The Political Economy of Equality and Growth in Mexico: Lessons from the History of the United States. James A. Robinson Harvard University

Transcription

1 The Political Economy of Equality and Growth in Mexico: Lessons from the History of the United States James A. Robinson Harvard University

2 Issues Following the transition from the one-party rule of the PRI to a competitive democracy, Mexican policymakers wish to move the economy onto a path of more rapid economic growth. Yet they have inherited a legacy of inequality of assets and political power that emerged as an intrinsic part of the PRI s strategy of rule. Do these inequalities matter for economic prospects? Should the new democratic governments try to do something about them? I present two examples from US economic history which suggests the answers to both questions is yes.

3 Failed Reform, Economic Stagnation and Persistent Inequality in the Post-Bellum South The slave economy of the South was relatively poor before the Civil War. The Civil War led to key institutional reforms, slavery was abolished and blacks given the vote. But after the ending of Reconstruction in 1877 an economic system recreated itself that looked remarkably like that which had existed before the Civil War based on labor repression, low wages, no labor mobility, and no investment in education and human capital. The South got even poorer and stayed that way for another 100 years.

4 Income per-capita Relative to the US Average in US Regions since NE MA ENC WNC SA ESC WSC Mt Pc Source: Easterlin (1960, 1961), Barro and Sala-i-Martin (1991).

5 Why did Reforms not work? The victorious North did not change the underlying inequalities of asset holdings (no forty acres and a mule ). In consequence they also left in power the ante-bellum elite. Though blacks started voting after 1865, the former white elite were able to re-establish their control first over the labor force and eventually over the political system. They offset the effects of the reforms implemented after The South stayed poor.

6 The persistence of the landed Southern elite in three Black Belt counties of Alabama Real estate holdings a Name County Minge, G. Marengo $ 85,000 30,000 Lyon, F. Marengo 75, ,000 35,000 Paulling, William Marengo 72, ,000 29,000 Hatch, Alfred Hale 70, ,000 40,000 Alexander, J. Marengo 69,000 38,000 10,000 b Whitfield, B. Marengo 65, ,000 b 100,000 Terrill, J. Marengo 62,000 93,000 Taylor, E. Marengo 61,000 Robertson, R. Marengo 60,000 Dew, Duncan Greene 52, ,000 b 41,000 Walton, Jhon Marengo 50, ,000 25,000 Collins, Charles Hale 50, ,000 b 30,000 Hays, Charles Greene 50, ,000 Brown, Jhon Sumter 50,000 69,000 13,000 Pickering, Richard Marengo 50,000 42,000 15,000 Withers, Mary Hale 50,000 40,000 75,000 b Jones, Madison Hale 50,000 36,000 b 27,000 Nelson, A. Hale 48,000 10,000 b Taylor, J. Hale 48,000 Pickens, Wm. Hale 45, ,000 b 51,000 Reese, Henry Marengo 45,000 52,000 24,000 Walker, R. Hale 42,000 55,000 Smaw, W. Greene 42,000 32,000 Blanks, E. Marengo 41,000 Walker, Morns Marengo 41,000 Number of planters Percent present in % 64% a Rounded off to the nearest thousand; as reported in the U.S. Census of Population, manuscript schedules. To convert to constant gold prices, see p. 14, note 13. b Wealth of father or husband Source: Weiner (1978, Table 2, p. 12)

7 Successful Reform, Industrial Dynamism and Falling Inequality in the Progressive Era What do I care about the Law? Hain t I got the power? Cornelius Vanderbilt

8 The Development of the Robber Barons Along with Vanderbilt were a stream of larger than life figures: Andrew Carnegie created one of the first great monopolies and by 1901 the US Steel Corporation controlled 60% of US steel production. John D. Rockefeller (the first billionaire in the US) founded the Standard Oil Company of Ohio in He unscrupulously eliminated competitors and rivals. J. P. Morgan

9 The Standard Oil Company

10 The Merger Boom of the 1890s

11 Progressive Reforms Interstate Commerce Act of 1887 and creation of the Interstate Commerce Commission began the development of Federal regulation of industry. Sherman Anti-Trust Act on 1890 began the attack on business trusts (monopolies). Real implementation came with presidencies of Teddy Roosevelt , William Taft and Woodrow Wilson Wilson passed the Clayton Anti-Trust Act in 1914 and created the Federal Trade Commission. Break-up of Standard Oil in 1911.

12 Woodrow Wilson If monopoly persists, monopoly will always sit at the helm of government. I do not expect to see monopoly restrain itself. If there are men in this country big enough to own the government of the United States, they are going to own it. In his The New Freedom (1913).

13 Wealth Inequality fell dramatically after 1900 Source: Peter Lindert (2000) Three Centuries of Inequality in Britain and America in Anthony Atkinson and François Bourguignon eds. The Handbook of Income Distribution, North-Holland.

14 As did income inequality

15 The Economy Grew Rapidly and above trend Source: Jeremy Atack and Peter Paseell (1997) A New Economic View of American History, Norton.

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17 The Anti-Trust moves at least halted the wave towards concentration and in some cases reversed it Source: Atack, Jeremy and Peter Passell (1997) A New Economic View of American History, Norton.

18 Why the Different Outcomes? The Failure of Reconstruction in the South Reform began to fail in the South as early as 1865 when became clear that freed Blacks would not get their 40 acres and a mule. The North was not prepared to pay to re-organize the South and had little economic interest in doing so. Conflicting political motivations: 700,000 black votes gave the Grant the Presidency in The Northern Democrats saw the possibilities of a coalition with white Southern Democrats. Compromise of 1877: Disputed election of Republican Rutherford Hayes. Electoral commission gave disputed southern electoral college votes to Hayes who placated Democrats by withdrawing Northern troops from the South and ending Reconstruction.

19 Why the Different Outcomes? The Success of the Progressives #1 Decisive political reforms with the introduction between 1888 and 1892 of the Australian Ballot in elections. This reduced vote buying and clientelism and allowed a much less corrupt politics to emerge more focused on programmatic issues.

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21 Why the Different Outcomes? The Success of the Progressives #2 Large mobilized farming coalition (the Grange) with a vested interest in reform and control over key legislative seats. Aided by realignment of politics in the 1890s (South and West Democratic, Northeast and Mid-West Republican). Political elite were distinct from this economic elite and feared its power. They thus had a collective interest across party lines in disciplining it (Putin and the Oligarchs in Russia?).

22 Lessons for Mexico Theory and evidence suggests that monopolies and concentrated industries are less innovative than competitive ones. Large concentrations of wealth also can undermine democratic institutions. Can the Progressive coalition form in Mexico? Seems to cut across party lines. Rural sector already empowered by democratization (PROGRESA/Oportunidades). But votes for the PRI, a coalition including those that oppose reform. Urban middle classes vote for the PAN? Multi-party system may not be conducive to reform (Labor market deregulation in Anglo Saxon countries).

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