Assessing the Obstacles to Industrialisation: The ... - Innovation

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Industrialisation in hfexico 9of time-series data is available for these other industries, but qualitativedata indicate that their rates of growth were quite slow. Many resembledartisanal shops more than modern factories. In the iron and steel industry,for example, an I 85 3 census listed but five foundries, only one of whichemployed more than roo workers. hledian foundry size was but 14employees. A similar situation prevailed in the glass industry, where anI 8 5 7 census turned up only five firms, four of which employed fewer thanroo workers. hledian firm size was 70 workers.'' Small-scale industriesexisted as well in paper manufacturing, beer brewing, and other activities,but again we know little about their development over time. It is clearlythe case, however, that even as late as the I 880s these industries were verymodest in scale. In the paper industry, for example, until 1892 thecombined value of production of the nation's I 2 paper mills was scarcelyone million pesos (at that time roughly $7oo,ooo). Total output wasapproximately four tons of paper per day.lgIn short, with the exception of cotton textiles, most of Mexicanindustry was still small in scale by the 1880s. An 1877 census of themanufacturing establishments in the Federal District, for example, turnedup 728 manufactories. Industries like boots and shoes, other leatherworking, hats, tailor shops, bakeries and wood-working predominated.Average firm size was only 17 workers, implying that these were moreartisanal shops than modern factories. Even in industries which in theadvanced economies were becoming large-scale, like iron and steel, smallscalefactories continued to predominate. In the iron industry, forexample, the 1877 Federal District census turned up only two foundries,whose combined investment in fixed capital was onl? 54,000 pesos (at thispoint the dollar and peso traded roughly one for one) and which employedonly roo workers between the two of them. Total output wasapproximatelv coo,ooo kilos of iron goods, with a value of onlv 60,000pesos.'OMost significantlv, all of the firms enumerated in the I 877 census wereconsumer goods producers; no capital or intermediate goods industriesexisted. Indeed, throughout the nation this was the case. The explanationfor this situation is fairly straightforward : the consumer goods industrieswere still too underdeveloped to support capital goods industries. Evenin the relatively rapidly growing cotton textile industry, an industriallB Secretaria del Estado, 'tlemoria de la Secretark dei Estado y dei Despacho de FomentoColoni~acidn 1ndustria.y Comercio de la Repibiica ~tfexicana, 18~7(Mexico, I 8 5 7), docs. I 8-z, 18-3.l9 Hans Lenz and Federico Gomez de Clrozco, La industria papelera en Afixico (Mexico,1940)~P.83.20 Secretaria de Hacienda, Estadfstica de la RepciDizca ~tfexicana (Mexico, 1880), cuadros deindustria.
loStephen H.Haberplant consisting of only 92 small factories running just over 2j0,ooospindles was not large enough to support a textile-machinery industry.The Mexican market had not yet reached the minimum threshold size tosupport capital-goods producers. %'hen it did, later on in the century,changes in the size of scale economies in capital goods industries again putthem out of Mexico's reach, a subject we will return to in the next section.Reussessitzg the obstucles to growth, 1880-1910Beginning in the 1880s the obstacles which had earlier limited Mexicanindustrialisation began to be removed. The spark that set off this processwas the inflow of capital from the United States and Europe. During thelast decades of the century foreign capital and foreign entrepreneurs (whopossessed knowledge about specific technologies and markets whichMexican capitalists did not) flowed into the nation, draining andretimbering the mines, spurring the growth of commercial agriculture,developing the oil industry and financing the whirlwind construction ofa national railway system. By 1910, according to the available estimates,foreigners had invested close to $2 billion in Mexico's railroads, mines anda variety of other undertakings - a sum that accounted for between 67 and73 % of the total capital invested in the country." The greatest part of thisforeign investment was clustered in export-related enterprises.'The key area into which foreign capital flowed was the transport sector.In I 873 Mexico possessed only 5 72 kilometres of railroads ;by I 88 3 it hadover j ,000. The network expanded to over 10,ooo kilometres by I 893 andto 16,000 in 1903 In 1910, just before the Revolution broke out, theMexican rail system boasted over 19,000 kilometres of track. These figuresaccount only for track laid under federal concession. In addition,commuter and feeder lines constructed under state or municipalconcessions accounted for an additional 7,8 10 kilometres.'"Although the system was laid out without any central plan, thegovernment generally awarding concessions on an ad hoc basis, theultimate effect was that a fairly well-integrated grid developed. Theprimary purpose of the railways was to move raw materials to the coastor to the northern border for export to foreign markets, but the sheernumber of feeder lines built eventually gave rise to an interconnected gridthat linked internal markets as well as the mining areas and the ports. Bythe turn of the century most of the major cities were connected to oneanother by rail.With the arrival of the railroad, transport costs fell precipitously," Rodney Anderson, Oufcasfs in fhezr 0ii.n Land: Lllrszcan Industrial It;'orkers, 1906-1917(Ilekalb, Illinois, 1976), p. 19." Coatsworth, C;rou'th /[qainst Del~eiopmenf, pp. jh and 40.
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