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

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whereas British operatives worked 3.8, and New England operativesworked 8.0. In the spinning department of the mills the results weresimilar: in Mexico 540 ring spindles per worker, compared with 62j forBritish workers and 902 for New England workers. When reduced to asingle measure of staffing levels - loom equivalents per worker - the dataindicate that Mexican textile mills employed almost twice as manyworkers per machine as did British mills, and over two-and-one-half timesas many workers per machine as did New England mills.'"To an extent the disadvantages of lower capacity utilisation rates,higher start-up costs, and lower labour productivity would have beenoffset by lower labour costs in Mexico. Workers in Mexico's textile mills,for example, earned on average roughly half of what British workers didand less than one-third of what New England workers did. But it is clearlynot the case that these lower labour costs would have made up forthe higher capital and operating costs in the textile industry: hlexico'scosts of production were still almost 20 % higher than in Great Britain."Moreover, in less labour-intensive industries, like beer brewing, glassmaking, steel and chemicals, the savings from lower wages would havebeen even less significant than they were in the textile industry.Mexican manufacturers therefore found it difficult to compete in thehome market against foreign manufacturers without the protection andsupport of the government. Almost all of Mexico's major industriesreceived some sort of tariff protection or federal subsidy. Beginning in theI 880s import duties on manufactures jumped markedly, with the schedulesbeing revised upwards in I 892, 1893, I 896 and 1906. By the end of thePorfiriato, levels of protection were so high that one US commercial agentreported that 'the Mexican tariff on cotton goods is the highest in theworld [sic], being exceeded only by those of Russia and Brazil. In someclasses of cloth the duty amounts to three times the value of the goodsabroad. ''13 In other product lines levels of protection were extremely highas well. In the dynamite industry, to cite but one example, a series ofdifferent import duties and excise taxes produced a tariff of 80% onimported goods.'7In addition to protective tariffs, most of the country's majormanufacturing enterprises operated under some kind of federal concession,which gave them tax-exempt status for a period of between seven5Vlark, 'Why isn't the Whole World Developed?', pp. 15 1-2. " Ibid., pp. 146 and I yo. 56 LK'illiam A. Graham Clark, Cotton Goods in Lafin America: Part One, ~Wexico, Cuba, and Central America (LY'ashington D.C., 1909). p. 38,5;Calculated from data in Be Mexican l'earbook, 1909-1910, pp. 414-1 5 ; E/ Economisfa~Vlexicano,4 Jan. 1902, p 217.
zzStephen H. Haberand 30 years. In 1893 the government declared that all new industriescapitalised in excess of 2j0,ooo pesos were exempt from direct federaltaxes and from customs duties on the machinerv and other materialsneeded to erect their factories. The required minimum capitalisation waslowered to roo,ooo pesos in I s98.j8A few enterprises were able to do evenbetter in their negotiations with the Diaz government. It sometimesgranted firms the sole right to tax-exempt status within a particularproduct line. In effect, in order to promote industrialisation in anextremely difficult environment, the government was setting up officiallysanctioned and subsidised monopolies.Besides the development of inefficient, highly protected industry, theother major feature of this wave of Mexican industrialisation was thetendency of manufacturing to be extremely concentrated. Within anygiven product line a few large firms controlled the lion's share of themarket. In steel, glass, soap, paper and dynamite production, single firmsheld monopolies or near-monopolies. Cigarette manufacturing wasdominated by two horizontally integrated giants (there were actually threefirms, but the largest producer owned 50% of the stock in the nation'ssecond largest, effectively reducing the number of competitors to two). Inbeer and cement three big firms carved up the market. Even in cottontextile production, which is usually characterised by near-perfectcompetition, two firms claimed roughly 20 % of total national productionand almost all the production of fine, high-quality goods. A comparisonof four-firm concentration ratios indicates that Mexico's textile industrywas 60 % more concentrated than Brazil's and 280 % more concentratedthan that of the United States in r9ro."This non-competitive industrial structure evolved for two reasons.First, as has already been discussed, technological considerations limitedthe number of producers who could hope to prosper in Xlexico's shallowmarket. Secondly, the underdeveloped nature of Sfexico's financial sectormeant that a small group of financiers skilled at manipulating both themarket and the state held an unusual degree of political and economicpower. They were therefore able not only to demand (and receive) highlevels of protection from the government, but were also able to employa wide arsenal of anti-competitive weapons designed to create barriers to'"latsuo Yamada, 'The Cotton Industry in Orizaba: A Case Study of hiexican Laborand Industrialization During the Diaz Regime', unpubl. I\IX diss., university ofFlorida, 1965,p. 49.'' For a more complete discussion of industrial concentration and the creation of barriersto entry see Haber, Industry and L7nderdeuelopment, chs. 4 and 6. For an analysis ofconcentration ratios for the textile industry see Stephen H. Haber, 'IndustrialConcentration and the Capital Alarkets: A Comparative Study of Brazil, Mexico, andthe United States, 18jo-rgjo',Journal of Econon~ic History, aol. 5 I (1991).
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