Part I. HlStorical sketch of mexican development to 1950



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PART I. HlSTORICAL SKETCH OF MEXICAN DEVELOPMENT TO 1950


(Written 1996)
The United States and Mexico (along with Canada) comprise North America. They share a similar history as well. Both were colonies of European powers. And both gained their independence at similar times in history; the United States declared its independence in 1776 while Mexico gained its independence in 1821. Yet, by the beginning of the twentieth century, the United States was substantially richer and more powerful than Mexico. The gap has widened over most of the twentieth century so that, as of 1995, the United States has a standard of living approximately ten times that of Mexico.

Prior to the Spanish Conquest, the major cultures of Mexico (the Maya, Aztec, Mixtec and Zapotec) had attained a high level of civilization, technology, and economic

development. However, during the period of colonization (1535-1821), these people were systematically and often forcefully integrated into the Spanish political- economic system. The genesis of the wide disparity in living standards can be found in the types of colonial systems imposed by the European powers.

There were at least four significant ways by which Mexico differed from the United States in its colonial period. First, under Spanish colonization, mining was the most important economic enterprise. Wealth, especially silver, was taken from the Mexican economy and shipped to Europe. By 1800, the port of Veracruz was shipping 2/3 of the world's supply of silver to finance much of the early industrialization of Europe. As a result of the loss of wealth, the living standards of the Mexican population fell considerably, especially in the period 1500 to 1650. In contrast, in the colonial United States, there were no precious metals to be mined. Wealth required production, especially of staple agricultural crops. Much of this wealth was retained in the American colonies.



Second, there was a decimation of the Indian population in Mexico, from an

estimated l6 million in 1500 to about 2 million by 1650. A similar decimation occurred in the American colonies. However, in Mexico, there was considerable mixing of the Indian and Spanish populations and cultures. This mixing changed the basic character of the people. Mixing was much less significant in the American colonies. As a result, American colonists retained a culture very similar to that of the British.



Third, land, wealth, and power in Mexico became very concentrated in very large, quasi-feudal estates called haciendas. The high concentration of land and power in Mexico made it less likely that Mexico could develop a large commercial class, as had occurred in New England. The hacienda system generated a very small group of landowners, many of whom were absent from their estates, and a very large group of landless poor.

Fourth, Mexico is more homogeneous in terms of land and natural resources than was the area of the American colonies. This meant that Mexico had less opportunity to develop important regional specialization. In the United States, proper natural conditions allowed the South to specialize in cotton production. The poor land and cold weather in New England forced people into commerce (shipping, banking, insurance, etc.). Cotton provided the opportunity to profit from this commercial activity. The fact that people in New England handled much of the commerce and that people in

the South produced a major crop allowed American

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colonists to become less dependent on Europe. No such benefits of regional specialization were possible in Mexico. And there was nothing in Mexico to serve the role that the "frontier" served in the United States --- an area where people could go to develop family farms. While the availability of large amounts of good, rain-fed agricultural land in the United States allowed many to become small farmers in what is now the Middle West, the lack of such land in Mexico made it difficult for family farms to develop. The maintenance of wealth in the American colonies, the development of an American commercial class, and the ability of the American colonies to specialize by region are important reasons why the United States was already richer than Mexico on the eve of independence.
Independence finally came to Mexico in 1821. But independence did not resolve the problems that had accumulated over the three centuries of colonization. The first

fifty years of independence were especially turbulent, with major battles for authority and power. Mexico had over thirty presidents and five constitutions in this period. The power vacuum was largely filled by the Catholic Church and the military. During this period, not surprisingly, there was virtually no economic development. And because of the political weakness, Mexico was unable to resist the expansionist aims of the United

States, resulting in the loss of Texas (in 1836), of Arizona, Utah, Nevada, California, and part of Colorado by the Treaty of Guadalupe Hidalgo in 1848, and of Southern Arizona and New Mexico in 1853. The inability of Mexico to develop a stable, constitutional government in the 19th century provides yet another reason why it lagged behind the United States in economic development.

The period from 1877 to 1911 is referred to as the "Porfiriato", after the dictator-president Porfirio Diaz. It was marked by political stability, by improved transportation and communications to integrate the country into a national market,



and by considerable economic growth, with per capita GDP growing by 2.2% per year from 1900 to 1910. The strategy to achieve this growth relied first on foreign investment (mainly from the United States, Great Britain, and France) which was directed mostly to railroads, mining, and metals. Second, the strategy to achieve growth relied on exports, which increased 600% over the period. The reliance on foreign investment and exports made Mexico highly dependent on the rest of the world (especially the United States). Profits of the American-owned companies were commonly repatriated to the United States. And recessions in the United States had devastating effects on Mexican exports. As we shall see later, Mexico abandoned this strategy in the 1930s but has returned to it since 1982. Third, the strategy to achieve economic growth relied on low wages to achieve high profits, which were then to be re-invested. This strategy added to the already high concentration of land and income. By 1910, most of the land in Mexico was held on 8431 haciendas owned by only 850 landowners. About 90% of rural families owned no land at all. Despite the fact that, by 1910, 80% of the population was still rural and 68% of the population still worked

in agriculture, there was little investment in agriculture (either by the landowners or

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by the government). Agricultural production grew at half the rate that the population grew.

For a variety of reasons we need not consider here, a revolution took-place in Mexico (1910-1917). In this revolution, over 1 million Mexicans lost their lives. After the revolution, the old landed and industrial elites lost many of their privileges (many of them left Mexico) while new sectors of the business class emerged. This is the origin of the split among the Mexican capitalists that has continued to this day. Politically, the old landed and industrial elites became "neo-liberals" and came to be associated with the National Action Party (PAN). The newer sections of the business class became “nationalists" and were associated with the ruling party, the Institutional Revolutionary Party (PRI). (See the Appendix to this Section.).

In 1917, a new constitution was adopted. This gave the central government considerable power. It also granted new rights for workers, including minimum wages, the right to unionize and strike, equal pay by sex, and maximum hours of work. Another significant aspect of this period was the disbanding of the Porfirian army. This accounts for much of the political and social stability Mexico achieved. Unlike most other Latin American countries, Mexico does not have a strong professional army.

It has an army of 135,000 "civilians in arms" who are not trained in military schools. The army today receives less than l% of the federal budget and does not intervene in internal political matters.

While the Mexican economy has remained basically capitalist over time, there came to be a steady movement toward a "mixed economy" as the central government increased its importance as both a regulator of private companies and also as a producer. The largest step in this direction came during the administration of Lazaro Cardenas (1934-1940). Faced with the problems resulting from the Great Depression, Cardenas, under the influence of Keynesian thinking, sought to increase internal spending in Mexico. This was done partly by increases in government investment, especially in construction and irrigation, and partly by policies to redistribute income to the lower-income people (who would have a greater tendency to spend their incomes than would the rich).

While Cardenas desired to accelerate Mexican economic development in a capitalist manner, he believed that certain sectors should be state controlled. Thus, the electricity, energy, mining, and transportation industries were nationalized, as were some

financial companies and banks. The rest of the private sector was left alone. Cardenas is perhaps best remembered for the nationalization of the foreign-dominated oil industry, which was seen as standing-up to foreign capitalists and preserving Mexico's

national sovereignty (the state company he created is called Pemex). In Cardenas' term, labor laws were strengthened, helping to forge a strong union movement. However, the unions in Mexico assumed their traditional role in a capitalist economy; i.e., they did not control the capital goods but were able to bargain collectively over wages and other

conditions of employment.

Finally, the Cardenas administration is associated with land reform. In his term, over l0% of land was redistributed, with about 800,000 families receiving land. Most of these recipients were organized into ejidos, which comprised about half of agricultural


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land by 1940 (and 70% of cropland in 1990). In the ejido system, land tenure is granted to the village, not to individuals. Lands are worked individually. Each ejido member is assigned a plot of land to work and may pass this on to his dependents. The land cannot be taken from him unless he fails to work it for two consecutive years. The system

provided security to the peasants and may have slowed migration to the cities. However, the individual plots were small. And after 1940, the government failed to provide sufficient investments and education in the ejido areas. Yet from 1940 to 1960, agricultural production grew at the annual rate of 5.9%, a very good performance.

It was also during the period between the Revolution and World War II that the present political structure began to take shape. In 1929, The National Revolutionary Party (PNR) was established by General Calles, who was then President. In 1934, the name was changed to the Mexican Revolutionary Party (PRM). In 1946, the party was

reorganized and adopted its present name, the Institutional Revolutionary Party (PRI). This party has held the presidency and the majority in the legislature without interruption from 1929 to 2000! See Appendix A for details of the political structure.

During the decade of the l940s, rapid economic growth came to Mexico. This was

due to the increase in foreign demand for Mexican products following the outbreak of

World War II. The increase in exports plus the dollars earned by the Mexicans working in

American agriculture stimulated spending by Mexicans on Mexican-made goods. They

also increased Mexico's reserves of foreign currencies. These reserves made it possible for

Mexico to begin importing capital goods after the war ended. At that time, the strategy of



"import-substitution industrialization" was adopted (see the next chapter). From 1940 to 1970, the policies of the Mexican government changed direction completely from those of Cardenas. As we shall see, it became a businessman's government. Import-substitution industrialization, government policies favoring private businesses and the commercial, export-oriented agricultural sector, and laws mandating majority Mexican ownership in most sectors of the economy formed the basis of Mexico's economic policies until 1970. The idea that the benefits of economic growth ought to be fairly distributed among the population was not considered until 1970.
GROWTH RATES OF THE MEXICAN ECONOMY

Porfiriato Revolution and Reform Development

1900-1910 1910-1925 1925-1940 1940-1960

GDP 3.3% 2.5% l.6% 6.4%

Population 1.1 0.1 1.6 2.9

GDP per capita 2.2 2.4 0 3.5

Agricultural Production1.0 0.1 2.7 5.1

Manufacturing Production 3.6 1.7 4.3 7.7

Mining /Petroleum Production 7.2 5.6 -1.9 3.9
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APPENDIX A: THE MEXICAN POLITICAL SYSTEM

The present form of government was established by the Political Constitution of the United Mexican States in 1917. The Constitution establishes Mexico as a federated republic, with 32 states or federal territories and a federal government. The Federal Government the main responsibility for governmental functions and over 85% of all tax revenues. Federal power is divided between an executive, a legislative, and a judicial branch. The President and the Congress are elected by a popular vote. Executive authority is given to the President who is elected to a six-year term (sexenio) and cannot succeed himself. The current president is Vicente Fox, elected in 2000.

The president has more extensive powers than does the President of the United States

(in relation to the other branches of government). The three previous presidents must be considered technocrats rather than politicians. Decision-making in Mexico is very centralized. The President dominates the legislature and judicial branch. The President also dominates state and local officials.

Legislative power is given to a bicameral Congress, composed of the Senate and the Chamber of Deputies. Senators serve a six year term, Deputies serve a three-year term, and neither may serve consecutive terms in the same chamber. Mobility among office holders is very high in Mexico. Judicial power is given to the Supreme Court of Justice and other courts. The Supreme Court has 21 members appointed by the President for life.

The Church and state are separate in Mexico, as they are in the United States. Recently, the Church has been between internally divided between a radical conservative faction of priests (mainly in the north) and a smaller faction of leftist priests. The Church hierarchy has argued that priests should be non-political.



The Institutional Revolutionary Party (PRI) is the dominant political party in Mexico. From 1929 to 2000, it won every presidential election and has always had a majority in the Congress. Through the 1982 election, it always won at least 70% of the

presidential vote. But in 1988, it "officially" won only a bit more than 50% of the vote. The PRI is alleged to have resorted to considerable fraud in these elections. In 1994, the PRI candidate won again; it appeared that the PRI had made a "comeback" after the poor performance in the 1988 election. In 1995, after the beginning of the economic crisis, the fortunes of the PRI tumbled. The Presidential candidate of the PRI is selected by party insiders. To a large extent, the outgoing president chooses his successor. Even though the PRI candidates have always won the presidential elections, they have waged vigorous political campaigns. For over a year, the candidate travels around Mexico giving speeches and listening to people's concerns. One surprising result is that, even though the outgoing president basically chooses his successor, the policies have changed greatly from one president to another. There have been many complaints of corruption involving the outgoing President in recent Mexican history.

The PRI organization is "corporatist". People relate to the government or party through structures that have been developed to represent their sector of society. The party was organized into three parts. One was labor, represented by the CTM, the large labor federation. A second was the peasantry, represented by the

National Campesino Federation, a federation of peasant groups. A third was the popular

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sector. The "popular sector" represents most government employees, small businesses, private landowners, and low-income urban neighborhood groups. Each of the three sectors is dominated by one large mass organization. The business community is organized into several government-chartered federations. Most business people are required to join one of these organizations. These organizations are not formally part of the party apparatus, but they are very influential in policy decisions. The military and the Church are also not formally represented in the PRI; however, their interests are commonly expressed at the highest levels of the executive branch.

Eight other parties hold seats in the Chamber of Deputies. The main opposition to the PRI has come from two groups. On the political right is the Partido Accion



Nacional (PAN). It has no official ideology; it is, however, pro-business, pro-Church, pro-democracy, and hostile to the PRI. Its main campaign theme is usually corruption in government. There is a moderate-progressive wing and a militant-conservative wing of the PAN, with the latter basically controlling the party since the mid-1970s. The PAN runs very well in northern Mexico; it has won the last two elections for Governor of Baja California. On the political left is the Partido de la Revolucion Democratica (PRD)

which includes a splinter group of the PRI; its leader is Cuauhtemoc Cardenas, the son of Lazaro Cardenas. There is a left-socialist wing and a center social democratic wing of the PRD. Many people believe that the PRD won control of the state legislature of the state of Michoacan, but that they were denied this victory by electoral fraud. The PRD runs well in the south of Mexico. The strength of both the PAN and the PRD is in the cities; the PRI is still dominant in rural areas.



By being the only governing party, the PRI has did bring political stability to Mexico. Factional differences have been reconciled within the party framework rather than between the factions in some form of struggle. However, genuine pluralism is

Absent. Dissidents are either co-opted into the existing system or are selectively repressed. The dominance of a single party for such a long time has led to a vast system of patronage and corruption. A few leaders act as competing "bosses". The groups they lead are based on bonds of personal loyalty, rather than shared ideology. "Getting things done" in Mexico always requires access to one of these bosses. It also commonly requires bribes and other forms of corruption.



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