALLING MINERAL PRICES AFTER 1900/PANICS & DEPRESSIONS IN U.S. OR WESTERN EUROPE PRODUCE ECONOMIC DECLINE IN MEXICO

c. FELT BY WORKING CLASSES IN FALLING REAL WAGES/UNEMPLOYMENT/ INFLATION

d. DISCONTENT ERUPTED INTO WORKING CLASS RIOTS--CANANEA/ ORIZABA 1906-07

e. LOSS OF LIFE/LOSS OF DIAZ CREDIBILITY/POLITICAL ISSUE FOR OPPOSITION/ BASIS FOR MYTH OF BRUTAL DIAZ DICTATORSHIP

F. REVOLUTION MADE BY GROUPS WHICH LOST MOST/GAINED LEAST FROM PORFIRIAN DEVELOPMENTALISM