The relationship between business and politics is crucial to understanding Mexican history, and Pesos and Politics explores this relationship from the mid-nineteenth century dictatorship of Porfirio Diaz through the Mexican Revolution (1876–1940). Historian Mark Wasserman argues that throughout this era, over the course of successive regimes, there was an evolving enterprise system that had to balance the interests of the Mexican national elite, state and local governments, large foreign corporations, and individual foreign entrepreneurs. During and after the Revolution these groups were joined by organized labor and organized peasants.
Contrary to past assessments, Wasserman argues that no one of these groups was ever powerful enough to dominate another. Because Mexican governments and elites committed themselves to economic models that relied on foreign investment and technology, they had to reach a balance that simultaneously attracted foreign entrepreneurs, but did not allow them to become too powerful or too privileged.
Concentrating on the three most important sectors of the Mexican economy: mining, agriculture, and railroads, and employing a series of case studies of the careers of prominent Mexican business people and the operations of large U.S.-owned ranching and mining companies, Wasserman effectively demonstrates that Mexicans in fact controlled their economy from the 1880s through 1940; foreigners did not exploit the country; and, Mexicans established, sometimes shakily, sometimes unplanned, a system of relations between foreigners, elite and government (and later unions and peasant organizations) that maintained checks and balances on all parties.
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About the Author
Mark Wasserman is Professor of History and Chair of the Department of History at Rutgers, The State University of New Jersey.
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Pesos and Politics
Business, Elites, Foreigners, and Government in Mexico, 1854â"1940
By Mark Wasserman
STANFORD UNIVERSITY PRESSCopyright © 2015 Board of Trustees of the Leland Stanford Junior University
All rights reserved.
Elites, Foreigners, and Government in Mexico, 1877–1940
The relationship between business and politics is crucial to understanding Mexican history, particularly the eras of Porfirio Díaz (1877–1911), the Revolution (1910–20), and the revolutionary reconstruction (1920–40). The ability of the Díaz regime to construct a network of intricate arrangements that tied together the many conflicting interests of the Mexican elite and foreign investors was, with the personal force of the dictator, the very heart of its thirty-five-year rule. The Revolution in considerable part resulted from the breakdown of these Porfirian deals. During the ten years of civil strife that followed the fall of Díaz, businesspeople, politicians, and military struggled to make new arrangements. The Constitution of 1917 restructured government relations with landholders and mineral producers and introduced a whole new array of rules for the treatment of employees. The transformation of business relations that reflected the interests of new elites and newly influential groups, such as workers and peasants, comprised the core of the struggles of the 1920s and was a crucial reason for the ultimate creation of the revolutionary party, the Partido Nacional Revolucionario (PNR), in 1929. The widespread expropriations of land and the government takeover of the oil industry during the presidency of Lázaro Cárdenas necessitated the construction of yet another set of understandings.
Pesos and Politics will combine the most important approaches to the field, such as the study of the composition and behavior of oligarchies, the exploration of the development of the modern state, the examination of the impact of external economic factors, and the emphasis on regional and local politics and consider the relations between businesses, elite, foreign investors, and government from the municipal to the international levels. The extension of the analysis to the regional and local levels will present a better picture of how the interactions between these entities worked on an everyday basis and improve our overall understanding of how Mexican business functioned and how its operations changed over time.
I will argue that throughout the era from 1876 to 1940—begun by Porfirio Díaz and his henchmen Manuel Romero Rubio and José Yves Limantour, continued through the nearly decade of civil war and the postwar state under Alvaro Obregón and Plutarco Elías Calles, and further sustained during the emergence of the one-party state and the readjustment during the presidency of Lázaro Cárdenas—there was an evolving elite-foreign enterprise system. This constantly changing set of arrangements required intricate checks and balances. For the sixty years under study, no one entity—neither the national government/regime, nor any national or regional elite faction, nor the military, nor foreign investors, collectively or individually—was so powerful as to dominate the relationships. For the most part, beginning with the mid-1880s, the state, with its varied strength over time, was the primary entity that maintained the equilibrium between contestants, for its own benefit and theirs. The negotiations and resulting agreements took place within important constraints. Because both the pre- and postwar regimes were committed successively to development, led first by raw material and agricultural exports and then by import substitution industrialization, each of which depended on foreign capital for its success, Mexican governments had to reach a balance that simultaneously attracted foreign entrepreneurs, but did not allow them to become too powerful. Díaz's purchase of the foreign-owned railroads and Cárdenas's expropriation of the foreign-owned petroleum companies were only the most notorious efforts to maintain the equilibrium. In addition, various regimes had to struggle to balance local, state, and national governments. Regional and local elite factions and the political bosses who sometimes represented them were powerful entities that often limited the actual power of national governments. The issue of local autonomy sustained through the entire period. The famous cry of "obedezco pero no cumplo" (I obey but do not comply) during the Spanish colonial period was no less the description of the relationship between the national government and the localities from the 1850s through 1940. Moreover, through almost all of the era, it was a more evenly balanced struggle than historians have assessed. Neither the Porfirian state nor the revolutionary state were even close to omnipotent. To a large extent the course of the Revolution owed to local and regional prerogatives overpowering the national regime.
Local, regional, and national elite and the governments at these levels that they influenced or ran were deeply involved in the struggle to maintain checks and balances with foreign investors. Here, too, the process was more on equal terms than historians have generally asserted. Foreigners did not control the Mexican economy at any point, though they owned a considerable part of it. It is not clear that foreigners received better treatment than native Mexicans, as some have claimed. For example, while some foreign enterprises might obtain favorable consideration at one level of government, they might likely find a less hospitable environment at another. The elite-foreign enterprise system functioned in spite of the sometimes nationalistic rhetoric of various regimes, which served to camouflage the never-ending process of negotiations.
Because Mexican business over the course of six decades is an enormous topic, far too extensive for a book of modest length, this study will concentrate on the three most important sectors of the Mexican economy: mining, agriculture, and railroads. Within these, it will investigate, for the most part, the operations of foreign enterprises and their interactions with elites and governments at various levels. It is my supposition, however, that the histories of foreign companies and individuals do not differ substantially from that of Mexican-owned and -operated enterprises.
At the core of the relationships between Mexican business and politics were the five overlapping sectors that competed and cooperated from the Reform (1854) to the Revolution (1910–40): (1) the Mexican national elite; (2) regional (state) elite; (3) local (municipal) elite; (4) large foreign corporations; and (5) individual foreign entrepreneurs. During and after the Revolution, organized labor and organized peasants joined these five.
Mexican elites were in constant conflict. From the Liberal reforms until 1940, three sets of simultaneous, interconnected struggles occurred: local elite fought the efforts of state-level oligarchies to encroach on their autonomy; rival elite factions at the state level clashed to establish their domination; and state elite battled with successive national regimes to maintain regional autonomy. The Mexican national elite, based in Mexico City, controlled the central government and unceasingly sought to extend its influence. For much of the nineteenth century, the national elite divided into two irreconcilable warring groups. After thirteen years of civil war from 1854 to 1867, the centralist Conservatives lost out to federalist Liberals, who in their efforts to modernize the nation soon became centralists. Dictator Porfirio Díaz, who seized power in 1876 and held it for thirty-five years, forged a national elite comprised of military officers, allied with civilian technocrats, the latter known popularly as científicos. This coalition encouraged and facilitated enormous foreign investment in order to modernize the nation's economy and maintain its position of power. Díaz and his cronies struggled to push their influence into the regions, but fiercely resistant regional elite forced compromise. A mosaic of deals and alliances formed the basis of the regime. The Revolution of 1910 tore apart the system. For a decade no national group or leader constructed a replacement, foundering on the rocks of regional opposition. In the regions and localities the various revolutionary and counterrevolutionary factions competed and alternated in power, mixing ambitious new freebooters and, at times, remnants of the old guard. During the presidency of Alvaro Obregón (1920–24) a new national elite took shape. Predominantly made up of military officers, it reconstructed a system of compromises similar to those of the Díaz era. In the 1930s, under the auspices of the PNR, government use of military force and patronage restarted the process of centralization. The new regime diminished (but did not destroy) the power of regional elites, employing peasant and worker organizations as political counterweights. Throughout the enduring conflicts between national regimes and regional elite, local elites fought to maintain their autonomy, as well.
The Revolution pushed the prerevolutionary elite from its political place and, in many respects, that elite never recovered. Economically, members of the Porfirian upper class survived in inverse relation to their dependence on land for their fortunes. Some of the old elite flourished in the new order. The new ruling elite derived mainly from the upwardly mobile middle classes and ambitious military officers. Overall, the biggest winners in the Revolution were members of the middle class, who gained access to government, education, and economic opportunity. The Sonoran dynasty—Adolfo de la Huerta, Alvaro Obregón, and Plutarco Elías Calles—epitomized this middle-class triumph.
The current historiography maintains that there was little or no separation between economic and political elite until the Revolution of 1910. Thereafter, the revolutionary regime supposedly split the national power structure into economic and political groups. The revolutionary party pointedly excluded the business sector from its ranks. But my research indicates that these separations did not apply at the state and municipal levels. And, if the careers of presidents Alvaro Obregón, Plutarco Elías Calles, and Abelardo Rodríguez were any indication, the overlap of economic and political interests existed on the national level as well. It is not evident that there was any clear difference between the single political and economic elite of the Díaz dictatorship and the supposedly dual elite that existed during the immediate postrevolutionary war years, 1920 to 1940. There arose from the Revolution a group of military and civilian entrepreneur-politicians whose activities blurred the lines between economic and political elite. As Dudley Ankerson observed of the generals, the difference between them and their predecessors was that "the methods of their plunder became more sophisticated." One observer noted, "The Generals and other officials devote more time to mercantile pursuits than to combating banditry; they ... attend to their own business first."
These demarcations were also not so clear at the state and municipal levels. Revolutionary leaders behaved much like their predecessors, employing public position for private gain. The revolutionary military, also like the Díaz elite, made money the "old fashioned way," through payoffs, bribes, and padding payrolls. If anything, the "freebooters" of the Revolution may have been better entrepreneurs, more adept at intermingling economics and politics, and more willing to innovate by entering new fields such as industry and gambling. Through 1940 the bifurcation of the elite into economic and political segments did not seem to have taken place at the state and local levels. The lessons learned in the nineteenth century regarding the need to control local politics in order to protect economic holdings was probably more important in the 1920s and 1930s than ever before.
Old and new elite depended on their families for the base of their influence and enterprise. The greatest fortunes of the Porfiriato, such as the Terrazas-Creel, the Madero, and the Molina-Montes fortunes, were founded on extended family ties. Before and after the Revolution the major fortunes of the Monterrey group were perpetuated by family. The revolutionaries were similarly inclined. Thus, the Quevedos and Almeidas used their extended families to solidify their economic holdings and political influence in Chihuahua during the 1920s and 1930s, and the Avila Camachos did the same in Puebla in the 1930s and 1940s. The revolutionaries also relied heavily on their camarillas, groups of loyalists with links from the university or local politics.
Foreigners went to Mexico in search of their fortunes from the first years of Mexican Independence in 1821. They also purchased the new nation's public debt and invested in its commerce, agriculture, and mining industry. After an initial boom and bust, during which the losers were primarily Europeans, there was a long period from the 1830s through the 1880s, when investment was almost nonexistent. Foreign invasions, civil wars, and political uncertainty presented risks that were far too high for investors, despite the enormous resources and potential opportunities. There were, of course, foreigners who settled and made good in Mexico during these dark years, such as the American Braniff family. Others, like Irishman Patrick Milmo (Mullins) and American Joseph A. Robertson in Monterrey and John R. Robinson in Batopilas, Chihuahua, made their fortunes in the 1860s and 1870s. Nonetheless, the real boom in foreign investment and entrepreneurship took place after Díaz took power in 1877. The regime, whose motto was "order and progress," attracted people and money from all over the world.
The number of foreigners in Mexico through 1940 never exceeded 1 percent of its population. Prior to 1910 Sonora had the highest percentage of foreigners with 3.5 percent and three other northern states, Chihuahua, Coahuila, and Tamaulipas, had more than 1 percent. Ten years of Revolution decreased the number of foreigners both in absolute and relative terms. Chihuahua, Durango, and Sonora experienced drastic deductions. But the number of foreigners in the north increased by 183 percent during the 1920s.
Of course, the number of foreigners was not nearly as important as the amount of money they invested. Although there is some disagreement about the statistics, especially those concerning the origins of investment in railroads, it is likely that there were about a billion and a half dollars invested from abroad in Mexico in 1912, with a little more than 1 billion from the United States and more than 300 million from Great Britain. By the mid-1920s US investment had risen to 1.280 billion dollars. Foreigners played important roles in the major sectors of the Mexican economy, mining, transportation, and agriculture. By some estimates the value of American investment was twice that of Mexicans in 1910. Americans controlled three-quarters of the Mexican mining and metallurgical industries. Other foreigners owned 80 percent of the nation's industry.
Foreign investment in underdeveloped nations is, of course, controversial. The advocates of the dependency framework maintain that there was an unequal relationship between the great industrialized nations that invested and the less developed countries that received the investment. According to this general viewpoint, the investors, who supplied capital and technology and often management, exploited the recipients, taking their nonrenewable resources from which they obtained enormous profits and returning nothing other than the paltry wages of selected workers and the rents derived by the domestic elite from their ownership of property and their control of positions of authority at various levels of government (through bribes and so on). Therefore, until recently the widely accepted interpretation of the economic history of Mexico since 1850 has been that the nation was a victim of exploitation, most particularly by US capitalists. In that analysis, the Díaz era was the most striking. John Mason Hart goes even further in asserting that the North Americans controlled the Mexican economy at least until 1910 and certainly dominated thereafter as well. During the past decade or so, however, the historiography, it seems to me, has taken two tracks. The first track emphasizing foreign entrepreneurs' exploitation and control has, despite various revisions in interpretations of the era, remained quite strong. But a second track, built by economic historians of Mexico, points out that foreign investment was often unsuccessful in Mexico and that Mexican elites often got the better of foreigners.
The evidence that either Díaz betrayed his country, selling it to the Americans, or realized too late that he had permitted the Americans too much influence, is not so clear as Hart or Ramón Ruiz might have it. The regime was anything but a pushover for Wall Street. Especially after 1900, Limantour and Díaz took a series of measures to encourage European investment to counteract the norteamericanos. This angered in particular American oil tycoons. Limantour also instituted higher tariffs to protect domestic industry from foreign competition. The evidence, furthermore, indicates that foreigners received no extraordinary treatment. Díaz favored those who offered Mexico opportunities to develop its economy, foreigners and Mexicans alike. Wealthy entrepreneurs, Mexican or foreign, had access to the highest echelons.
Excerpted from Pesos and Politics by Mark Wasserman. Copyright © 2015 Board of Trustees of the Leland Stanford Junior University. Excerpted by permission of STANFORD UNIVERSITY PRESS.
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Table of Contents
List of Tables viii
1 Elites, Foreigners, and Government in Mexico, 1877-1940 1
2 Mexican Entrepreneurs 31
3 Mexico Versus the Seven Kings: The Railroad Consolidation, 1902-1910 58
4 Foreign Landowners 77
5 The Corralitos Company 112
6 Foreign Mining Entrepreneurs 132
7 The American Smelting and Refining Company in Mexico, 1890-1940 158
8 Conclusion 181