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In theory, the Kingdom of New Spain in the colonial period encompassed present-day modern Mexico, Texas, the territory lost to the United States in 1848, the Floridas, the Caribbean possessions, the Philippines, and Central America.^* In practice, the viceroy never controlled all this territory. He was more focused on what is today Mexico.

The colony's government was legitimate. Many people believed that God had given the king the right to tell other people what to do. In addition, it derived its authority from the confidence it engendered in all classes and races. There was general agreement that royal government served the public interest.Violent disputes were rare. Once this legitimacy disappeared, it was difficult to find a substitute.

Wealth of New Spain

New Spain provided two-thirds of the revenue of the Spanish Empire. In 1799, this was 20 million pesos (US per capital income was about 116 a year). Then million was spent for local administration and defense. Four million went to subsidize other areas of the viceroyalty in Central and North America, the Caribbean, and the Philippines. Six million went to Spain. In 1800-10, New Spain produced 24 million a year. In 1806, it sent 19 million to Spain to help finance wars in Europe.

The economy was healthy, balanced, and, for the most part, functionally independent of the mother country. Precious metals represented 84% of all exports but mining was only a small part of the economy. In 1800, mining represented 13% of the economy whereas manufacturing represented 25% and agriculture 62%. The internal market used 86% of all the production.

Silver mines were engines of economic growth, encouraging the expansion of agriculture, commerce, and manufacturing. Mexico was the world's principal supplier of silver in 1780-1819. Mexican silver miners raised capital locally. for example, Antonio de Obregón of Guanajuato borrowed two million pesos from merchants in the 1780s to invest in his mining venture. His mines produced 30.9 million pesos of silver from 1788 to 1809. In 1791, his mine yielded as much silver as the entire Viceroyalty of Peru. To understand how much this was, one has to understand that the per capita income of England, the most advanced nation in the world, was 196 pesos.

Comparison Between the Mexican and United States Economies in 1800

• Per capita income: Mexico was 116, US was 165.
• Mexico had a larger industrial base.
• US population was 6 million, Mexico was 4 million.
• Mexico had some of the largest cities on the continent: Mexico City had 150,000, Guanajuato had 60,000, Querétaro 50,000. Puebla 40,000 and Zacatecas 30,000. By comparison the largest cities in the US were New York with 60,000, Philadelphia with 41,000, and Boston with 25,000.
• Mexico was more racially mixed and integrated. Social status was determined more by economic than DNA factors.

Mexico in 1850

The wars of independence and the disorder that followed ruined the economy and destroyed the legitimacy of the nation's institutions.

Between 1821 and 1850, only one president completed his term of office. Between 1825 and 1855, there were three constitutions, twenty governments, and one hundred cabinets. Between 1837 and 1851, sixteen different men served twenty-two governments as president. There were 48 foreign ministers, 61 ministers of government, 57 secretaries of finance, and 41 secretaries of war.

As governments were unable to maintain order and protect lives and property, the country sank into anarchy. Fear and uncertainty made dictators appealing for people hoped they would provide order. Given the unpredictability, capitalists were reluctant to invest their money.

Civil wars were a problem. There was one in 1834. Then in 1835-1845, secessionists established the republics of Yucatán, Texas, and the Río Grande. Only Texas was able to consolidate its independence but the others maintained some autonomy.

Given its internal weakness, it is not surprising that other nations preyed upon it. Spain invaded in 1829, France in 1838, the United States in 1847, and England, France, and Spain in 1861.

Government Revenue

In 1806, the government received 39 million pesos; in 1827, 5.4 million. In the first decade of independence government revenue averaged 12.2 million pesos.

Of the 1.33 million collected in 1821, forty percent came from extraordinary revenues such as loans and eighty percent went to the military. For the British loan of 1822-23, Mexico assumed an indebtedness of 16 million pesos at 5% interest, but the treasury only received 5.5 million in disposable money. Then it validated internal debts totaling 45 million and authorized a new foreign loan of 16 million. It set aside 4 million to reduce the first debt. One estimate is that in the first seven months of 1825, the government could expect a revenue of 9 million pesos but an expenditure of 21 million, of which 16 million would go to the army and 3 million to the navy. For fifty years after independence, customs duties were the principal source of income, producing 80-90% of normal revenues. Governments survived by borrowing. In 1850, the foreign debt was 56 million pesos and the domestic debt was 61 million. By 1967, the foreign debt had reached 375 million pesos and the domestic debt 79 million.

Post-Independence Economic Depression

Mineral production fell from an average of 25 million pesos to a low of 6.5 million in 1819 and averaged 11 million for the next four decades. Production in 1801-1810 was 5.5 whereas it was 2.6 million in 1821. Exports fell from 20 million pesos in 1800 to 5 million in 1825. Per capita income fell from 116 pesos in 1800 to 56 in 1845. Guanajuato mines had 2,000 miners working from daylight to dusk, six days a week, pulverizing ore in 1810 but only 168 in 1821. The Valenciana mine employed 22,000 people in 1810 but only 4,000 after independence.

Why did the US outstrip Mexico in the first half of the 19th century? this is hard to answer but the following had some effect.

Geography

• The land is poor and harsh in most of the country.
• Limited natural resources.
• Considerable natural obstacles to national development and integration.
• Climate variations pose a serious threat to people and crops.
• The northern one-third of the country is a desert while rain forest cover large areas of the south.
• Fifty percent of Mexico suffers from a perpetual scarcity of water. Only 13% enjoys sufficient rainfall to sustain crops without irrigation. Less than 10% of the land is arable without extensive irrigation. Even today, only about15% of the land is arable, an amount equal to the arable land of the state of Kansas.
• The topography is formidable as well. Two-thirds of the country is mountainous. Lots of gorges. Volcanoes and earthquakes occur in some parts.

Economy

• The wars brought the destruction of farms, livestock, mining equipment, mines, and buildings.
• The destruction of the mines affected the ancillary enterprises.
• Had difficulty obtaining the necessary mercury from Spain and Austria in order to process silver.
• There was a massive loss of capital because it was destroyed, fled the country, and withdrawn from circulation.
• Lacked banking institutions, relying, instead on personal loans or the Church.
• Europe flooded the country with textiles in the 1920s, thus undercutting the Mexican textile industry.

The fundamental problem in these years was that the leaders could not decide what would be included with the Mexican state and who should rule. this lack of political consensus meant the loss of territory and the loss of opportunity.

* Panamá was part of Colombia. Technically, it is in South America.