Diego Castañeda Garza: Wealth, War and Modernization: Essays on Mexican Economic History

Abstract

This dissertation examines the intricate relationship between war, wealth accumulation, and economic modernization in Mexico from independence in 1810 to the mid-20th century. It challenges the notion of the Mexican 19th century as a "censored century", unknowable due to a lack of data, by employing a novel database of wills to reconstruct wealth inequality trends. In turn, those estimates can be used to highlight the changing political economy dynamics. The study reveals consistently high levels of wealth inequality, punctuated by fluctuations driven by political and economic forces.

Inequality, wars, and economic modernization are inexorably tied. Previous research has seen wars as great levelers. However, wars in 19th-century Mexico did not uniformly reduce inequality. Some conflicts, such as the War of  Independence, destroyed wealth, while others, like the conflicts of the  First Republic, enabled elite extraction and wealth accumulation. The evolution of inequality clarifies the political economy dynamics that shaped the formation of the Mexican state and its accumulation of state capacity. Constant warfare became an obstacle to the structural transformation of its economy. 

Contrary to common sense, losing territory to the US in the aftermath of the Mexican-American War in 1848 ultimately strengthened the Mexican state. The resulting smaller, more manageable border enhanced the security and control of the territory. It facilitated demographic shifts that would translate into greater state capacity. The consolidation and strengthening of the state after nearly 60 years of warfare led to the modernization of the economy during the Porfiriato (1877–1910). The late 19th century saw the beginnings of industrialization in a context of state capture by economic elites, consolidating control over natural resources, banks, and infrastructure. 

The Mexican Revolution (1910–1940), a reaction against the Porfirian elites, brought significant changes, but its impact on inequality was mixed. Initial reforms led to decreased income inequality, yet subsequent industrialization policies, particularly import substitution industrialization (ISI), contributed to its resurgence. Despite fostering economic growth, ISI  created a "mesocratic distribution," favoring a growing middle class while exacerbating inequality between urban and rural areas. 

This dissertation stresses the crucial role of political decisions and institutions in shaping inequality, demonstrating that economic forces alone do not determine the distribution of resources. By analyzing winners and losers across different historical periods, the thesis provides insights into the complex dynamics of inequality in a developing nation,  offering lessons for contemporary policymaking to achieve equitable and sustainable development.