The Politics of Property Rights: Political Instability, Credible Commitments, and Economic Growth in Mexico, 1876-1929 (Political Economy of Institutions and Decisions)

This detailed economic history of Mexico presents a theory about how rent seeking permits economic growth and explains why political instability is not necessarily correlated with economic stagnation. It is intended for historians of Latin America, scholars interested in economic development, and political scientists interested in the political foundations of growth. Hb ISBN (2003): 0-521-82067-7 Cover......Page 1 Half-title......Page 3 Series-title......Page 5 Title......Page 7 Copyright......Page 8 Dedication......Page 9 Contents......Page 11 TABLES......Page 12 List of Abbreviations......Page 17 Acknowledgments......Page 19 1 Introduction......Page 25 THE PARADOX OF GROWTH AMID INSTABILITY......Page 26 METHODS AND APPROACHES......Page 33 2 Theory......Page 42 CREDIBLE COMMITMENTS AS PRIVATE CONTRACTS......Page 45 Implications......Page 47 Third-Party Enforcement......Page 50 VERTICAL POLITICAL INTEGRATION......Page 53 Characteristics of Vertical Political Integration......Page 56 VPI AND POLITICAL INSTABILITY......Page 60 3 VPI Coalitions in Historical Perspective......Page 65 THE POLITICAL ECONOMY OF PORFIRIAN MEXICO......Page 66 Private Interests and Public Policy during the Porfiriato......Page 71 THE REVOLUTION BEGINS, 1910–1914......Page 75 CIVIL WAR, 1914–1917......Page 80 POST–CIVIL WAR INSTABILITY, 1917–1929......Page 85 4 Finance......Page 104 FINANCIAL SYSTEMS......Page 105 SOLVING THE COMMITMENT PROBLEM IN PORFIRIAN MEXICO......Page 107 Negotiated Agreement......Page 108 Enforcing the Agreement......Page 112 Implications for Financial Development......Page 114 Predation under Huerta and Carranza......Page 117 The Absence of Credible Commitments......Page 121 Establishing a Credible Commitment......Page 126 Surviving the Revolution......Page 132 Market Structure and Competition......Page 136 New Market Entrants......Page 137 Risks and Returns......Page 138 Investor Expectations......Page 143 CONCLUSIONS......Page 146 5 Industry......Page 148 MANUFACTURING BEFORE THE REVOLUTION......Page 149 Enforcing the Porfirian VPI Coalition......Page 159 THE IMPACT OF THE REVOLUTION......Page 161 Violence and Civil War......Page 162 Property Rights to Trade Protection......Page 164 Organized Labor as a Third-Party Enforcer......Page 167 Profit Sharing......Page 169 Trade Protection, Organized Labor, and the VPI Coalition in Manufacturing......Page 171 VPI Coalitions in Manufacturing......Page 175 Surviving the Revolution......Page 178 Recovery of Production......Page 184 Investor Confidence and Expectations......Page 186 New Investment......Page 194 Ownership Continuity......Page 199 Productivity......Page 204 CONCLUSIONS......Page 211 6 Petroleum......Page 214 DEVELOPMENT OF THE INDUSTRY UNDER DÍAZ......Page 216 THE IMPACT OF REVOLUTIONARY INSTABILITY......Page 222 Surviving the Revolution......Page 224 Rents from Taxes and Production......Page 225 Output and Investment......Page 236 Taxes......Page 245 Profits......Page 247 Investor Perceptions......Page 254 CONCLUSIONS......Page 258 7 Mining......Page 260 DEVELOPMENT OF THE INDUSTRY UNDER DÍAZ......Page 261 THE REVOLUTION......Page 277 INSTITUTIONAL REFORM......Page 286 Survival......Page 290 Investment......Page 294 Output......Page 302 Taxes......Page 303 CONCLUSIONS......Page 306 8 Agriculture......Page 309 Early History......Page 313 Agriculture in Porfirian Mexico......Page 315 Violent Conflict......Page 323 Institutional Change......Page 329 Enforcement of the Property Rights System......Page 331 ECONOMIC PERFORMANCE......Page 339 Staple Production......Page 340 Export Agriculture......Page 347 Fertilizer and Machinery Imports......Page 359 CONCLUSIONS......Page 363 9 Conclusions......Page 366 HISTORY......Page 367 POLITICAL SCIENCE......Page 375 ECONOMICS......Page 378 References......Page 383 Index......Page 399 "This book addresses a puzzle in political economy: why is it that political instability does not necessarily translate into economic stagnation or collapse? In order to address this puzzle this book advances a theory about property rights systems in many less developed countries. In our theory, governments do not have to enforce property rights as a public good. Instead, they may enforce property rights selectively (as a private good) and share the resulting rents with the group of asset holders who are integrated into the government. We then use the theory to explore how systems such as this operate in an empirical manner. We focus on Mexico, from 1876 to 1929. We explain how the property rights system was constructed during the Porfirio Diaz dictatorship (1876-1911) and then explore how this property rights system either survived or was reconstructed during the long period of political instability that followed, 1911-1929. The result is a book that offers, on the one hand, an analytic economic history of Mexico under both stability and instability and a generalizable framework about the interaction of political and economic institutions."--Jacket This book addresses a puzzle in political economy: why is it that political instability does not necessarily translate into economic stagnation or collapse? In order to address this puzzle, it advances a theory about property rights systems in many less developed countries. In this theory, governments do not have to enforce property rights as a public good. Instead, they may enforce property rights selectively (as a private good), and share the resulting rents with the group of asset holders who are integrated into the government. Focusing on Mexico, this book explains how the property rights system was constructed during the Porfirio Díaz dictatorship (1876–1911) and then explores how this property rights system either survived, or was reconstructed. The result is an analytic economic history of Mexico under both stability and instability, and a generalizable framework about the interaction of political and economic institutions. We began this book in order to address a puzzle in political economy: why is it that political instability does not necessarily translate into economic stagnation?

The book explains why political instability is not necessarily correlated with economic stagnation.