This book joins a significant body of inter-disciplinary scholarship on long-run political and economic development. Building on the theoretical framework of Douglass North, it provides a detailed study of the historical development of pre-industrial England and Spain from 1250 to 1800, and traces how development in these metropoles impacted colonial institutions and thus set off long-term development trajectories in Mexico and the United States. In theoretical terms, the book identifies three purported lacunae in the development scholarship of Douglass North – the roles of norms and values in institutional change, the necessity of effective central authority for economic development, and the origins of constraints on that authority – and addresses them by integrating insights from Max Weber and Mancur Olson. Setting aside for reasons of space many elements of this dense and rich book, this review focuses on aspects likely to be of particular interest to readers of JLAS; most principally its study of Mexico and certain aspects of its broader theoretical framework.
After a lengthy and careful theoretical discussion, and a thorough overview of pre-industrial development in England and Spain, the authors enter into a long-standing conversation among economic historians of Latin America in exploring both the divergence between Mexico and the United States in political and economic development, and the particularly striking degree of instability that wracked Mexico during its first fifty years of independence. They trace both features of Mexico to the Spanish colonial era, arguing that because of the weakness of the Spanish state, it generated revenue from the silver trade alone and allowed smuggling to ‘dominate the empire's trade with Europe’ (p. 177). This central place of smuggling in economic activity prevented the establishment of (p. 172) ‘the various legal mechanisms and informal legal institutions of a modern market’. Without these so-called ‘modern’ norms (more on this below) and without any institutional infrastructure outside the capital city or below the viceroy, conditions for development were completely absent. Though the Bourbon Reforms were an attempt to change this by modernising colonial institutions, the authors see these as having had limited impact. As a result, at independence, ‘the Mexican city-states had no formal provincial governing structure … the provincial elite had almost no military power at all or taxing ability in 1808. That was the legacy that was so lethal to Mexico for a half century after 1821’ (p. 304). By comparison, the United States, despite deeper regional and religious tensions at independence, had stable and effective institutions of authority at the state level and was thus able to establish post-independence order and set the stage for political and economic development. This claim that the success of federal systems depends on effective authority at the subnational level echoes the work of Daniel Ziblatt, and provides a persuasive, though not terribly novel, account of the roots of disorder in the initial years of Mexican independence.
Yet several questions are raised by this line of argument. First, much existing scholarship sees the Bourbon Reforms in Mexico as much more transformative than the authors claim. Dozens of forms of internal taxes, including monopoly fees and sales taxes, were introduced in the Bourbon era and effectively collected. In his Mexico: the Colonial Era (Cambridge University Press, 2002) Alan Knight describes late Bourbon New Spain as ‘an overtaxed and overgoverned society’ (p. 246). A broader version of this alternative view can be found in James Mahoney's Legacies of Liberalism (Cambridge University Press, 2010), which argues that long-term development outcomes in Spanish America were shaped by the intensity of implantation of both initial mercantilist colonial institutions and subsequent liberal institutions – i.e. the Bourbon Reforms. Mahoney sees Mexico, along with Peru and Colombia, as colonies where the Bourbon Reforms fundamentally altered the mercantilist institutions of the early colonial era described so well in this book, and argues that this subsequent effective implantation of liberal institutions explains why these countries had better long-term trajectories of economic and social development than Bolivia, Guatemala and Ecuador, where mercantilist institutions remained unchanged in the Bourbon Reform era. This scholarship directly challenges the book's argument that colonial institutions failed to penetrate Mexican society and territory at the eve of independence, and that these remained unaltered by the Bourbon Reforms.
Second, one wonders how the book's framework can account for the divergent trajectories among former Spanish colonies. In a brief discussion (pp. 372–5) the authors engage with the Chilean experience, arguing that its small size made the absence of effective institutions outside the capital city less of a lasting drag on development. Yet surely size alone, even if one accounts for the difficulty of terrain, cannot account for the striking variation in development across Spanish America: if it could, Ecuador and Uruguay and the countries of Central America would be its great success stories. Instead, a more persuasive account could depart from differential integration into the post-1820 global political economy: here, Mexico was an outlier in regional perspective in the relative unimportance of commodity exports. Perhaps one can account for the long cycle of instability in post-independence Mexico by pointing to the absence of a booming economic sector. The sorts of rents export booms generate might be necessary to motivate the Olsonian stationary bandit so central to the authors’ account of development to impose centralised authority against the interests of powerful local elites.
In addition to its case study of Mexican development, the book's broader theoretical framework will also be of relevance to readers of JLAS. Here, the authors place time at the heart of their analysis, highlighting that development unfolds over the longue durée, and that this is largely a consequence of its dependence on the evolution of both societal norms and effective state institutions. This reader finds the role of temporality under-theorised: why exactly does it take a long time (p. 383) ‘to develop an effective system of laws and rules and the government on which they depend’? Is this because development is characterised by gradual but steady change (p. 399)? Or do causes unfold slowly, producing effects only long after they first emerge as in Paul Pierson's ‘third quadrant’ of historical causes? Or, instead, are long periods of relative stasis punctuated by relatively sharp changes such as the Bourbon Reforms?
I also find myself troubled by the authors’ discussion of societal norms: the distinction between rural/traditional norms and the urban/modern norms necessary for effective markets to emerge flies in the face of much scholarship on the peasantry, including the work of James Scott, Samuel Popkin, Jeffrey Paige and Robert Bates, that sees peasants as rational economic actors. This distinction between traditional and modern norms is one of many strong echoes of modernisation theory in this book. The most striking and general way in which this resonance manifests is in the book's placement of all countries at various points on a single path to development, failing to account for the possibility of equifinality. Though the authors respond (p. 393) by claiming that they avoid teleology or inevitability, the very identification of stages of development would seem to call that response into question.
Despite these concerns, the book does play an important service in chastening advocates of drastic economic reform by explaining why meaningful change can occur only over long time periods, and can best be understood with reference to historical causes. Its account of the historical origins of contemporary development in early colonial institutions, and of those in the challenges of development in England and Spain, provides an important reminder of the need to take history seriously in the study of political and economic development, and will be of great interest to scholars in these lines of inquiry.
