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Assessing the Obstacles to
Industrialisation: The Mexican
Economy, 83 0-I94o*
STEPHEN H. HABER
2
John H. Coatsworth, Growth Against Development: The EconomicImpact of Railroads in
3 Ibid., p. 35.
Porfirian Mexico (Dekalb, Illinois, 1981), p. 18.
4Enrique Cardenas, 'Some Issues on Mexico's Nineteenth Century Depression', mimeo
(1981), pp. 29-30.
Industrialisationin Mexico 5
home districts to Mexico City on the nation's bandit-infested roads.
Though no global data are available on the frequency of highway
robberies, Paul Vanderwood's qualitative data indicate that, like
contemporary joggers in Central Park, most travellers expected to be
robbed at least once on a long journey. The available quantitative data
mirror this judgement. In one single day in 1861, for example, the
stagecoach from Mexico City to Puebla was robbed three times.5 During
one Is-day period in I865 there were four major robberies along the
highway from Orizaba, Veracruz, to Mexico City- an average of one
every four days. The Mexico City Independencia,summing up this situation,
proclaimed that it was 'a scandal the way bandits infest the roads. What
the government is thinking about we do not know, but the bandits
rampage with impunity.'6
In addition to inefficient transportation technology and the threat of
banditry, Mexico's market was further segmented by a system of internal
tariffs, similar to that which existed in Germany prior to the Zollverein.
Until the latter part of the nineteenth century, Mexico was a congery of
individual provinces, each of which functioned with a great degree of
autonomy from the central government. Essential to the political
autonomy of these provinces was the fiscal autonomy provided by state
taxes. That this taxation system served as an impediment to the
development of a national market and a national economy was not deemed
particularly important by those who benefited from it.
Since the scale of technology employed in most manufacturing
enterprises in the early nineteenth century was very modest, robust
regional markets probably could have sustained an industrialisation
process, even without access to a national market. Indeed, as Sidney
Pollard has demonstrated, industrialisation in nineteenth-century Europe
was largely a regional phenomenon.7 The market for manufactured goods
in mid-nineteenth century Mexico, however, was neither robust nor deep.
Our knowledge of living standards, the distribution of income, and wages
during the early republic is extremely limited, but indirect evidence about
Mexico's social and economic structures suggests very low income levels.
Indeed, the great majority of the Mexican population were village-
dwelling peasants who practised rain-fed, subsistence agriculture. A
sizeable portion of the population did not even function in the money
economy. Even as late as 191o, after a 40-year period of economic growth
and structural change, 71.3 % of the population resided in villages of less
Paul Vanderwood, Disorder and Progress: Bandits, Police, and Mexican Development
(Lincoln, Nebraska, I98I), pp. 3, ii and 37. 6 Ibid., p. II.
7 Sidney Pollard, Peaceful Conquest: The Industrialization of Europe, I76o0-970 (London,
1981).
6 StephenH. Haber
than 2,500 persons, indicating that they were peasants who lived in
traditional villages.8 A good portion of this population (close to 6o % in
some states) could not even speak Spanish, implying that they functioned
only in local markets.9 Finally, Coatsworth's national income estimates for
the nineteenth century suggest an economy characterised by low income
levels. Gross Domestic Product per capita in I845 was only $56 (195o
dollars), and was, as has previously been mentioned, shrinking.'0 The
market for manufactures would in fact have been even smaller than this
$56 figure indicates, since the nation's skewed distribution of wealth no
doubt produced an extremely uneven distribution of income. In fact, at
the turn of the century, when real GDP per capita had doubled since 845,
average household incomes were still so low that in years of bad corn
harvests, when the price of this important staple rose, Mexico's working
class could not afford to purchase cotton cloth.1"
Not only was the market not conducive to the growth of manu-
facturing, neither was the legal-institutional environment. In the United
States and England, for example, legal systems had developed in which
decisions were based on precedent, in which judges made rulings based on
pride in craft, and in which well-defined bodies of contract, commercial
and patent laws were established. This made property rights, at least for
the 'respectable classes', easy to protect. In Mexico no such state of affairs
existed. Until the last two decades of the nineteenth century no legislation
existed to encourage the formation of limited liability corporations, a
modern patent law did not exist, nor was there a body of mortgage credit
law designed to protect long-term investments. Indeed, as was the case in
early modern Europe, economic activity of all kinds still required special
permits and licences for which special taxes and fees were charged. Above
all, litigants faced a corrupt and whimsical judicial system. Thus it was
extremely difficult to enforce contracts, collect on loans (especially if they
were to the government) or enforce property rights without resorting to
political machinations. As David Walker has pointed out in his work on
commerce in nineteenth-century Mexico, without access to those who
8
James W. Wilkie, The Mexican Revolution:Federal Expenditureand Social Changesince o191
(Berkeley, 1970), p. 2I8.
9 Direcci6n General de
Estadistica, Estadisticas Sociales del Porfiriato, r877-y9ro (Mexico,
1956), pp. II8-20. The data are for I895, when in the nation as a whole 17% of the
population spoke only an indigenous language. The percentage of non-Spanish
speakers in the mid-nineteenth century was certainly significantly higher than the 1895
figure. But even in I895 the majority of the population in indian-dominated states like
Yucatan and Oaxaca spoke only an indigenous language. In seven other states (out of
3 ) over 20 % of the population spoke no Spanish in I895. It is highly likely that in
the mid-nineteenth century the national average approached the levels of these states.
10 Coatsworth, 'Obstacles to Economic Growth', p. 82.
1 El Economista Mexicano, 7 May I904, p. 114.
Industrialisationin Mexico 7
wielded political power and influence it was virtually impossible to
conduct business of any kind.12 Since the government changed hands in
the early nineteenth century on an almost monthly basis (Mexico had 75
presidents between i821 and I876), access to those who wielded the
political power necessary to enforce property rights constantly shifted as
well. The net result was an arbitrary institutional environment that made
free enterprise problematic.
The ramifications of these various institutional and social factors were
several. First, it meant that the Mexican economy could not grow.
Secondly, because of the lack of a robust economy, the Mexican state
could not defend itself from external or internal attack. Indeed, it was
during this period that the nation lost nearly half of its territory to the
United States, saw the secession first of the Central American provinces
and later the Yucatan, and was successfully invaded by France. Finally,
these factors served to discourage industrial development. Manufacturers
faced a divided and shallow market, an uncertain institutional environment
and a contracting economy.
What is perhaps most surprising about the economic history of this
period is the amount of industrial development that did occur. The history
of early Mexican manufacturing is still far from written, but the picture
that does emerge indicates an impressive amount of industry relative to
the other countries of Latin America. In a way, some of this
industrialisation was due to the very features that discouraged a more
complete and self-reinforcing process of industrial growth. High internal
transport costs protected small manufacturers from the onslaught of
British goods. The ability of the well-connected to manipulate the state to
their own advantage produced a government finance bank (capitalised
from import revenues) which lent the majority of its portfolio to its own
board members. The need for government revenues produced tariffs, both
federal and state, which served to afford some protection to industry.
The best-developed and fastest-growing of Mexico's nineteenth-century
industries was cotton textiles. In 1843, after a I2-year period of investment
and growth (a small fraction of which was subsidised by loans from the
government-sponsored Banco de Avio, which existed from 1830 to 1842),
the nation boasted 59 cotton textile factories, the great majority of which
were located in the states of Mexico and Puebla, producing primarily for
the Mexico City market. These firms processed some io.6 million kilos of
raw cotton into yarn, most of which was sold to independent weavers
though some was also processed into cloth in the factories. No data are
12
Coatsworth, 'Obstacles to Economic Growth', p. 98; David W. Walker, Business,
Kinship and Politics: The Martinet de Rio Family in Mexico, I82j-1867 (Austin, Texas,
1986).
8 StephenH. Haber
available on the number of workers employed in I 842, but it was probably
in the area of ten thousand.13
Eleven years later the number of active mills had actually declined to
only 42. Other indicators suggest, however, that the situation had
improved for the remaining mills. If we use raw cotton consumption as
a proxy for output (which eliminates the problems associated with
measuring output in goods of different types and different qualities over
time), the data indicate a rise in production of I9 %.14 This increase may
have been due to the increase in the number of machines in service, which
grew by I8 %. Lack of accurate labour-force data makes it difficult to
assess the growth of labour productivity.
By 877, the end of the early period of Mexican manufacturing, the size
of the cotton-textile industry had increased significantly since the I85os.
Mexico now had 92 cotton mills, though these were somewhat smaller in
size than the I854 factories: the average mill now worked only 2,753
spindles with 128 workers, compared to 3,004 spindles with 264 workers
in I854.15
In comparison to the United States, this was a modest textile industry.
Mexico's 253,270 ring spindles in 1877 was an extremely low figure
compared to the 10.7 million spindles in the United States in I880.16
Compared to other Latin American nations, however, this was quite a
sizeable industry. Brazil, for example, in 1866 possessed but nine mills,
employing 768 workers and 14,875 spindles. By i88i the number of
Brazilian mills had increased to 44, and now employed 60,419 spindles,
but this was still only one-quarter of the number in Mexico.17
Besides cotton textiles other important industries existed as well,
though none functioned on as large a scale. Unfortunately, little in the way
13 parael estudiodela industrialiiacion
Secretariade Hacienday CreditoPLblico,Documentos
en Mexico, I837-i84I (Mexico, 1977), doc. 5; Ministerio de Fomento, Estadistica del
Departamento de Mexico(Mexico, I854), doc. 2. For a discussion of the Banco de Avio
see Robert A. Potash, The MexicanGovernment andIndustrialDevelopment in the Early
Republic:TheBancodeAvio (Amherst, I983). The literaturehas tended to overestimate
the role of the bank in financingMexico'searlyindustrialisation.The total loans of the
bank to cotton textile manufacturers from 1830 to 1842 came to 509,000 pesos, but in
854, when therewere fewer mills in operationthanin 1842,the total value of the plant,
equipment, and buildings of the industry (valued at acquisition cost) was 8,872,95i
pesos, indicatingthat the bank could only have been responsiblefor six per cent of the
financecapital of these enterprises.
14 Ministerio de Fomento, Estadisticadel Departamento de Mexico,doc. 2.
5 Calculatedfrom ibid.; and Secretariade Hacienda,Estadisticade la ReptiblicaMexicana
(Mexico, i88o), cuadros de industria.
16 US Bureau of the Census, Censusof Manufactures, 1879.
17 A. V. de BorjaCastro,'Relatorio do segundo grupo', in Antonio Jose de Souza Rego,
de 1866(Rio de Janeiro, 869), p. 49; Ministeriode
exposifaonacional
Relatorioda segunda
e
Trabalho, Industria, Comercio, Comisio Executiva Textil, Indistriatextil algodeira
(Rio de Janeiro, 1946), p. 5I.
Industrialisationin Mexico 9
of time-series data is available for these other industries, but qualitative
data indicate that their rates of growth were quite slow. Many resembled
artisanal shops more than modern factories. In the iron and steel industry,
for example, an 853 census listed but five foundries, only one of which
employed more than oo00 workers. Median foundry size was but 14
employees. A similar situation prevailed in the glass industry, where an
1857 census turned up only five firms, four of which employed fewer than
Ioo workers. Median firm size was 70 workers.18 Small-scale industries
existed as well in paper manufacturing, beer brewing, and other activities,
but again we know little about their development over time. It is clearly
the case, however, that even as late as the i88os these industries were very
modest in scale. In the paper industry, for example, until I892 the
combined value of production of the nation's 12 paper mills was scarcely
one million pesos (at that time roughly $700,000). Total output was
approximately four tons of paper per day.19
In short, with the exception of cotton textiles, most of Mexican
industry was still small in scale by the i88os. An 1877 census of the
manufacturing establishments in the Federal District, for example, turned
up 728 manufactories. Industries like boots and shoes, other leather
working, hats, tailor shops, bakeries and wood-working predominated.
Average firm size was only 17 workers, implying that these were more
artisanal shops than modern factories. Even in industries which in the
advanced economies were becoming large-scale, like iron and steel, small-
scale factories continued to predominate. In the iron industry, for
example, the 1877 Federal District census turned up only two foundries,
whose combined investment in fixed capital was only 54,000 pesos (at this
point the dollar and peso traded roughly one for one) and which employed
only Ioo workers between the two of them. Total output was
approximately 5oo,ooo kilos of iron goods, with a value of only 6o,ooo
pesos.20
Most significantly, all of the firms enumerated in the 1877 census were
consumer goods producers; no capital or intermediate goods industries
existed. Indeed, throughout the nation this was the case. The explanation
for this situation is fairly straightforward: the consumer goods industries
were still too underdeveloped to support capital goods industries. Even
in the relatively rapidly growing cotton textile industry, an industrial
18
Secretaria del Estado, Memoria de la Secretaria del Estado y del Despacho de Fomento
ColonigacionIndustriay Comerciode la Repiblica Mexicana, ir87 (Mexico, I857), docs. 18-
2, I8-3.
19 Hans Lenz and Federico G6mez de
Orozco, La industriapapelera en Mexico (Mexico,
1940), p. 83.
20 Secretaria de Hacienda, Estadzsticade la
ReptiblicaMexicana (Mexico, I880), cuadros de
industria.
o StephenH. Haber
and family-run firms producing for local and regional markets became
increasingly characterised by large, capital-intensive, vertically integrated
firms producing for the national market. This transformation held true
across product lines and across regions. From cement to steel, from
textiles to beer, large corporations, many of them exercising monopoly
control of the market (a subject we will return to in some detail shortly),
began to appear, pushing aside the smaller, regional producers that had
historically been the mainstay of Mexican industry. A complete description
of this transformation is beyond the scope of this article, but a few
examples can give the reader an idea of how Mexican industry changed
once the earlier obstacles to industrialisation were removed.
Perhaps in no other area was the transformation from small, regional
producers to a large, national producer as pronounced as in the steel
industry. In 1o00 the first integrated steel mill anywhere in Latin America
was founded in Mexico, the Fundidora Monterrey steel works. The
subscribed capital of the firm was I0 million pesos (about $5 million at the
contemporary rate of exchange), making it the second largest manu-
facturing enterprise in Mexico and thirtieth largest corporation of any
type. Unlike the small foundries that had preceded it, Fundidora
Monterrey was a totally integrated operation, handling all phases of steel
production, from the mining of the ore to the rolling of finished products.
Moreover, Fundidora Monterrey's equipment was a far cry from the
antiquated technology utilised by its predecessors. Iron ore was reduced
to pig iron in a Massick-and-Crook-type blast furnace capable of handling
I,ooo tons of ore per day, with an output of approximately 35 tons of pig
iron; and three Siemens-Martin open-hearth furnaces, with a daily capacity
of 35 tons each, and one Bessemer Converter refining the pig into steel
ingots. The firms also owned all the necessary rolling mills, cranes,
locomotives and other machinery to turn out a variety of finished steel
products.30 When the mill was running at full blast, over 2,000 workers
toiled round the clock in its various departments.
A similar transformation occurred in the paper industry, where one
new firm, the Compafifa de las Fabricas de San Rafael y Anexas, came to
control the nation's entire production of newsprint and virtually
controlled the domestic production of other classes of paper goods.
Founded in 1890, San Rafael y Anexas ran two mills, both in the state of
Mexico. Like Fundidora Monterrey, it was a totally integrated operation:
30
Jose Luis Cecefia, Mexico en la orbita imperial (Mexico, 1973), p. 87; The Mexican
Yearbook,1912 (London, 1913), p. 114; Fundidora Monterrey, 'Informe Anual, 1902',
p. 46; Luis Tor6n Villegas, La industria sideriurgicapesada del norte de Mexico y su
abastecimientode materiasprimas (Mexico, 1963), p. 55; Oscar Realme Rodriguez, 'La
industria siderurgica nacional', unpubl. tesis de licenciatura, Universidad Nacional
Aut6noma de Mexico, 1946, p. 97.
14 StephenH. Haber
it owned and operated its own haciendas, where the trees were grown, ran
its own mechanical wood-pulp plant, generated its own hydroelectric
power, and operated its own railroad. The total number of workers in all
of these operations is unknown, but in its two paper mills alone 2,000
operatives were employed. The total paid-in capital was 7 million pesos,
and annual production was roughly three times that of all its small
competitors combined - roughly I 2 tons of paper per day. In fact, within
a decade of its founding, San Rafael eliminated almost all of its domestic
competition.31
In other capital-intensive industries, like cement, beer, dynamite and
explosives, and glass, a similar process occurred: large, highly capitalised
firms producing for the national market replaced the numerous small
shops which had preceded them.32 They also began to drive foreign-
produced goods out of the market. In beer production, for example, the
nation's newer, larger, firms (the Cervecerfas Cuauhtemoc and
Moctezuma) not only began to challenge the numerous local beer
producers, but also replaced foreign beer imports. Beer imports fell from
approximately 3 million kilos in fiscal 1889-90 to just over 5oo,ooo kilos
in 1910-Ii, while demand for beer was rising. The Cerveceria
Cuauht6moc's production alone in 9 0 was over 2 5 times that of the total
volume of imports.33
In more labour-intensive manufacturing, especially in consumer non-
durables, a similar transformation was underway. Data from the two
largest of these industries, cotton textiles and cigarettes, illustrate this
change best.
One of the most obvious indicators of this change in the textile industry
was the tremendous growth in the number and size of factories. At the end
of the earlier period (1877) there had been 92 cotton mills in operation,
each employing on average 2,753 spindles, 98 looms and 128 workers. By
1895 the mills were both more numerous and larger: there were now I o
mills in operation, employing an average 3,741 spindles, 112 looms and
207 workers. By I9I0 they were more numerous and larger still: there
were now 123 active mills, employing 5,714 spindles, 203 looms and 260
workers on average. In other words, not only were there now roughly
3' The Mexican Yearbook, i908 (London, 1909), p. 539; The Mexican Yearbook, Io909-o
(London, 1911), p. 416; The Mexican Yearbook,1912 (London, 1913), p. II, i26; Lenz
and G6mez de Orozco, La industriapapelera, p. 83.
32 For a more complete discussion of the transformationof these industriessee Stephen
H. Haber, Industryand Underdevelopment: The Industrialization
of Mexico, I890-I940
(Stanford, 1989), chs. 4 and 6.
33 Calculatedfrom data in El Economista Mexicano,24 Dec. i898, p. 249; El Economista
Mexicano,27 July 1907, p. 360; Fernando Rosenzweig, Comercioexteriorde Mexico,
1877-19II: estadzsticaseconomicasdel Porfiriato (Mexico, 1960), p. 208.
Industrialisationin Mexico 15
one-third more mills in operation than there had been three decades
earlier, but they were roughly twice the size of the earlier mills.34
There had also been an increase in productivity since the early years of
the industry. Physical productivity (measured in output of pieces of cloth
per active loom) increased some 379 % between 1843 and 1905, an average
rate of growth of productivity of roughly 2.5 % per year. This is a low end
estimate, since it does not take into account improvements in the quality
of cloth or the increase in the production of fine-weave goods, both of
which were substantial. Labour productivity increased as well, though
this is somewhat harder to measure in the years prior to i895 because of
significant changes in the allocation of the labour force between spinning
and weaving departments of the mills. An analysis of post-I895 data,
however, indicates a similar increase in output per worker: labour
productivity grew by 31 % between 1895 and 1905, a 2.7% annual
increase. 35
Whatever the exact rate of productivity growth, it is clear that Mexico's
newer, highly mechanised firms were more efficient than their older
competitors and certainly were able to out-compete the nation's artisans,
thereby forcing both of these traditional producers from the market. Of
the nation's 150 cotton mills in 1905, for example, only 123 were
operating, the other 27 (almost all of them smaller, older mills) unable to
compete against the newer, more efficient mills.36 The nation's artisans
fared even worse: of the 4I,000 artisan cloth producers in 1895, only
12,000 remained in 19I0.37
A similar transformation occurred in the cigarette industry where three
giant firms, employing automated cigarette rolling machinery from
France, drove the nation's artisanal producers out of the market. In 1898
the nation's output of almost 5 million kilos of cigarettes was divided up
among 766 manufactories. Ten years later, in I908, though production
had increased by 76% to almost 8.7 million kilos, the number of
producers had fallen by over 40 % to 437. In other words, output per
establishment trebled over the ten-year period, from 6,40o kilos in 1898
to 19,819 kilos in I908. By June 191I, the last date for which data exist,
there were only 341 manufactories in operation, less than half the number
in existence just 12 years earlier.38 These figures probably understate the
degree to which the major producers forced out the smaller manufacturers,
34 Calculated from Secretaria de Hacienda y Credito Puiblico, Documentos, doc. 5;
Ministerio de Fomento, Estadistica del Departamentode Mexico, doc. 2; Seminario de
Historia, Estadisticas economicasdel Porfiriato, p. io6. 35 Ibid.
36 Calculated from Seminario de Historia, Estadisticas econdmicas del Porfiriato, p. io6.
37 Anderson, Outcasts in their Own Land,
p. 47.
38 Calculated from Secretaria de Hacienda, Boletin de estadzsticafiscal, I894-I9Ir (Mexico,
various years).
I6 StephenH. Haber
since the data on the number of firms includes cigar manufacturers (which
were not mechanised and therefore not subject to the same kind of
concentration because of increasing returns to scale) as well as cigarette
producers. Indeed, firm level data from the three major cigarette
producers suggest that they controlled 60 % of the market by the close of
the Porfiriato.
Data on the labour force also indicate that the big, mechanised firms
were forcing the artisanal shops out of business. In I895 there were 10,397
workers employed in cigarette production. By 910o there were but 6,893,
approximately half of whom were employed by the nation's three major
firms.39 If we assume that cigarette output was the same in i895 as it was
in 1898, the first year for which output data are available, the data indicate
that output per worker increased from 473 kilos in 1895 to I,216 kilos in
19 0 - an increase in labour productivity of I 57 % over the 5-year period
- the apparent result of the substitution of automated rolling machinery
in the big firms for thousands of workers rolling cigarettes by hand in
hundreds of small shops. These figures, like those on output per factory,
also tend to underestimate the degree of change in the industry. It is
unlikely that output in I895 was equal to the level of 1898 - it was almost
certainly significantly lower. Thus, if anything, the degree to which the
automated machinery employed by the large firms raised labour
productivity was probably greater than the 157% increase estimated
here.40
Family-owned enterprises remained in Mexico. In some lines of
manufacturing, like leather goods, cigars and food processing, small firms
continued to dominate. Even in the increasingly concentrated cotton and
wool textile industries, small firms that produced for geographically
isolated areas continued to hold out. Wherever there were sizeable
economies of scale or speed, or where the lack of a skilled labour force
created incentives to mechanise production, however, big firms were
pushing the small producers out. Because no comprehensive industrial
census was ever carried out during the Porfiriato, it is not possible to
calculate the percentage of industrial production attributable to large-scale
manufacturing. Data from the census of 929, however, shed some light on
the subject. As a percentage of total national production of manufactures,
the subsectors that were becoming increasingly concentrated - steel,
textiles, cement, beer, dynamite, soap, paper, glass, tobacco products -
accounted for just over half of all manufactures produced in 1929. I
a variety of reasons. In the first place, Mexico did not in fact have a legal minimum
wage prior to the 1930s. Secondly,the authorsdid not publish the sources or methods
used, so there is no way of knowing exactly what the 'minimum wage' figures
represent.It is most likely the case that the reportedfigures representthe lowest wage
rate that the researcherscould find for a particularyear, which is not, to put it mildly,
a systematicapproachto gathering wage data.
44 Coatsworth, 'Obstacles to Economic Growth',
p. 82.
45 El EconomistaMexicano, 7 May 1904, p. II4.
46 Mexico's investment in human capital was extremely low. The educational system
served only the few, with the vast majorityof the populationhaving almost no formal
schooling and very low levels of literacy. In I895 only 14% of the population could
socialesdel Porfiriato
read and write. See Direcci6n General de Estadistica,Estadzsticas
(Mexico, I956), p. 123.
47 AlexanderGerschenkronmade this point about the role of imported technology for
late developers in Eastern Europe. See his EconomicBackwardness in Historical
Perspective: A Book of Essays (Cambridge, I962), ch. I.
Industrialisationin Mexico 19
48
Haber, Industryand Underdevelopment, p. 33.
49 See El EconomistaMexicano, I8 Jan. 1902, p. 245; 2I June 1902, p. 203; 5 Sept. 1903
(English edition), p. 536; ii July 1908, p. 297.
50
Gregory Clark, 'Why Isn't the Whole World Developed? Lessons from the Cotton
Mills', Journal of EconomicHistory, vol. 47 (I987), P. I46.
20 StephenH. Haber
enter the international market, but was a resounding failure. The lack of
a merchant marine to ship its goods to foreign markets, the lack of
institutions to provide credit to exporters, the competition of producers
from the advanced industrial economies, and high tariff barriers in other
Latin American countries, all worked against Mexican industrial exports.51
A second obstacle to successful industrialisation was the low
productivity of Mexican labour compared with that in the advanced
industrial countries, and this again pushed up production costs. The
Mexican working class had its social roots in the peasantry; many workers
were only recently off the farm; some moved back and forth between the
factory and the field. They therefore worked with the rhythm of a
peasantry, not of an industrial proletariat. For this reason Mexican
industrialists did not have the same degree of control over labour as did
their counterparts in the United States, England or Germany. Though
they could force workers to work long hours, they could not instil in
them the attitudes and values that are essential to the development of
industrial discipline. Like European industrialists in the late eighteenth
and early nineteenth centuries, Mexican factory owners regularly
complained about the 'laziness' of their work force and their inability to
force the workers to submit to routinised work.52
This resistance on the part of the working class took two forms. One was
that workers openly resisted employers' attempts to increase productivity
or achieve greater discipline on the shop floor. There were even occasions
when entire shifts of workers abandoned their machines in order to attend
a fiesta at a nearby hacienda or barrio.53 The second was that Mexican
workers generally worked less intensively than did their American or
European counterparts. In the weaving departments of Mexico's cotton
textile mills in 910o, for example, the average worker operated 2.5 looms,
51 For a detailed discussion of this attempt to export manufactured goods during the
Porfiriato see Haber, Industryand Underdevelopment, pp. 39-43.
52 For a
typical analysis of the productivity of Mexican labour by a Mexican industrialist
see Jose Robredo, Punto de vista de los industrialesde hiladosy tejidosde la Repiblica (Mexico,
1925), p. 5I. For a similar analysis by a foreign observer see G. Jenner, 'Informe de Mr
G. Jenner sobre la inversi6n del capital ingles en Mexico', in Informesy documentos
relativosa comerciointerior,mes de setiembrei886 (Mexico, i886). This experience with the
slow transition to 'factory time' was not unique to Mexico. In Meiji Japan, for
example, people returning from study or work abroad regularly commented on the
laxness and lack of time discipline of Japanese workers compared to their Western
counterparts. The transition to modern conceptions of time and work, however,
appears to have proceeded more rapidly in Japan than in Mexico. See Thomas C.
Smith, Native Sourcesof JapaneseIndustrialization,I7fo-1920 (Berkeley, I988), pp. 225-8.
53 One of the more notorious cases of this occurred in the San Lorenzo cotton mill in
Orizaba Veracruz in 1923. For details on this case see Archivo General de la Naci6n,
Ramo de Trabajo, Box 560, file 6, doc. iI.
Industrialisationin Mexico 21
63
For an analysis of the profitability of Mexican manufacturing during this period see
Haber, Industryand Underdevelopment, ch. 7.
64
Brazil had a much better developed banking system and far larger and more complex
stock and bond markets than Mexico did. Over the long run this allowed Brazil
to overtake Mexico's early lead in industrialisation and also gave rise to lower levels
of industrial concentration than existed in Mexico. See Haber, 'Industrial Con-
centration'.
65 Naomi Lamoreaux, The Great Merger Movement in American Business, 1894-1-90
(Cambridge, Eng., I985), pp. i26-7.
z6 StephenH. Haber
economy enabled San Rafael to hold on to its control of the market over
the long run. It was not until 1936 that San Rafael's monopoly was
broken, when the Mexican government, for political reasons, decreed that
the distribution of newsprint was a strategic industry that should be
controlled by the State, not by a private firm. It therefore created a
government distribution monopoly, though San Rafael continued to
control production.
In short, during the 20 years between i890 and i910 Mexico underwent
a rapid process of economic modernisation and growth. A national market
was created by the building of a rail network, the mining sector was
revitalised, a petroleum industry was created, agriculture became
increasingly commercialised and industry moved into a wide variety of
new products that had never before been produced in Mexico, driving
imported goods from the market and pushing the nation's artisans to the
wall. But the contradictions and obstacles inherent in the rapid
industrialisation of an economy like Mexico's prevented self-sustaining
industrialisation from taking hold. The market was still too small to
support capital goods industries (it could barely sustain consumer-goods
producers in many lines of production), the industries that did exist were
unable to compete without extensive support and protection from the
government and a group of rent-seeking financiers came to control the
manufacturing sector.
In 1932 real per capita GDP fell by an incredible I6 %. Over the six-year
period real GDP per capita fell by 30.9%.72 The results, as one might
expect, of this downturn were contractions in industrial output, nominal
wages, employment, profits and new investment. In fact, many of
Mexico's major industrial firms came close to bankruptcy during the
depression.73
It was not until the mid-I93os, therefore, once a general economic
recovery began, that a new round of industrial development took place.
Several factors were behind this recovery. One was government deficit
spending, which not only pushed up aggregate demand, but also served
to remove some of the remaining obstacles to industrialisation. Extremely
significant here was spending on a federal highway network (the road
system increased from 1,426 kilometres in 1930 to 9,929 kilometres by
i940),74 which created demand for producer goods like cement and steel,
as well as linked markets, and spending on irrigation systems in the north
of the country, which increased agricultural productivity. The second was
the agrarian reform, which redistributed wealth in the countryside and
therefore, over the medium term, redistributed incomes as well, thereby
increasing the size of the market. Thirdly, though there was a good deal
of conflict between the government of Lazaro Cardenas (1934-40) and
industrialists, one of Cardenas' accomplishments was the restoration of
social peace in Mexico. Industrialists may not have wielded political
power in the Cardenas government, but Cardenas did create a stable
political environment through the formation of a national party, thereby
restoring the confidence of the industrialists in the viability of the State.
Mexican manufacturers no longer had to fear the vagaries of an unstable
political system. Finally, there was a recovery of the price of Mexico's
major exports, silver and oil, which revived the economy through the
same mechanisms that had earlier forced it to contract. Overall, from 1933
to 1939 real per capita GDP grew by 24 %, or roughly three per cent per
year.7
With the increase in demand, the return of profits, and the creation of
a stable political system, industrialists, Porfirian as well as a new group of
immigrant entrepreneurs, began a new round of investment in manu-
facturing. Not only did investors revalue their assets upwards (the ratio
of market-to-book values increasing twofold for the older, major firms
between 1932 and 1938), but spending on new plant and equipment
72 Calculated from data in Instituto Nacional de Estadistica
Geografia e Informatica,
Estadisticas historicasde Mexico (Mexico, I985), P. 311.
73 For a detailed discussion of the effects of the depression on employment, wages, profits,
and investment see Haber, Industryand Underdevelopment, ch. 9.
74 Instituto Nacional de Estadistica Geografia e Informatica, Estadisticas historicas de
Mexico, p. 566. 75 Calculated from ibid., p. 311.
LAS 24
30 Stephen H. Haber
Conclusions
Although Mexico did not become an industrial society until the second
half of the twentieth century, a significant amount of industrialisation was
achieved in the nineteenth century - particularly during the 20 years from
I890 to 1910. Even as early as the I83os Mexican policy-makers and
entrepreneurs attempted to copy the experience of Western Europe by
introducing modern technology and modern organisational arrangements
in the cotton-textile industry. Mexico's low level of nineteenth-century
industrial growth was not therefore a product of not wanting to
industrialise.
76 Cardenas, La industrialiacio'nmexicana, p. 144; Haber, Industryand Underdevelopment,
ch.
10.
77 Secretaria de Hacienda y Credito Publico, 'Directorio de las fibricas de hilados y
tejidos registrados' (Mexico, I938).
78
Cardenas, La industrialiacion mexicana, p. 1o.
Industrialisationin Mexico 3
The problem for Mexican industry during the early and mid-nineteenth
century was that the economic environment was not conducive to
manufacturing growth on a large scale. Internal tariffs, the lack of reliable
and inexpensive transport and widespread brigandage precluded the
creation of a national market. Insecure property rights, a corrupt judiciary
and political instability made contracts difficult to enforce and gave rise to
an uncertain institutional environment. Finally, low household incomes
precluded the development of deep and secure markets.
During the three decades associated with the dictatorship of Porfirio
Diaz these obstacles were overcome, but by this point new constraints on
industrial growth presented themselves. These obstacles were largely
internal to firms. In the nearly ioo years since the onset of the Industrial
Revolution important developments had occurred in manufacturing
technology, which both raised the minimum-efficient scale of production
and increased fixed capital costs. The Mexican market, in the meantime,
had not grown in step with this technological revolution, nor had there
been the kind of change in labour productivity and attitudes about work
that had occurred in Western Europe. In addition, Mexico had not created
institutions designed to mobilise the capital needed to finance this new
technology. Mexico was therefore unable to adapt much of this new
technology without either creating non-competitive production and
marketing arrangements or resorting to government subsidies and
protection. The result was an impressive amount of industrialisation by
Latin American standards, but a relatively unimpressive industrial
revolution by the standards of the North Atlantic economies.
It is conceivable that had the model of growth of the Porfiriatopersisted,
many of these obstacles to industrialisation might have been overcome.
Incomes might have risen, educational levels might have improved, the
banking system would have continued to expand and the internal market
would have grown. Continued economic growth might have created its
own demand, eliminating the obstacles that stood in the way of
industrialisation. Indeed, Mexico's industrial entrepreneurs were banking
on this to happen. It was for this reason that they often invested ahead of
the market, erecting industries which were too large for the demand they
faced and losing money over the short run in the hope that when the
market expanded they would be in a position to take advantage of it.
This, however, did not happen. In fact, the very inequalities that were
an integral part of the Porfirian model of economic growth produced a
Revolution. The Revolution, while it did not destroy the nation's
industrial plant, created significant uncertainty among the industrialist
class. These events, coupled with the onset of the Great Depression,
produced a slowdown in the rate of growth of industrial investment until
2-2
32 StephenH. Haber
the middle of the 1930s. It was therefore not until the middle of the
twentieth century, almost a century after the first rumblings of
industrialisation began in Mexico and nearly 50 years since the first large-
scale industrial enterprises were established, that Mexico began to make
the transition to an industrial society in which manufacturing led the
economy.