Trade contraction and economic regression: the Paraguayan economy under Francia, 1814-1840

I argue here that economic activity fell considerably in the first three decades of Paraguay's early national period, below levels it had attained in the late colonial period and would attain again only after the mid-nineteenth century. I attribute this economic depression primarily to regional political fragmentation and the institutional regression it triggered. In the 1810s, the United Provinces of the River Plate sought to keep the former Viceroyalty of the River Plate under a single federal government, but failed to prevent Paraguay's early secession. Their subsequent trade blockades and military threats had profound economic and political effects on Paraguay: revenues from foreign trade taxation fell, scale economies in defence and justice provision vanished, a standing army emerged, government budget deficits worsened, mercantilist regulations heightened, the fiscal burden increased, and transactions costs generally rose. Proponents of federation, more representative governments, and freer trade progressively declined, while supporters of secession, political absolutism, and government regulation became ever more prominent. In the 1820s, blockade relaxations exacerbated economic intervention by the state, which substantially redistributed property rights in land towards itself. In the 1830s, renewed blockading had more than proportional negative effects on economic activity, which remained below late colonial levels at least until international waterways became freely navigable shortly after mid-century. Colonial absolutism and mercantilism may be said to have been restored with a vengeance. Long-run economic performance worsened.autarky, economic contraction, institutional regression; trade exposure, political cleavages; "autonomous' development; financing of public spending, state land ownership, taxation of peasantry.

"Coerced indigenous labor and free mestizo peasantry: a property-rights, rent-seeking view of colonial Paraguay."

Here I first survey the evidence on forced and free labor in a resource-abundant, sparsely settled Spanish-American colony on the American Indian and Portuguese frontiers. The focus among forced labor forms is on the compulsory labor service obligations the Spanish exacted as tribute from the indigenous people they eventually resettled in segregated towns. The “encomienda” and “congregación,” respectively, were justified by right of conquest and in exchange for the protection and conversion to Catholicism of the new subjects of the Crown. Among free labor forms I focus on the free peasantry that arose in the lands left vacant as the indigenous population declined. Free peasants included the American born offspring of Spanish parents (creoles), as well as the “mestizo” offspring of Spanish and indigenous parents, which in distant and isolated Paraguay had led to legally consider mestizos as Spaniards, not subject to paying tribute in the form of labor services. I then offer a conceptual framework based on Domar’s hypothesis on the causes of slavery or serfdom (which I previously reviewed in Pastore 1990), augmented to include property-right and rent-seeking considerations. Next, I use this conceptual framework to interpret the evidence presented earlier. Subsequently I find the analysis to be robust, particularly in connection with the previously expressed contention that the labor services “encomienda” in Paraguay were a tax-farming scheme. Last, I recapitulate and gather the conclusions.In the Spanish american colony of Paraguay, inland and on the Indian and Portuguese frontiers, tribute extraction from indigenous people in the form of labor services took the form of the encomienda (from the Latin "commenda"), mit'a, and yanaconazgo. Because of the paucity of Spanish immigration, however, children of Spanish and indigenous parents (the so-called "mestizos), were considered Spanish and exempt from the encomienda. However, in exchange for granting encomiendas to its worthiest subjects the Crown had required them, as well as colonists of lesser means to provide military service for their own defense against Indian and Portuguese attacks, thus saving the expenditure of royal revenues . A small peasantry free from labor services obligations but subject to military contributions to defense thus developed. In a resource-abundant frontier setting, therefore, a "free" mestizo peasantry thus developed, even though in similar circumstances elsewhere these were subject to the same compulsory labor as those to those imposed on indigenous people.

"Coerced indigenous labor and free mestizo peasantry: a property-rights, rent-seeking view of colonial Paraguay."

Here I first survey the evidence on forced and free labor in a resource-abundant, sparsely settled Spanish-American colony on the American Indian and Portuguese frontiers. The focus among forced labor forms is on the compulsory labor service obligations the Spanish exacted as tribute from the indigenous people they eventually resettled in segregated towns. The “encomienda” and “congregación,” respectively, were justified by right of conquest and in exchange for the protection and conversion to Catholicism of the new subjects of the Crown. Among free labor forms I focus on the free peasantry that arose in the lands left vacant as the indigenous population declined. Free peasants included the American born offspring of Spanish parents (creoles), as well as the “mestizo” offspring of Spanish and indigenous parents, which in distant and isolated Paraguay had led to legally consider mestizos as Spaniards, not subject to paying tribute in the form of labor services. I then offer a conceptual framework based on Domar’s hypothesis on the causes of slavery or serfdom (which I previously reviewed in Pastore 1990), augmented to include property-right and rent-seeking considerations. Next, I use this conceptual framework to interpret the evidence presented earlier. Subsequently I find the analysis to be robust, particularly in connection with the previously expressed contention that the labor services “encomienda” in Paraguay were a tax-farming scheme. Last, I recapitulate and gather the conclusions

Trade contraction and economic regression: the Paraguayan economy under Francia, 1814-1840

I argue here that economic activity fell considerably in the first three decades of Paraguay's early national period, below levels it had attained in the late colonial period and would attain again only after the mid-nineteenth century. I attribute this economic depression primarily to regional political fragmentation and the institutional regression it triggered. In the 1810s, the United Provinces of the River Plate sought to keep the former Viceroyalty of the River Plate under a single federal government, but failed to prevent Paraguay's early secession. Their subsequent trade blockades and military threats had profound economic and political effects on Paraguay: revenues from foreign trade taxation fell, scale economies in defence and justice provision vanished, a standing army emerged, government budget deficits worsened, mercantilist regulations heightened, the fiscal burden increased, and transactions costs generally rose. Proponents of federation, more representative governments, and freer trade progressively declined, while supporters of secession, political absolutism, and government regulation became ever more prominent. In the 1820s, blockade relaxations exacerbated economic intervention by the state, which substantially redistributed property rights in land towards itself. In the 1830s, renewed blockading had more than proportional negative effects on economic activity, which remained below late colonial levels at least until international waterways became freely navigable shortly after mid-century. Colonial absolutism and mercantilism may be said to have been restored with a vengeance. Long-run economic performance worsened

Trade contraction and economic regression: the Paraguayan economy under Francia, 1814-1840

I argue here that economic activity fell considerably in the first three decades of Paraguay's early national period, below levels it had attained in the late colonial period and would attain again only after the mid-nineteenth century. I attribute this economic depression primarily to regional political fragmentation and the institutional regression it triggered. In the 1810s, the United Provinces of the River Plate sought to keep the former Viceroyalty of the River Plate under a single federal government, but failed to prevent Paraguay's early secession. Their subsequent trade blockades and military threats had profound economic and political effects on Paraguay: revenues from foreign trade taxation fell, scale economies in defence and justice provision vanished, a standing army emerged, government budget deficits worsened, mercantilist regulations heightened, the fiscal burden increased, and transactions costs generally rose. Proponents of federation, more representative governments, and freer trade progressively declined, while supporters of secession, political absolutism, and government regulation became ever more prominent. In the 1820s, blockade relaxations exacerbated economic intervention by the state, which substantially redistributed property rights in land towards itself. In the 1830s, renewed blockading had more than proportional negative effects on economic activity, which remained below late colonial levels at least until international waterways became freely navigable shortly after mid-century. Colonial absolutism and mercantilism may be said to have been restored with a vengeance. Long-run economic performance worsened

"Coerced indigenous labor and free mestizo peasantry: a property-rights, rent-seeking view of colonial Paraguay."

Here I first survey the evidence on forced and free labor in a resource-abundant, sparsely settled Spanish-American colony on the American Indian and Portuguese frontiers. The focus among forced labor forms is on the compulsory labor service obligations the Spanish exacted as tribute from the indigenous people they eventually resettled in segregated towns. The “encomienda” and “congregación,” respectively, were justified by right of conquest and in exchange for the protection and conversion to Catholicism of the new subjects of the Crown. Among free labor forms I focus on the free peasantry that arose in the lands left vacant as the indigenous population declined. Free peasants included the American born offspring of Spanish parents (creoles), as well as the “mestizo” offspring of Spanish and indigenous parents, which in distant and isolated Paraguay had led to legally consider mestizos as Spaniards, not subject to paying tribute in the form of labor services. I then offer a conceptual framework based on Domar’s hypothesis on the causes of slavery or serfdom (which I previously reviewed in Pastore 1990), augmented to include property-right and rent-seeking considerations. Next, I use this conceptual framework to interpret the evidence presented earlier. Subsequently I find the analysis to be robust, particularly in connection with the previously expressed contention that the labor services “encomienda” in Paraguay were a tax-farming scheme. Last, I recapitulate and gather the conclusions

Estado e industrializacion: dos hipotesis y la evidencia sobre el Paraguay, 1852-1870

I confront here with the evidence the revisionist hipothesis that early in the second half of the nineteenth century, once the Parana River was opened to international navigation and trade by the new Argentine government, the foreign trade of Paraguay during the governments of Carlos Antonio Lopez and his son Francisco Solano increased noticeable relative to the level it had attained during the first half of the nineteenth century. Exports of yerba mate, which the Paraguayan government bought at monopsonist prices from individuals licensed to harvest it and sold in the market down river in competition with Brazilian suppliers. But though the evidence is consistent with the notion that the Paraguayan government invested part of the earnings that it obtained from its exports in improving its military forces and improving communications, no evidence exists of a state-led industrialization such as that which until now had been asserted to have taken place. Rather, the evidence suggest that the government's economic policy was similar to that followed by the late colonial period by the Bourbons. [Confronto aqui con la evidencia la hipótesis revisionista de que a principios de la segunda mitad del siglo diecinueve, abierto el rio Parana a la navegación internacional en 1852 por el nuevo gobierno argentino, el comercio exterior paraguayo durante los gobiernos paraguayos nacional tempranos de Carlos Antonio López y su hijo Francisco Solano aumentó notablemente en relación al nivel que había tenido durante la primera mitad del siglo diecinueve. Crecieron en particular las exportaciones de yerba mate, que el gobierno compraba a particulares a precios monopsónicos y revendía en el mercado río abajo en competencia con proveedores brasileros. Pero aunque la evidencia es consistente con la noción que el gobierno paraguayo invirtió parte de las ganancias que obtuvo de estas exportaciones en fortalecer su ejército y mejorar las comunicaciones, no existe evidencia de ninguna “industrialización liderada por el estado” como la que hasta ahora se había aseverado. Antes bien, la evidencia sugiere que política del gobierno era similar a la tardo colonial borbónica de fines del siglo dieciocho]

Estado e industrializacion: dos hipotesis y la evidencia sobre el Paraguay, 1852-1870

I confront here with the evidence the revisionist hipothesis that early in the second half of the nineteenth century, once the Parana River was opened to international navigation and trade by the new Argentine government, the foreign trade of Paraguay during the governments of Carlos Antonio Lopez and his son Francisco Solano increased noticeable relative to the level it had attained during the first half of the nineteenth century. Exports of yerba mate, which the Paraguayan government bought at monopsonist prices from individuals licensed to harvest it and sold in the market down river in competition with Brazilian suppliers. But though the evidence is consistent with the notion that the Paraguayan government invested part of the earnings that it obtained from its exports in improving its military forces and improving communications, no evidence exists of a state-led industrialization such as that which until now had been asserted to have taken place. Rather, the evidence suggest that the government's economic policy was similar to that followed by the late colonial period by the Bourbons. [Confronto aqui con la evidencia la hipótesis revisionista de que a principios de la segunda mitad del siglo diecinueve, abierto el rio Parana a la navegación internacional en 1852 por el nuevo gobierno argentino, el comercio exterior paraguayo durante los gobiernos paraguayos nacional tempranos de Carlos Antonio López y su hijo Francisco Solano aumentó notablemente en relación al nivel que había tenido durante la primera mitad del siglo diecinueve. Crecieron en particular las exportaciones de yerba mate, que el gobierno compraba a particulares a precios monopsónicos y revendía en el mercado río abajo en competencia con proveedores brasileros. Pero aunque la evidencia es consistente con la noción que el gobierno paraguayo invirtió parte de las ganancias que obtuvo de estas exportaciones en fortalecer su ejército y mejorar las comunicaciones, no existe evidencia de ninguna “industrialización liderada por el estado” como la que hasta ahora se había aseverado. Antes bien, la evidencia sugiere que política del gobierno era similar a la tardo colonial borbónica de fines del siglo dieciocho]

Factor Proportions, Public Finances, and Property Rights: A Test and Reformulation of Domar's Hypothesis on Serfdom or Slavery.

Does Domar's Hypothesis on the Causes of Serfdom or Slavery, which he derived from the Russian record between 1450 and 1550 as told by Kliushevsky, help to understand forms of labor control in a Spanish American colony where as in Russia and continental British America, land was also abundant relative to labor? I find that fully accounting for the phenomenon alluded to implies accounting for the role of the state in the delineation and enforcement of property rights, in particular, of the early modern centralized state as it first appeared in Spain. The state's role in limiting the mobility of labor and enforcing employers cartels or not doing so appears to be a function of relative labor scarcity vis a vis land so as to extract economic rents that would otherwise accrue to labor

State-led "industrialization": the evidence on Paraguay, 1852-1870

I confront here with the evidence the revisionist hipothesis that early in the second half of the nineteenth century, once the Parana River was opened to international navigation and trade by the new Argentine government, the foreign trade of Paraguay during the governments of Carlos Antonio Lopez and his son Francisco Solano increased noticeable relative to the level it had attained during the first half of the nineteenth century. Exports of yerba mate, which the Paraguayan government bought at monopsonist prices from individuals licensed to harvest it and sold in the market down river in competition with Brazilian suppliers. But though the evidence is consistent with the notion that the Paraguayan government invested part of the earnings that it obtained from its exports in improving its military forces and improving communications, no evidence exists of a state-led industrialization such as that which until now had been asserted to have taken place. Rather, the evidence suggest that the government's economic policy was similar to that followed by the late colonial period by the Bourbons. [Confronto aqui con la evidencia la hipótesis revisionista de que a principios de la segunda mitad del siglo diecinueve, abierto el rio Parana a la navegación internacional en 1852 por el nuevo gobierno argentino, el comercio exterior paraguayo durante los gobiernos paraguayos nacional tempranos de Carlos Antonio López y su hijo Francisco Solano aumentó notablemente en relación al nivel que había tenido durante la primera mitad del siglo diecinueve. Crecieron en particular las exportaciones de yerba mate, que el gobierno compraba a particulares a precios monopsónicos y revendía en el mercado río abajo en competencia con proveedores brasileros. Pero aunque la evidencia es consistente con la noción que el gobierno paraguayo invirtió parte de las ganancias que obtuvo de estas exportaciones en fortalecer su ejército y mejorar las comunicaciones, no existe evidencia de ninguna “industrialización liderada por el estado” como la que hasta ahora se había aseverado. Antes bien, la evidencia sugiere que política del gobierno era similar a la tardo colonial borbónica de fines del siglo dieciocho].autarky; export boom; growing state exports & state investments in infrastructure and military capacity; public finances and state enterprises resembling those of late-colonial Bourbonic administration.