The economic history of Aridoamerica: developmental contrasts with the U.S. East Coast and Southern Mexico

BACHELOR'S DEGREE IN BUSINESS ADMINISTRATION AND MANAGEMENT Department of Public Policy and Economic History Academic year 2024/2025 Bachelor’s Thesis: THE ECONOMIC HISTORY OF ARIDOAMERICA: DEVELOPMENTAL CONTRASTS WITH THE U.S. EAST COAST AND SOUTHERN MEXICO Author: Adrián de la Torre Ebro Director: Ernesto López Losa, PhD Bilbao, June 2025 2 ABSTRACT This essay aims to review the economic history of Aridoamerica in relation to both the US East Coast and Southern Mexico and to offer a realistic perspective on the future economic prospects of the region. The text begins by defining what Aridoamerica is; later, it continues with an extensive historical-economic analysis of the region; as part of this historical analysis, the author examines Dr. James Mahoney's Bourbonic Developmental Switch theory and applies it to the case of Northern Mexico, exploring how changes in Spanish colonial policy in the 18th century might have influenced the region's long-term economic trajectory. In its final section, the essay analyzes possible economic events and phenomena that might take place in Aridoamerica in the future taking into account economic and political trends currently affecting the area. Key words: economic history, Aridoamerica, Viceroyalty of New Spain, Thirteen Colonies, nearshoring, Rio Grande, colonial development, economic growth, Mexico, American Southwest RESUMEN Este ensayo tiene como objetivo revisar la historia económica de Aridoamérica en relación tanto con la costa este de los Estados Unidos como con el sur de México y ofrecer una visión realista acerca del futuro económico de la región. El texto comienza definiendo qué es Aridoamérica; más tarde, continúa presentando un extenso análisis histórico-económico de la región; como parte de este análisis histórico, el autor examina la teoría del Bourbonic Developmental Switch del Dr. James Mahoney y la aplica al caso del norte de México, explorando cómo ciertos cambios en las políticas coloniales españolas en el siglo XVIII podrían haber influido en la trayectoria económica de la región en el largo plazo. En su sección final, el ensayo analiza posibles eventos y fenómenos económicos que podrían tener lugar en Aridoamérica en el futuro teniendo en cuenta las tendencias económicas y políticas actualmente presentes en la zona. Palabras clave: historia económica, Aridoamérica, Virreinato de Nueva España, Trece Colonias, nearshoring, Río Grande, desarrollo colonial, crecimiento económico, suroeste de los EEUU 3 TABLE OF CONTENTS INTRODUCTION AND CONCEPTUAL FRAMEWORK ......................................................... 4 METHODOLOGY AND LIMITATIONS ................................................................................. 10 CHAPTER I – ECONOMIC LIFE IN ANCIENT ARIDOAMERICA: THE CASE OF THE AZTECS .................................................................................................................................. 12 CHAPTER II – ECONOMIC DEVELOPMENT IN ANCIENT SOUTHERN MEXICO: A CONTRAST WITH ARIDOAMERICA ................................................................................... 16 CHAPTER III – ECONOMIC DEVELOPMENT IN THE HABSBURG-CONTROLLED VICEROYALTY OF NEW SPAIN ............................................................................................ 26 CHAPTER IV – ECONOMIC DEVELOPMENT IN THE BRITISH THIRTEEN COLONIES: A COMPARISON WITH ARIDOAMERICA AND NEW SPAIN ................................................ 39 CHAPTER V – THE BOURBONIC DEVELOPMENTAL SWITCH WITHIN THE SPANISH EMPIRE: HOW ARIDOAMERICA STARTED CATCHING UP .............................................. 42 CHAPTER VI – THE MEXICAN WAR OF INDEPENDENCE AND THE SUBSEQUENT PROCESS OF ECONOMIC DESTRUCTION IN NEW SPAIN ............................................... 70 CHAPTER VII – THE MEXICAN-AMERICAN WAR AND ITS ECONOMIC IMPACT ON ARIDOAMERICA.................................................................................................................... 75 CHAPTER VIII – THE ECONOMIC HISTORY OF ARIDOAMERICA FROM THE END OF THE MEXICAN-AMERICAN WAR TO THE END OF THE PORFIRIATO IN MEXICO ....... 82 CHAPTER IX – RECENT AND POSSIBLE FUTURE ECONOMIC DEVELOPMENTS IN ARIDOAMERICA.................................................................................................................... 87 CONCLUSIONS .................................................................................................................... 105 REFERENCES ....................................................................................................................... 110 ADDITIONAL BIBLIOGRAPHY ............................................................................................ 114 APPENDIX A – INSTRUCTIONS ON HOW TO INTERPRET MAHONEY’S CONSISTENCY TABLES IN CHAPTER V ...................................................................................................... 120 4 INTRODUCTION AND CONCEPTUAL FRAMEWORK Aridoamerica is a geographical and cultural region encompassing modern-day Northern Mexico and parts of the US Southwest. It is characterized by its dry, arid landscape and the cultivation of the hardy tepary bean – the Phaseolus acutifolius - , a key food source with deep cultural significance for the communities native to the area. Unlike the lush and fertile Mesoamerican lands of modern-day central Mexico and Central America to its south, Aridoamerica features a much harsher climate. Since Aridoamerica is not a state or an explicit political entity, there are different interpretations around the exact territory that belongs to the region – same way people might argue about the exact borders of the continent of Europe and how far into Russia it stretches or whether or not countries like Georgia or Armenia can be considered to be part of it - . For the purposes of this essay, it will be considered that Aridoamerica includes the Mexican states of Baja California, Baja California Sur, Sonora, Sinaloa, Chihuahua, Durango, Coahuila, Nuevo León and Tamaulipas and the US states of California, Arizona, New Mexico and Texas. The northern borders of the region vaguely coincide with the real, de facto northern borders of the old Viceroyalty of New Spain at the highest-ever extent of its territory around the year 1790; while Spain claimed that the viceroyalty reached Alaska – and it is true that the Spanish did indeed establish the towns of Valdez and Cordova in Alaska in the 1790s - , Spanish authority was profoundly weak and mostly non-existent to the north of southern California and central New Mexico. The author of this essay has long harbored a deep passion for economic history, particularly in understanding how historical patterns of trade, production, and institutional development shape contemporary societies. This enduring interest has naturally extended to the study of Aridoamerica, a region whose pre-colonial and colonial economic dynamics offer unique insights into adaptation, resource management, and cultural resilience in challenging geographical environments. Drawn by both academic curiosity and personal fascination, the author has visited the region on three separate occasions, each trip enriching his understanding of its historical complexity and deepening his commitment to exploring the intersection between institutions, geography, economy, and societal development in marginal or harsh environments. The Mexican part of Aridoamerica and the American part of it share the same climate, the same natural biomes, the same geography, the same geology, the same plants, the same native species of animals and the same temperatures and seasons throughout the year and yet wealth 5 and economic development are much higher on the northern portion of it. Such a phenomenon might make one think that theories relating to geographic economic determinism – the belief that geography plays a big role in the long-term economic development of a society – hold little value, while theories relating to how it is actually the quality of a society’s institutions what holds a bigger relevance when predicting long-term economic development - in the line of the work of recent Nobel-winning economists Daron Acemoglu, Simon Johnson and James A. Robinson - should be given more consideration in comparison. What can Aridoamerica tell about this topic? What lessons can be taken from the economic history of this region? This essay aims to explore these questions and how the case of Aridoamerica can – or not – add value to this “geography-versus-institutions” debate; it is the feeling of this essay’s author that not much has been written about Aridoamerica’s economic history from a wholistic standpoint or about what studying the area can reveal in relation to the discussions around the matter of the relevance of good and bad institutions in the long-term development of an economy. The American and the Mexican portions of Aridoamerica share a series of cultural traits; chief among them, the cowboy – or, originally in Spanish, vaquero, which is where the word buckaroo in English comes from – culture and all its relevant symbols: the ranch – from Spanish rancho - , the lasso – from Spanish lazo - , the rodeo – a Spanish loanword - , the armadillos – another Spanish loanword – and so on. Figure 1. The color orange shows the Mexican states most generally accepted as being part of Aridoamerica, the color red shows the US states most generally accepted as being part of Aridoamerica; it important to keep in mind however, that the northernmost parts of California do not belong to Aridoamerica as they lack the arid, dry landscape typical of the region. Source: own creation. 6 It is easy to see then, even from a purely linguistic standpoint, that all elements of classic cowboy culture come from the Spanish colonization of Aridoamerica starting in the mid1550s; the traditional cowboy attire derives from the clothing that the Spanish Dragones de Cuera – an elite Spanish military unit charged with taking care of New Spain’s northern borders and repelling raids by hostile tribes like the Comanche or the Navajo in places like New Mexico, Texas or Arizona – wore. The clothing of the Dragones de cuera, which included leather coats, wide-brimmed hats - typical of Córdoba, Spain – and boots, was adopted by early settlers, ranchers and cowboys in the region. And of course, Comanche and Navajo are Spanish interpretations of the names those two tribes called themselves by. This thesis is structured chronologically and thematically to provide a clear, comparative understanding of Aridoamerica’s economic development. The first chapter offers a summary of Aridoamerica’s economic history in ancient times, focusing on the Aztecs during their presence in the region. Their migratory phase is used as a case study to illustrate the economic limitations and adaptive challenges in Aridoamerica’s arid environment. The second chapter follows the Aztecs’ migration southward, analyzing the economic history of Southern Mexico after the Aztecs had established themselves in the area but before the arrival of Spain at Veracruz in 1519. This sets up a comparative framework to highlight the economic backwardness of Aridoamerica relative to Southern Mexico at the time. The third chapter examines the economy of the Viceroyalty of New Spain during the Habsburg era (1535–1700), including its expansion into Aridoamerica. The fourth chapter briefly analyzes the economic model of the British Thirteen Colonies during the same period to allow a cross-continental comparison of economic trajectories. The chapter analyzing the economy of ancient Southern Mexico and the chapter analyzing the economy of the British Thirteen Colonies are, thus, included in this essay in order to correctly and precisely contextualize the economic history of Aridoamerica, the same way one could not be able to accurately explain how – as an example – Haiti is a particularly poor economy in the Caribbean without taking a comparative look at the economies of the Dominican Republic, the Bahamas or Jamaica. The fifth chapter studies a developmental theory by Dr. James Mahoney and analyzes whether or not it can help explain Northern Mexico’s economic divergence from the south – a phenomenon that started in the 18th century - . This is followed by several chapters tracing Aridoamerica’s economic history from the year 1700 to the present. The final chapter speculates on the region’s future based on current trends. An appendix – Appendix A - expands on the methodology behind the theory discussed in Chapter V. 7 Throughout the essay, extractive institutions will be discussed. Extractive institutions, for the purposes of this essay, will be understood as regulatory systems deliberately designed to concentrate power and resources in the hands of a ruling elite by restricting economic opportunities and political participation for the broader population. In the long run, these institutions inhibit inclusive development, limit innovation, and suppress dissent in order to maintain existing power structures. A society ruled through inclusive institutions, on the other hand, would derive in the opposite case: a setting where economic freedom and autonomy are stimulated and where political expression is allowed if not directly encouraged. A historical example of an extractive institution could be the institution of slavery in the US South. Slavery suppressed economic mobility by keeping enslaved people in permanent poverty, preventing them from owning property, investing, or participating in the consumer economy. It also curtailed political freedoms, as anti-slavery voices were systematically silenced by the dominant slave-holding elite. An example of an inclusive institutional model could be the one set up by the Magna Carta in England in 1215. The Magna Carta limited the power of a privileged minority – the English royal family – while expanding the political freedoms of the majority of the population, which led to England developing a very successful political ecosystem that was replicated by many other nations all over the globe in the following decades and centuries. Whether a human society is ruled through extractive or inclusive institutions is not a binary matter – a society or a development model is rarely totally extractive (0) or totally inclusive (1) – but rather a spectrum, an analogic variable instead of a digital one. An institutional setup might be just a bit more extractive or inclusive than other system, or it might be a little more extractive in some aspects while being more inclusive in some others. All governance and institutional models have some extractive elements and some inclusive elements, and while extractive institutions tend to limit economic growth in the long run, a society can still experience economic development under a mostly extractive institutional model. This society will, however, experience less economic development than if it followed a more inclusive model. Additionally, it is important to remember that an institutional model might have been markedly extractive or inclusive for the standards of the time it was established in and not be so today. While most of the world has moved towards institutional inclusion models in the last few centuries, it is possible for countries to regress towards institutional extraction – for example, by falling into dictatorship or by being invaded and turned into extractive colonies designed to operate for the benefit of the invading nation - . 8 ASPECT SOOCIETIES RULED THROUGH EXTRACTIVE INSTITUTIONS SOCIETIES RULED THROUGH INCLUSIVE INSTITUTIONS Political power Concentrated in the hands of a very small elite that is hard to join Distributed across different sections of society Rule of law Weak and selectively enforced in order to benefit the elite Strong and applies somewhat equally to all individuals Property rights Weak, insecure and arbitrarily violated by those in power Clearly defined and protected for all Economic innovation Discouraged, as it can threaten the status quo Encouraged, fostering competition and creative destruction Market access Restricted; elites control key markets and resources in order to enrich themselves through monopolies and cartels Open; individuals and firms can freely enter markets and compete Education and human capital Limited access, especially for those outside of the political elite Broad – and often free - access to quality education and skill development systems Social mobility Very low, practically nonexistent High mobility; meritocratic advancement possible Taxation and income distribution Designed to extract wealth from the majority for elite gain Aimed at funding public goods and services for widespread benefit Political participation Suppressed or manipulated to maintain elite dominance Inclusive and democratic; citizens have real, tangible influence over policy and legislation 9 Likely long-term economic results Economic stagnation, inequality and underdevelopment Sustained economic growth, innovation, and broad-based prosperity Historical examples of systems and events supportive of institutional extraction or inclusion Slavery in the US South, serfdom in Tsarist Russia, the institutional model currently in place in North Korea The Magna Carta and the institutions it set up, Spain’s Transición and 1978 Constitution Figure 2. A table serves as a kind of summary of the differences between extractive institutions and inclusive institutions. Source: own creation. 16 CHAPTER II – ECONOMIC DEVELOPMENT IN ANCIENT SOUTHERN MEXICO: A CONTRAST WITH ARIDOAMERICA On their way southwards, the Aztecs encountered other groups of people, defeating or subjugating different tribes, city-states and fiefdoms. The Aztecs spent the years between 1064 or 1065 and 1325 gradually gaining more power, territory, wealth and troops as they kept marching south and either defeating rival communities or annexing them through eloquence, gifts or threats. It is estimated that in the year 1299, the Aztecs started attacking the large citystate of Colhuacan around what would today be Mexico City. By the year 1323 the Aztecs had successfully defeated Colhuacan after decades of war, taking control of most of the Valley of Mexico. In 1325, the Aztecs founded Tenochtitlan as the capital city of their newly-established empire. By the 1340s, the Aztecs had become the undisputed super power in Southern Mexico, as the Maya groups to the east of them - which had once been powerful and rich - had been in decline for centuries at that point and most local opposition to the Aztecs around the Valley of Mexico had been either exterminated or turned into a vassal of some kind. The Aztecs quickly established a tributary system by which all of the tribes, city-states and communities who had promised them allegiance - often after having been soundly defeated in battle - would routinely make trips to Tenochtitlan to make them valuable gifts in the form of pets, clothing items, tools, weapons, decoration items, grain, slaves, precious metals, jewelry, plant seeds and really anything that the “donors” thought the Aztecs would be satisfied with. This system was very similar to the one Imperial China imposed on Indochina and Korea. Along with this tributary system, the Aztecs developed a highly sophisticated trade network that connected all the groups under their rule. The establishment of a unified network of tribes, city-states and communities that did not wage war against one another allowed Southern Mexico to experience a period of rapid economic growth. Thanks to this Pax Azteca individuals were now allowed to travel much further away while staying within the same political framework, merchants were allowed to sell their products in a bigger number of locations and roads became safer as bandits grew fearful of the Aztecs’ fury. All these factors contributed to the regions around the Valley of Mexico experiencing high levels of economic growth following the establishment of the Aztec Empire. It is important to note, however, that the economic growth derived from the establishment of the Aztec Empire was not as high as it could have been. While the Pax Azteca led to bigger 17 trade networks, the tributary system imposed by the Aztecs was completely predatory. Groups under the rule of Tenochtitlan would often spend big amounts of time and human and economic resources to craft expensive, high-quality items only to gift them to Aztec elites, when those items could have been sold for a price at a market. Since tribute payers did not usually receive payments of any kind in exchange for the items they gave away, they mostly ended up in absolute poverty and unable to hold on to economic resources to acquire goods or services in markets, which in the long term limited private consumption levels. Many communities quickly stagnated economically after the very first few years of Aztec domination as regular payments to Aztec elites depleted their local resources, leaving their members with no capacity to invest in their own economies, infrastructure or long-term development. Another problem was that the Aztec tributary system limited technological innovation among the Aztec vassals. Exploring a hypothetical scenario can be useful here: if a smith made five bronze swords and successfully gifted them to the Aztecs, that same smith was unlikely to ever go on to gift them five obsidian-blade swords - which would have been of higher quality and more lethal – afterwards even if he had later learned how to craft them unless explicitly told to do so for fear of punishment for not gifting what had been “expected” of him. Moreover, the same smith might decide not to sell obsidian-blade swords in the private market later, fearing that Aztec authorities elites could find out and either demand them as tribute or question why he had not offered them before. While this would be the opposite of the previously mentioned hypothetical case in which the Aztecs could react negatively to being gifted obsidian-blade swords, the key point here is that either scenario could realistically occur, and the smith would have no way of predicting which way the coin toss would land. The smith, facing this dilemma, would likely simply decide to keep crafting, gifting and selling bronze swords forever and to never produce obsidian-blade swords, which were better and more lethal - and he knew how to make - . If this kind of example is applied to every kind of good - clothing items, tools, etc. - , it is easy to see how the Aztec tributary system likely limited economic growth in the long term by disincentivizing innovation and the production and trade of many high-value-added, high-quality goods. Aztec elites held absolute power and were accountable to absolutely nobody, so they could execute almost anybody without any kind of repercussions. The Aztec tributary system created a climate of big uncertainty amongst the Aztecs’ subjects - who constituted the vast majority of the population of the empire - , and uncertainty is bad for business and the economy at large in the long run. 18 Figure 5. A page of the Matrícula de Tributos - Tribute Registry - , a record of the taxes paid to the Aztecs by their tributary provinces. This specific drawing shows the tributes paid by the province of Tepecoacuilco - its identifying glyph is located in the bottom left corner - and its communities, including a payment of 100 axe coins and 1600 cuachtli - right under the military uniforms - , among other objects that were delivered. The Matrícula was originally produced by anonymous Aztec scribes, and then reproduced in the 1520s by anonymous Spanish scribes. 19 Aztec punishments were often cruel events that involved ritualistic human sacrifice and were designed to instill absolute fear among subjects. With a level of public punishment so high, communities were terrified of ever annoying or upsetting Aztec authorities in any way, which in the long term made subjects produce “the bare minimum and expected” and nothing else for fear of being punished. This system, which was based on fear, uncertainty and a lack of transparency, instilled paralysis on the vassals of the Aztec Empire. In the long run, subjects stopped trying to study new ways of crafting goods for fear of annoying or upsetting their Aztec overlords, which might have ultimately meant that new, innovative production techniques that could have led to economic growth, productivity increases or even entirely new economic activities were never discovered. Innovation and investigation were actively punished under this system, which forcefully led to economic growth levels that, while initially high, were likely not as high as they could potentially have been. The Aztec tributary system was, in sum, highly inconsistent, completely opaque and something that ended up becoming an extremely extractive institution that actively punished innovation and limited economic growth; modern economists agree that extractive institutions are big inhibitors of economic prosperity in the long run; therefore, the relevance of the long-termm economic harm done by some of the Aztecs’ institutions should not be understated. The Aztec trade network was not perfect either. While it allowed many groups to engage with more distant customers and sellers and to obtain access to a bigger variety of goods and services, it also often acted as a de facto customs union against products from the outside. For example, trade with the Maya groups in the Yucatán Peninsula, while mostly allowed – though not always, as the Aztecs would periodically raid Maya lands to undermine them and force them to pay tribute, weakening those groups and their militaries and making them dependable on commerce, which ensured the Aztec Empire would always have favorable trading conditions when engaging with them through trade - was severely controlled by Aztec political elites. These elites often demanded free tribute from Maya merchants, effectively monopolizing key resources and ensuring that only themselves and their immediate allies had access to them, and that regular commoners could never be able to acquire the highest-quality items available within the trade network, even if they had the money or the resources to acquire them. It can thus be said that the Aztec trade network limited trade with outsider groups and ended up becoming a protectionist racket that only benefited the Aztec elites politically while limiting the trading and economic possibilities of commoners and merchants. Trade limitations with the outside were designed to enhance Aztec political power and to benefit Aztec oligarchs and 20 politically-connected elites. As a hypothetical example, a merchant that sold 50% of all his products to the Maya and sold the other half inside the Aztec trade network was less dependant on Aztec elites and had less of an incentive to comply with Aztec authorities than a merchant who sold 80 or 90% of all his products to the Aztecs. Outward trade restrictions were designed and introduced to make the merchant class dependent on the Aztec political elite. Modern economists agree that protectionist measures end up limiting economic growth for everybody involved in the long term, meaning that these trade restrictions were another way Aztec political elites sacrificed potentially higher economic growth rates in order to enhance their own power and political authority. While barter was common in the Aztec trade network, at various points between 1325 and 1521 three kinds of items were used as a form of currency to facilitate trade; cacao beans, cuachtli – white-colored, cotton-made blankets that generally held a value equivalent to between 65 and 100 cacao beans depending on the quality of their fabric – and what Mexican historians have generally called “axe coins” (“monedas hacha”), small pieces of metal in the form of axes made out of bronze alloys. Whether barter or one, two or all of those three currencies would be accepted when performing transactions depended generally on the specific trader one interacted with, with some merchants being open to bartering while other preferred using different forms of currency. Aztec elites never established a unitary standard or any obligations when it came to the use of barter or currency for trade. The Aztecs’ dominance over surrounding groups provided them with a plentiful labor force. The Aztec economy was organized through the calpulli, a community of families assigned specific plots of land to cultivate, ensuring that production was distributed among the families, the State, the priests, and the head of the calpulli. Additionally, the collection of tribute enabled the Aztecs to accumulate an abundance of raw materials and goods. Another key factor in their prosperity was the use of advanced agricultural and land management techniques – in fact, Tenochtitlan was constructed on an island in the middle of Lake Texcoco - . The Aztecs employed a farming technique called chinampas, which involved creating arable land on water. To do this, they drove four large wooden posts into the marshy ground, forming a rectangular shape. They filled the area with branches and grasses, then covered it with mud. The posts took root, securing the soil at the edges. The chinampa absorbed water from the lake, and the mud acted as a natural fertilizer, allowing peasants to harvest multiple times a year. The Aztecs also built agricultural terraces in the mountains and used both plant-based and animal-based fertilizers. 21 The economy was generally prosperous, even if not as prosperous as it could have been based on the facts exposed a few paragraphs back. It is estimated that Aztec society was either the second richest society in all of the Americas before 1492 - with it being only slightly poorer than that of the Inca in Peru – or the absolute richest one. However, GDP per capita estimations for either of these two civilizations are incredibly difficult to perform since neither of them conducted substantial census reports, meaning it is impossible to estimate the total population figures of either empire at any point in their history with a high degree of realism or precision. Figure 6. A map of the Aztec empire and borderline states in the year 1519 right before the arrival of the Spanish in the area. Map designed by Wikimedia Commons contributor Giggette. It is important to highlight the various economic activities the Aztecs developed after settling in the Valley of Mexico. Other groups had already engaged in some of these activities before the Aztecs, but the Pax Azteca allowed many of these activities to reach new levels of productivity and sophistication (Fisher, J. R., 1997). The Aztec Empire developed metallurgy to a high degree of sophistication – though it never surpassed Europe in this regard - . The Aztecs were able to work tin, copper, gold, silver, obsidian and bronze amongst other materials, but iron working was never independently 22 discovered in the Americas before the arrival of the Europeans. Copper and gold appear in nature in their pure form and the Aztecs were actually skilled at working those; however, iron does not appear in its pure form on Earth, except in a handful of meteorites. All other iron must be smelted from ore, and the heat needed to do so is high enough so that it does not easily come about by accident. The Aztecs – along with every other civilization in the Americas – never reached a level of development high enough where they were able to craft industrial ovens that could reach the temperatures necessary to work iron. Steel is an alloy formed by the mixing of iron and carbon; since the Aztecs were never able to work iron, they were never able to fabricate steel either. When the Spanish arrived in 1519, their steel weapons were a noticeable advantage over those of the Aztecs, which were made out of bronze, copper or obsidian, all weaker materials than steel. Aztec metallurgy was the most advanced in the Americas, but it could not hold a candle to what Europeans had been able to fabricate by the year 1492. Mining – at a rather basic level, admittedly – ended up becoming an important economic activity for the Aztecs. Obsidian, a type of volcanic glass, was sourced from the Sierra Madre Sur and Sierra Madre Occidental mountain ranges in Southern Mexico and commonly used for the crafting of both weapons and everyday items like ceremonial knives, plates, work tools and jewelry. One notable mining area for obsidian was the volcanic region of Zináparo in what is now the State of Michoacán, where the process of obtaining the stone in pre-Hispanic times has been extensively studied. The most frequent method of extraction was surface mining, which was relatively simple. However, it was also common to mine underground, though only at a rather shallow level. Recent research on old mining sites in Southern Mexico reveals that underground mining typically involved the creation of horizontal galleries primarily built along sloped terrain. Larger chambers were also excavated, and while it is not confirmed, there may have been some deeper shafts that are now covered. It is important to keep in mind though, that the mining techniques of the Aztecs were not as advanced as that of European nations. Textile work in the Aztec Empire had among its main products the manufacturing of cotton fabrics and maguey fiber. The vast majority of pre-Hispanic fabrics were made with fibers of plant origin. Typically, cotton - either white or brown - , was used to make soft garments that were later widely distribution across Aztec-controlled territories. Henequen - Agave fourcroydes - , from the Yucatan Peninsula, the ixtle – a kind of vegetal fiber extracted from maguey from regions such as those that today constitute the states of Hidalgo, Tlaxcala and the State of Mexico - and the sweet hesper palm – Brahea dulcis – were widely distributed and 23 commonly used throughout the empire for the confection of hard garments. Sometimes however, feathers and fur or skin of jaguars, rabbits or hares were also added to fabrics as ornamental elements. The pre-Hispanic processes used for weaving are still applied by many indigenous peoples in Mexico today. The tool commonly used for weaving was the waist loom (iquitihualoni) - a horizontal loom so called because one end of it is placed on the waist while the other hangs from a tree, a column or some other fixed point - continues to be used abundantly by Mexican indigenous peoples today. Women were generally expected to assume the role of weavers from a young age, as indicated in the ceremonies dedicated to the birth of girls, in which they would be presented with the utensils necessary for weaving. From the age of four, according to the Mendoza Codex, girls began to learn how to spin using a spindle - malacatl - , and from the age of 14 they were taught how to weave with a loom and a stick – tzotzopaztli - . Feather work was another important economic activity; according to Spanish historian Bernardino de Sahagún, the first goods to be traded by the Pochteca guild, during the reign of the first tlatoani – the title the leaders of the Aztecs enjoyed, similar to emperor or tsar - of Mexico-Tlatelolco, Cuacuauhpitzáhuac, were feathers from birds such as red and blue parrots. At the time of the second or third tlatoani, Tlacatéotl, quetzal feathers also began to be traded, along with cotton clothing and turquoise and jadeite stones. Although this industry seems to have its origins in the Mayan civilization, whose merchants had already been trading in feathers since the 4th century in regions of the coasts of the Gulf of Mexico and Oaxaca, Aztec feather work reached its peak during the reign of the emperor. Ahuízotl, in the 15th century, since its vast conquests brought a variety of exotic feathers from various parts of Mesoamerica. In fact, one of the main motivations of the Aztec Empire to invade the distant fiefdoms of Tehuantepec, Miahuatlán and others in the region was to obtain their riches in feathers, since Aztec merchants traveled to these places every year to obtain these treasures by trading. " As stated previously, these economic activities and others made the Aztec Empire a powerful economy, especially for its geographical context. Spanish conquistador Hernán Cortés was so impressed by the central market of Tenochtitlan that he wrote King Charles I of Spain about it in the following terms: “There is one square twice as large as that of the city of Salamanca, surrounded by porticoes, where are daily assembled more than sixty thousand souls, engaged in buying, and selling; and where are found all kinds of merchandise that the world affords, embracing the necessaries of life, as for instance articles 24 of food, as well as jewels of gold and silver, lead, brass, copper, tin, precious stones, bones, shells, snails, and feathers. There are also exposed for sale wrought and unwrought stone, bricks burnt and unburnt, timber hewn and unhewn, of different sorts. There is a street for game, where every variety of birds found in the country are sold, as fowls, partridges, quails, wild ducks, fly-catchers, widgeons, turtledoves, pigeons, reedbirds, parrots, sparrows, eagles, hawks, owls, and kestrels they sell likewise the skins of some birds of prey, with their feathers, head, beak, and claws. There are also sold rabbits, hares, deer, and little dogs, which are raised for eating and castrated. There is also an herb street, where may be obtained all sorts of roots and medicinal herbs that the country affords. There are apothecaries' shops, where prepared medicines, liquids, ointments, and plasters are sold; barbers' shops, where they wash and shave the head; and restaurateurs, that furnish food and drink at a certain price. There is also a class of men like those called in Castile porters, for carrying burdens. Wood and coals are seen in abundance, and braziers of earthenware for burning coals; mats of various kinds for beds, others of a lighter sort for seats, and for balls and bedrooms. There are all kinds of green vegetables, especially onions, leeks, garlic, watercresses, nasturtium, borage, sorrel, artichokes, and golden thistle; fruits also of numerous descriptions, amongst which are cherries and plums, similar to those in Spain; honey and wax from bees, and from the stalks of maize, which are as sweet as the sugar-cane; honey is also extracted from the plant called maguey, which is superior to sweet or new wine; from the same plant they extract sugar and wine, which they also sell. Different kinds of cotton thread of all colors in skeins are exposed for sale in one quarter of the market, which has the appearance of the silk-market at Granada, although the former is supplied more abundantly. Painters' colors, as numerous as can be found in Spain, and as fine shades; deerskins dressed and undressed, dyed different colors; earthenware of a large size and excellent quality; large and small jars, jugs, pots, bricks, and an endless variety of vessels, all made of fine clay, and all or most of them glazed and painted; maize, or Indian corn, in the grain and in the form of bread, preferred in the grain for its flavor to that of the other islands and terra-firma; pâtés of birds and fish; 25 great quantities of fish, fresh, salt, cooked and uncooked ; the eggs of hens, geese, and of all the other birds I have mentioned, in great abundance, and cakes made of eggs.” Figure 7. A detailed miniature model of an Aztec market in Southern Mexico on display at the Field Museum of Natural History in Chicago. Photograph taken by Joe Ravi. As described, the economy of Southern Mexico was highly complex for its time, featuring organized markets, tribute systems, specialized labor and all the other elements of sophistication previously mentioned; on the other hand, the economic systems found in Aridoamerica were much simpler and poorer. In the arid and semi-arid regions to the north of the Valley of Mexico, environmental constraints limited agricultural development, leading to more nomadic or semi-nomadic lifestyles and subsistence economies based almost entirely on the hunting of small animals and the gathering of some small plants. These societies lacked the centralized state structures and intricate trade networks typical of their southern counterparts. In sum, it is fair to say that the economy of Aridoamerica was centuries behind that of Southern Mexico before the year 1519. 32 share - . This extractive model contributed to persistent economic inequality and underdevelopment in Southern Mexico, with effects that lasted long after the system was formally abolished. It is important to remember though that, as has been mentioned already, the Spanish Crown did try to end or limit the encomienda system at various points in time and did promote laws that tried to protect the rights of the natives; however and as stated before, many times these laws were simply ignored by officials and military commanders on the ground. In the 1535, the Mexico City Coin Mint - Casa de la Moneda - was established thanks to the silver and other precious metals discovered in Zacatecas. This coin mint quickly became one of the most important in the world, with Spanish coins being used for commerce all throughout the globe – Spanish coins would be known as Spanish Dollars in the English-speaking world - . Spain’s large reserves of gold and other precious metals gave international traders and financiers good reasons to use Spanish coins. By the year 1783, when the US really started being fully independent from the United Kingdom, American authorities started using the Spanish real de a 8 - the coin numbering pattern was changed to an octal system in the 18th century, so the weight of silver was known as real de a 8 – as the standard, everyday-use coin in the country while they got their own coin fabrication system up and running (McCusker, J. J., 1992). These coins came mostly from this very mint in Mexico City. The enormous flow of metals from the Americas – mainly Zacatecas in Mexico and Potosí in Bolivia, though Bolivia was known at the time as the province of Alto Perú inside the Viceroyalty of Peru – to Spain caused a spike in inflation, and inflation in Spain remained generally higher than in other European countries during the 16th and 17th centuries. Spain became the largest trading country in the world, and New Spain was a large part of the why of it. The Manila Galleon, also called the Nao de China or the Acapulco Galleon, was the name given to a series of ships that crossed the Pacific Ocean once or twice a year between Manila – Philippines - and some of the the ports of New Spain in the Americas, mainly Acapulco – in Guerrero - , Bahía de Banderas - Nayarit -, San Blas – Nayarit - and Cabo San Lucas - Baja California Sur - . The name of the galleon varied depending on the city of destination. From 1565 to 1815, more than 300 voyages were undertaken by these galleons. Thus, New Spain became the biggest trade link between Asia and the Americas, bringing Chinese silk, porcelain, and spices to the Americas in exchange for Mexican silver extracted in Zacatecas. Through New Spain many goods from Asia got to Spain and then Europe at large. 33 At the end of the 16th century, the growing of the power of the Spanish Crown within New Spain, coupled with a gradual decrease in the status and power of the encomenderos, a new, somewhat kinder form of use of indigenous labor was introduced by the Spanish Crown: the repartimiento de indios (“distribution of Indians”), which became the main and most lasting mechanism of domination of the indigenous peoples of southern New Spain. In accordance with the provisions of two royal decrees from April 21, 1574 and November 24, 1601, the repartimiento was a labor system that revolved around the allocation of indigenous labor for the benefit of the Spanish. In exchange for a – rather negligible many times – remuneration, this new system periodically forced the indigenous people of Southern Mexico to work seasonally, generally eight days a month, in the houses and estates of the local Spanish elites. Once the season was over, the indios had to return to their respective reductions, so that they could work on their own tasks or collect the tribute they had to pay to the Crown or to the encomenderos – some former encomenderos kept acting as such outside the law and in spite of their gradual power decline, effectively becoming something similar to modern-day mobsters - , and they were replaced in the distribution chain by another group of Indigenous people. The system was based on three principles: coercion on the Indigenous people – though to a lesser extent that under the encomienda system - , weekly rotation of workers, and forced remuneration, in accordance with a rate established by royal authorities. (Gibson, 1964) Every Sunday in New Spain, between 2% and 4% of the indigenous men aged 16 to 60 - in certain periods, this percentage increased to 8 or 10%, especially during the dobla or “doubling” - , and excluding the town mayors and the sick, were required to gather in the plaza or another public area within their respective settlement (Haskett, R. S., 1991). They awaited the arrival of the overseers from the Spanish estates in the surrounding areas or the mine foremen, who would take the workers the following day according to the quotas established in a registry created by the president of the local Audiencia Real - . It was the president who granted Spanish landowners the right to acquire indigenous labor, after the payment of half a silver real for each worker to the Crown. The employer was also obligated to pay the Indigenous workers for travel time and one real for each day worked, as well as provide the necessary tools for the job. The Indigenous mayors were responsible for ensuring compliance with the system's rules, which were overseen by Spanish jueces de repartimiento – “distribution judges” - . In many cases though – and not unlike with the previous encomienda system - , the rules that affected the exploitation of Indigenous people under the repartimiento system were simply ignored. What many hacienda owners would do is bribe the presidents of the Audiencia or 34 distribution judges – or both – so that they would earn more money than going the legal way but the hacienda owner would still be spending less money in net terms by either being allowed to employ a bigger-than-legally-permitted amount of people, having them work for more hours or other mechanisms. The mita system – a legal regime that applied to mining-heavy regions of the Spanish Empire; mainly Zacatecas and Potosí – meant indigenous miners were compelled to work in mines for a set period each year, and in return, they theoretically received wages and provisions, though this system was brutal and often led to high mortality rates – and of course, miners were often unpaid under threats of death and punishment (Haskett, R. S., 1991) - . In the 1570s, a new, massive smallpox outbreak severely reduced the labor force available in New Spain, leading to shifts in economic production and a greater reliance on African slaves. While not many Africans were moved to New Spain in comparison to the coastal towns of New Granada, the Portuguese colony of Brazil or the British Thirteen Colonies, a modestly-sized African-Mexican community ended up establishing itself in the coasts of Guerrero and western Oaxaca. New Spain’s economic system was not one that infused economic freedom. A series of antigrowth institutions that limited economic freedom were established by the Spanish Crown during the 16th century. The Casa de Contratación - House of Trade - , established in 1503, played a crucial role in limiting economic freedom and growth in New Spain and other Spanish colonies. Its primary purpose was to regulate and control all trade between Spain and its overseas colonies, but the way it operated severely restricted economic opportunities for colonists and stifled broader economic development; the Casa de Contratación ended up effectively monopolizing trade between New Spain and the rest of the world. Some specific goods coming out of the colonies were required to pass through Spain before reaching other parts of Europe or other colonies, effectively blocking colonists from engaging in direct trade with foreign nations or, sometimes, even other Spanish colonies. This reduced competition and kept prices high, making goods more expensive for colonists and limiting their ability to trade freely in the international marketplace (Hernández, R., 2016). . The Manila Galleons did not have to pass through Spain first. They were directly managed by the Spanish Crown but allowed a more flexible route between Asia and the Americas. This was in contrast to other colonial trade more tightly controlled by the Casa de Contratación, which 35 had to go through Spain - Seville or Cádiz – within a centralized, monopolized system. Other colonies, like those in the Caribbean and South America, had their trade tightly regulated by the Casa de Contratación kand could not engage in direct trade with other colonies or foreign powers. The Manila Galleon was an exception to the rule (Hernández, R., 2016). The Casa de Contratación also enforced specific trade routes, meaning that colonial ships could only travel on certain pre-approved routes between the colonies and Spain. For instance, New Spain could only send its goods to Spain via designated ports like Veracruz or Seville, and the Crown controlled who could engage in such trade (Hernández, R., 2016). This forced colonists to use approved merchants and go through bureaucratic red tape, creating inefficiencies and extra costs. These regulations limited the flexibility of traders and merchants, making it harder to seize economic opportunities that arose in other parts of the world and often making commercial voyages more expensive or longer than they could have been had the Spanish Crown allowed more freedom for traders to decide where to sail and from which ports; of course, that would have meant that the Crown could not have effectively taxed all commercial ships, meaning that long-term economic growth was artificially gutted in order to maximize Crown tax revenues. The Casa de Contratación was also responsible for collecting taxes and overseeing the flow of silver and other precious metals from the colonies. Through its system, it imposed a 20% tax on precious metal mining - the already mentioned Quinto Real or Royal Fifth- , which significantly reduced the profits available for local entrepreneurs and miners. Revenue generated from trade was funneled directly to Spain, leaving the colonies with a fraction of the profits, limiting their capacity for local economic development or reinvestment into new industries. While similar taxes did exist in Spain proper, the Quinto Real only applied to the colonies. Colonists were not allowed to operate independently outside of the official trade system controlled by the Casa de Contratación. Only approved Spanish merchants, who were often based in Spain, could legally trade with the colonies (Hernández, R., 2016). This stifled the development of a local, self-sustaining market where colonists could trade freely with each other, entrepreneurs could invest in local industries, and new businesses could emerge. Colonial entrepreneurial activity was heavily constrained by the central authority of the Casa de Contratación, meaning that only those who were well-connected with the Spanish political elite could participate in the most lucrative trades. Since the Crown controlled what could be produced and traded, there was little room for innovation in New Spain’s economy. For example, agriculture and mining were regulated in a way that made it difficult for colonists to diversify production or shift to new industries without explicit Crown approval. This limited economic diversification led to an over-reliance on 36 mining, which eventually caused economic stagnation when silver mining became less profitable once the silver mines in Zacatecas started depleting in the 1600s. With trade and financial decisions in the hands of a central authority in Spain, economic development was largely dependent on what the Spanish Crown deemed profitable. Colonists had little influence over policies that directly impacted their economic activities, such as tariffs, restrictions on manufacturing, or regulations on the distribution of goods. This system slowed down economic growth because the focus was always on extracting wealth for the Crown, not fostering self-sustaining, diversified local economies. Mining, a very relevant economic activity in New Spain, was completely controlled by the State, with no possibility of private companies being allowed to own mines or control physical access to them at all. Only State-approved miners could work the mines – through the already mentioned Mita system - , which coupled the Quinto Real, hurt the ability of local entrepreneurs to profit freely from the region’s natural resources. Additionally, the gremios - guilds - regulated trades and crafts in New Spain, controlling who could engage in specific professions like blacksmithing, carpentry, or textiles. These guilds limited competition and freedom of entry into various industries, essentially controlling who could practice certain trades and at what prices, maintaining a system that favored established elites and people who were politically connected to them and not necessarily the most prepared or promising of apprentices. To sum up, in can be said that New Spain’s economic system was firmly rooted in mercantilism, characterized by strict governmental control over trade and production, limiting economic freedoms and favoring Spanish interests. Every time the Spanish Crown had to make a choice between allowing higher levels of economic freedom and establishing pro-growth policies in an economic sector or trying to exert high levels of control over such economic sector in order to maximize tax revenues and royal control over it, the Crown always ended up on the latter side of things. This anti-liberal framework was strongest in the southern heart of the colony, particularly in Mexico City and its outskirts, where Spanish authority was most concentrated. However, as one moved further north, the Spanish grip on land and economic affairs waned, leading to a decline in the enforcement of mercantilist policies. This relative autonomy allowed Northern Mexico to develop a more liberal, market-oriented economy, driven by local enterprise and trade networks less constrained by colonial regulations. Consequently, the economic landscape of Northern Mexico contrasted sharply with that of the south of the colony, where mercantilist restrictions remained more rigid and pervasive. For example, it is known that 37 extractive institutions such as the encomienda system – and its subsequent variations - , so present and relevant in Southern Mexico, was simply not a thing in northern regions such as Sonora (Brading, D. A). ASPECT SOUTHERN MEXICO NORTHERN MEXICO Population density High, with dense urban and rural indigenous populations Low, with sparse, scattered indigenous and settler populations; big proportion of Spanish settlers Indigenous societies Centralized, sedentary civilizations under the direct, strong rule of the viceroyalty – for example, the Zapotecs and the Tlaxcaltecs - Nomadic or semi-nomadic groups with effective independence from the viceroyalty, like the Apache and the Comanche Economy Heavily mercantilistic and state-controlled; based on tribute, agriculture, and gremio-controlled activities; the Catholic Church was a powerful institution that promoted certain economic activities More informal and flexible, focusing on cattle ranching, mining and, later on, trade – even if illegal - with the Thirteen Colonies/US; very loosely regulated, with elements of economic liberalism and autonomy Political control of the land Strong imperial presence, with strong viceroyal authorities, reales audiencias, local cabildos and jueces de repartimiento Weak imperial control, land only partly governed via military outposts, missions, local militias and the dragones de cuera Church presence Very strong church presence and authority; land dominated by powerful religious institutions: dioceses, monasteries, cathedrals, etc. Very weak presence of missionary orders – mainly the Jesuits and the Franciscans - in remote missions and with little real authority 38 Urban development Highly urbanized, with Mexico City, Puebla, Oaxaca and other big cities as major colonial centers Few urban centers; mostly presidios, mining camps, or religious mission towns Education and culture Big universities, printing presses, elite schools, theaters Scarce formal education; religious and military instruction were more common; very little cultural production Military presence Military presence secondary to administrative and ecclesiastical authority Military crucial and frequently the only viceroyal presence; frequent conflicts with indigenous groups; frontier defense a critical task Social hierarchy Society was very strongly structured and hierarchical; strong caste system; Spanish and creole elites, indigenous labor Social hierarchies were more fluid and less clear; social roles blurred by necessity; survival and landownership more immediately relevant to settlers; big relative presence of Spanish traders, entrepreneurs and liberalminded people Availability of labor force Very high due to the presence of big indigenous populations; kidnapping and enslaving of indigenous peoples common even if illegal; when paid, indigenous laborers received very low wages Very low due to the low population numbers and the hostility of local indigenous groups like the Apache; in order to hire labor, it one had to bring workers from the south, enticing them with good salaries and conditions; encomienda system effectively non-existent Figure 8. A table serves as a kind of summary of the economic and social differences between Southern Mexico and Southern Mexico during the days of the Habsburg-controlled Viceroyalty of New Spain. Source: own creation. 39 CHAPTER IV – ECONOMIC DEVELOPMENT IN THE BRITISH THIRTEEN COLONIES: A COMPARISON WITH ARIDOAMERICA AND NEW SPAIN At around the same time the Viceroyalty of New Spain was getting established, the British Thirteen Colonies were doing the same to its northeast. The British Thirteen Colonies were more economically liberal and free than New Spain. British colonial systems allowed for greater economic autonomy, private enterprise and market-driven economies, while New Spain was controlled through a more centralized, extraction-oriented system designed to benefit the Spanish Crown and politically-connected elites. In the Thirteen Colonies, there was a strong emphasis on private property rights (Jones, A. H., 1984). Land was more freely available for colonists to own, cultivate and use for personal or business purposes. For example, the system of headrights allowed settlers to acquire land in exchange for paying their passage to the colonies. Landowners had the freedom to farm, trade or sell their land as they saw fit, encouraging investment and economic growth. In New Spain, land ownership was largely controlled by the Crown and the Church, which meants that land distribution was often based on political considerations rather than economic rationale or business viability. Indigenous peoples were frequently denied property rights and subjected to forced labor, despite such practices being formally illegal. The British colonies had a relatively free market economy, and colonists could engage in direct trade with other colonies, Britain, and even some foreign nations - depending on the time period - . While there were British Navigation Acts that regulated trade, the colonies still enjoyed the flexibility to create their own economic opportunities, especially as the mostly mercantilist system the British had initially established up started to weaken over time. In contrast, the Spanish Crown controlled all trade between its colonies and the rest of the world through the Casa de Contratación. Some specific goods from the colonies had to pass through Spain before reaching other parts of the empire so they could get taxed in Seville or Cádiz, and colonial trade was heavily restricted. Colonists could not freely trade with other colonies or foreign nations, which severely limited economic development and market competition. This would change somewhat with the switch in regime to the Bourbon dynasty - that will be discussed in a later chapter - , however. The Thirteen Colonies generally had more limited levels of government intervention in their day-to-day economic activities. Colonial governments were often relatively hands-off, and there was a focus on allowing individuals and businesses to pursue profits independently. Colonists could establish businesses, engage in agriculture and trade without facing constant regulation from the British Crown (Egnal, M., 1975). The Novohispanic colonial system, on the 40 other hand, was highly centralized and regulated. The Crown controlled most economic activities, including mining, agriculture, and trade. The British Thirteen Colonies had greater access to private investment and capital than New Spain did. Merchants and landowners could access financial resources through local banks, private investors, and even credit from Britain. This access to capital and credit allowed for the growth of businesses and the development of infrastructure, such as roads, ports, and cities (Egnal, M., 1975). In New Spain, access to capital was controlled by the Spanish Crown and politically-connected elites. Investment was focused on extracting resources – particularly silver - for the State and local entrepreneurs had limited access to financial resources. The focus on mining and the Crown’s extraction of wealth ultimately led to increased Crown tax revenues at the cost of long-term economic stagnation in many sectors. Additionally, it is important to mention that the Thirteen Colonies had a much more radical and violent way of interacting with natives. In the Thirteen Colonies, most natives were mostly exterminated en masse (Lange, M., Mahoney, J., & vom Hau, M., 2006); in New Spain, where the native population was bigger – Tenochtitlan had around 200,000 or 300,000 inhabitants by 1492 and no permanent settlement to the north of the Valley of Mexico exceeded the 20,000 figure; Cahokia, located near modern-day Missouri, had an estimated population of approximately 15,000 people around the same time (Lange, M., Mahoney, J., & vom Hau, M., 2006) and is usually considered to have been the biggest settlement to the north of the Valley of Mexico - , extermination would have been much harder to achieve even if the Spanish Crown had wanted to resort to it, and it in fact did not. The Spanish Crown tried to avoid the extermination of natives wherever possible, and the vast majority of the deaths of natives in the Spanish Americas were the product of disease. Conversely, the Crown promoted a policy of mestizaje – miscegenation - , legally allowing natives and Spaniards to marry and have their mixed-race sons and daughters considered legal heirs. In fact, the Crown promoted between the years of 1803 and 1806 the Real Expedición Filantrópica de la Vacuna – Royal Philanthropic Vaccine Expedition – to cure natives struck by smallpox. Since the Indigenous population was much lower in the Thirteen Colonies – because there were fewer of them there and the few that were there were rapidly annihilated - , exploiting Indigenous peoples in economic activities such as ranching or mining was not possible in places like New York or Pennsylvania (Jones, A. H., 1984). In southern New Spain, the quickest way for someone to get rich was to establish connections with political elites, use those connections to get some land and to reach the local juez de 41 repartimiento, bribe him so that he would look the other way when they underpaid their indigenous workers - or kidnapped them to work for them illegally - , and then set up a big hacienda. Something like this was impossible in the Thirteen Colonies: privately-controlled land was much more common there (Jones, A. H., 1984), meaning it was not easy to use bribery or political connections to acquire a piece of land, and there were no large amounts of natives to kidnap or exploit, meaning that one had to actually pay somewhat fair wages to people if they wanted to have somebody work for them – supply of manpower was much lower than in New Spain but demand was similarly high; therefore, the price to pay to employ somebody was higher as the equilibrium price of manpower was higher - . It is sensible to argue then that, generally speaking, the economy of the Thirteen Colonies was much freer and pro-growth than that of New Spain (Lange, M., Mahoney, J., & vom Hau, M., 2006); it is also obvious that there was a larger presence of extractive institutions in New Spain than in the Thirteen Colonies, where institutions – while not perfect by any means – were generally less predatory towards economic growth and entrepreneurship. Figure 9. A map of the Thirteen Colonies. Maine was originally part of the colony of Massachusetts. Delaware was not its own colony but part of Pennsylvania; when the revolution began though, Delaware declared independence - separately from Pennsylvania - along with the other 12 and is thus counted among the 13 original states of the United States. Source: Encyclopædia Britannica Kids. 48 Figures 11, 12 and 13. Mahoney designs three tables that illustrate the relative development rankings of most Hispanic American countries over the past century. These tables serve to highlight the remarkable consistency in the hierarchical positions occupied by each nation within the region. Mahoney finds this phenomenon of countries each developing individually but still occupying almost the exact same positions relative to each other within the regional developmental ranking for decades very interesting and worthy of further study. Since Mahoney is a researcher of Hispanic American developmental history, he wonders if this phenomenon might be related to Spanish colonialism and the way Spain colonized each of the observed countries. Mahoney says he looked for a temporal “base point” to use as a kind of anchor or reference point, a date forward from which it would be useful to track the developmental history of the region. Mahoney ends up setting the year 1650 as this base point. Mahoney explains that by the year 1650 the functions and roles and functions of each Spanish colony within the empire had been fully established, meaning a territory would by then have been de facto positioned into one of three colonial groups: colonial centers, colonial semiperipheries and colonial peripheries. It was around 1650 when the Spanish administration in the Americas had fully consolidated. The year 1650 comes decades after the 49 conquest-and-settlement period of the 15th and 16th centuries, and 50 years before the economic reforms promoted by the Bourbonic dynasty in the early 1700s. Mahoney argues that by the year 1650 colonial Spanish institutions in the Americas had developed to the point where it might be sensible for researchers to theorize that Spanish colonial policies critically influenced future developmental stories in Hispanic America. Mahoney classifies the studied Hispanic American territories under the modern states that exist today in the region – so, for example, he divides Peru into Peru and Bolivia even though Bolivia was in 1650 a region of Peru called Alto Perú and not an entity at all independent of Peru - . Colonial centers were, according to Mahoney, the two most important regions in the Spanish Empire in the Americas and the areas where the bulk of colonial administrators and civil servants lived. These were the locations where Spanish control of the land was strongest and most direct. Colonial semiperipheries where regions of the empire where Spanish control and authority was relatively weak but still somewhat present. These areas were less important to the Spanish crown than colonial centers but sill constituted regions of some relative relevance. Colonial peripheries, however, were the absolute “backwater regions” of the empire. These places held very little relevance to the crown and were not very economically productive in absolute terms; very few – if any – colonial administrators and civil servants lived in these locations. Actual, effective imperial control of the land was mostly nominal in these areas. Mahoney produces a table – Figure 14 – classifying the different studied territories into colonial centers, colonial semiperipheries and colonial peripheries in the year 1650: Figure 14. Mahoney classifies the different studied Hispanic American countries into three groups based on their role within the Spanish Empire in the 1650s. 50 Using economic and social data for the studied nations from Thorp (1998) and Jaggers and Gurr (1996), Mahoney’s Table 4 – Figure 15 in this essay - calculates the correlation coefficients between the level of colonial penetration of a colony – whether a colony was a colonial center, a colonial semiperiphery or a colonial periphery – and the previously explained levels of economic development - measured using GDP per capita - , social development – using again, a variable taking into account literacy rates and life expectancy – and democracy – using, again, “democracy scores” assigned by Jaggers and Gurr (1996) - . Figure 15. Mahoney designs a table that shows Spearman correlation coefficients between colonial penetration and the three previously mentioned development indicators across former Spanish colonies from 1900 to 1990. The strong and statistically significant negative correlations, especially for social development – like −0.72 in 1900 — indicate that countries more deeply penetrated by colonial rule - colonial centers - consistently rank lower in development outcomes than those with lighter colonial presence - colonial semiperipheries and colonial peripheries - . This supports Mahoney’s argument that qualitative differences in colonial experience – and not just colonialism per se - help explain persistent inequalities in postcolonial development. Mahoney starts to realize that those Hispanic American regions of the Spanish Empire where imperial authority and control of the land were strongest are now, in modern times, some of the poorest and least developed of the area, which would have been surprising to someone living in the 1650s: 51 “At the height of the colonial empire in the mid-17th century, one might not have expected that marginal territories such as modern Argentina, Uruguay, and Costa Rica would become the region’s most developed countries. More likely, one would have thought that more prosperous areas such as modern Peru, Bolivia, and Ecuador would remain the wealthiest regions.” Mahoney explains that a “great reversal” in development seems to have ocurred in Hispanic America after the Bourbons gained control of the Spanish crown in the early 1700s and started implementing profound economic reforms for all of the 18th century. These reforms, driven by Spain’s declining power and the rise of global capitalism, liberalized colonial trade and administration. As trade routes expanded and tariffs were reduced, peripheral colonies like Venezuela, Chile, and the Río de la Plata region experienced rapid economic and demographic growth. Buenos Aires and Caracas emerged as important ports, while Argentina and Uruguay exploited agricultural and livestock potential previously untapped. Even landlocked Paraguay saw economic gains through yerba mate production. Meanwhile, older centers such as Colombia, Ecuador, Peru, and Bolivia stagnated or declined. Colombia lost its trade prominence, Ecuador’s wool industry collapsed under foreign competition, and Peru’s influence diminished as silver production faltered. By the early 19th century, Mexico (especially its southern region), although still wealthy, began a prolonged economic decline, as did Peru and Bolivia after independence. In contrast, countries like Costa Rica and Paraguay improved their relative standing during this period. By around 1850, the region had settled into a new developmental hierarchy: the former peripheries had often outpaced the old cores. This reversal was shaped by colonial liberalization, integration into global markets, and political independence, although the reasons why some countries succeeded more than others remain open to debate. The author of this essay proposes calling this great reversal Mahoney refers to the Bourbonic Developmental Switch for purposes of clarity and brevity in the future, as referring to such a theory with a single, clear name moving forward will make it easier for historians, economists and sociologists to reference it with precision and to further study it. Like Mahoney explains, this Bourbonic Developmental Switch was likely made possible by a dramatic reconfiguration of imperial economic policy in the 18th century. Under the Habsburgs, the Spanish Empire operated a strict, mercantilistic system that created monopolistic trade channels and favored certain cities and regions as mandatory hubs for 52 commerce. Southern Mexico, with big ports like Veracruz or Acapulco and major non-coastal cities like Mexico City or Puebla, was deeply embedded in this framework. Goods entering and leaving the empire were required to pass through specific approved administrative centers and often faced heavy tariffs, bureaucratic controls, institutional friction and corruption in the form of shakedowns and bribes – as the managers of these approved ports took advantage of their privileged position to enrich themselves outside the limits of the law - . This protected certain trade and political elites and ensured revenue for the crown, but also stifled regional economic dynamism and locked out potentially more time-efficient – and thus economically cheaper - routes and markets. The Bourbon reforms, particularly the Reglamento de Libre Comercio of 1778, sought to modernize and revitalize the empire’s economy. By lifting many internal and external trade restrictions and allowing new ports and regions to engage trade directly, the Bourbons undermined the very structure that had sustained the dominance of colonial centers like Southern Mexico and Peru. At the same time, they opened the door for some peripheral regions such as Chile, Costa Rica, Argentina or Uruguay to emerge as viable commercial alternatives. As mentioned, before the Bourbonic reforms, trade with external markets - such as Brazil or the Thirteen Colonies - was forced to pass through specific designated colonial centers. For example, commercial exchanges with Brazil had to necessarily route through Peru, and trade with the Thirteen Colonies was constrained by the need to pass through Southern Mexican ports like Veracruz, with oversight from Southern Mexican authorities. These limitations were not based on geographic efficiency or economic rationale, but rather on administrative inertia, political interests and institutional tradition. Once the Bourbon reforms lifted these restrictions, trade flows quickly adjusted to new, more time-efficient and cheaper routes. Goods could move from Buenos Aires directly to Brazil without before-hand supervision or control from Lima, and commerce with North America could be conducted through northern Mexican territories without southern Mexico acting as an intermediary or overseer. Habsburg economic and commercial legislation had, in essence, favored trade centers that were not the most optimal from a cost or time perspective, which meant that regions that were better suited for trade from a purely economic or business point of view – areas like Argentina, Uruguay, Costa Rica or Chile - were not “allowed” to experience notable economic growth until the 18th century. The Bourbonic reforms allowed these regions to finally unlock their full economic potential. 53 Now, it is clear that having been a colonial periphery did not automatically guarantee high degrees of long-term development; in Mahoney’s Table 5 – Figure 14 in this essay – it can be seen that some colonial peripheries - like Honduras and Nicaragua – did not achieve a high degree of long-term development in spite of them being colonial peripheries. From this, Mahoney argues, it can be inferred that, while being a colonial periphery was likely a necessary or at least useful condition to achieve long-term development, some other requirements had to be met in addition. Mahoney then decides to study what conditions were necessary – as in, without them a certain developmental outcome did not occur, although these conditions just by themselves did not automatically guarantee the outcome – and sufficient – just the presence of these by themselves was enough to guarantee a certain developmental outcome - .To find out which conditions these are, Mahoney uses fuzzy-set methods. For an in-depth explanation on what fuzzy-set methods are, how they work, and how Mahoney uses them to arrive at the consistency scores about to be shown here in this chapter, readers should read this essay’s Appendix A – Instructions on how to interpret Mahoney’s consistency tables in Chapter V – page XXX - . In his Table 6 – Figure 16 - , Mahoney grants each studied territory a set of fuzzy-set scores across four possible outcomes - economically developed, economically underdeveloped, socially developed and socially underdeveloped – based on their developmental status during the 20th century. These scores can be 0,0.17., 0.33, 0.50, 0.67, 0.83 or 1.00. Again, for a more in-depth explanation, it is recommended that readers read this essay’s Appendix A. 54 Figure 16. Mahoney grants every studied colony a set of fuzzy-set scores for four possible development outcomes in the 20th century. In his Table 7, Mahoney introduces variables possibly explaining the long-term outcomes of the different Hispanic American nations studied. Mahoney includes dense indigenous population as a possibly relevant condition to study. He theorizes that dense indigenous populations might have led to regions with such a characteristic to feature racial and ethnic exclusion and that such regions might have had their development cut short during the 1700yo-1850 period. Additionally, regions with dense insigenous populations might have had problems depeloving a pro-market economic environment since indigenous people often faced institutional barriers when trying to protect their property rights, and past research has shown that failure to protect property rights can harm entrepreneurial activity and the establishment of pro-business policies. On the other hand, Mahoney theorizes, territories without dense indigenous populations may have faced fewer inter-racial conflicts and a higher degree of social cohesion, which might have been good for long-term development. Thus, Mahoney includes both the presence of dense 55 indigenous populations and the absence of such a thing as relevant plausible conditions to study in his Table 6. Secondly, Mahoney includes the condition labor-intensive estates; this studies whether a region had a significant presence of what Mahoney describes as large-scale, labor-intensive hacienda-style institutions. Mahoney points out that previous research has shown that these kinds of elements generally have negative long-term economic consequences for the regions where they are located. For starters, these estates usually relied on a poor, mostly non-resident workforce, which – quoting Mahoney here – “may have undercut local demand for manufactured products and made it unprofitable to invest in modern sectors of the economy”. Additionally, since it was healthy individuals that owned these haciendas and poor – mostly indigenous – groups those who worked in them, the whole phenomenon might have created and eternized an environment that promoted economic and social inequality. The owners of these large haciendas – who were usual very well connected politically – might in turn have pushed for anti-education and anti-liberal measures in order to keep their workforce poor, weak and reliant on them. Mahoney also explores the condition mineral/tropical exports. Mahoney understands that the mass exporting of tropical products – by this, Mahoney likely refers to items such as tobacco, sugar, coffee and cacao – and minerals – like silver or gold – offer poor economic returns and make it harder for local economies to invest in activities that are better for long-term development and the formation of capital. The condition strong liberals, Mahoney says, refer to a region containing a significant faction of intellectuals who, by the late 18th century, questioned the legitimacy of Spanish rule in the Americas and who – quoting Mahoney here – “advocated free trade and markets, a separation of church and state, and an expanded state role in promoting development”. On the other hand, strong conservatives refers to the possibility of a territory containing a significant elite of people opposed to free markets and open trade, and who favored the granting of privileges to the Catholic Church and the maintaining of extractive, protectionist or mercantilistic institutions. 56 Figure 17. Mahoney grants every studied former colony a set of fuzzy-set scores for five different potential explaining factors. Mahoney then uses fuzzy-set methods to determine what conditions are necessary and sufficient for a territory to end up in one of the considered categories – socially developed or socially underdeveloped and economically developed or economically underdeveloped. Table 8 shows the results for the consistency tests between the different conditions and outcomes studied. Again, for an in-depth analysis on what these numbers mean and how Mahoney arrived at them, it is highly recommended that readers read this essay’s Appendix A. Appendix A also includes an analysis of the conditions Mahoney’s method ended up classifying as necessary and sufficient that will be of great interest to anybody interested in developmental history. 57 64 Mexico as one single, unitary territory. It is the view of this essay’s author that this is a mistake. It is more adequate to split Mexico into two rough halves: Northern Mexico and Southern Mexico. While these two territories belong today to a unified state – the United Mexican States - , they were largely unconnected between the 16th century and the late 19th century, with Northern Mexico being a vast frontier mostly unchartered to the novohispanos living to the south of Zacatecas. The material conditions in each of the two territories were different – as shown in Figure 8 - , and the economic systems de facto established in each location were also very different, as the mercantilistic, mostly anti-liberal economic regime present in Southern Mexico was not nearly as strong in Northern Mexico. Northern Mexico was, thus, a beneficiary of the Bourbonic Developmental Switch while Southern Mexico was a victim of it. Mahoney’s model Colony Dense indigenous population Laborintensive estates Mineral/tropical exports Strong liberals Strong conservatives Colony type Mexico 1.00 1.00 1.00 1.00 1.00 Colonial center; impact of the BDS negative; victim of the BDS Proposed model Colony Dense indigenous population Laborintensive estates Mineral/tropical exports Strong liberals Strong conservatives Colony type Southern Mexico 1.00 1.00 1.00 1.00 1.00 Colonial center; impact of the BDS negative; victim of the BDS Northern Mexico 0.00 0.17 1.00 0.33 1.00 Colonial periphery; impact of the BDS positive; beneficiary of the BDS Figure 20 – The first table shows the way Mahoney fits Mexico into his theory; the second table shows the way the author of this essay would fit Mexico into Mahoney’s theory, splitting it into two rough halves. The fuzzy-set scores given to Northern Mexico by the author, while based on available qualitative historical data and information, are still subjective. Source: own creation. The way Mahoney presents it – with Mexico as unified point of study and classified as a colonial center - , all of Mexico was a critical part of the Spanish Empire, and the entire geography of the full territory was a colonial center. By classifying all of Mexico as a colonial 65 center, Mahoney sets all of Mexico – including Northern Mexico – to be a victim of the Bourbonic Developmental Switch – since it was the Spanish colonial centers that were negatively affected by the Bourbonic economic reforms starting in the early 1700s – as a victim of the Bourbonic Developmental Switch when, in reality, it is very likely that Southern Mexico was a victim of the Bourbonic Developmental Switch while Northern Mexico was a beneficiary of it. Mahoney’s classification of Mexico is a simplification that overlooks the profound regional variation within viceroyal Mexico. As explained, a closer reading of both empirical evidence and Mahoney’s own theoretical apparatus reveals a critical need to disaggregate Mexico into at least two analytical regions: Southern Mexico, which did function as a colonial center with heavy bureaucratic, ecclesiastical, and trade significance, and Northern Mexico, which was comparatively marginal in the early colonial period but gradually emerged as a dynamic frontier region. This north-south divide aligns precisely with the pattern Mahoney observes elsewhere within the Spanish Empire: a "switch” by which the economic advantages of previously privileged regions - the colonial centers - are eroded following Bourbon reforms, while peripheral regions gain ground due to the liberalization of trade and the reduction of institutional rigidities. Like Mahoney explains, this Bourbonic Developmental Switch was made possible by a dramatic reconfiguration of imperial economic policy in the 18th century. Under the Habsburgs, the Spanish Empire operated a strict, mercantilistic system that created monopolistic trade channels and favored certain cities and regions as mandatory hubs for commerce. Southern Mexico, with big ports like Veracruz or Acapulco and major non-coastal cities like Mexico City or Puebla, was deeply embedded in this framework. Goods entering and leaving the empire were required to pass through specific approved administrative centers and often faced heavy tariffs, bureaucratic controls, institutional friction and corruption in the form of shakedowns and bribes – as the managers of these approved ports took advantage of their privileged position to enrich themselves outside the limits of the law - . This protected certain trade and political elites and ensured revenue for the crown, but also stifled regional economic dynamism and locked out potentially more time-efficient – and thus economically cheaper - routes and markets. The Bourbon reforms, including the Reglamento de Libre Comercio of 1778, sought to modernize and revitalize the empire’s economy. By lifting many internal and external trade restrictions and allowing new ports and regions to engage trade directly, the Bourbons undermined the very structure that had sustained the dominance of colonial centers like Southern Mexico and Peru. At the same time, they opened the door for peripheral regions such 66 as Northern Mexico, Argentina or Uruguay to emerge as viable commercial alternatives for the first time. As mentioned, before the Bourbonic reforms, trade with external markets - such as Brazil or the Thirteen Colonies - was forced to pass through specific designated colonial centers. For example, commercial exchanges with Brazil had to route through Peru, and trade with the Thirteen Colonies was constrained by the need to pass through Southern Mexican ports like Veracruz, with oversight from Southern Mexican authorities. These limitations were not based on geographic efficiency, a desire to achieve time efficiency or economic rationale, but rather on administrative inertia, political interests and institutional tradition. Once the Bourbon reforms lifted these restrictions, trade flows quickly adjusted to new, more time-efficient and cheaper routes. Goods could move from Buenos Aires directly to Brazil without before-hand supervision or control from Lima, and commerce with North America could be conducted through northern Mexican territories without southern Mexico acting as an intermediary or overseer. Habsburg economic and commercial legislation had, in essence, favored trade centers that were not the most optimal from a cost or time perspective, which meant that regions that were better suited for trade from a purely economic or business point of view – areas like Argentina, Uruguay, Chile or Northern Mexico - were not “allowed” to experience notable economic growth until the 18th century. The Bourbonic reforms allowed these regions to finally unlock their full economic potential. Northern Mexico, with its proximity to the British Thirteen Colonies – later the United States - emerged as a new, strategic economic frontier. The liberalized trade framework allowed the region to develop more rapidly, benefiting from lower institutional friction, access to new markets, and increasing demographic and infrastructural investments. Southern Mexico, by contrast, began to lose its privileged status. Without the institutional protections it had once enjoyed, it could not compete as effectively in the new, freer commercial landscape. Its economic decline tracks closely with Mahoney’s broader findings about colonial centers, yet it is only half of the Mexican story regarding the Bourbonic Developmental Switch. Mahoney rightly recognizes Argentina as a beneficiary of the Bourbonic Developmental Switch, highlighting it as a peripheral region that flourished under Bourbonic economic liberalization. The oversight, however, lies in not recognizing a parallel transformation in Northern Mexico, which mirrors Argentina’s trajectory both in terms of timing and mechanism. By insisting on treating Mexico as a unitary case, Mahoney’s model inadvertently 67 obscures internal variation that supports his own theory. If Mexico is instead analyzed as comprising two different regions - Southern Mexico as a colonial center and Northern Mexico as a colonial periphery - then its developmental trajectory perfectly aligns with Mahoney’s Bourbonic Developmental Switch theory. Southern Mexico declined after the collapse of its trade monopolies and bureaucratic privileges, while Northern Mexico gained ground as trade barriers fell and new opportunities opened. Mahoney says that Mexico is one of two outlier cases that seem to contradict his Bourbonic Developmental Switch Theory – the other being Paraguay - : “The correlation for colonial penetration and economic development is also consistently negative, but two outliers - Mexico and Paraguay - reduce its strength. First, Mexico is the most heavily colonized country in Palmer’s index, but it performs well on economic development (though not on social development), thereby violating the inverse relationship.” Mahoney is correct here: his classification has Mexico – all of it, apparently – as a colonial center, but modern Mexico’s good economic data contradicts Mahoney: if Mexico was a colonial center, then why is Mexico now fairly wealthy for the standards of Hispanic America? Mahoney says he has an explanation: “The ability of Mexico to achieve a relatively high level of economic performance appears to be a product of the Mexican Revolution (especially the reforms of Lázaro Cárdenas) and the proximity of its northern states (where most industry is concentrated) to markets in the United States.” The problem with this is that the Mexican Revolution affected the north of the country much more than it did the south. Additionally, Mahoney admits that the good economic performance of Mexico in modern times is due to the great economic growth in Northern Mexico specifically – indeed the north of Mexico has had much higher rates of economic growth in recent decades, which has made the average economic data for all of Mexico look better than if only the south of the country was analyzed - . Mahoney thus seems to have followed this process when applying his theory to the case of Mexico: first he gave all of Mexico a set of fuzzy-set scores based exclusively on the realities of Southern Mexico – as explained previously - , then he concluded that all of Mexico was a colonial center – based, again, exclusively on southern data - and thus must necessarily have been a victim of the Bourbonic Developmental Switch; then, he analyzed the – good – economic data for Mexico nowadays to his surprise, realizing that it mostly derives from the north of the country but without choosing to modify his model in any 68 way in order to better accommodate the radical differences in economic data and colonial legacies between the two regions. To sum up, Mahoney is comparing southern fuzzy-set scores with very north-influenced modern economic data. That is where the problem lies and the reason for Mahoney’s confusion: he is effectively comparing past data from Southern Mexico with present data from Northern Mexico. Had Mahoney split Mexico into the two rough halves proposed in Figure 20, he could have compared those two sets of data with the economic data of Mexico nowadays, realizing what is somewhat clear: following Mahoney’s theoretical framework, it is highly likely that Northern Mexico was a colonial periphery that benefitted from the Bourbonic Developmental Switch, while Southern Mexico was a colonial center that was harmed by the Bourbonic Developmental Switch. With these adjustments, Mexico’s case goes from being an outlier that possibly undermines Mahoney’s theory to one of its biggest supporting pillars. This reevaluation also contributes to a broader methodological point in the study of colonial legacies and colonial development stories. Huge countries like Mexico, with complex colonial histories and vast regional disparities, cannot be reduced to single data points or study units simply because they are one state these days; rather, they must be examined at a subnational level, where the interaction of imperial policy, geography, and institutional legacy can be more accurately traced. The case of Mexico – when Mahoney’s methodology is corrected - thus not only strengthens Mahoney’s broader theory but also highlights the importance of granularity and historical nuance in comparative political economy, but only if it is acknowledged first. One might now wonder why this distinction could not also be applied to – for instance – the coastal/central regions of Colombia and the Amazonic half of the country. The answer is simple: Mahoney’s study – and its fuzzy-set methods - explains that, in order for a colonial periphery to become a beneficiary of the Bourbonic Developmental Switch, some additional requirements were likely necessary – or, at the very least, strongly useful - . It is likely that Colombia’s Amazonic region, while most likely having been a colonial periphery if Mahoney’s terminology is to be applied, simply lacked the elements that made Argentina or Northern Mexico beneficiaries of the Bourbonic Developmental Switch, like being close to major foreign markets – Brazil in the case of Argentina, the British Thirteen Colonies or the United States in Northern Mexico’s case - , a large population of liberal-minded people – see Mahoney’s Table 8 - , or simply a significant population in absolute terms. The Colombian Amazonic region is very sparsely populated, much more so than Northern Mexico ever was – as of the year 2025, around 30 million people live in Northern Mexico and only 1 million people live in the Colombian Amazon - . 69 In conclusion, the Bourbon reforms of the 18th century catalyzed a dramatic reordering of the Spanish Empire’s economic geography. By dismantling the monopolistic and protectionist trade structures established under the Habsburgs, the reforms gave rise to a Bourbonic Developmental Switch: a reversal in fortunes where colonial peripheries like northern Mexico and Argentina rose in economic significance while colonial centers like Peru and southern Mexico declined. To fully appreciate this transformation though, Mexico must be reclassified internally - recognizing the divergent paths of its northern and southern halves - and analyzed not as a singular colonial center, but as a composite case that reflects the full spectrum of imperial dynamics and postcolonial development within its borders. Once that is taken into account, it becomes clear why, following Mahoney’s theory, Northern Mexico started to diverge from Southern Mexico economically starting in the early 1700s. 70 CHAPTER VI – THE MEXICAN WAR OF INDEPENDENCE AND THE SUBSEQUENT PROCESS OF ECONOMIC DESTRUCTION IN NEW SPAIN The Mexican War of Independence, which took place between the years 1810 and 1821, had profound economic consequences across the entirety of the newly independent nation, but the intensity of its economic effects varied significantly between the southern and northern portions of Mexico. These differences stemmed from the two regions’ distinct economic structures, levels of integration into colonial markets, and degrees of economic devastation suffered during the conflict. The southern portion of Mexico, with its dense, majorityIndigenous population, agricultural economy, and stronger and more direct Spanish Crown presence, faced very severe disruptions in its economy and in its society, while Northern Mexico, very sparsely populated and more dependent on mining and cattle ranching, suffered economic stagnation at first but, in the medium term, experienced a better adaptation to the new post-war reality by taking advantage of its growing economic ties to the US. In general terms again, while the war affected both regions, the depth and persistence of economic hardship were notably greater in the south of the newly-founded nation (Garduno-Rivera, R., 2021). It is estimated that more than a million people died in New Spain during the Mexican War of Independence. That is, one sixth of the population of New Spain had been annihilated during the war. War expenses, on the other hand, both in Spain and in America, led the viceroyalty to bankruptcy. The mines, many of them abandoned, reduced their production to a third of the levels they had before 1810. The production of the haciendas, likewise, was reduced due to lack of labor. As a side effect, the Church stopped receiving the usual tithes. The Spanish metropolis continued to impose economic restrictions and request the sending of resources to help with its own crisis. The members of the viceregal army were dissatisfied with their low salaries and because, in the viceroyal army fighting the separatists, there was an open preference for the expeditionary troops who had arrived from Spain since 1812, which made many novohispano soldiers feel disenfranchised and like they were fighting for a country that did not care that much for people like them. Before the war, New Spain was a highly regionalized economy, and the colonial structure ensured that economic activity was concentrated in different ways. Southern Mexico – and particularly areas like Oaxaca, Chiapas, and parts of modern-day Guerrero - was an agricultural hub with significant Indigenous populations – around 70 or 80% of the population in those three states is of Indigenous origin these days - . Its economy relied on cash crops such as cacao, sugar, and cochineal, which were mostly exported to Spain. Large 71 landowners controlled vast haciendas and encomiendas, where Indigenous laborers worked under exploitative conditions – even if those conditions were illegal, since many times the Spanish Crown turned a blind eye to abuses in order to avoid conflicts with local elites and powerful individuals - . Trade networks linked this agricultural production to urban centers in Southern Mexico like Mexico City, Guadalajara or Puebla, while artisan industries such as textiles and pottery supplied local and regional markets. The economic structure of Southern Mexico was deeply tied to Spanish colonial systems, making it particularly vulnerable when those systems collapsed. Northern Mexico – as a reminder, this essay considers Northern Mexico to include the states of Baja California, Baja California Sur, Sonora, Sinaloa, Durango, Chihuahua, Coahuila, Nuevo León and Tamaulipas - , had a vastly different economic structure. Mining was the backbone of the economy; however, unlike the activities in the centralized agricultural economy of the south, the mining industry in the north required significant external inputs - such as mercury for silver refining - and depended on a steady labor force that was difficult to maintain due to the region’s lower native population density. As explained previously in Chapter VI: since there was almost nobody living in places like Sonora or Chihuahua – and the very few Indigenous communities living in the area maintained a nomadic lifestyle, inhabited no permanent settlements and were usually hostile to outsiders - , individuals in need of a workforce in Northern Mexico had to hire employees with fair wages and could not resort to kidnapping or the encomienda or repartimiento systems like in Southern Mexico. This led to an environment with economic conditions more similar to those in the Thirteen Colonies than in Southern Mexico. Additionally, in Northern Mexico, cattle ranching was another big sector of the economy, as large haciendas dominated livestock production in the arid environments typical of Aridoamerica. Unlike Southern Mexico, Northern Mexico had very few Spanish settlements – and most of them amounted to small religious missions and small military forts and prisons; big cities were exclusively found in the south - , and its economy was less integrated into colonial trade networks, giving it a level of economic autonomy that would later prove beneficial when Spanish rule met its end. Direct control of civil society by the Spanish Crown was much weaker here than in the south, and economic activity was not as limited and coerced by royal Spanish authorities (Garduno-Rivera, R., 2021). The war devastated Southern Mexico’s agricultural sector in ways that took decades to recover. The destruction of haciendas was widespread as insurgent forces and Spanish troops clashed in rural areas, often burning down estates or seizing their resources. The displacement of labor 72 was another major issue, as Indigenous peasants and laborers fled violence or joined revolutionary forces, leading to severe labor shortages. The collapse of exports, particularly of cochineal and sugar, further damaged the economy, as trade routes became unsafe and Spanish merchants withdrew from the region. The once-thriving agricultural economy found itself without markets or the infrastructure to rebuild quickly, leaving large parts of the population in economic ruin (Garduno-Rivera, R., 2021). Before the war, Southern Mexico had strong commercial links to Spain and urban centers like Mexico City, but the war disrupted these connections. Trade routes and roads became insecure as insurgents frequently targeted convoys, leading to higher transportation costs and reduced economic activity. Local markets contracted as rural unrest and war-related disruptions weakened demand for goods, leading to widespread economic stagnation. Additionally, foreign markets declined as Spain prioritized other colonies for trade, cutting off critical exports from Southern Mexico. With the collapse of these economic networks, merchants and landowners found themselves struggling to maintain their livelihoods, and many businesses failed. The Manila Galleon disappeared completely as well, disconnecting Mexico from Asia in terms of trade. Southern Mexico also suffered from the war’s disruption of colonial economic policies. The tax collection systems – however predatory at times - that had once provided revenue to maintain infrastructure and governance broke down, leading to fiscal instability that persisted well beyond independence. Local governance weakened as well, leading to a further increase in banditry and economic disorder, which further discouraged investment and trade. Currency shortages became prevalent, as the colonial government could no longer sustain silver coin production as it lost control of the Zacatecas mines, leading to inflation and a generalized loss of confidence in the financial system. These economic disruptions left Southern Mexico in a fragile state, requiring substantial rebuilding efforts that were hindered by ongoing political instability in the newly independent country and a decades-long conflict between federalists and centralists. One of the most significant post-war economic consequences in the south was the attempt at land redistribution, though with mixed results. After independence, new land policies sought to break up the hacienda system, temporarily allowing Indigenous communities to regain lost lands (Garduno-Rivera, R., 2021). However, these gains were often short-lived, as political instability and corruption enabled new local elites to consolidate land and wealth. Many hacienda owners struggled to recover from the economic devastation of the war, and in some cases, the land was reabsorbed into large estates rather than being distributed equitably. This 73 contributed to long-term economic stagnation in rural areas, where poverty remained widespread, and agricultural productivity was painfully slow to recover. Corruption around land use simply changed hands, and property rights weakened as many commercial and financial contracts were deemed invalid by the new Mexican authorities after independence. It can be said then, that Northern Mexico’s economy, while also affected by the war, was less devastated and more adaptable. The silver mining industry suffered profoundly due to the destruction of mines and quarries, as both revolutionary and royalist forces targeted mines to make the opposite faction unable to exploit their valuable resources for military objectives. The loss of capital and skilled labor further compounded the issue, as many Spanish administrators and experienced miners stopped working or left the country, leaving behind an industry in profound decline that ultimately took decades to recover. Additionally, disruptions in the supply chain - particularly intensified by the scarcity of mercury due to Spanish trade restrictions with the goal of making it impossible for separatists to exploit the mineral resources of the viceroyalty - made silver production difficult. The departure of the Spanish dragones de cuera also led to a rise in insecurity and attacks against civilians from hostile native groups in Northern Mexico – like the Apache - , which made mines easier targets for strikes from those groups. Unlike the agricultural sector in the south, the ranching sector in the north showed greater resilience. As Mexico’s internal markets collapsed, ranchers found new opportunities in border trade with the United States, supplying beef, hides, and wool to American customers. This shift allowed Northern Mexico to maintain a degree of economic stability that the south lacked. The less intense fighting in the north also meant that haciendas and livestock farms were not as frequently targeted, allowing economic activity to persist even as the country was engulfed in conflict. Even back in the 1810s, the economy of Northern Mexico was already somewhat dependent on trade with the US – and less dependent on Spain economically – in comparison to the economies in the south of the country. The war significantly altered governance in Northern Mexico, but in ways that ultimately benefited local elites and businesses. With the weakening of Spanish control, local elites gained greater economic independence, allowing them to direct trade and economic policies in ways that suited their interests. Many ranchers and merchants increasingly traded with the US rather than relying on Mexico City, creating a new economic orientation that would shape Northern Mexico’s development in the decades to come. With this increased trade with the US 80 settlers westwards and contributed significantly to the nation’s economic expansion. The new territories opened up new opportunities for farming, ranching, and mining, which boosted the economy of the nation. Additionally, the acquisition of these lands strengthened the US’s position in global trade by providing access to the Pacific Ocean. The war was, to sum up, a conflict deeply rooted in economic motivations, with the desire for land, resources and access to new trade routes fueling both the struggle itself and the drive for independence in regions like Texas. The conflict had far-reaching economic consequences for both countries involved: the US emerged from the fight with vast new territories rich in natural resources, while Mexico was left struggling to recover from the loss of its northern half. The conflict and its immediate aftermath marked a turning point in the economic history of both Aridoamerica and North America at large, setting the stage for the US to become the world's largest superpower and for Mexico to become an economic and political subordinate of the US. In 1848, once Mexico had surrendered, there were discussions between Mexico and the US on where the new border should be set. Mexico tried to limit its territorial losses but in the end accepted all of the US’s demands. The US could have annexed all of Mexico – the US army easily occupied Mexico City and large parts of Southern Mexico as their intervention was not limited to the north of the country - . There was a group of American authors, journalists and politicians who supported the idea of annexing all of Mexico; they were known as the All of Mexico Movement. Proponents of this movement believed that acquiring all of Mexico's vast lands would provide economic benefits through resources, fertile land, and access to the Pacific Ocean. They envisioned a US stretching from the Atlantic to the Pacific and to the Yucatan Peninsula to the southeast. The All of Mexico Movement faced resistance from both within the US and in Mexico. Some Americans feared the expansion would intensify the debate over slavery – since most Mexicans were anti-slavery and Mexico had abolished it in 1829 - , while others worried about the challenges of integrating a large Mexican population that was mostly Catholic and mixed-race. Racist American lawmakers and senators prevailed and decided that it was best to “only” annex the northern half of the country, which had a low population density and lacked a strong Mexican identity. The idea of All of Mexico remained a contentious issue but was largely abandoned after the war. 81 Figure 22. A map shows the entire territory James K. Polk – President of the USA between 1845 and 1849 – wanted America to annex, including all of Northern Mexico, Cuba and a portion of the Yucatán Peninsula. Source: Encyclopædia Britannica. 82 CHAPTER VIII – THE ECONOMIC HISTORY OF ARIDOAMERICA FROM THE END OF THE MEXICAN-AMERICAN WAR TO THE END OF THE PORFIRIATO IN MEXICO Following the war with its neighbor to the north, Mexico was left with a much reduced territory. The new border between Mexico and the United States created a clear division between two different economies, as the conflict only intensified the economic disparities between the two nations. On the US side, and particularly in recently-obtained southern and western states like Texas and California, the economy was increasingly becoming industrialized, driven by high-intensity agriculture, mining, and new urban industries. In contrast, Northern Mexico, while much less economically hurt by the war than Southern Mexico, still faced significant economic challenges, with a population dispersed across a vast, arid landscape with limited infrastructure and economic opportunities. The economic changes that followed the Guadalupe-Hidalgo treaty – which put an official end to the war - were pivotal in defining the development trajectory of both regions. After the Mexican-American War, Mexico faced two incursions from foreign – mainly American – adventurers, often referred to as filibusters, who sought to exploit the country’s political instability for personal gain or to advance certain political causes. These filibusters were a significant challenge to the then weak Mexican republic, especially in its northern territories, where the federal government struggled to maintain effective control over the land. Several American-led filibustering expeditions occurred in Sonora and Baja California with the desire of replicating the Texas Revolution. While each driven by different motivations, they all shared a common goal: to undermine Mexican sovereignty for the benefit of foreign interests. The most famous of these post-1848 filibustering expeditions was the one that ended up with the establishment of the so-called Republic of Sonora. In 1853, a group of American and European adventurers, led by William Walker, tried to take control of the Mexican state of Sonora. Walker, who had previously attempted to conquer Nicaragua and other Central American territories, led a small invasion force into Sonora in 1853, with the goal of establishing a filibuster republic. His ambitions were centered on expanding American influence into Northern Mexico, particularly in territories that were strategically important. Walker’s group, which as stated included mercenaries from all over the globe, seized the Sonoran town of Guaymas and declared the establishment of the Republic of Sonora. 83 However, their efforts were short-lived, as Mexican forces quickly mobilized to put down the rebellion. Walker’s forces faced local resistance and largely lacked the resources needed to sustain their occupation. After a brief period, the filibusters were defeated, and Walker was forced to retreat. His failure was a significant blow to the filibuster movement, though it did not end the practice altogether. Baja California also became a hotspot for filibustering activities, particularly in the 1850s and 1860s. One prominent filibuster leader during this period was the American businessman and adventurer Henry W. Halleck. Halleck led an expedition into Baja California in 1853, seeking to establish a foothold for American settlers. His goal was to claim the region for the United States, taking advantage of Mexico’s distracted government and the region's sparse population; however, this attempt also failed due to logistical difficulties and resistance from the Mexican army. The filibusters were quickly defeated and Halleck was forced to flee back to the United States with his dream of a filibuster republic soundly crushed. Following the Guadalupe-Hidalgo treaty, one of the most significant changes was the shifting economic relations along the US-Mexico border. As both countries became more connected through trade, the Northern Mexican economy began to pivot towards even closer ties with the United States – as previously mentioned, these ties were already notable before the war; they just intensified after it - . This period marked the beginning of large cross-border trade, with big influxes of goods flowing back and forth across the border, often through informal or illegal channels, such as smuggling. The new economic interdependence was both a challenge and an opportunity for the Mexican economy, particularly in the borderlands. The US side of the border became an important trade hub, with the development of trade routes and infrastructure such as railroads and roads that facilitated the movement of goods. Northern Mexico, however, lagged behind in infrastructure development, often relying on trade routes that bypassed its interior and focused on cities like Tijuana, Piedras Negras, and Ciudad Juárez, which developed into key border towns. Smuggling was a persistent part of this early trade relationship, as tariffs, taxes, and regulations in both countries often created incentives for illicit exchanges. Goods such as textiles, tools, and food were smuggled across the border to evade tariffs. In Northern Mexico, this underground economy provided an essential lifeline for many families, particularly in Sonora, Chihuahua and Coahuila. Clandestine Mexican sweatshops dedicated to the fabrication of cheap textile products located in border towns like Juárez became known as 84 maquiladoras; these days, many of these maquiladoras have grown to become legal, legitimate businesses. Despite many challenges, cross-border trade opened up a channel for foreign investment, particularly from the United States, which saw the Northern Mexican territories as an area of opportunity. US traders and businessmen began to invest in Mexican agriculture and mining, particularly after the discovery of new mineral deposits in the region. In the 1850s, the expansion of American-owned mining operations in Northern Mexico - particularly in Sonora and Durango - began to shape the economic profile of the region. These mines produced silver, lead, and other minerals, which were essential to both Mexican and global markets, especially as global demand for silver grew during this period. After a decades-long hiatus, mining had finally started to become the powerful economic sector it had been in the old viceroyal days again. With its vast expanses of desert and semi-desert territories, the region’s agricultural lands was not as fertile as those in the central and southern parts of Mexico; however, the introduction of new irrigation techniques, the expansion of the cattle industry, and the arrival of new, smaller waves of American settlers – who now faced much higher restrictions and limits imposed by the Mexican government so as to avoid another Texas Revolution - seeking land for agriculture contributed to the growth of the Northern Mexican economy. By the mid-19th century, cattle ranching in Northern Mexico had began to re-flourish in modern ways, particularly in Nuevo León, Coahuila, and Chihuahua, which produced significant amounts of beef and leather, goods that were in high demand in both the United States and Mexico. The cattle industry was an essential economic pillar of Northern Mexico’s economy and became closely linked to US meat markets, which saw an increasing demand for beef due to their expanding population and urbanization. Sonoran beef became enormously famous in the US for its high quality and great taste. At the same time, the development of cotton and wheat production in Northern Mexico began to rise, particularly in areas where new irrigation projects were underway. The agricultural potential of the northern territories was slowly realized, despite environmental challenges like water scarcity and difficult terrain – Northern Mexico can be quite mountainous - . In contrast, the economy of Southern Mexico remained more focused on traditional forms of agriculture and agriculture-based economies. Southern Mexico’s economy was still dominated by plantations, with sugar, coffee, and tobacco remaining major export crops and large Spanish-inherited haciendas controlling the majority of production. These southern 85 industries were far less integrated with global markets than the previously mentioned growing economic activities in Northern Mexico, however. The late 19th century saw the expansion of the railroad system on both sides of the border. Railroads were crucial in connecting previously isolated regions of Northern Mexico with the American economy, creating the infrastructure needed to move goods more efficiently and rapidly across the border. This infrastructure boom led to the rise of major industrial centers in border towns like Tijuana, Ciudad Juárez, and Nogales, which facilitated the exchange of goods and services across the border. Railroads helped establish new mining regions in Northern Mexico, including parts of Sonora and Chihuahua, which were now more easily accessible to American mining companies. American investors were instrumental in bringing in the capital, technology, and expertise required to develop these mines, further intertwining the economies of the US and Northern Mexico. The development of railroads also led to greater urbanization in Northern Mexico, with new towns and cities emerging along the rail lines, catering to both American settlers and Mexican laborers. With the rise of Porfirio Díaz to power in 1876, the economic trajectory of Northern Mexico saw more significant changes. Díaz, known for his authoritarian rule, sought to modernize Mexico and integrate its economy into the global capitalist system. His policies prioritized foreign investment, railroad construction, and the expansion of mining and agriculture - especially in Northern Mexico, which was seen as a key area for economic growth - . During the Porfiriato, the expansion of railroads continued at an accelerated pace, connecting Northern Mexico more closely to the United States. Foreign capital, particularly from the US, poured into Northern Mexican mining operations, agriculture, and infrastructure projects. American companies continued to dominate mining and agriculture in Northern Mexico, with major investments in regions like Sonora, Chihuahua, and Coahuila. Annual economic growth between 1876 and 1910 averaged 3.3% (COMITAN, 2007); under Díaz, Mexico arguably experienced its first period of substantial economic growth since the 1810s. The Porfiriato also saw the development of large estates and agricultural plantations, with latifundio – latifundios were large landholdings, the ultimate evolution of the traditional Spanish hacienda, really - systems becoming more entrenched in Northern Mexico. This system was closely tied to foreign investment, as large American-owned businesses sought to take advantage of cheap land and labor in the region. The expansion of irrigation projects, the spread of American-style farming, and the increased demand for mineral exports call reated a boom in Northern Mexico’s economy, although this development was not equally distributed. 86 The benefits of this economic growth were often concentrated in the hands of a small elite, leaving much of the rural population in poverty. The perception that this newly found economic growth only reached the very top of Mexican society was widespread among most common Mexicans of the time. The Mexican Revolution, which lasted between 1910 and 1917, was driven by deep-rooted economic inequalities. Under Porfirio Díaz’s regime, economic growth was indeed heavily concentrated in the hands of a few elites and foreign investors, particularly in mining, railroads, and agriculture. Land was increasingly privatized to mostly positive macroeconomic consequences, but this displeased peasants and Indigenous communities who had traditionally farmed communal lands. By 1910, nearly 90% of rural Mexicans had no land at all, forcing many into exploitative labor in haciendas and latifundios when they had been able to enjoy better working conditions before. This growing inequality fueled widespread discontent, particularly among peasants and workers. Francisco I. Madero’s call for democratic reform resonated with those who sought not only political change but also land redistribution and economic justice. The revolution devastated the economy in the short term, destroying infrastructure, reducing industrial output, and causing massive displacement. However, in the long term, it laid the foundation for important reforms. The 1917 Constitution included progressive labor laws, moderate land redistribution, and restrictions on foreign ownership of natural resources. These changes weakened the old elite and promoted a more state-driven economic model in the 20th century. While its implementation was uneven, the revolution marked a turning point in Mexican economic history, initiating the decline of oligarchic capitalism and laying the groundwork for nationalist economic policies in the decades to come; however, even though the revolt’s leaders promised social justice and economic reform, the revolution’s long-term economic consequences were arguably very much negative. Prior to 1910, Mexico had been experiencing steady growth, industrialization, and integration into global markets under the Porfiriato. Although this growth was unequal and exclusionary, the Revolution dismantled many of its foundations through a decade of violence, destroying infrastructure, disrupting production, and scaring foreign investment away. What followed the Mexican Revolution was not the emergence of inclusive, economically liberal institutions, but the consolidation of absolute power under the Institutional Revolutionary Party – or PRI, by its Spanish acronym - , which established an authoritarian regime that lasted over 80 years and was arguably as corrupt as Porfirio and his cronies. In effect, one set of extractive institutions was simply replaced by another. The Revolution did not liberalize Mexico’s economy or democratize its institutions meaningfully, it simply altered who held the reins of centralized power, stalling potential for broad-based, sustained economic development. 87 CHAPTER IX – RECENT AND POSSIBLE FUTURE ECONOMIC DEVELOPMENTS IN ARIDOAMERICA In recent decades, the economic trajectory of the northern Mexican states has continued to be shapedd by their geographical proximity to the US and their dependence on cross-border commerce, migration, and investment. In contrast, the southern regions of Mexico have remained more agricultural, and experienced slower economic growth rates. These evergrowing regional disparities have laid the foundation for both political movements like “Nortexit” – a modern rendition of historical Northern secessionist aspirations - and a growing rhetoric that Northern Mexico’s economic autonomy might be better served by closer ties to the US than by remaining under the control of the federal government in Mexico City. While many Northern leaders have always been of this mind ever since the Bourbonic Developmental Switch – as the cases of Texas and Rio Grande reveal - , it seems that this train of thought is now reaching many common Northern Mexicans who are not in positions of power. As explained throughout this essay, Northern Mexico began to diverge economically from the rest of the country after the Bourbonic Developmental Switch, but later events intensified its effects. The early 20th century Mexican Revolution had its roots in the socio-economic inequalities between the landed elite, mostly in the south, and the growing labor forces in the industrializing north. By the time the revolution was over, Northern Mexico began to see an even bigger influx of US capital and business ventures towards it. Maquiladoras – the previously mentioned factories that were established to take advantage of lower wages in Mexico while producing goods for export to the US – have played a crucial role in shaping the region's economic landscape in recent decades. Border cities like Tijuana, Ciudad Juárez, and Nogales – the Nogales on the Sonoran side of the border, that is; Nogales had been one single town before the Treaty of Guadalupe Hidalgo split it into two: Sonoran Nogales and Arizonan Nogales - have become hubs of this growing industry, facilitating the flow of both labor and capital from the US into Mexico. Over time, the relationship between these border cities and their American counterparts has grown increasingly symbiotic, with many factories and industries relying on labor, goods and services from both sides of the border. As the 20th century progressed and particularly after the implementation of NAFTA in the 1990s, Northern Mexico has become deeply integrated into the global supply chain of goods and services. This economic relationship has accelerated the industrialization of border states such as Baja California, Sonora, and Nuevo León, while the southern parts of Mexico have 88 mostly remained dependent on agriculture, tourism, remittances – many of the Mexicans living in the US come from Southern Mexico - . US businesses, particularly those looking to minimize labor costs, continue to invest heavily in Mexican manufacturing, especially in the textile, automotive, and electronics sectors. The development of maquiladoras in cities such as Ciudad Juárez – right across the border from El Paso – has become a symbol of this process of growing economic integration. Cross-border trade has continued to flourish, particularly in goods like electronics, automotive parts, and medical devices. This has helped create an economic zone that straddles both countries, with an increased dependency on American customer bases that is felt on the Mexican side. The USD has become an increasingly important currency in many northern cities, with many wages and prices being tied to it – one is likely to be allowed to buy any product in a Northern Mexican grocery store with American dollars - . The interconnectedness of the two economies has meant that economic downturns in the US often negatively affect Northern Mexico, creating vulnerabilities for the region. For example, a phenomenon starting in the 2010s is that of many Americans from US border towns like San Diego or El Paso moving to the equivalent towns on the Mexican side of the border – Tijuana in the case of San Diego, Ciudad Juárez in the case of El Paso – to take advantage of lower property prices in Mexico. These people work in the US and earn big salaries – in US dollars – in the US but, every night, once they are off work, they return to their homes in Mexico. This has resulted in a big case of gentrification in these Mexican border towns, as many real estate companies in these municipalities now prefer to sell housing units to Americans for high prices that most Mexican locals cannot afford, pushing pricing of all housing units higher. 89 Figure 23. A map shows the proportion of the workforce employed in informal employment, by state. Informal employment is higher in the south than in the north. The lowest value is found in the northern state of Chihuahua – 32% - , while the highest value can be found in the southern state of Oaxaca – 73% - . Source: INEGI’S México, ¿cómo vamos? 2022 report. INEGI is Mexico’s National Institute of Statistics and Geography – Instituto Nacional de Estadística y Geografía - . As Northern Mexico has grown to become ever richer than Southern Mexico, modern equivalents of historical movements for increased Nothern political empowerment have repeatedly popped up. In recent years, the "Nortexit" – norte means north in Spanish - , a political movement aiming to express the growing desire for greater autonomy in Northern Mexico - or even full secession from the rest of the republic - , has gained traction on social media. The movement reflects an increasing sense of frustration with the central government’s policies and the economic disparities between the north and the south some Northern Mexicans feel. The movement’s followers argue that Northern Mexico, with its close ties to the US, would be better off economically were it to be granted greater authority in matters such as tax collection, and while secession itself is not a widely supported or practical political stance, the ideas behind Nortexit reflect the sense that Northern Mexico’s economic future is inextricably more tied to the United States than to the rest of the Mexican republic. Nuevo León Governor Samuel García made headlines in 2021 with the following comments in reference to Mexico’s regional structure: “En el norte trabajamos, en el centro administran 96 significant portion of their tax revenues, in Mexico, the majority of taxes are collected by the federal government and then redistributed to the states through a series of mechanisms – in some states, 50 or 60% of all state funds derive from federal transfers; for more information, see Figure 29 - . The most important mechanism is the Participaciones Federales – a federal revenue sharing program for general administrative purposes - , which distributes funds to states based on a non-publicly-disclosed formula that considers factors such as population size, economic activity, and past history of revenues and expenditures. Another key mechanism is the Aportaciones Federales system – “federal contributions” - , which comprises more concrete funds meant to finance specific sectors such as education, health and security. Additionally, there are special funds intended for infrastructure projects, disaster relief, and economic development programs. While these mechanisms are designed to ensure equitable distribution and support less-developed regions, they have led to frustrations among wealthier states that feel like they contribute more than they receive. This tension is particularly evident in northern states like Nuevo León, Baja California, and Chihuahua, which generate a large share of Mexico's GDP but receive less federal funding per capita than poorer states in the south. The northern states are true economic powerhouses. Northern cities like Monterrey, Tijuana, and Hermosillo are home to major high value-added industries, including manufacturing, software development, consulting, finance, advertising, automotive engineering and insurance. Every year, millions of Mexicans from the south of the country move to the north. STATE IMMIGRATION EMIGRATION NET RESULT Aguascalientes 276,430 144,612 +131,818 Baja California 1,463,949 211,540 +1,252,409 Baja California Sur 313,283 42,130 +271,153 Campeche 199,443 141,018 +58,425 Coahuila 398,612 438,541 -39,929 Colima 193,703 114,254 79,449 Chiapas 174,961 678,362 -504,401 Chihuahua 561,040 259,407 301,633 Durango 210,697 464,734 -254,037 97 Guanajuato 557,773 646,602 -88,829 Guerrero 195,093 966,482 -771,389 Hidalgo 609,940 654,244 -44,304 Jalisco 1,067,778 841,477 226,301 Mexico City 1,679,063 4,955,432 -3,276,369 Michoacán 433,109 953,793 -520,684 Morelos 500,693 220,687 280,006 Nayarit 252,605 244,381 8,224 Nuevo León 1,319,964 268,647 1,051,317 Oaxaca 293,054 1,030,645 -737,591 Puebla 660,918 1,080,205 -419,287 Querétaro 686,545 211,297 475,248 Quintana Roo 945,101 88,963 856,138 San Luis Potosí 294,725 684,423 -389,698 Sinaloa 312,601 656,351 -343,750 Sonora 425,906 284,860 141,046 State of Mexico 5,190,562 1,344,291 3,846,271 Tabasco 210,156 446,038 -235,882 Tamaulipas 764,320 526,943 237,377 Tlaxcala 210,269 211,661 -1,392 Veracruz 762,798 1,990,971 -1,228,173 Yucatán 269,765 305,166 -35,401 Zacatecas 177,107 503,806 -326,699 Figure 26. A table containing the figures for internal migration within Mexico between March 15, 2019 and March 15, 2020 according to official government datanfromnINEGI. Table made by the author. In only one year, millions of Mexicans left the southern portion of the country for the richer central and northern states. The net migratory result for the nine northernmost states is +2,617,219, while the net migratory result for the nine southernmost states – Chiapas, Oaxaca, Guerrero, Veracruz, Tabasco, Campeche, Yucatán, Quintana Roo and Puebla – is -3,017,561. 98 The total population of Mexico is approximately 128 million people and the whole population of these 9 southernmost states is approximately 47 million; taking that into account, the scale of the current movement of Mexicans from the south of the country to other regions of it is not some small trickle but a full-fledged exodus. The only thing preventing massive drops in the total population figures of the south as of now is births, but as fertility rates keep dropping in all of Mexico, the south’s population will start shrinking in a few years. STATE POPULATION Aguascalientes 1,493,459 Baja California 3,779,050 Baja California Sur 872,439 Campeche 949,481 Coahuila 3,457,516 Colima 719,445 Chiapas 5,914,879 Chihuahua 3,900,629 Durango 1,890,563 Guanajuato 6,313,504 Guerrero 3,603,188 Hidalgo 3,222,994 Jalisco 8,732,495 Mexico City 9,352,517 Michoacán 4,943,602 Morelos 1,964,164 Nayarit 1,237,293 Nuevo León 6,130,641 Oaxaca 4,242,791 Puebla 6,586,805 Querétaro 2,530,655 Quintana Roo 1,917,252 San Luis Potosí 2,874,010 Sinaloa 3,169,760 99 Sonora 3,039,967 State of Mexico 17,728,216 Tabasco 2,537,961 Tamaulipas 3,575,756 Tlaxcala 1,469,900 Veracruz 8,093,517 Yucatán 2,375,403 Zacatecas 1,674,227 Figure 27. A table shows INEGI’s 2024 estimates for the total population of every Mexican state. Table made by the author. Northern states contribute significantly to Mexico’s total exports, mainly through trade with the United States. However, much of the tax revenue generated from these economic activities goes to the federal government, which then redistributes funds using a formula that, as previously mentioned, does not directly correlate with the amount contributed by each state but instead takes into account multiple variables indifferent to the amount of money a state collects for the federation. From the perspective of some northern leaders, this means that their states work hard to grow the economy, yet much of their wealth is sent elsewhere to fund less productive regions. This creates a feeling of perceived injustice, as they see their infrastructure and public services not “be as good as they could be” despite their economic success. Southern states, including Chiapas, Oaxaca or Guerrero, receive proportionally higher federal transfers. These states maintain lower levels of industrialization and high-quality employment, relying instead on agriculture, tourism, street vending and other mostly informal activites. Given their higher poverty rates, the government prioritizes them when distributing funds to reduce regional inequalities. While supporters of this approach argue that redistributive policies help level the playing field and improve national cohesion, northern states argue that this discourages economic self-sufficiency and punishes states that are economically successful. They contend that consistently channeling funds to underdeveloped regions without robust accountability mechanisms fosters dependency rather than sustainable long-term development, creating perverse incentives for southern political leaders to maintain their jurisdictions in poverty in order to secure greater federal transfers - part of which is 100 frequently misappropriated by politicians and bureaucrats, as corruption remains a very problematic issue all over the country - . Despite being wealthier, northern states can sometimes struggle with infrastructure and public service issues that they believe could be addressed by receiving higher federal funding. They argue that Mexico City prioritizes investment in the capital region and underdeveloped states while neglecting the needs of northern cities that sustain much of the economy. For instance, while large-scale projects like the Tren Maya – a train planned to connect a few southern states so that tourists can visit the entire region using it and goods can be transported more quickly - in the Yucatán Peninsula, the AIFA – a recently-established airport in Mexico City – and the opening of the Dos Bocas oil refinery in Tabasco have received substantial federal funding since 2018, infrastructure in northern cities, such as highways, public transport, and water supply systems, often faces severe budgetary constraints. This has fueled resentment, as many in the north believe their tax contributions should be reflected in better local infrastructure rather than being spent on projects in faraway states that they perceive as “undeserving” of this comparatively larger financial support. There is also a political component to this economic dispute. Northern states tend to have more businessfriendly policies, while the federal government, especially under leftist administrations, has historically favored social spending in poorer regions. This ideological divide intensifies the perception of unfair treatment. In recent years, the ruling party, MORENA – a portmanteau of Movimiento de Regeneración Nacional or National Regeneration Movement - , has placed a strong emphasis on social programs and direct cash transfers to low-income populations, which are concentrated in the south. Critics argue that this approach prioritizes electoral considerations over economic efficiency, as funding decisions often benefit regions that are politically aligned with the ruling government. The southern regions of Mexico tend to vote for MORENA more and one of the reasons why is this decision to strengthen cash transfers and direct citizen support programs. Northern anti-MORENA politicians argue that MORENA has used these mechanisms to set up a clientelist system that will keep the party in power for years to come; MORENA supporters find these accusations absurd exaggerations and claim that cash transfers to citizens and other direct public support programs were very much needed to reduce poverty in the poorer areas of the republic. 101 Figure 28. A graphic made by the think tank Centro de Estudios Espinosa Yglesias shows the results of a study conducted by them in 2019 that concluded that a person that is born poor has a 54% chance of getting out of poverty at some point in their live in the north; that figure progressively decreases the further south one goes to 58% in the the central-north region, 62% in the central-western region, 68% in the Bajío and in the region encompassing Mexico City and its outskirts, and 86% in the south. At a national level, only 26% of Mexicans who are born poor get to escape poverty at any point in their lives. As stated, there have been whispers of increased regional autonomy, with some voices suggesting that northern Mexico should function more independently in economic and fiscal matters. While outright secession is not a serious possibility, the idea that northern states should have more control over their finances is gaining traction. To prevent escalating tensions, the federal government may find it a good idea to reconsider how it allocates resources. One possible solution is implementing a more dynamic fiscal system where states that contribute more receive proportionally more federal funding while still maintaining some 102 level of inter-regional solidarity. Another option could be to allow states to raise and manage a greater portion of their taxes, reducing their dependence on federal transfers in the first place. Some argue that every state should manage all of its funding and public investments, with the role of the federation significantly reduced in regards to the funding of regional public finances – a model like that would mean that every state could go on to establish their own version of the Concierto Económico Vasco or Basque Economic Agreement the Spanish region of the Basque Country enjoys today; this agreement means that Spain and the Basque Country are almost completely separate entities when it comes to fiscal matters - . Figure 29. Federal funds – in millions of pesos - received by each state and proportion of each Mexican state’s total funds derived from federal grants. Data is for the year 2021 and extracted from the Presupuesto de Egresos de la Federación 2021. Table extracted from Hablemos de ingresos en los estados (2021), a report by Mexican think-tank Instituto Mexicano para la Competitividad. It can be said then that the current federal fiscal model prioritizes redistribution to poorer southern states, which northern leaders argue fosters dependency and corruption and fails to reward economic productivity. In the future, as economic disparities continue to worsen and political divisions keep on deepening, this debate will likely intensify, potentially reshaping 103 Mexico’s fiscal policies. Addressing these concerns through a more balanced and transparent system could help alleviate regional tensions and create a fairer approach to national development. Keeping on ignoring the demands of the northern states – however valid one might think they are – is unlikely to bring any good results for Mexico’s cohesion as a sovereign nation in the long run. Figure 30. Tax money collected by each Mexican state in millions of pesos. Data is for the year 2021 and extracted from the Presupuesto de Egresos de la Federación 2021. Table extracted from Hablemos de ingresos en los estados (2021), a report by Mexican think-tank Instituto Mexicano para la Competitividad. In general, southern states receive more federal funding. As an example of the current debate taking place, Chiapas receives around twice as much federal funding as Nuevo León on a yearly basis, even though Nuevo León contributes to federal financials with much higher tax revenues 104 and the two entities have very similar population numbers – see Figure 27, Figure 29 and Figure 30 - . Some might find this fair since Chiapas is the poorer state; naysayers might argue richer, more productive states like Nuevo León are not sufficiently rewarded for their good economic performance or even that they are actively “punished” by the federation. It is also important to take into account that pricing of all goods and services is lower in the south than in the north, so one peso of federal payments goes much further in the south than in the north when it comes to the number of goods and services it can fund. 105 CONCLUSIONS Aridoamerica’s economic history presented no noticeable development or advancement until the arrival of the Spanish in the area in the early 16th century. Before the Spanish introduced the population of Aridoamerica to a variety of tools they lacked - like horses - , transportation of goods in the region was severely limited, which paralyzed communities and made trade between different tribes almost impossible, as crossing the arid deserts of locations like Arizona, Sonora or Chihuahua on foot often led to a painful death derived from exhaustion, thirst or hunger. While communities often traveled and moved from place to place - in expeditions that were always somewhat likely to suffer human losses - , they largely ignored each other; when trade between groups did happen, it was limited to the exchanging of basic, non-crafted items like plants or animal furs. Contrary to the stagnant Aridoamerica, Southern Mexico thrived economically in the centuries preceding the year 1519, as the Pax Azteca led to increased commerce and allowed traders to reach vast areas with relative security and all while staying inside one unified political entity. Aridoamerica - and truly the entire area of the Americas to the north of the Aztec trade network - was back then much poorer than Southern Mexico. The economic systems established by the Aztecs in Southern Mexico did, however, limit economic freedoms in multiple ways. In the long term, these limitations – put in place by Aztec political elites in order to maintain their authority and power - capped potential economic growth. After gaining control of the Spanish crown in the early 1700s, the Bourbons implemented a series of economically liberalizing reforms in their newly-acquired Spanish colonies. These reforms included the removing of trade restrictions and the weakening of colonial monopolies; thanks to these reforms, marginal, largely ignored territories within the empire – areas where direct Spanish authority was relatively weak - started experiencing high rates of economic growth for the first time. Additionally, these reforms made the central regions of the empire – like, for example, Peru – be less commercially sheltered, causing them to be more easily exposed to the uncertainties of the market. In sum, these economically liberalizing reforms caused a empire-wide reversal, allowing these previously marginal areas to grow wealthier and ultimately surpass the former 'core' regions of the empire in prosperity. While he did not discover it, the author of this essay proposes calling this theoretical phenomenon the Bourbonic Developmental Switch for purposes of clarity and brevity in the future, as referring to such a concept with a single, clear name moving forward will make it easier for economists and historians to reference it with precision and to further study it. 112 Jones, A. H. (1984). Wealth and Growth of the Thirteen Colonies: Some Implications. The Journal of Economic History, 44(2), 239–254. https://www.jstor.org/stable/2120701 Lange, M., Mahoney, J., & vom Hau, M. (2006). Colonialism and Development: a Comparative Analysis of Spanish and British Colonies. American Journal of Sociology, 111(5), 1412–1462. https://doi.org/10.1086/499510 Maddison, Angus. 1989. The World Economy in the 20th Century. Paris: OECD. Mahoney, J. (2003). Long‐Run Development and the Legacy of Colonialism in Spanish America. American Journal of Sociology, 109(1), 50–106. https://doi.org/10.1086/378454 Matrícula de tributos. (2020). Matrícula de tributos. Mediateca - Instituto Nacional de Antropología E Historia. https://mediateca.inah.gob.mx/repositorio/islandora/object/codice%3A1274#page/1/mod e/2up McCusker, J. J. (1992). Money and Exchange in Europe and America, 1600–1775: A Handbook. University of North Carolina Press. https://uncpress.org/book/9780807843673/money-and-exchange-in-europe-andamerica-1600-1775/ Mendel, J. M., & Korjani, M. M. (2012). Fast Fuzzy set Qualitative Comparative Analysis (Fast fsQCA). Studies in Fuzziness and Soft Computing, 291, 1–6. https://doi.org/10.1109/NAFIPS.2012.6291025 Brading, D. A (2019). Miners and merchants in Bourbon Mexico, 1763-1810. 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Unlike traditional methods that treat variables as either present or absent – 0 or 1 - , fuzzy-set methods allow for degrees of membership in a set - ranging from 0 to 1, meaning something like 0.2 is valid - , capturing the nuanced ways in which cases - such as countries, organizations, or individuals - may partially exhibit a condition or outcome. fsQCA identifies combinations of conditions - called configurations - that are sufficient or necessary for producing a given outcome. This approach is especially useful in social sciences such as economics, where causality is often complex, conjunctural - multiple causes might be acting together at the same time - , and asymmetrical - different paths may lead to the same result - . By systematically comparing cases and simplifying causal patterns into logical rules, fuzzy-set methods help researchers draw meaningful insights from small to medium-sized datasets. In fsQCA, substantive knowledge is the point one starts at; it refers to theretical or contextual knowledge used to define relevant causes and outcomes, it informs the researcher what to measure and which conditions might be relevant and worthy of study. Substantive knowledge then guides the selection and definition of the desired outcome and the potential causes. Cases are the individual units of analysis – i.e., countries, organizations, people - , with each case having values for the desired outcome and a k amount of potential causes. Based on the k potential causes, a 2^k number of combinations - candidate causal “recipes” - are formed. These combinations are what the fsQCA software will test to see which of them best explains the outcome. The method then applies fuzzy logic to compute a truth table, reduce it using Boolean algebra, and derive simplified causal configurations – fsQCA computations - . It identifies patterns where combinations of causal conditions lead to the outcome. The method then applies fuzzy logic to compute a truth table, reduce it using Boolean algebra, and derive simplified causal configurations – fsQCA computations - . It identifies patterns where combinations of causal conditions lead to the outcome. The most representative or consistent cases that support the identified configurations the best are known as the Best instances. Coverage indicates how much of the outcome is explained by 121 the configuration or configurations. Higher coverage means more cases are explained by the rules. Figure 31. A graphic representation of the process fsQCA follows in order to find conditions necessary or sufficient for a certain outcome to take place. Source: Fuzzy set Qualitative Comparative Analysis (Fast fsQCA) by Jerry M. Mendel and Mohammad Korjani. As explained by Mahoney, fuzzy-set logic is different from that of traditional statistics as it looks at set relations rather than correlations. These are not statistical probabilities, but rather necessity and sufficiency consistency scores: they measure how consistently a condition appears when a certain outcome is also present. Fuzzy set logic revolves around consistency. In fuzzy-set QCA, necessity consistency scores are calculated using the following formula: Where: - Xi = membership of territory i in the condition set, like dense indigenous population 128 - Xi = membership of territory i in the condition set, like dense indigenous population - Yi = membership of territory i in the outcome set, like economically developed - min(Xi,Yi) is the degree to which the condition is included in the outcome for that country. An example will be useful for understanding how sufficiency consistency scores are calculated: one might want to, for instance, study the relation between the condition strong liberals and the outcome economically developed. Territory Strong liberals (X) Economically developed (Y) Min (X, Y) A 0.9 0.8 0.8 B 0.6 0.6 0.6 C 0.5 0.3 0.3 D 0.2 0.4 0.2 Sum 2.2 2.1 1.9 Sufficiency consistency score = 1.9 / 2.2 = 0.864 This result points to strong liberals are a pretty consistent sufficient condition for economic development: in 86.4% of the “presence” of strong liberals, the outcome was also present to a similar or higher degree. For example, under Cause ≤ Economically Developed Country, a value of .23 for Dense indigenous population means only 23% of countries with dense indigenous populations are economically developed. Low proportion equals weak sufficiency; since 77% of countries with dense indigenous populations are not developed, it can be inferred that having a dense indigenous population is not a sufficient condition to be economically developed. The tilde (~) represents the absence of a condition; for example, ~Dense indigenous population means lack of a dense indigenous population. How to interpret the values: - Values closer to 1.0 suggest that the condition is sufficient for the outcome. 129 - Values above 0.65 are typically considered potentially significant, and this is why some are listed with significance levels - like 0.90 (0.07)†). - A significant sufficient condition would be one where almost all or all cases with that condition have the outcome. These are the interpretations for every score in Mahoney’s Table 9: Column 1: Cause ≤ Economically Developed Country 1. Dense indigenous population → 0.23 Not sufficient. 2. ~Dense indigenous population → 0.60 Absence of a dense indigenous population is almost sufficient; it does not pass the 0.65 threshold, though. 3. Labor-intensive estates → 0.31 Not sufficient. 4. ~Labor-intensive estates → 0.46 Not sufficient. 5. Mineral or tropical exports → 0.20 Not sufficient. 6. ~Mineral or tropical exports → 0.57 Relatively close to the 0.65 threshold, but still not sufficient. 7. Strong liberals → 0.40 Not sufficient. 8. ~Strong liberals → 0.36 Not sufficient. 9. Strong conservatives → 0.23 Not sufficient. 130 10. ~Strong conservatives → 0.42 Not sufficient. No single factor or absence of a factor is a sufficient condition for economic development in this data. Column 2: Cause ≤ Economically Underdeveloped Country 1. Dense indigenous population → 0.38 Not sufficient. 2. ~Dense indigenous population → 0.50 Not sufficient. 3. Labor-intensive estates → 0.54 Not sufficient. 4. ~Labor-intensive estates → 0.62 Very close to the threshold. 5. Mineral or tropical exports → 0.27 Not sufficient. 6. ~Mineral or tropical exports → 0.53 Not sufficient. 7. Strong liberals → 0.53 Not sufficient. 8. ~Strong liberals → 1.00 (0.01) A completely sufficient condition: the absence of strong liberal elites is a statistically significant sufficient condition for economic underdevelopment. Just by not having a strong liberal faction – and regardless of any other condition - , a region was on a path towards economic underdevelopment. This makes sense, since liberals would have been the ones to push for measures designed to bring about economic liberty, the dismantling of economically restrictive, extractive or protectionist institutions and trade. 9. Strong conservatives → 0.46 131 Not sufficient. 10. ~Strong conservatives → 0.58 Relatively close to the 0.65 threshold, but still not necessary. Column 3: Cause ≤ Socially Developed Country 1. Dense indigenous population → 0.31 Not sufficient. 2. ~Dense indigenous population → 0.90 (0.07) The absence of a dense indigenous population seems to be a sufficient condition for social development, at a marginal statistical significance (p = 0.07). This makes sense when one takes into account that, in Hispanic America, it is usually the indigenous groups who are the most socially conservative and religious elements of society. 3. Labor-intensive estates → 0.46 Not sufficient. 4. ~Labor-intensive estates → 0.46 Not sufficient. 5. Mineral or tropical exports → 0.27 Not sufficient. 6. ~Mineral or tropical exports → 0.43 Not sufficient. 7. Strong liberals → 0.40 Not sufficient. 8. ~Strong liberals → 0.36 Not sufficient. 9. Strong conservatives → 0.31 Not sufficient. 132 10. ~Strong conservatives → 0.58 Not sufficient. Column 4: Cause ≤ Socially Underdeveloped Country 1. Dense indigenous population → 0.54 Not sufficient. 2. ~Dense indigenous population → 0.60 Not sufficient, though close to the 0.65 threshold. 3. Labor-intensive estates → 0.62 Not sufficient, though close to the 0.65 threshold. 4. ~Labor-intensive estates → 0.62 Not sufficient, though close to the 0.65 threshold. 5. Mineral or tropical exports → 0.33 Not sufficient. 6. ~Mineral or tropical exports → 0.43 Not sufficient. 7. Strong liberals → 0.53 Not sufficient. 8. ~Strong liberals → 0.82 (0.14) High consistency, but only marginal significance (p = 0.14); the absence of strong liberals likely contributed to social underdevelopment, but complete sufficiency just by itself cannot be assumed. 9. Strong conservatives → 0.54 Not sufficient. 10. ~Strong conservatives → 0.58 Not sufficient, though relatively close to the 0.65 threshold.