Sun, 6 August 2017
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That’s it. Let’s get into the show.
Nogales VS Nogales
My research for The Mexican Revolution took me on several detours. One of those detours was the Labyrinth of Solitude. Another detour was Why Nations Fail.
If I could go back in time to when I was 18 or 19, when I was deciding to go to college and thinking about majoring in Global Studies, which is the ridiculous Marxist version of Poli Sci and International Relations, I would say tell myself first of all not to major in Global Studies because it would be a colossal waste of time, and I would tell myself, “If you really want to understand global development, college will not explain it to you. You should start with two books. One of those books is Why Nations Fail. The other is Guns, Germs, and Steel.”
In college I had to read a ton of irrelevant nonsense: Postmodern imbeciles like Horkheimer and Adorno, Foucault, and a bunch of other people whose appraisal of global development is so flawed that it’s honestly baffling to me that anybody takes them seriously in the 21st century.
These two books basically took my Bachelor’s degree, threw it in the garbage, set it on fire, and then spit in my face. They showed me that my degree is EVEN LESS VALUABLE than a Gender Studies degree. I graduated with a piece of paper that’s worth less than Comparative Literature.
But Daron Acemoglu, James Robinson, and Jared Diamond have at least helped me stop believing the total nonsense I believed in my 20’s. I can’t turn back the clock, but I can hopefully serve as a warning to anybody who’s thinking about going down the same stupid road I went down. Don’t do it. Just read the two books I mentioned.
Why Nations Fail and Guns, Germs, and Steel offer arguments that in some ways compete with each other and in some ways complement each other.
Right away in the first chapter of Why Nations Fail, they smacked me so hard that my face still hurts.
The simplest way to understand the basic argument of the book is to look at the differences between Nogales, Arizona, and Nogales, Sonora, Mexico. And then North Korea vs South Korea.
The differences between those places are not explained by geography or culture. These are places separated only by a little fence, not by oceans and not by cultures. Just a fence.
There are differences in culture, especially between North and South Korea, but they didn’t start that way. And those cultural differences didn’t cause the South Korea to win and North Korea to fail.
Acemoglu and Robinson argue that the real determining factors in a country’s prosperity are its economic and political institutions. To put it in as plain language as I can, the countries with good institutions are prosperous while the countries with bad institutions fail. To be clear, Acemoglu and Robinson aren’t calling them “good” and “bad” institutions. I am. The language the authors use is inclusive institutions and extractive institutions. We’ll talk a bit more about those definitions later, but for now we’ll just say that inclusive institutions give people incentives to start businesses and to get involved in the democratic process, while extractive institutions either don’t incentivize people or they actively punish people for starting businesses.
What I just said should be totally obvious. Of course there are competing theories, but none of them, especially the ones coming out of Global Studies departments, come even remotely close to reality. But there is a semi-competing idea put forward by Jared Diamond.
If you’re not familiar with Jared Diamond and his book Guns, Germs, and Steel, he proposed a theory of global development that was based largely on geography. He spends 500 pages laying out his theories, and so I’m not going to even attempt to explain him adequately. But the basic argument is that Europe became a world power because they got a lucky roll of the dice geographically. His theory is very powerful and makes more sense the more you think about it.
But geography is not the whole story. And this is where Acemoglu and Robinson come in. Jared Diamond’s theory does not explain, for example, North and South Korea. And it doesn’t explain the reversal of fortune on the American continent.
What do I mean by “reversal of fortune?” I mean, why is Mexico so poor today if the Aztecs were so much more economically powerful than North American tribes before colonization? If Diamond were correct and geography was the main determinant, then Mexico would still be the dominant power in North America.
Geography is extremely important, but it’s only about half the story. Institutions are the other half.
So how did those different institutions come about? Why does Nogales, Arizona have different institutions than Nogales, Sonora? To find the answer, we have to talk about how Spain and England colonized the continent. (They did so in some very different ways.) We also have to talk about WHY Spain and England were able to begin colonization in the first place. Then we have to look at how exactly they did it, because their styles were very different.
Why did England become the primary superpower?
The Black Death, also called the Plague, was a disease that ravaged Europe in the 1300s. It lasted about seven years and killed between 75-200 million people. At that time the estimated world population was 450 million. The Black Death killed potentially HALF the world’s population.
Before the Black Death, English peasants had a bit more political power than the peasants of most other nations, especially the ones in Eastern Europe. After the Black Death, which killed roughly half of all the populations that it came into contact with, the English peasants were able to agitate for even more rights. In Eastern Europe, the Black Death only resulted in the government squeezing its people even harder.
There were small differences in peasant rights before the Black Death, but the Plague was a critical juncture that each nation’s political institutions had to respond to. It was a turning point that made the relatively small differences between nations larger. The response of each nation to that critical juncture put each country on a somewhat different path than others. Some of the most important critical junctures in Europe were the fall of Rome, the Plague, the Atlantic slave trade, the colonization of the Americas, and the Industrial Revolution.
Before Colonization of Americas
Absolutism began to crumble in England, but increased in Spain as those two societies began structuring themselves differently in response to the decline of Rome, and then to the Plague. England and Spain were more similar before the fall of Rome, but they took separate paths as Rome fell. Same with the Plague. At each critical juncture, the societies drifted further and further apart.
The nation of Spain was born in 1492 with the marriage of Ferdinand and Isabella. With that marriage, the kingdoms of Aragon and Castile became one. The Reconquista also happened in 1492, when Spain liberated itself from the Moors, the Arabs.
And of course Christopher Columbus sailed to the Americas and began claiming territoiries for Ferdinand and Isabella, who funded his voyage.
In subsequent years, through marriages, their dynasty acquired more land in the Americas as well the Netherlands, Germany, and part of France. The Spanish monarchy was now in charge not just of the Iberian Peninsula, but of a multicontinental empire. The emperor, Charles, strengthened the absolutism that Isabella and Ferdinand started.
The North and South American territories that Spain took were rich with gold and silver. The discovery of those precious metals strengthened the Spanish crown and led to even more absolutism.
As the crown became stronger and more absolutist, the laws of the empire became more and more extractive, as Acemoglu and Robinson call it. By the year 1600 Spain was in economic decline.
Property rights were highly insecure. Jews and Arabs were forced out of Spain and were not allowed to take any gold or silver with them as they left. Spain defaulted on debts in 1557 and 1560, and 8 more times in the following 100 years. The banking families who had lent money to the Spanish crown were totally ruined by those defaults.
Spain’s colonization style funneled money to the top while England’s colonization style spread wealth much more broadly among the citizens. There was no free trade in Spanish America, and trade was highly regulated. For example, merchants in Mexico could not trade with merchants in Colombia. If the crown could not get a piece of the action, nobody could.
This policy did nothing to help Spain’s decline, and in fact it only sped it up.
Spain’s version of Parliament primarily represented a few of the biggest cities. In England, Parliament represented people in urban AND rural areas. This meant the English government represented a broader range of people with different and competing interests. As that power was spread more and more broadly in England, the people could use their influence to push for less and less absolutism. This obviously led to a virtuous cycle in which English citizens had more incentive to start businesses and innovate and create wealth. Spanish citizens had basically no similar incentives.
In the 1500s Spain was getting massive amount of wealth ffrom Latin America. Spain was much, much wealthier than England, but the crown was spending its wealth stupidly and setting up future generations for failure. Official positions could be bought and sold, or passed down through inheritance.
By the way, that system is STILL in place in some sectors in Mexico. You can just buy your way into an important job even though you have no credentials, or your mommy or daddy can give you their job when they retire.
By the end of the 1600s England was growing and industrializing while Spain declined.
The citizens of England had more incentive to innovate and to generate wealth than almost anybody in the world. And the nation prospered as a result.
But this wasn’t because the English government was just more benign, more fair. The English didn’t colonize the Americas differently than Spain just because they thought it would be a smarter longterm move. They weren’t playing 3-dimensional chess.
In fact, they originally wanted to copy the seemingly-successful Spanish model of colonization.
The authors write:
“The Spanish strategy of colonization was highly effective. First perfected by Cortes in Mexico, it was based on the observation that the best way for the Spanish to subdue opposition was to capture the indigenous leader. This strategy enabled the Spanish to claim the accumulated wealth of the leader and coerce the indigenous peoples to give tribute and food. The next step was setting themselves up as the new elite of the indigenous society and taking control of the existing methods of taxation, tribute, and, particularly, forced labor.”
Spain was richer than England at this time. England was a minor power, and suffering the effects of the War of the Roses. As such, England was in no condition to begin colonization when Spain did.
But roughly 100 years later, England had recovered a bit and they were building up their navy. Spain tried to invade England, and famously the Spanish Armada was defeated.
Spain’s navy was much more powerful, and they could easily have overthrown Queen Elizabeth and taken Britain as their own territory. But bad weather conspired against Spain, as did the death of one of Spain’s best naval commanders. So at the last minute Spain had to choose someone else to lead the attack, and the guy they picked was not a great tactician.
The English defeated Spain’s armada, which opened up the seas, meaning England now had new trade routes and could really start colonizing.
So by this time England was a latecomer in the colonization of the Americas. All the rich lands had been taken by Spain. They were left with the part nobody else wanted: North America.
Unlike Mexico and South America, the indigenous population of North America was small and spread out. Spain took advantage of dense populations in their colonies. Indigenous slaves worked in the fields and mines, and a giant percentage of the wealth generated or extracted there went straight to the Spanish Crown.
The settlers who founded Jamestown were heavily influenced by Spain’s method of conquest. They wanted to take the local ruler hostage and use him to force the locals into slavery in fields and mines.
This didn’t work. The locals were not cooperative, and they didn’t live in huge cities like the Aztecs and Incas. And there was no gold or silver.
So the English settlers were forced to work for their food.
John Smith, yes that John Smith, was in charge of the settlers. He wrote to England asking for them to send more carpenters, agricultural workers, blacksmiths, and masons, rather than adventurers and dreamers. All the goldsmiths who had come were useless. He soon instituted a new rule, “He that will not work shall not eat.” That is perhaps the only thing that helped Jamestown survive the second brutal winter.
Smith was working for the Virginia Company, which was losing money in Jamestown because of the lack of gold and free labor. So he was forced out of the colony and he went back to England. The guy who took his place tried to coerce the settlers into working. He told them that anybody who tried to leave the colony would be executed, anyone who stole food would be executed, and anyone trying to get back to England would be executed.
But his strategy did not work. So the Virginia Company had to adapt.
The Company decided to give the settlers incentives rather than coercion. They gave 50 acres of land to each male settler, and 50 more acres for each family member. Each adult male settler was given a say in the laws and institutions governing the colony. They saw that the only way to make a colony economically viable was to give the settlers incentives to work hard.
Every time the English elites tried to set up a system that restricted economic and political rights, they failed.
In Spain’s American colonies they were able to force the locals into slavery and ship all the wealth to Spain, leaving a few rich foreigners to govern the massive impoverished local population. The Spanish Crown won big in the short term but bankrupted an entire continent and screwed over future generations of Spanish citizens. Today Spain’s unemployment is around 18%. That’s almost as bad as Greece. For comparison, unemployment in the UK is around 4%.
I said in Episode 1 of the Fall of Tenochtitlan that a huge portion of Spain’s wealth today comes directly from the colonial period, and that’s true. But Spain is also feeling the negative effects of absolutism from hundreds of years ago.
So we’ve seen the very beginning of the processes that put Mexico on a different path from the United States. In the next episode we’re gonna watch how the Latin American indpenedence movements impacted Latin America’s ability to join the Industrial Revolution. And we have to talk about how all of this influenced Mexico’s first constitution.
Thank you for listening to The Mexico Podcast. And again, visit digitalnomad.mx for the Mexican Spanish Master Course. Or sign up for my email list to get the free version. It’s up to you. How deep do you want to go with Mexican Spanish? You can reach me at email@example.com with any questions or comments.