THE SIGNIFICANCE OF MERCANTILISM IN THE PROCESS
OF THE ECONOMIC EVOLUTION OF VENEZUELA
APPROVED,
iajor Professor
1 nor Profes
Director, Dejafortment of Economics
B»wr Sociology
Deah of the Graduate School
\
THE SIGNIFICANCE OF IEEC#NTILIS» IN THE PBOCESS
Of THE ECyNOSIC EVOLUTION OF VENEZUELA
THESIS
1 r e s e n t e d to the Graduate Council of the
North Texas S t a t e U n i v e r s i t y l a P e t t i s i
F a i f i l l a o a t of tho Requirecseots
f o r the Uegree of
/••.STEE OF ARTS
Uy
Eciuartio S o s a - f t o d r l g a e z , 8 , 5 . » ;*rcbitect
( P r o f e s s i o n a l M p l o m a ) , B.C.P.
Denton, Toxas
Key, 1964
TA8L*i vi> CONTENTS
Pace
L I S T OF T;-SLES
,
L I S T fif ILL U ST r AT IG N S
*
PAST ONEs
Chapter
I.
II.
ill.
vi
CKGRWIND
GSIIESAL I NTS try OCT I ON
BUKOFS ;'T TOE
ASSBKIC
MUm?
2
01? THE tlSCuVERY OF
€
d
s u a e c u m j s p j t s or: i s s j x / . k t i l i s s .
PAP.? T':W i
IV.
. . . . . . . . .
BACKGROUND Of STEUAIiT* .5 ;fOfcK .
F O P M L m u N , ; ; 6 R l C U i T i J S E , fiUZ PHYSIC -''L * L * m i U Q
li/ : .SIC ECOKtfMC CONCEPTS.
,
26
.
33
"eceptco
1 o p u i a t i on anu A g r i c u l t u r e
Process ol Urbeni zat io»
The S o l e of F o r e i g n T r a d e I s
by S t e u a r t
n ,
i:
5TSy.,AT' S TflOUGUT
Introuuction
Shy I l l s P h i l o s o p h y ;.'pg n o t
S t e u a r t ' s Philosophy
The B o l e of t h e S t a t e
V.
v
Stressed
. . . . . . . . . . . .
44
Valise
B a l a n c e o f K e a l t l i nnu T r a u e
Money
P u b l i c P . o r r o w i n $ obq T a x a t i o n
fIX.
IKSTHUMEIiT WP t h - U K i m
W
CCKTXfeL
6;"
Introduction,
The I s g t r a i a e n t s
of
"emulation
111
trad C o n t r o l
Chapter
i'lll,
Ps§e
CONCLUSIONS ON STED/.ilT'S THOUGHT
71
»-/MT V«i; fX* COIMENT5 ON ECONOMIC
s?v'OLOTION OF tfEKEZOKLi'.
Ia.
x.
il.
INTRODUCTION .
tkb m $ T
. . . . .
st;:Gei
i>sg~ms?A?iic (
?I1 E SfiCCIl; ST.'GEi
8ISI ":iC
-isoo) . . .
CI 'OO-ICIO) « . . . .
76
?e
07
Introduction
New &ce»o&ic Structure
Instruments ol' CaiaoisBtioas
Encoulenas gad feisi.eaes
{roUuction
Spanish Mercantilism
The Btsio Legal Structure of the Spanish
Marcauti lisui and Its Instruments
Le Corapeffle Guipuzco«na
The Control of Spanish Covernaeat i a t h e
Veaesuelea Scoaoay burin# Colonial Tlaes
Conclusion
111.
THE THIRD ST^GSi
REPUBLIC , COFFEE BE
127
Introduction
1810-1857
Tbo Federal devolution sail Guzraen-lUanco
Castro and G<$aez
Coffee
Conclusion
XIII.
THE POUfiTH STAGS*
REPUBLIC „ PElliiihiim Bll '< . . .
142
Introuuetioa
Le'jbl ;-.speet$
!!i stories I Back y r o u n d
Cr-Q8»is5iag Prices and Production
Hit* Consequences ©£ I'etroleuw ."-ctivitiess
iitv,
S S 1 U A E Y .AMD iA-'i
Ih.SZi
'JS
171
Sumnery
Conclusions
- t¥e,mi&
.
* . lei
aiDLlOGS.-'Fliy
186
iv
LIST of TABLES
n£»able
I.
11.
III.
XV.
V.
Ml,
The Goltl Production So Venezuela iroti 1529
tO lu10• « • . . • . . « • « • « . . . * * .
Amounts of Sxport of Tobecco Coxrespontiiny
to Several fears
104
Amouuts of Export of Tobecco Correspond!ng
to Several Years
105
Production of ordinary Linen Cloth io
Venezuela, for 1599, 1600, 1605 and 1607 . .
Ill
Distribution of the Population of Venezuela
in Different Types in 1799 .
126
Distribution of the Populatio n oil Venezuela
in 1039 into Ethnic Groups
I'll.
VIII.
Public Revenue# of Venezuela on June 30, 1832. .
X.
aI.
XII,
a111.
\IV,
131
132
National Income of Venezuela in Several
Fiscal Years
IX.
^V
136
Export of Coffee for Several Years . . . . . . .
130
Coiaperi sou of the Government Capital
Expenditures of the Yoars 1957 anu 1909. . .
Comparative Prices o£ Crutfe Oil l;elivoted
in Mew York, December, 1959.
144
161
.''elatisnstitp Between laport o.'" C-soJs and
Export of t'etroleua from 1910 until 190&. .
164
Population of Venezuelo .ccoruiny to Several
Censuses from 1891 until 1960 . . . . . . .
162
Distribution of the Population I s i:ural and
Urban in 1920, 1936, 1941, 1950
167
LIST OF ILLOSTKSTICJ-IS
14 ap
1.
I" 8g0
Iboro mericc: Loeotloa of Moin Indian
Cultures, Pre-OispRf?ic St ego
•0
Cultural Areas of Venezuela:
4* •
11 i 8 p 8 n i c Stage
Fre06
3.
Venezuelai
Petroleum Field
4.
Venezuela?
Present Political Livigion
vi
05
ross, 1960. . . . . .
160
169
i' l a t e
Pege
1,
Yenosuslan Intiian -^ornan . . .
182
2,
The Spanish ConquistG'ior. . . .
183
3,
trimitive Farrainy Practices hich Preveilea
Daring t h t St ages i Hi spanl c ami
Republic, the Sre of Coffee .
164
Petroleum Towers on the Lake of Msracaibo . . . .
185
4,
vii
PART ONE
£©®ae»ta d o c t r i n e i s o v a r y wber© t h e u x p r e s s i o n o£ t h e
coouitioog of t i e U s e to
i t l i i s l t I t «#@yg#«# t a a E u r o p e
£ r o t f t h # e n « o f ISie
i i f t o e s t b c e n t u r y onwerUc
was i v ® r y d i f f t r e s i t p l a c e
f r o a the Kurope of the
t w e l f t h «s4 t h i r t e e n t h
centuries,
t-.%exuader
Grey
CHAPTER 1
GENERAL INTRODUCTION
The p u r p o s e of t h i s t h e s i s i s t o e v a l u a t e t h e econonic
t h o u g h t i n v o l v e d i n t h e p r o c e s s of t h e economic e v o l u t i o n of
Venezuela.
When the c o n t i nent of America* was d i s c o v e r e d ,
Europe had emerged from f e u d a l i s t s and was l i v i n g i n the mercantilist
stage.
The i d e a s and p o l i c i e s of t a e r c a n t i l i sm
d e t e r m i n e d the c h a r a c t e r of the Spanish conquest of America
attii p r e v e i led duriny c o l o n i a l times .
M e r o a n t i l i sm has two raeeni ngs.
The f i r s t meeuiay s i g -
n i f i e s bul l i o n i sva, a f a v o r a b l e balance of t r a d e , and e x p l o i t a t i o n of c o l o n i a l c o u n t r i e s by i m p e r i a l i s t n a t i o n s .
The
other meaning r e p r e s e n t s an o r i e n t a t i o n and p h i l o s o p h y f o r
emerging n a t i o n s , and f o r underdeveloped c o u n t r i e s .
The
second s e a n i n g of m e r c a n t i l i s m i s e x e m p l i f i e d p a t e x c e l l e n c e
in the works of James Steuart of C o l t n e s s .
The S p a n i s h m e r -
c a n t i l i s m was an example of the f i r s t meani ny.
That i s , i t
was c h a r a c t e r i z e d by b u l l i o n i s m , government i n t e r v e n t i o n , and
e x p l o i t a t i o n of c o l o n i e s .
In t h i s paper the word "America" i s used to mean the
c o n t i n e n t and the words "United S t a t e s " to r e f e r to the
nation.
3
The war f o r i n d e p e n d e n c e brought a b o u t t h e f o r m a t i o n of
an economic u n i t , t h e n a t i o n - s t e t e ,
p a r t t h e product OF t h e
raercaatilist
V e n e z u e l a , whi ch was i n
ideas.
AS a r e p u b l i c ,
Venezuela l i v e d t h e f i r s t hundred y e a r s wit h t h e same economic
base as t h a t of t h e c o l o n y , t h a t i s ,
ities.
by a g r i c u l t u r a l a c t i v -
In 1920 a o m economy emerged, t h e p e t r o l e u m i n d u s t r y ,
which was, and s t i l l
is,
t h e p r i n c i p e l economic a c t i v i t y .
During t h e c o l o n i al p e r i o d and duriny t h e r e p u b l i c , t h e g o v ernment p l a y e d an important r o l e i n t h e economy, t h a t I s ,
the
framework of t h e economy was t h e market, but i t was c o n t r o l l e d
by government a c t i o n .
S t e w a r t ' s thought r e p r e s e n t e d a d e f i n e d o r i e n t a t i o n f o r
ewerginy n a t i o n s .
However, he l i v e d duri ng t h e l a s t part of
t h e e r e of m e r c a n t i l i s m , and t h i s a c c o u n t e d f o r t h e x a c t t h a t
he was i g n o r e d or n e g l e c t e d both i n Spain when she was a powerf u l i m p e r i a l i s t i c n a t i o n , and l a V e n e z u e l a when t h a t c o u n t r y
became i n d e p e n d e n t .
The r o l e of t h e government i s i m p o r t a n t i n d i r e c t i n g t h e
development of emerging n a t i o n s \ i t
i s more s i g n i f i c a n t when
t h e a c t i o n of t h e government i s o r i e n t e d by e p h i l o s o p h y of
planning for development.
In t h i s c o n t e x t t h e p h i l o s o p h y of
Steuart i s relevant.
T h i s t h e s i s w i l l be d e v e l o p e d i n t h i s order *
the s i t u a -
t i o n of Europe when America was d i s c o v e r e d , some comments on
t h e two t y p e s of m e r e a n t i l i sra, i n c l u d i ng S t e u a r t ' s ; then t h e
principal
a s p e c t s of t h e economic e v o l u t i o n of
c o n c l u s i o n s which stem from t h e s e o b s e r v a t i o n s .
Venezuela and
CHAPTER I I
iUSOTE A J THE MOMENT OF THE
DISCOVERY OF AMERICA
At the end of the f i f t e e n t h c e n t u r y Europe was l i v i ng i a
the f i n i i l s t age of
f e u d a l i s m , and was p r e p a r e d f o r & § r e a t
t r a n s f o r m a t i o n la c u l t u r a l ,
Thus t h e d i s c o v e r y o f
e c o n o m i c and p o l i t i c a l
aspect s.
America was not & c a s u a l a c c i d e n t , hut
r a t h e r en e v e n t t h a t bad t o o c c u r at t b a t t i m e .
Several f a c t o r s c o n t r i b u t e d to t h i s economic, p o l i t i c a l
and t e c h n o l o g i c a l c h a n g e which made p o s s i b l e t h e e x p a n s i o n of
t h e Mediterranean Sea and t h e discovery of o t h e r
First,
n a v i g a t i o n had p r o g r e s s e d
of t h e a s t r o l a b e ,
lands.*
not a b l y due t o t h e i n v e n t i o n
as w e l l a s t o t h e c o n s t r u c t i o n o f
larger
s h i p s e q u i p p e d w i t h sails t o n a v i g a t e a g a i n s t winds and w i t h
s t r o n g e r k e e l s f o r b e t t e r stability.
of G u t e n b e r g p r i n t i n g ,
S e c o n d , t h e improvement
and t h e s i m u l t a n e o u s i n t e n s i f i e a t i o n
of t h e p a p e r industry tuade t h e d i f f u s i o n o f
progress p o s s i b l e .
technological
T h i s s i t u a t i o n allowed more p e o p l e t o
participate i» cultural
and e c o n o m i c p r o g r e s s I n
other
* c f . Skepperd Bancroft d o u g h ®«d Cltsrles w o o l s e y Cole,
ricaBoraic H i s t o r y of guror>e ( B o s t o n , 1 9 4 1 ) .
From i486 until
1522 t h e r e were f o u r t e e n i m p o r t a n t U i s c o v e r i e s of new " w o r l d s
p. 109.
2.
'A.
(Caracas,
A r e l l a n o - M o r e n o , D r i f l e a e s de l a Economia y p n a s o l a n a
1960) , pp. 2 1 - 2 2 .
5
words, c u l t u r e p r o y r e s s e d from a parochi el framework to a
universal one.
t h i r d , t h e r e was a g e n e r a l c o n v i c t i o n of the
t e r r e s t r i a l s p h e r i c i t y , thanks to c o n t a c t with Arabs who, in
t u r n , had i n h e r i t e d the Greek-Roman c o n c e p t . 3
Fourth, the
s p i r i t of niercanti 11 so** and the e a g e r n e s s f o r p r o f i t c r e a t e d
an a n x i e t y f o r new b u s i n e s s e s and a d e s i r e f o r more g o l d .
"Old schoo1 of m e r c a n t i l i s t thought, b u l l i o n i s r a , emphasi feed
t h a t the n a t i o n ' s wealth was t o be measured by the amount of
bullion i t possessed."5
Uuring t h i s period of raercantilism
t h e growth of the Money economy was s i g n i f i c a n t .
t a t e d the expansion of t r a d e . 6
It f a c i l i -
F i n a l l y , the European n a t i o n s
were 1n the p r o c e s s of becoming u n i f i e d n a t i o n s .
a l s o a s s o c i a t e d with morcant1li s t t h o u g h t ,
This i s
In a broad s e n s e ,
m e r c a n t i l i sn was a system of p r o t e c t i o n and p o l i c y of the
"econooie u n i t " 7 which was r e l a t e d to p o l i t i c a l u n i t y .
Had
the medieval p a t t e r n p r e v a i l e d , i t would have been very
d i f f i c u l t , if
not i m p o s s i b l e , to explode t h e Mediterranean
framework of commerce and t r a d e , which made I t p o s s i b l e to
conquer the A t l a n t i c .
3
I b l d . . p. 2 0 .
%@e Chapter I I I of t h i s s t u d y .
P h i l i p C. Newman, Arthur D. Gayer, and a l l i e n II.
Spencer, e d i t o r s , Source l e a d i n g s l a Economic Ybouuht (New
York, 1 9 5 4 ) , p. 22.
6
&11 F. VJeckscher, " M e r c a n t i l i s m , * Encyclopedia of the
S o c i a l S c i e n c e s , e d i t e d by Edwin R. A. Sellgman (New York,
1 9 3 2 ) , X, 337.
7
I b i d . , pp. 3 3 3 - 3 3 7 .
uoanent's oti a e r e i a l i l i s a i .
'-he t*asa chapter w i l l c o a t c i o
6
f'/b^n America was di s c o v c r e u , the European n a t i o n s were
i n v a r i o u s s t a g e s of p o l i t i c a l u n i f i c a t i o n and economic
power.
Henri Pirenne a s s e r t e d t h a t , "France was ruined
by the Hundred Years' s*ar, end i t was not u n t i l Louis XI
came to t h e throne [ 1 4 6 1 - 1 4 8 3 ] t h a t measure* were taken to
bring about i t s economical r e v i v a l
w
T j i e
political
anarchy which r e i g n e d l a Germany prevented i t ,
in the absence
of c e n t r a l government, from i m i t a t i ng i t s western n e i g h b o r s .
" I t a l y , torn between p r i n c e s and r e p u b l i c s a l l s t r u g g l i n g
f o r supremacy, continued to f a l l i n t o independent economic
areas » . . the supremacy of I t a l y i n banking and luxury was
still
so marked that i t was s u c c e s s f u l l y maintained over
the r e s t of Europe, l a s p i t e of i t s p o l i t i c a l d i s u n i o n , u n t i 1
the
di scovcry of new r o u t e s t o the I n d i e s turned the main
current of n a v i g a t i o n and cowiaerce from the U e d i t e r r e n e e n to
the A t l a n t i c E n g l a n d was "the country which enjoyed a
more powerful end u n i t e d government then any o t h e r j " * * however , as a consequence of the Hundred Years* H'ar, i t was
s t i l l weak.
"In Flanders the small towns appealed to the
Count a g a i n s t the tyranny of the g r e a t c i t i e s
1 2
Finally,
Spain and Portugal had developed by that time 1nto a new
form of p o l i t i c a l l i f e , the n a t i o n - s t a t e , aided by a strong
®Henri P i r e n n e , Economic a.ad S o c i a l H i s t o r y of Medieval
Europe (New Xork, 1 9 3 7 ) , p . 2 1 8 .
9
n
I b i d . , p. 219.
10
Ibid.
I b i d . . p. 217.
l2
I b i d . , p. 215.
?
nations! sentiment at sell as toy the r e s e n t f u l s t r u g g l e
between the bourgeosie on one aide and clergy sad n o b i l i t y
on the o t h e r . * 3
This f a c t placed them in a r e l a t i v e l y advan-
tageous p o s i t i o n concerning the d i s c o v e r y . * 4
Was Spain the
most advanced European country to undertake t h i s t a s k ?
Per-
il aps n o t , but ®t that moment i t s strong p o l i t i c a l unit was
decisive.
The r e s t of Europe, as has been pointed o u t , was
c o n v u l s i v e , weak, <ii v i c e d .
The c o n s c i e n c e of the d i s c o v e r y
of the American continont was of yreot s i g n i f i c a n c e f o r
Europe, as w e l l as for the new s t a g e of economic l i f e t
cantilism.
mer-
This was the stage of "expansion of Europe," 1 1 '
which brought about the expansion of c a p i t a l i s t s .
k% a Matter
of fact, the expansion of Europe s t a r t e d e a r l i e r »
x3
, - r e l l a n o - » o r e n o , 0£. j j i t , . , p. 26. The author l a t e r
mentions other meaningful f a c t s . ''The p r i n c i p a l preoccupat i o n of the C a t h o l i c Kings was to r e - e s t a b l i s h peace and to
c o n s o l i d a t e the royal a u t h o r i t y by means of s e v e r a l r e s o l u t i o n s with which they obtained p o l i t i c a l power over c i t i e s ,
n o b i l i t y and c l e r g y ) m i l i t a r y predominance by means of Holy
Brotherhood and a i l i t a r y o r d e r s , and the r a c i a l and r e l i g i o u s
u n i t y with the e x p u l s i o n of Jews and the p e r s e c u t i o n of
pagans.* The e x p u l s i o n of Jews, who were very a c t i v e In
commerce, was one of t h e p r i n c i p a l causes of Spanish backwardness. This f a c t and the c h o i c e of Madrid as c a p i t a l of
Spain were d i s a s t r o u s t o the f u t u r e of that country. Cf.
Kederic© Carlos Sain® de Robles, £ q £ gjj£ tit drill ,ff> c.ipl.t.ll.
(Madrid, I 9 6 0 ) .
14 I b i d . . p. 26
lv
' Cic>tstjf! and C o l e , a&. c l t . , p. 103, "The expantloa of
Europe wbi ch began in the f i i t e e n t h century was e two-way
p r o c e s s . On the one hand Europe exported to the other
c o n t i n e n t s p o p u l a t i o n s , i d e a s , language, i n s t i t u t i o n s , end
a way of ooing t h i n g s ; on the o t h e r , i t iaported f r o a the
o v e r s e e s arens goods and i d e a s which pro foundly modi f1ed i t s
own c i v i l i z a t i o n . "
§
The crusades may be considered as an e a r l i e r expansion
movement whieh began at t h e end of the eleventh century
and lasted long enough to be linked with the Portuguese
and Spanish e x p l o r a t i o n s . Though s u p e r f i c i a l l y
r e l i g i o u s in n a t u r e , the crusades had ecosiomie bases
snd r e s u l t s . They opened up trade with the Levant.
They brought Europeans i n t o contact with new p e o p l e s ,
new l u x u r i e s , new ways of l i f e j but they f o c m e d
' a t t e n t i o n on the tjediterraneaa world. known since
antiquity
This e a r l i e r expansion, t h e r e f o r e , strengthened the
center of the Mediterranean Sea, while l a t e r , the expansion
of Europe towara the American hemisphere brought about a
s h i f t of the economic center from the Mediterranean to the
Atlantic.
"The major factor in the d e c l i n e of the Kedi-
terraneen area was the s h i f t in commerce occasioned by the
ui s c o v e r i c s fAmerica]." 1 7
As « consequence of the s h i f t of
the economic center to the A t l a n t i c , a l l the Mediterranean
p o r t s , such as Venice and Genoa, d e c l i n e d . T h e new
stronger s t a t e s t
Spcin, Portugal, France, England, and l a t e r
Holland, a i l had good harbors on the Atlantic c o a s t . T h e
types of coaaerce changed when the expansion of trade
occurred.
it wide v a r i e t y of goods was exchanged ia Europet
s p i c e s f roo the Sast, b u l l i o n from the West, porcelain from
China and cocoa frota America.
The f i n a n c i a l e f f e c t s of expansion should be aentioned.
From 1300 to 1450 the production of gold and s i l v e r was
16
I b l d . , p. 103.
l7
I b l d . . p. 120.
l8
19
I b i d . . p. 120.
2Q
I t a l i c s are n i n e .
I b l u . , p. 119.
l b i d . , p. 121.
cteclining In Europe as the olci s i n e s were worked o u t . B e s i d e s ,
not® gold was going to the Orient in order to pay f o r the
s p i c e s and luxury goods obtaitied frooi t h e r e . 2 *
Thus the
supply of gold from America helped that s i t u a t i o n ) however,
i t l a t e r brought about an i n c r e s s e of p r i c e s .
in which the i n f l a t i o n occurred was Spain.
The f i r s t p l a c e
I t general terms,
the p r i c e of gooeis went up f a s t e r than the w a g e s . 2 2
S i r i n g t h i s period many people were fami l i a r with the
problem of i n f l a t i o n but very few understood the causes of
the p r o b l e a .
Thus, iu France, 1 , M a l e s t r o i t , in h i s book
faradobes >bout Money ( 1 S 6 6 ) ,
t r i e d t o e x p l a i a the s i t u a -
t i o n , s t a t i n g that c o s t s of goods did not vary in r e l a t i o n to
gold but i n r e l a t i o n t o c o i n s .
In other words, i t was a prob-
lem of colnage ( t h e asaount of gold In c o i n s ) .
Jean Rodin
21 I b i d . , pp. 125-126.
22
I b l d . . pp. 120-129. In order to I l l u s t r a t e the
i n c r e a s e l a Spain, France and England t h e f o l l o w i n g are soate
f i g u r e s which appearod l a the above-aentioned pagest
Spanish P r i c e s
XMJUL
ftii
1501-1510
100
1591-1600
303
1601-1610
340
French P r i c e s
Mm®.
1501-1525
ir-76-1600
100
277
361
English P r i c e s
XSLMJL
1501-1510
1593-1602
1643-1652
90
•"Ibid.« p. 130.
IAAIJ.
100
256
34 C
MM
100
130
139
MffiJ,
100
219
TiMM,
100
138
10
(1520-1596) ropliod to Malestroit in his book, S©b1v to the
£f I. ftalestrolt {1568) »
Bodin demonstrated the
eaas# of this Inflation as the exaggerated supply of gold
from America,
He eatabli shed the basis fox what is callad
today tho quantity thfiory of
aoney.as
a
consequence of
expansion, the political, cultural and social framework
chsaged subst&nti elly.
The shift of economic activities
toward the .it 1 antic brought about pari passu. a shift in
political strength.
Those nations with Atlantic harbor®,
such as France, Spain, England and Holland, became store
powerful.
There was more interaction in political thought.
Thus, European people met people from other nations ami this
enriched the sources of speculation about political systems. 25
Coanunicatioa and i ateractioa among i ntellectual writers Mere
wore frequent.2**
24
Jean Bodin, *La Response tie JU 8, aux paradoxes de
Malestroit touchaat 1'eschtrisseoent de toutes ehoses & le
aoyel d*y reaedier," Rirly Sco.Boal.c Thought: Selections from
Sfitlffllf, M M O i J E S i.Lh9.l M M& Mktk* ®dit@d by Arthur Eli
Honroe (Cambridge, 1948), p. 12?. "I f i ad that the high
prices we see today are duo to sooe four or five causes. The
principal & almost the only one (which no one has referred to
until now) is the abttttdan.oo of gold t> silver . . . The second
reason . . . in part from monopolies. The third is scarcity,
caused partly by export & partly by waste. The fourth is the
pleasure of Kings 0 <jro»t lords, who raises! the prices of
things they like. The fifth has to do with tho price of money,
debased from its former standard." (llsaphasi s is added here.)
*^'Clough and Cole, op. clt., pp. 133-134.
26 I .bid. At that tine Thomas More (1476-1535) sketched
new social life in his book Utopia. Francis Bacon (1561<
1626) used th« saae approach ia
New Atlaatis. Thomas
'.a his Sj
Uobbes (1568-1679) framed a now thaory of government affirming thet they must be able to prevent a relapse into savagery,
p. 134.
11
The
f i e l d
freraework of
of k n o w l e d g e was p r o f o u n d l y
k n o w l e d g e
i i n v e s t ! g a i i t n i
h o c eric
was a o r e ufti v e r s a l ,
0 0 r e
o b j e s t i v a . * '
as a s t a t e p o w e r ,
started its
o t h o r
S a i t i t t t t l a a
a f t e r
e n c e d
t h e
r a p i d
d e v e l o p m e n t
w i t h
o v e r s e a s
r e s u l t s
*"
A
f o r m a t i o n
o f
C f .
ft.
T h e
o f
n o d e r a
o a e
II.
e p s r t
T e w n e y ,
S t u d y
( N e w
R e v o l u t i o n . "
26,.€
a n d
C o l e ,
££,.
S e f o r c i a t i o a
w a s
i s
s o
« a d
1 9 6 1 ) ,
c i t . .
o f
p .
wUieh
i n t i a e t e l y
t h e
t o
any
1 n f l a ~
" t h e
c o n n e c t e d
c o n s i d e r
t h e
o t h e r , " ^ 6
t h e
p p .
1 3 9 .
6 2 - 7 2 ,
o f
( C a t h o l i c )
F u r t h e r m o r e ,
d i f f i c u l t
t h o s e
ieltale.ft
Y o r k ,
E c o n o m i c
l o u g h
i t
f r o m
a c t h o u o l o g y
R e l i g i o n
c a p i t a l i s t .
c a p i t a l i s m
t h a t
a n d
the
d e c l i n e t o t h e p l s s e of
the ^reat
e x p a n s i o n
t h e
H i s t o r i e s !
0 /
c h a n g e d ;
S e c t i o n
I I
CBAPTES III
SfcSE COHHGNTS ON HGGCANTILISII
was poi nted out in tb# preetalag chaptcr, Europe la
1500 emerged fro® feudalise? into a new political frsaework
based on the emerging nation-states.
This process of politi-
cal iBtegrstion was guided by the economic doctrines called
mercantilisra.
This economic thought sod economic policy
prevailed la Europe froa the sixteenth to the eighteenth
centuries.
It has been said that it was not a defioea body
of doctrines and never dominated completely even d«rio§ its
moment of maximum influence) however, It «©f®f disappeared.*
Mexeoder Gray wrote:
It has become en accepted phrase to speak of "raercantili8m doctrine" and "aercantili sm theory," yet aercanti lisn is a deceitful word, if it is interpreted
as implying that at any time there was a group of
writers who consciously advanced a body of mercantilist thought to Khich any canon of orthodoxy could
ho applied. * mere indication of the spatial and
temporal frontiers of S'.ere&oti li sra Is a sufficient
we m i h q ©galnet the old vul^er error iaplicit it the
view (which perhaps still survives) thct Mercantilism
wsi the current orthodoxy before It was attacked by
the Physiocrats, and that both schools wera superseded by /.daw S»ith. , ,
Hiewaan, Gayer ana Spencer, c>p. cit., p. 23.
^Alexander Gray, The Development of Sconoaic Doctrinet
A.a Introductory Survey (New York, 1931), p. 35.
12
13
M o r c u n t i list.i was n e v e r rsore t h a n a a a a n o .
The t r u e
end wot political in I t s character—the creation of
c s t r e s s s t a t e ; M e r c a n t i l i s t s was tho »»a total $f
the means on the economic s i d a to the titalsaent of
this end.3
Accordiag to Cray, the kernel of atfcsntiUts was tU«
developsaont of the state, that Is, the instruaeut of direction to achieve the political unit.
Therefore, to nsintain
the state it was necessary to secure revenues.
"The pos-
sibility of s e c u r i n g u revenue by taxation was itself,
however, one of tbe indirect consequences of the geographical
ai scoveries, end i s particular of the discovery of America."*
t»n the other hand, to increase taxation it would be
necessary to increase national incorae by the total of economic
resources.
"health, as a source of ® nation's power, above
all visualized as aoney—that fora of wealth which endures,
which is adaptable to all ends, which can be me&ie to fetch,
tv
to carry at command—had thus come t a t © r e s p e c t L a t e r on,
p. <>9.
4
Ibld., p. 70. Gray continued his reasoning: "-Vhat
first coausended the New ?or id to the European was its
proaiserf store of preeious Betels. The Influx of silver
rapidly revolutionized the trade, commerce and the finance
of Europe. The eonsequence of the new discoveries of ailver
on the European price-level i s one of the most familier
exemplifications of that dowdy platitude, the quantity
theory of Money." C f . Bodin, 0&. clt., pp. 123-141. Bodin
was one of the first nercantilists who made a sophisticated
approach to the problem of inflation at that time. According
to him, the causes merei too reach export, monopoly, scarcity of goods, w i l l i n g n e s s of princes administering prices,
and westing of t h i n g s which ought to be economized.
m
J
lbici., p. 71.
u
be adds that the fundaments! a arrow for the aercanti list was
"the strength of bis country.
aeans wera subservient,
This was the end to which all
Uoreovor, la eotiiidtri ag the pros-
perity and strength of his country, the true aercantilist had
always at the back of his mind a comparative standard
Therefore, because wealth is iJt«&ni»§f»i for econoaic development , and a generally accepted form of wealth is bullion,
to possess § © M
is st<yalf leant,
But it is significant In a
relative sense, not strictly aceordi ng to the distorted view
of Adam Smith on Mercantilisn.
He made the aercantilists ®
classical example of clotted econoaic nonsense, sad he "is
responsible for the view so long prevalent that they confused
money anu wealth.
Here M s ®
Smith was less than j ust
Gray explained
ssuming that bullion is in some sense wealth ^ar
excol lease.. how ia a country to yet it? If it hr.s
saints, or can acquire plantations with mines, well
end good. Its task, then, is (sorely to prevent the
silver and the gold from flowing, if need be by
"sanguiaery" laws, to use Adaa Setl th's phrase. But
if a country has no mines, the desired silver and
gold can only be obtained as the result of trade,
end the whole trade of the country must accordingly
be so ordered and conducted that as a result of its
operations gold may come into the couutry, . , » In
order that the supply of bullion in the country any
increase, it is therefore necessary that there be t
"favourable balance of trade* represented by an
excess of exports over imports, leading ia this
consequence to a balance of payment being due to the
country. . . . It was thus a primary principle of the
typical raercantl list to maximize exports whi le
mlnlolzing imports
''JMa-. P- T 4 .
"Ii>U.. PP-
p. 75.
%K
A
•lexander Grey conc iudwu t h a t " m e r c e n t i l i s r a was a p o l i c y
of u b i q u i t o u s and p e r p e t u a l yovermaeat a c t i v i t y .
M e r c a n t i l i s t thought has a v a r i e t y of m a n i f e s t a t i o n s
according to t h e c i r c u m s t a n c e s of every c o u n t r y .
Put i t may
be s a i d t h a t t h e r e i s a common denotairmtor which u n i f i e s a i l
of t h i s thought i n t o e r e a l body of d o e t r i n e # n a a e l y , t h e
n e c e s s i t y of a p o t e s t t o o l of p l a n n i n g and c o n t r o l - s t a t e t o
c » r r y out t h e development of the c c u a t r y , t h a t I t , t h e I n c r e a s e oi' a c t i o n a l income end wealth*
To I l l u s t r a t e t h e
s t r o n g a a t l o n o l l s a m a n i f e s t e d by a m e r c a n t i l i s t w r i t e r , t h e
f o l l o w ! a y q u o t a t i o n I s s i v e e from i i o n t c h r S t i o n :
Premi eremeat j e r e p r e s e n t o vos Uaj e » t e « que t o a t e l a
quinquai l l e r i e , I I s f a b r i q u e de l a q u e l l e sont occiipez,
t i n t dedans que dehors l e royaume, oon de v i l l e s
s e u l e s , mais de p r e v i n c e e n t i f e r e s ,
se peut f a i r e
aboodaaaent ot e p r i x t r e s r a i s o o a b l e dans l e pays
de vos S e i g n e u r i e s , que d*y en a d m e t t r e e t r e c e v o i r
d ' o s t r a n g e r e c * e s t o t e r l a v i e a p l u s i e r s nil 111 era de
vos s u b j o c t s dont c e t t e I n d u s t r i e e s t 1 * h e r i t age e t
ca t r a v a i l l e fonds e l e u r r e v e a u ; c * e s t d i o i n u e r
d * a u t a n t v o t r e p r o p r e r i c h e s s e , l a q u e l l e se f a i t e t
s ' a u ^ a e n t e de c e l l s de vos p e u p l e s .
Karl P o l a a y i „ a n o t h e r w r i t e r on t h i s d o c t r i n e , a f f i r m e d
t h a t the i s e r c e a t i lissa systesa mss 8 r e s p o n s e to many c h a l lenges »
" P o l i t i c a l l y , t h e c e n t r a l i z e d s t a t e c a l l e d f o r t h by
t h e CoMMercial d e v o l u t i o a " which had s h i f t e d t h e M e d i t e r r a n e a n
to t h e
t l a c t i c framework and "compelled t h e backward p e o p l e s
9
10
I b i d . , p. 77.
' n t o i n e de ao»tchr<5t i e a , T r e l c . t i de 1* Oeconoale
o l l t i o u e . R e p r i n t of 1GS9, e d i t e d by ? u n k - 3 r o o t a n o , pp. 51ft: * *
Quoted i n Gray, 0£, e l t . . p . 03.
16
©f l a r g e r Agrarian c o u n t r i e s to o r g a n i z e f o r commerce and
trad®.* 1
From the economic s t a n d p o i n t , " t h e instrument ©f
u n i f i c a t i o n we* c a p i t a l , I . e . ,
private resources a v a i l a b l e
i n form of money hoards and thus p e c u l i a r l y s u i t a b l e f o r the
development of commerce."
The n a t i o n a l market i ntegrateii
the l o c a l and f o r e i g n market.
"The 'freeing* of t r a d e p e r -
formed by m e r e a n t i l i s a merely l i b e r a t e d t r a d e from p a r t i c u l a r i s m , but at the same time extended t h e scope of r e g u l a t i o n s ; markets Mere merely an a c c e s s o r y f e a t u r e of an
I n s t i t u t i o n a l s e t t i n g c o n t r o l l e d and r e g u l a t e d more than
ever by s o c i a l a u t h o r i t y . " 1 1
The o p i n i o n s of other w r i t e r s on m e r e a n t i l i s m w i l l now
be r e v i e w e d .
Adam Smith termed m e r e a n t i l i s m "the commereial
and mereanti l e
s y s t e m . "
important p o i n t s t
1
* *
His a t t e e k was based on two
t h e view of money and the commerci a l
p o l l c y d e f i n e d as a system of p r o t e c t i o n .
The r e a l f i s t
of m e r e a n t i l i am, according to S a i t h , i s c a s t i n the f o l l o w i n g
statement t
"Wealth c o n s i s t s In money, or in gold or s i l v e r ," 13
This o v e r s i m p l i f i c a t i o n which l e a d s to t h e m e r e a n t i l i s t
i n s i s t e n c e on e x c e s s of e x p o r t s over imports was e x p l s i ned
as the i n a b i l i t y to d i s t i n g u i s h between money and w e a l t h .
11
A
Kar1 P o l a n y i , The S r e a t T r a n s f o r a e t i o a i The P o l i t i c a l
W.ftiBI
&M. Xi&U. ( B o s t o n , 1957), pp. 6 5 - 6 7 .
12
Quoted i n Heekscher, ojg,. c i t . ,
13
I b l d . . p . 337.
pp. 333-339.
1?
l a t e r m e r c a n t i l i s t view c o n s i d e r e d t h e b a l a n c e of trad© e
desirable e n d . O n
t h e o t h e r hand,
. . . f t i s e s p e c i a l l y n o t i c e a b l e t h a t a e r c a n t i l i sm
s t a t e s m e n cod w r i t e r s b e l i e v e d i n whet was c a l l e d
"freedom of t r a d e , " or " f r e e t r a d e , " t h e u t t e r a n c e s
of C o l b e r t to t h a t e f f e c t a r e innumerable and i n most
c a s e s q u i t e s e r i o u s l y meant. . . . What they meant
was t h a t i i n t e r f e r e n c e should aita at changing c a u s e s
and not e f f e c t s , t h e t i t was u s e l e s s t o p u n i s h '
u n a v o i d a b l e r e s u l t s without removing t h e i r c a u s e s .
As a p a r a d o x i c a l but very t y p i c a l m e r c a n t i l i s t ,
Bernard Mandeville wrote i n 17141 " P r i v a t e v i c e s ,
by t h e d e x t r o u s management of a s k i l l f u l p o l i t i c i a n
may be t u r n e d i n t o p u b l i c b e n e f i t s . " . . . fHeckscher
concluded] G e n e r a l l y , i t may be s a i d t h a t mercant i l i s m i s of g r e a t e r i n t e r e s t f o r what i t attempted
t h a n f o r what i t a c h i e v e d . * °
Thomas Mun p o i n t s out i m p o r t a n t a s p e c t s i n " t h e e x p o r t a t i o n of our Honeys i n Trade of Merchandize" which " i s a
means t o i n c r e a s e our T r e a s u r e H e e x p l a i n e d !
. . . i f we have such a q u a n t i t y of wares as doth f u l l y
p r o v i d e us ef a l l t h i n g s n e e d f u l fro® beyond t h e seas{
why should we then doubt t h a t our moays Lsic] sent out in
t r a d e , must not n e c e s s a r i l y corae back again i n t r e a s u r e ;
t o g e t h e r with t h e g r e a t g a i n s which i t «»y p r o c u r e i n
such manner as i s b e f o r e s e t down? /'nd on t h e o t h e r
s i d e t h o s e n a t i o n s which sent out t h e i r monies do i t
because they have but few wares of t h e i r own, how come
they t h e n have so much t r e a s u r e as we ever see i n t h o s e
p l a c e s which s u f f e r i t f r e e l y t o be e x p o r t e d at e l l
t i n e s and by whomsoever? I answer, Even by t r a d i n g
with t h e i r Moneys i f o r by what o t h e r means can t h e y
get i t , having no Mines of Cold and S i l v e r ? . . . For
i f we only behold t h e a c t i o n s of t h e husbandman i t t h e
s e e d - t i m e when he c a s t e t h away aueh good corn i n t o t h e
ground, we w i l l r a t h e r account him a mad man than a
husbandmant but when we c o n s i d e r h i s l a b o u r s , in t h e
14
I b l d . , p . 336.
15
l b l d . . p . 339.
m
h a r v e s t which I s t h e end of h i s endeavours, we f i a d
t h e worth end p l e n t i f u l e n c r e a s e of h i s a c t i o n s . ^
Wi1lias D. Gramp, i n a very i n t e r e s t i n g aad p r o v o c a t i v e
a r t i c l e , * ^ emphasized the goal of f u l l employment of t h e
f a c t o r s of production as one of the most important alms of
the mercantilist doctrine.
The concept of trade for the
m e r c a n t i l i s t I n c l u d e s a l l economic a c t i v i t y .
A brisk t r a i e
i n v o l v e s methods of assuming the maximum amount of product i v e e f f o r t s which i s what f u l l employment p r o v i d e s . 1 6
The o b j a c t i v e was not accumulation of b u l l i o n , but a
s e t of c o n c e p t s i ncludingi
a f a v o r a b l e balance of t r a d e ,
the advancement of p r i v a t e I n t e r e s t , the s u b o r d i n a t i o n of
t h e working c l a s s ,
low i n t e r e s t r a t e s , and t h e e l e v a t i o n of
trade at the expense of other i n d u s t r i e s .
Furthermore,
»r amp s t a t e s that a few of t h e m e r c a n t i l i s t s may hove
i6
Ihosaas S t u n , "England* s Treasure by f o r r a i g n Traae,"
Miix g&itffMff, XMiaH>
trm
IMMSSMS.
p r i o r to A<j«» S m i t h . e d i t e d by Arthur E l i Monroe (Cambridge,
1951), p. 184. Note a l s o t h a t Heckscher comments a. propos
of t h i s matter s M e r c a n t i l i s t s went much f u r t h e r , however,
turning a g a i n s t "a dead stock c a l l e d p l e n t y , " not only f o r
the moment but f o r the long run p e r i o d . They came to look
upon a p l e n t i f u l supply of commodities wi t h i n a country with
e great d i s f a v o r as m e d i e v a l statesmen had regarded a d e p l e t i o n of commodities. The great o b j e c t became to decharaer
l e royttiBte de ser merchandises. s t i m u l a t i n g e x p o r t s snd
hampering imports by every c o n c e i v a b l e means. Heckscher,
op« c i t » , p• 337.
*^'>'ii l l i a m u . Grasp, "The L i b e r a l Elements
in English
M e r c a n t i l i s m , " M&Mi. I E
® d i t ® d b y *?©sepfe
Spongier and William R. A l l e n (Chicago, 1960), pp. 6 1 - 9 6 .
ld
I b i d . . p. 6 6 .
19
eonfused uoncv with w e a l t h . ©ou t h u s sstle b u l l i o n ! s m a g o a l .
However, f u l l eaployaent of the f e e l e r s of production c o n s t i t u t e s the Marrow of tbe m e r c a n t i l i s t d o c t r i n e . 1 9
i n o r d e r to a c h i e v e f u l l employment the Mercant i l i s t s p r o p o s e d a v a r i e t y of measures. Most of t h e
measures have o f t e n been c a l l e d w o n d e r f u l example® of
what an economy s h o u l d not undertake. However, they
become s e n s i b l e i f r e l a t e d t© t h e o b j e c t i v e of p o l i c y .
The m e a s u r e s e t a be grouped i n t o t h o s e which a f f c c t e d i
(1) t h e t o t a l spending of t h e economy, (2) p r i c e s ,
wages and the d i s t r i b u t i o n of income, (3) I n t e r e s t
r a t e s , and (4) the supply of l a b o r . The measures In
the f i r s t t h r e e groups were meant to I n c r e a s e employs e n t mainly by i n c r e a s i n g the demand f o r labor w h i l e
t h o s e i n the f o u r t h group were meant to i n c r e a s e the
labor s u p p l y . 2 0
The t o t a l spendinq of the e c o n o a y - M o s t of the merc a n t i l i s t s thought the economy would f l o u r i s h i f
all its
s e c t o r s (Government was included by P e t t y ) i n c r e a s e d t h e i r
spendings.
However, n e r c a n t i l i s t s emphasized tbe spending
on e x p o r t s as a main support of employment. 4 : 1
'vecies and p r i c e s . — '.'ages end p r i c e s were r e l a t e d to
employment i n four ways, according to m e r c a n t i l i s t thought.
F i r s t , wages determined export p r i c e s and tbe amount of
e x p o r t s , and t h e r e f o r e determined both spending end © s p l a y meat.
Second, the r e l a t i o n s h i p between money wages and
p r i c e s — r e e l wages, determined i ncorae d i s t r i b u t i o n which
in turn i n f l u e n c e d the volume of spending and employment.
T h i r d , s e l l i n g p r i c e s determined the volume of spendi ng and
l9
I b i t > . . p. 6 7 .
21
Ibid.
20
Ibid.
20
employment.
F i n a l l y , r e a l wages determined t h e amount of
labor s u p p l i e d . 2 2
file r&t® of i n t e r e s t . - - S e v e r a l m e r c a n t i l i s t w r i t e r s ,
i n c l u d i n g i t i s s e l d e n , Malyness, Temple, Borbon, Child and Law,
advocated « low r a t e of i n t e r e s t which would sake i t p o s s i b l e
to i n c r e a s e t h e i n v e n t o r i e s of Merchants, and consequently
would lower t h e p r i c e of e x p o r t s , and t h a t both t h e s e e f f e c t s
would in t u r n cause an i n e r e a e n t in employment
I n c r e a s e of labor s u p p l i e d . — T h i s f i n a l group of measures c o n s i s t e d of "means of i n c r e a s i n g t h e q u a n t i t y of labor
s u p p l i e d . . . , of i n c r e a s i n g the labor supply, and of
I n c r e a s i n g the p r o d u c t i v i t y of l a b o r . " 2 4
The f a c t must be
emphasized t h a t m e r c a n t i l i s t s looked at employment from both
s i d e s of the market—supply end demand—and t h i s s i g n i f i e s
t h a t t h e i r p o l i c y "sought to i n c r e a s e the q u a n t i t y of
r e s o u r c e s and was not a m a k e - s h i f t f o r c r e a t i n g j o b s . " 2 5
The assumption underlying m e r c a n t i l i s t labor p o l i c y i s t h a t
" s e l f - i n t e r e s t governs i n d i v i d u a l conduct, an assumption
f u l l y e n t e r t a i n e d today as i t was two and t h r e e hundred years
age ."26
Furthermore,.
. . . t h e m e r c a n t i l i s t labor p o l i c y c o n s i s t e d of
measures t o i n c r e a s e t h e p o p u l a t i o n ; to i n c r e a s e the
s i a e of t h e labor f o r c e within e given p o p u l a t i o n ,
22
l b l . d . . p. 69.
23
I b i d . . pp. 71-72.
24
I b l a . . p . 74.
25
Ibid.
26T.. j
JMe*
21
i n number of worker® and i s t h e a a o a a t of work
supplied by each laborerj and t o I n c r e a s e the
productivity of the labor force. In order to increase the population some writers proposed that
subsidies be given to large fami lies j end occasionally they attached the iogenious sefcesae of
f i n a n c i n g the subsidies by a tax on bachelors--which
Makes one wonder what would have happened had the
subsidies been successful. Gther Methods were to
encourage the isaigration of skilled workers and
t r a d e s m e n w h i c h , i t was beli eved, would b e t © a s i © r
if
there were greater religious t o l e r a n c e . 2 ?
The increase of the labor force constituted an important
challenge to be «et by mercantilist thinkers.
A possible way
t o achieve it was to bring c h i l d r e n into employment. 2 ®
Thus,
in bringing more people to the labor force it would decrease
the number of persons employed 1n the aray and navy and In
this way "direct aen into gainful employment . . .
to reha-
b i l i t a t e the poor and i n d i g e n t whom circumstance or choice
had deprived of the will to work
Mercantilists co nsi dered that there were three sources
of activation which gave raon the it&pulse to work (in the
sense of
economic activity) i
first, the stiaulus of physical
environmentj second, the sense of human emulation, or the
desire to challenge and eaulate their betters, a force is
created in part by the s o c i a l
framework} third, the anxiety
for pecuniary rewards, that is, profit motivation. 30
Finally, Gustav Schaoller, in his work 6..af. jUrkaptil-
s e s t e t s in s e i n e r atitftri«fth»«i a e d e u t u n a (1664), regarded
27
IMA.
29
lMd.
. pp. T4-75.
28
Ibld.. p. 75.
30
Ibid.. p. 76.
m e r c a n t i l i s m as e s s e n t i a l l y a " p o l i c y of economic u n i t y , "
"to s l a r g e e x t e n t independent of p a r t i c u l a r economic
tenets."31
A«
o p p o s i t e view was expressed by tfilliasis
Cunninghsm i a The Growth of Ba.allsfa Industry sad Commerce
(1682).
He c o n s i d e r e d m e r c a n t i l i sm as "the e x p r e s s i o n of
a s t r i v i n g a f t e r economic power for p o l i t i c a l p u r p o s e s ,
m a n i f e s t ! n g I t s e l f p a r t i c u l a r l y i n England." 3 ^
The d i s -
crepancy between t h e s e views was fundamentally due t o "a
c o n f u s i o n between the ends end t.he means of economic p o l i c y ;
each of the® pointed to something of fund omental importance
i H t h e development of economic a c t i v i t i e s end idee s i n t h e
period between the Midole Ages end the I n d u s t r i a l Eevolutioo.11^
Several o p i n i o n s on raercanti lisra, as w e l l &« i t s import a n t a s p e c t s , have been c o n s i d e r e d .
Before a r r i v i n g at
coaoludino comments on t h i s school of thought, t ©ontrsist
of i t s view on government and market with t h a t of the l a t e r
c l a s s i c a l economists w i l l be g i v e n .
of two kinds t
The d i f f e r e n c e c o n s i s t s
f i r s t , e d i f f e r e n c e l a aeons , the c l a s s i c a l
economists proposed i com pl etel y f r e e market and m e r c a n t i l i s t s
proposed c o n t r o l l e d markets.
Second, a d i f f e r e n c e i a e n d s ,
t h e c l a s s ! c a l economists estphasi zed e f f i c i e n c y in t h e use of
p a r t i c u l a r r e s o u r c e s , end m e r c a n t i l i s t s s t r e s s e d the f u l l
31
0 « o t e d i n Heckscher, £&. c l t . , p. 333.
32
I b i d . . pp. 3 3 3 - 3 3 4 .
33
l b i d . , p. 334.
23
eaployaent of the f a c t o r s o f production.
la brief, the
classical oeouoaists advocated i c o s p l e i # a a r & ® t economy,
and aereantilists stood for a planned and controlled economy,
but both aoctriaes wer« framed withi n tit® concept of "private
BHterpri se." 3 4
Furthermore, both doctrines stated that self~i titer est
w a s the force to activate economic behavior, but m e r c a n t i l i s t s , especially S t e w a r t , believed that individual selfinterest did aot always coi nciue with the public welfare,
and as 6 result governaent regulation was needed to protect
public w«al.
In conclusion, raerccntilism w®$ the body of ecoaoaic
thought and economic policies which had the s a i n purpose of
pl&nniug sad developing nations which emerged from the
invertebretsd situation of feudalism into a stag© of p o l i t i c a l and economic units, uaaely, modern nations,
Mercantilism
a c c e p t e d "private enterprise* in » framework of a controlled
market«
Today's nations, which are ia the process of development , have soucthing in coaaon with those emerging nations of
the sixteenth century.
Today, as in the past, such nations
cannot rely on a c o m p l e t e l y free narket to solve the problems
of allocation of resources.
a4
In both circumstances, the
Gramp, ojl> £ & • » PP> 64-85.
*"Nawaan, Gayer and Spencer, 0£. cit., p. 49.
24
eaergifif
fictions
neeu e s t r o n y cm! adequate government t o
r e g u l a t e t h e m a r k e t , t o s o l v e problems of p u b l i c i n t e r e s t ,
t o p l a n t h e i r economies in o r d e r t o a c h i e v e f i l l craploysent
of economic r e s o u r c e s , and to a l l o c a t e p r o p e r l y t h e f a c t o r s
of p r o d u c t i o n t o achieve econonic development end p u b l i c
/> /
welfare. 11,13
"The n o s t a c t u r e Lnyli sh m e r c a n t i l i s t w r i t i n g I s exemp l i f i e d l a t h e works of Sir J««©§ S t e w a r t T h e r e f o r e ,
t h e study of h i s work w i l l be c c t a i c ^ f u l i n t h e undcr~
s t e a d i n g of t h e problem of t h e s i x t e e n t h c e n t u r y emerging
n a t i o n s , m wel 1 s i t h a t of t h e p r e s e n t o n e s .
36
By proper e l l o c a t i o n of f a c t o r s of p r o d u c t i o n i s
meant t h a t a l l o c a t i o n t h a t wi11 lead to aaximun p u b l i c
welfare.
Newman, Gayer and Spencer, 0£. t i t . . p . 49.
PART TWO
STEUART'S THOUGHT
In order to communicate an
adequate idea of whit 1
understand by political
©economy, I have explained
the term by pointing out the
object of the arti which is
to provide food end employment to everyone of the
society.
James Steuart
CHAPTER IV
BACKGROUND Of STEO/Jlf« S SOBK
Introduction
'•» has been s t a t e d * morcanti l i s t s emerged s h o r t i y a f t e r
t h e end s f t h e m e d i e v a l p e r i o d when b o u r g e o i s qoq end fetȤs
u n i f i e d t h e i r e f f o r t s against feudal lords to c e n t r a l i s e the
p o l i t i c a l power i n o r d e r t o c r e a t e t p o l i t i c a l and economic
unit c a l l e d the n a t i o n - s t a t e .
T h i s was t h e coaatoo denomi-
n a t o r of d i f f e r e n t a e r c a n t i l i s t t h i n k e r s during two tad c
half
c e n t u r i e s ( 1 5 0 0 - 1 7 5 0 ) , but t h e r e *as a v a r i e t y of
p o l i c i e s ana s t r a t e g i c d i s a g r e e m e n t s .
T i e extreme m e r c a n t i l i s t s a t t e m p t e d t o i n c r e a s e n a t i o n a l
p # « r by e n c o u r a g i n g a f a v o r a b l e b a l a n c e of t r a d e w i t h e v e r y
n a t i o n w i t h which t h e n a t i o n t r a d e d .
Manufacturing a c t i v -
i t i e s f o r e x p o r t were regarded w i t h p r e f e r e n c e over t h o s e
f o r t h e d o m e s t i c raarket.
Others c o e s i d e r e d p r e c i o u s m e t a l s
®s t h e r e e l a e a s u r e of t h e u e t i o n e l w e e l t h , t h o t i s ,
lioni$&.
bul-
For t h a t purpose t h e y recoiasiended r e s t r i c t i o n s on
t h e e x p o r t of b u l l i o n b e c a u s e t h e y m i s t a k e n l y i d e n t i f i e d
money—gold—with Health.
Stewart's philosophy represented the i n t e l l e c t u a l atteopt
t o u n i f y e l l of t h e s e p o l i c i e s on p o l i t i c a l econoray i n o r d e r
26
2?
to achieve tho politieel end economic development of emerging
net ions through economic plannin^.
In this attempt govern-
ment play® on important rolej the market is regulated by
government action In order to achieve full aaploytsent of
economic resources, and in this way, to obtain the economic
development of the nation.
la brief, Steuart's thought represented a philosophy
end a guidance of the eaergitig nations in order to obtain
their development, their political and economic unity. Since
that was the case, one must broaden the scope of the present
inquiry to include Steuart 4 s thought, for the purpose of the
present study is to arrive at conclusions regarding the role
of mercantilism in tho Venezuelan economic evolution.
The essence of Steuart'a message seeas to suggest a
substantial reliance upon adequate government planning end
action to achieve national economic development—rather
than ® benign dependence on the "natural forces of the
merkot."
Sir Jaiocs Steuart of Coltness was born in £di nburgh,
S c o t land, on October 21, 1712.
versity of Edinburgh.
He studied law st the Uni-
Later, he resided in Tubingen, Germany,
a small town with a university which provided hia the proper
atmosphere and intellectual company which helped him in his
work.
There he wrote his famous book, f j n Inquiry Into the
Principles of Political Oeeowoav. published in London by A,
Miller and T. Cade11 In 1767, who published wise years later
the :/o tilth of ^©t.ioas by «tiaa Saith.
other
icsportant
b o o k 3 end r e p o r t s *
Steuart also wrat<?
i rinclolos
*. called to the Present State of the C o i n o f
published
la
of loti^y
S e n c i c l was
/.ftor 1 7 7 5 h e w r o t e eight © o r e r.ork*
1772.
concern! tig politics, prices , regaletitas end finance.
In
1780 ho died in Sdi nt»urgh while? preperlag his lest v.ork,
SJL ite i£MMk
Why B i s
Bis
book, £ a
IMSMlBX
Philosophy
Inquiry l i s t s
t h e frrlnelpleg. o f
intellectual
as w e l l
as t h e
"novelty"
the subject.^
Cut a d i f f e r e n t
in
the B r i t i s h
Political
They recognized t h e "originality" and
"penetrati ng genious" of S t e w a r t ,
of
1
w a s Not Accepted
Oecoaoav. attracted the attention o f
groups ox' the d a y .
M M >
This
England.
ki nd o f
thought p r e v a i l e d
public
that time
thought h i n d e r e d attention being paid to
Steuert*s phi losophy of pleRSiing m u
secepted.
at
even more Its being
T h u s , The Critical Seview. an important orgen of
opinion o f
that
tirae, stated»
We can have BO i d e a of any statesman interfering
i n t h e cosaercial concerns of a free country. . . .
N o t h i n g ought t© b e w o r e uncontrolled or can be more
permanent, than the pri neipleg of coaaercej and
nothi ng ought to be so independent of a statesman,
because they ere self-evident j they can spring from
mutual necessities, they can never be m i s t a k e n . 3
l
Ssaitr Kanjan Sen, The Eeo.aoale*. of Six.
St.es..a r t
(Cambridge, 1957), pp. 6 - 1 7 . All this Part on Steuart's
throught has been h e a v i l y influenced by Sen's work, which constituted a guidance for the direct research on Steusrt's works.
2
Ibid.. p .
%he
m-
MX'*
13.
Critical Keview. XXXIII, 411.
P-
l4
-
Quoted in Sen,
29
That was a s t a t e m e n t on the v a l i d i t y of t h e " n a t u r a l
f o r c e * " of t h e a a r k e t ,
t h e c o n d e m n a t i o n of p l a n n i n g .
The
m a r r i a g e b e t w e e n b u s i n e s s m e n ana t h e state was d e e a e d ao
longer necessary.
On t h e o t h e r hand, t h e expand!ng economy
of Great B r i t a i n, due t o both i n t e r n a l p e a c e and f o r t u n a t e
East I n d i a t r a d e , c o u t r i b u t e u t o t h e r e j e c t i o n of
S t e u a r t *s
phi l o s o p h y and t o t h e welcoming of t h e l a l s a e s t - i ; . » i r e d o c t r i n e
a d v o c a t e u e t t h e saiac t i m e by '.dam S n s i t h . 4
Sea p o i n t e d out t h a t "oae hundreC y e a r * e a r l i e r S t e u a r t ' s
work might have beta a c c l a i m e d by t h e g e n e r a t i o n t h a t had
produced Hobbes.
» » . S t e w a r t was c l e a r l y out of t u n e w i t h
h i t c o n t e m p o r a r i e s , e s p e c i a l l y i a h i s own c o u n t r y , " 0
addition to t h i s ,
Is
"'.dao Smith was t e a c h i n g i n Glasgow long
b e f o r e S t e u a r t *s r e t u r n from ® x i I c ,
end hi s a d v o c a c y of
l a l s s e a - f a i r e had a l r e a d y g a i n e d c o n s i d e r a b l e p o p u l a r i t y
amongst t h e e l i t e of S c o t l a n d . * ^
On t h e o t h e r hand, S t e u a r t
was a s s o c i a t e d early w i t h " t h e J a c o b i t e c a u s e which d i d not
commend him t o t h e p r o g r e s s i v e e l e m e n t s of h i s t i m e . " 7
Furthermore, h i s w r i t i n g s are d i f f i c u l t to r e a d , a f a c t
which added a h i n d r a n c e t o the u n d e r s t a n d i n g of h i s m e s s a g e . 6
4
S e n , oj>. c l t . ,
6
Ibid..
h u d .
p,
IT.
p.
14,
, pp.
7
Ibld.
14-15,
30
Steuart's Philosophy
S t # a a r t * s philosophical thought wet based on the p l a n n i n g end control of the market within the framework of a
"/iccorciiugly we shall find I n this inquiry
free society,
so»e reasoning buiIt on th& principles of arbitrary powerj
others of those national 1ibertiesj others, again, on those
of deiaocrocy
11© bcslieveci firmly in the republican f ora
of fcovarnaent, because f r o a "sxperieoce, we shall find, that
trade anu industry have been found mostly to flourish uader
the republican foria.ni0
114s p h i l o s o p h y was east and framed in his outstanding
work, J^B Inquiry l a t e the f r l n . e l p l . e g of Political Oeconoav.
For Steuart political economy was b o t h an art and a science.
^hen he treated it as economic policy, then he defined it as
an art.
When he structured its fundamental principles, then
he called i t
a science.
Steuart wrote s
In order to communicate an adequate idea o f what I
understand by political ecostony, I have e x p l a i n e d
the term by p o i n t i n g out the o b j e c t of the arti
which is to provide food, and employment to everyone of the society.**
That is to say, political economy I s concerned prictetri ly
w i t h people.
In t h i s
contest, full enploymont and a proper
Masses Steuart, The
>orks (Londoe, 1005), I, Preface,
vii.
arses Steuart, £» i n q u i r y into the fry! a c i s l e s of
Political Oeeoaorov (London, 1767) , 1, 242. Hereinafter
referred to as Political Oeconoav.
P«
31
d i s t r i b u t i o n of a c t i o n a l iscoia# e r e i n d i s p e n s a b l e .
purpose S t e u a r t ,
For t h a t
i n t h e f i r s t bo ok, e x a m i n e s " t h e p r i n c i p l e s
which i n f l u e a c o t h e i r
of p r o v i d i n g f o r t h e i r
[people's] uultiplication,
the aothoJ
s u b s i s t e n c e , t h e o r i g i a of t h a i r
l a b o r , t h e e f f e c t of t h e i r
liberty m 4
b u t i o n of them i n t o c l a s s e s .
slavery, the d l s t r i -
. . ,"12
The s c o p e of " p o l i t i c a l o e c o n o a y " e a b r a e o s t h e e c o n o m i c
and p o l i t i c a l f r a m e w o r k of a n a t i o n a l p l a n n i n g , a c c o r d i n g t©
S t e u a r t *• v i e w ,
F i r s t , he s a i d , " p o l i t i c a l oeoooosay" i s a
complex f r a m e w o r k of a r t and s c i e n c e b e c a u s e i t
economic p o l i c y and b e c a u s e i t
i s an
a l s o has p r i n c i p l e s ,
Second,
t h e e s s e n c e of " p o l i t i c a l o e c o n o a y " i s t h e p r o v i s i o n of f o o d
and employment f o r e v e r y member of s o c i e t y .
The e m p h a s i s on
f u l l employment e n h a n c e s t h e i m p o r t a n c e of S t e u a r t f s a p p r o a c h
w i t h ! xi t o d a y *s economic g o a l s of K e y n e s ! an e c o n o r a i s t s and
o t h e r s who c o n s i d e r f u l l employment a u e a n i n g f u l o b j e c t i v e .
Till arts s, h i s " p o l i t i c a l o e c o n o a y " i s c o m p r e h e n s i v e , and c o n s t i t u t e s a u n i f i e d body of c o n c e p t * which a r e a e e n i n g i ' u l f o r t h e
s o c i e t y as a w h o l e , not o n l y f o r
i n d i v i d u a l s . * 3
Knowledge of t h e r e l a t i o n s h i p b e t w e e n g o v e r n m e n t and
" p o l i t i c a l o e c o n o a y " i s v e r y i m p o r t a n t t o an u n d e r s t a n d i n g of
S t e u a r t * s scheme.
Governoent i s m
important i ustrument in
" p o l i t i c a l © e c o n o m y h e b e l i e v e d j g o v e r n m e n t i s " t h e power
12
Ibld.
lS
I b l d . , P r e f a c e , p. v i i i .
32
t o c o n u a e n d a n d " p o l i t i c a l oeconoray" i s " t h e t a l e n t to
cxecute,"
Government s a s t falsi© economic a c t i v i t i e s "by
engaging ovary one of t h o s o c i e t y to c o n t r i b u t e t o t h e s e r v i c e of the o t h e r s .
» . ,* *4
The o p e r a t i o n of c o n t r o l sad p l a a n i a g , S t e u a r t w r o t e ,
i s performed by the government, and "who f i t s ot t h e h « i 4
of t h i s o p e r a t i o n , i s c e l l e d t h e s t a t e s m a n , " who a u s t "be
c o n s t a n t l y awake, a t t e n t i v e t o h i s employwent, a b l e and
uncorrupted. . . . i m p a r t i a l l y j u s t
. • » f o r every c l a s s
of i n h a b i t a n t s , and di sregartif ul of t h e i n t e r e s t of i n d i v i d u a l s , wh0a t h e t r e g a r d I s i n c o n s i s t e n t with tha g e n e r a l
welitre
The Role of t h e S t a t e
s a c o n c l u s i o n t o t h e above comments, one may dyduce
t h a t t h e r o l e of t h e S t a t e i s r e l e v a n t t o a c h i e v e t h e w e l f a r e
of t h e s o c i e t y ,
" S t e u a r t does not
e l i e v e in the beneficence
e i t h e r of n a t u r a l equilibriurn or ox an u l t i m a t e s y n t h e s i s but
i s c o n s c i o u s t h a t t h e n a t u r a l f o r c e s have a g r e a t potency f o r
good as w e l l as f o r e v i l , "
T h e r e f o r e , he s e e k s "to c o n t r o l
them so as t o o b t e i n t h e b e s t p o s s i b l e r e s u l t s w i t h i n t h e
c o n t e x t of t h e e x i s t i n g s o c i a l o r d e r . " 1 6
14
I b i d . . p. 149.
l5
Ibid.
L&Sen, OP. c i f e . . pp. 24,
25.
CUM"TEE V
P O P U L A T I O N , A G B I C O L T U K E , ASD P H Y S I C A L P L A N N I N G
Population and Agriculture
For S t e u a r t , "popuiat ion tad agriculture ere the f o u n dations oi the whole,"*
into three partst
distribution."
U s divided the problem of p o p u l a t i o n
(1) s i z e ) (2) o c c u p a t i o n ; and
In the list pert he anticipated the study of
physical p l a n n i n g — r e g i o sal p l a n n i n g — w h i c h
developed
(3) regional
later would be
by Johann Heiarfcfa, Von T h u e n e n , Alfred
Ueber, end
August L o e s c h , ea e c o n o m i s t s , and Patrich GeUdes and Lewis
M u o f o r d , 3 as r e g i o n a l p l a n n e r s .
(1) fitii respect to the factors that d e t e r m i n e the size
of the population he arrived at the conclusion that food
supply is very i m p o r t a n t .
Food supply is partly determined by n a t u r e , the c o n d i tions oi the s o i l , and partly by huaen e f f o r t s .
Technology
*Steuart, P o l i t i c a l U e c o a o a y . I, 150.
2
S e n , oja. clt., p, 32.
J
T h i s is writer * s o b s e r v a t i o n .
Cf •
Gayer and
S p e n c e r , op. c.it>. p p . 320-346 J Lewis ?iuraf ore!, The C u l t u r e
of Cities (flew fork, 193C) , p p . 13-72 j and Patrick G e d d e s ,
Citiet. 1 n Syolation (New York, 1915), Spanish version by
S, L.""Kevol, published by Edieieftes Im'i uito (Hueues /-:ires,
1960).
S3
34
end o r g a n i s a t i o n i n c r e a s e p r o d u c t i v i t y .
foresaw ® l i m i t .
restricted.
However, S t e u a r t
I n t h e f i r s t p l a c e t h e supply of 1and I s
Second, even c o n s i d e r ! n g augcientetion i n t e c h -
nology ant! l a b o r , t h e r e I s a p h y s i c a l i i s a i t I s t h e production.**
l u t h i s reasoniny, Sea observed, " S t e u a r t
evidently
ties t h e pbenomeaor Q£ u i a i n i s h i n g r e t u r n to.
Thus, S t e u a r t concluded h i s r e a s o n ! ng on t h a t Matter t
fie mny c o n c l u u e t h a t t h e uumbwrs of mmklu€ must
depend upon the q u a n t i t y of food producedj end t h « t
t h e food produced by t h e earth f o r t h e i r nouri s h ment . , . w i l l bo i n t h e compound p r o p o r t i o n of t h e
f e r t i l i t y of t h e c l i m a t e , and t h e i n d u s t r y of t h e
inhabitants.6
(2) Concerning t h e d i s t r i b u t i o n of p o p u l a t i o n by
o c c u p a t i o n , S t e u a r t added t h e f o l l o w i n g comments whi ch arc
tho cooti nuation of t h e p r e c e d i n g paragraphi
From t h i s l a s t p r o p o s i t i o n i t appears p l a i n t h a t
t h e r e can be no g e n e r a l r u l e f o r u e t a r n i n i n g w h B t
i s n e c e s s a r y f o r a g r i c u l t u r e , not even i n t h e s a a e
country.
[A v a r i e t y of c i r c u m s t a n c e s determine
ovaployment and p o p u l a t i o n : ] The f e r t i l i t y of t h e
s o i l when c u l t i v a t e d ) t h e e a s e of c u l t i v a t i n g i t f
t h e q u a n t i t y of good spontaneous f r u i t s ) t h e p l e n t y
of f i s h i n t h e r i v e r s and s e a ) t h e abundance of wild
b i r d s and b e a s t s , have i n a l l ages and ever o u s t
i n f l u e n c e g r e a t l y t h e nourishment, and c o n s e q u e n t l y ,
r e g u l a t e tha m u l t i p l i c a t i o n of ae.nt and deterraine
h i s employment.7
S t e u a r t c o n t i nuau h i s
i n q u i r y OR p o p u l a t i o n e n d a g r i -
c u l t u r e ; he observed s c l o s e r e l a t i o n s h i p between thetat
* S e n , 0£,. c l t . ,
5
I b i d . , p . 3f3«
7
m£-,
P. 2 4 .
p p . 33, 3 4 .
6
S t e i i » r t # P o l i t i c a l Oocoattiav. I , 156.
Population and agriculture have a ©Its© connection
with one another, that I find even the abuses to
which they are severally liable, perfectly flail®?,
I have observed bow naturally it must happen, that
when too many of a society propagate, a part must
starve; when too tnanv cultivate, t pert ntust starve
also. Here is the reason;
The more of a people cultivate the country, the
,sseller t*f it roust fall to every man's share; and
tfben these portions are reduced so low as to produce
no were then what is necessary to feed the laborers,
the agriculture is flocked to the utmost
Steuart divided agriculture into two sectionst
useful, the other abusive.
the one
;\t that moment he introJuced the
important concept of surplus and traUe In opposite sense to
subsistence.
Trade is b method of producing subsistenee for
the workers and surplus to be provided for the "free hands"
of the state.
The aether of subsistence does fiat Imply
"alienation" (or exchange)
Slavery "in former times had the same effect in peopling
the world that trade na4 industry have now.
Ken were then
foreed to labour because they were slaves to others j aen are
imw forced to labour because they ere slaves to their own
Consequently labor played an Important role? in the
ovolution of tka
economy In early times.
la the secoatl esse,
a society does not need compulsion cny longer, it will be
necessary to proauce surplus for luxuries, as well as to
establish the division of the society In two groups t
the
farmors devoted to cultivation, and the "free hands" who
a
lllid.. P. 15C.
Ibiu., p. 40,
9
Ibid.. pp, 156-157.
36
purchase the c y r i c u l t u r £ l surplus prGsactct by the f t r i e r s ,
wi th t h e i r poi-souel s e r v i c e .
i 1
The proiiuetioR of s u r p l u s
b r i n g s about aore p o p u l a t i o n . * *
People arc required to produce s u r p l u s f o r two a a l n
reasons;
f i r s t , because they are compelled t o do s o , eg l a
the c a s e of s l a v e r y * m 4 second, beeeusc- t h e y have some
inducement.
In both c a s e s p o p u l a t i o n w i l l i a c r e a g e * rthat
are the a l t e r n a t i v e s to s l a v o r y ?
The f i r s t a l t e r n a t i v e 1$
the method of m u l t i p l y tag hue an noeUs,
The second, i s to
encourage * luxury" and to i n t e n s i f y t r a d e . * 3
Steuart e x p l a i n e d t h e i n c e n t i v e s to work.
In e a r l y
times t h e «@ats of human b e i n g s were few, and "a s i m p l i c i t y
of raannors e s t a b l i s h e d , t o have encouraged i n d u s t r y ,
e x c e p t i ng i n a g r i c u l t u r e which i n a l l ages has been the
foundutioa of p o p u l a t i o n , woulii have been on i n c o n s i s t e n c y . "
T h e r e f o r e , concludes S t e u a r t ,
H
to make aenklad labour boyoad
t h e i r wants, t o raoke one p a r t of & s t a t e fcork to a a i n t e i u t h e
other g r o l u i t i o u s l y , could o n l y be brought about by s l a v e r y ,
ami s l a v e r y was then as n e c e s s a r y toward m u l t i p l i c a t i o n , as
I t would now be d e s t r u c t i v e of i t T h e
n
i b l d . . p. 48.
X2
reason i s c l e a r ,
I b i a . . p. 114.
13
Sen,
o l t . , pp. 3 4 - 3 6 . Sea had t h e same r e a s o n i n g ,
s t e u a r t %iefines luxuryt "the consumption of s u p e r f l u i t y or
the supplying of wants not e s s e n t i a l l y n e c e s s a r y t o 1 ! f e . "
S t e u a r t , P o l i t i c a l Qeconoav. X, 152. See a l s o pp. 37-3# of
this thesis.
l4
S t e u a r t , P o l i t i c a l Oecononv. Z, 36,
3?
continues Steuart, if people were not forced to work, then
labor for subsistence only would exist.
It Is obvious that the aore luxuries that ere produced
end Ueaanued, the greater the stimulus to produce a surplus
of agricultural goods by the t araicrs.
Thus multiplication
is "the efficient cause of agriculture."
On the other hand,
"trade, I n d u s t r y and manufacture only tend to multiply the
number of raen, by encouraging agriculture,*1^
Thus the division of labor is started when society I s
divided into two dependent groups having reciprocal needs
end interests.
So, Steuart affirmed J
Reciprocal wants excite to labourj consequently
those whose labour is not directed toward the cultivation of the soi1, must live upon the surplus
produced by those who do. This divides society
into two classes. The one I call farmers, the other
free hands.
AS creating these reciprocal wants was what set
the society to work, and distributed them naturally
Into two classes we have mentionedj so the augmentation of wants w i l l require an augmentation of
free hands, end their demand for food will lucres®©
agriculture.
Steuart explained the development of the economy that
heel as a point of departure the formation of luxury and
surplus of agriculture, and the consequent division of labor
into two groups, farmers and free hands, and finally, the
need for money to facilitate exchangei
P. 39.
16
Ibld.. p. 151.
3fc
I define luxury to mean no aore than the consumption of superfluity, or tb© supplying of wants
not e s s e n t i a l l y necessary to lifej and, X say, that
a taste for s u p e r f l u i t y wi 11 introduce the use of
money, which I represent as the general object of
want, that i s of desire, araony mankind? end I show
how an eagerness to acquire it becomes an uni versal
passion, a aeans of incre&si ng industry among the
free handsj consequently, of augmenting their numbers{
consequently. of prosoti ng agriculture for their
subsi steace.
The new situation needed the presence of money to
fecilitate exchange because barter was not s u f f i c i e n t . I n
another part, Steuart explained more eccur ately this new
situation.
'.ne;i once this iraagi nary wealth, money, becomes
well introduced into e country, luxury wi11 very
naturally follow; and when ooney becomes the object
of our wants, raanki nd becoaes industr ious in turning
thoir labour towards every object which »aay engage
the rich to port with it j and thus tho inhabitants
of any country may increase in numbers, until the
ground refuses further nouri shsuent.*9
Physical Planning
Steuart was one of the pioneers In physioal planning.
He provided basic reasoning for i n d u s t r i a l localization. The
l7
Iblq., p. 152.
ie
Sen, op. clt., p. 3 6 .
Sen observed that "Money not
only f a c i l i t a t e s the process of exchange (or 'alienation 1 )
but also becomes very soon a vital element when for all
practical purposes it comes to be the principal channel of
expression in the market of the * effectual demand* for food
as wel1 as luxuries, for the labour of the * farmers* as well
as of the 'free hands*
| €|
Steuart, Political Qeeoaesay. 1, 33.
39
introduction of luxury and aoney 1B t h e econoay produced a
different!atiou In occupational activity between farmers
sad "free hands
as has already been poi nted out.
Parwers are located on and rooted to the land they
cultivate because of the nature of their activity—agriculture.
However, the "free hands" have more f r e e d ® ® l a the
choice of their residence.
Kost of them life close to the
<jeoyr aphical warbet where they sell their personal services
end their products. ' In t h i s r e s p e c t Steuart established
the fundamental points of a theory o± localisation.
The
f o l l o w i n g quotation gave su aspect of that subject.
In countries where labour is required for
feeding a society, the sualler the proportion of
labourers, the greater w i l l be that of the free
hands . . . all of the surplus is consumed by the
people not essployed ia griculture; consequently,
by those who are not bound to reside upon the spot
which feeds the®, and which a t y be the habitation
best adapted for the exercise of that industry
which is most proper to produce an equivalent to
the farsers for their superfluities.
From this it is plain that the residence of the
farmers only is essentially attached to the place of
cultivation, Hence, faras la sose provinces, tillages in others.
X now proceed to the other class of infcabitents%
the free hands who live upon the surplus of the
f erasers.
These I a u s t subdivide into two conditions. The
first, to whom t h i s surplus directly belongs, or who,
with a revenue of aoney already acquired, can purchase
it. The second, those who purchase it with their
d a l l y labour of personal service.
Those of the first condition may live where they
pleasei those of the second » a t t l i v e where they can.
The residence of the consusero, in eiany cases,
^ ° I b U . , p . 46.
40
determines that of the suppliers . . . . These I take
to be the p r i n c i p l e s which i n f l u e n c e the swelling of
the bulk of c a p i t a l s [great c i t i e s 1, and smaller
cities.
When the residence of the consumer does not
determine that of him who supplies i t , other cons i d e r a t i o n s are allowed to operate. They aret
I . Relative to the place and s i t u a t i o n of the
establishment, which g i v e s a preference to the s i d e s
of r i v e r s . . . when machi aes wrought by water are
necessary . . . to the place which produces the substance of the manufacture [raw a e t e r i e l s j} as in
s i nc®• * * •
I I . Relative to the convenience of transportat i o n , as upon navigable r i v e r s , or by great roads.
Ill.
Relative to the cheapness of l i v i n g , consequent ly not Cfrequently] in great c i t i e s , except
for t h e i r own consumption.2*
Process of Urbanization
The process of urbanization started with t h i s i n i t i a l
d i v i s i o n of labor between "free hands" and "farmers" which
brought about the production of more surplus production.
In
i t s turn money was aore necessary as a mediua of exchange.
Thus, as money becomes more p l e n t i f u l , every a g r i c u l t u r a l
surplus can be converted into money.22
But Stewart goes beyond that framework.
The proper and
f r u i t f u l employment of a l l members of the labor f o r c e
*"^Ibid.. f pp * 48"*49. Seo also sen, op. ci t . , p. J7.
Sen observed that "The iintroduction of luxury end moHey
leads not only to ta occupational d i f f s r o n t i a t i o n between
farmers and * f r e e hands * but also to a s p a t i a l speoretion.
Farmers are n e c e s s a r i l y confined to the land they c u l t i v a t e , but the ' f r e e hands' have greater r e s i d e n t ! a l freedomj
yet while those who have been able to acquire some money
may l i v e wherever they choose, the maj o r i t y of * f r e e hands *
have to l i v e where they can s e l l t h e i r personal s e r v i c e s or
t h e i r products."
22
S t e u e r t , P o l i t i c a l Oeeonoav. I , 75.
41
c o n s t i t u t e s an i m p o r t a n t t a s k t o be a c h i e v e d .
"I think I t i s
s b s u r d t o wi s h f o r new i ^ h a b i t a n t s , w i t h o u t f i r s t knowi ng bow
t o employ t h e o l d .
. . .
I s h a l l t h e n b e g i n by s u p p o s i n g t b s t
i n h a b i t a n t s r e q u i r e r a t h e r t o be w e l l employed t h a n i n c r e a s e d
i n nurabera."23
As a c o n s e q u e n c e of t h i s r e a s o n i n g , a c c o r d i n g t o S t e u a r t ,
the increase ia population is closely related to the increase
of t h e a n n u a l a g r i c u l t u r a l s u r p l u s . 2 4
A g r i c u l t u r e should be
c o n c e i v e d as aa a c t i v i t y p r o d u c i n g enough s u r p l u s f o r t r a d e
and not as a means of s u b s i s t i n g , a c c o m p l i s h i n g i n such a way
"a s o u r c e of food f o r t h e i n d u s t r i a l c l a s s e s and a good market
for their products."25
from t h e c o n c e p t of r e c i p r o c a l wants and m u t u a l i n t e r dependence of t h e two g r o u p s i
f a r a e r s and " f r e e heads
S t e u s r t d e v e l o p s t h e i d e a of t h e optiaum nuaber of p e o p l e i
t h e "number of husbandmen, t h e r e f o r e , i s t h e b e s t , which can
p r o v i a e food f o r a l l t h e s t a t e f
end t h a t number of i n h a b i -
t a n t s I s b e s t which i s c o m p a t i b l e with t h e f u l l caploywent
of e v e r y one of t h e m . " 2 6
23
ikiSL. * P* 6 0 . Sen, o p . c i t . , p . 3fc, " S t e w a r t
reserves the t e r n ' m u l t i p l i c a t i o n * for t h a t i n c r e a s e in the
p o p u l a t i o n which i s r e c i p r o c a l l y s e r v i c e a b l e t o t h e comm u n i t y . All o t h e r i n c r e a s e 1s a o r e ' p r o c r e a t i o n . I t i s
not always t h o u g h t a n a t u r a l p r o c e s s b u t , more o f t e n t h a n
n o t , by a c o n s c i o u s c o n t r o l and g u i d a n c e t h a t ' p r o c r e a t i o n *
can be c o n v e r t e d i n t o ' m u l t i p l i c a t i o n . , w
24
S t e u a r t , P o l i t i c a l Qeconoav. 1 , 8 3 .
25
S e n , oj>. c l t . . p . 3 6 .
26
S t e u a r t , P o l i t i c a l Oeconoav. I , 6 9 .
42
ConcluUi ny Coaaeats
S t e u a r t s u g g e s t e d t h a t " i t i s n o t , however, n e c e s s a r y
t h a t every
c o u n t r y should produce a l l t h e a g r i c u l t u r a l s u r p l u s
i t needs . . . t h e importent t h i n g i s t h a t e q u i v a l e n t s should
be a v a i l a b l e f o r i n d u c i n g e i t h e r t h e hooe farmer or t h e f o r e i g n
farmer t o produce more s u r p l u s S t e u a r t
recommended t h a t
a g r i c u l t u r e must be more e f f i c i e n t i n order t o produce a
l a r g e r s u r p l u s of g o o d s ; on t h e o t h e r hand, i f raenufacturing
becomes more e f f i c i e n t , then t h e r e w i l l be a l a r g e r supply of
equivalents.
Thus, S t e u a r t s t r o n g l y advocated t h e i n t r o d u c -
t i o n oi machinery i n n»#nuf a c t u r i ng.
Sen a f f i r m e d t h a t " S t c u n r t ' s p o p u l a t i o n p o l i c y i s more
p o s i t i v e th&n that, of M c l t h u s b e c a u s e S t e u e r t
. . . b e l i e v e s i n t h i s optimum [ a i s e of p o p u l a t i o n ]
and h o l d s i t i s not o n l y a " p h y s i c a l i i a p o s s i b i l i t y "
but a l s o a "moral i s p o s s i b i l i t y " of i n c r e a s e i n
nuabers which stay stand i n i t s way. . . . He [ S t e u a r t J
i s anxious t o p r e v e n t not o n l y over but a l s o underp o p u l a t i o n ; but oven h i s " o o r a l i m p o s s i b i l i t y " as t h e
c a u s e of u n d e r - p o p u l a t i o n i s d u e , so he h o l d s , t o a
r e s t r i c t i o n of s u b s i s t e n c e , not t o a d e l i b e r a t e c h o i c e
between^"a baby and a baby car" or t o any b i o l o g i c a l
factor.2"
Thus, S t e u a r t d e v e l o p e d a complete framework of p h y s i c a l
(location)
and economic p l a n n i n g :
d i v i s i o n of l a b o r , l o c a l i -
z a t i o n of economic a c t i v i t i e s , optinum c o n c e p t of p o p u l a t i o n ,
f u l l and proper employment of t h e labor f o r c e and h i s t h e o r y
of l u x u r y , which i s e s s e n t i a l l y an attempt t o emphasize t h e
2
1
0 £ .
clt.,
^ ' f i i l c i . . p. 39,
, p. 4 4 .
pp. 3 0 - 3 9 .
48
r o l e of consumption and employment, t h a t , as Sea i n d i c a t e d ,
a o s t of h i s contemporaries ignored, 3 ®
To S t e u a r t Money was
not a mere " v e i l " \ i n h i t system of r e c i p r o c a l wonts the r o l e
of money wfes regsrded as important ©s o t h e r e q u i v a l e n t s . 3 1
S t e u e r t was a broaduinUod e c o n o a i s t who considered
economic f o r c e s as r e s p o n s i b l e f o r the development of the
d i f f e r e n t s t a g e s of s o c i e t y j in a n u t s h e l 1 , b i s work was «
attempt a t ce economic i n t e r p r e t e t i on of hi a t o r y , unu3uel et
that t i m e . 3 2
Sen s u a a e r i z e d S t e w a r t ' s a n a l y s i s as f o l l o w s :
P r e s s u r e of p o p u l a t i o n l e a d s t o a g r i c u l t u r e , the
need f o r a g r i c u l t u r a l s u r p l u s b r i n g s about s l a v e r y ,
the m u l t i p l i c a t i o n of wants i n t r o d u c e s luxury and
t h a t i n turn exchange economy, the i n f l u x of p r e e i o u s
a c t a l from America a c c e n t u a t e s the s p a t i a l s e p a r a t i o n
of farmers and " f r e e hands'* and h e l p s t h e growth of
cities.33
^ I b i d . . , p. 4 8 .
31 I b i d . . pp. 43, 4 8 .
52
I M A . , P. 49.
33
Ibid.
CHAPTER VI
34SIC ECONOMIC CfiNCKPTS
B e f o r e d i s c u s s i n g the i n s t r u m e n t s of planning sod control , brief
comments w i l l be reviewed on none basic
concepts
i a economics which are i n t e r - r e l a t e d i n a body of c o n c e p t s
which r e p r e s e n t , i f they ere used by t h e s t a t e s m a n , important
t o o l s f o r development.
Value
Value w i l l be commented on f i r s t .
S t e u s r t d i s t i ngui shed
between "prime c o s t , " which i s t h e c o s t of p r o d u c t i o n , and
"selling prioe."
"The f i r s t depends upon the time employed,
the expense of t h e workmen and the v a l u e of materi a l s .
The
second i s t h e sua of t h e s e , added to the p r o f i t upon a l i e n ation.
. . . [ t h e c o s t 1 i s i n v a r i a b l e a f t e r the f i r s t d e -
t e r m i n a t i o n , but tho second i s c o n s t a n t l y i n c r e e s i ng, e i t h e r
frora d e l a y i n s e l l i n g o f f , or by m u l t i p l i c i t y of a l i e n a tions*
The p r i n c i p l e s which determine the v a l u e are f o u r ,
accordi ng to S t e u a r t t
loio. The abuadanoe of the t h i n g s to be v a l u e d .
2do. The demand which mankind makes f o r them.
* S t e u e r t , P o l i t i c a l Oeoooomv. I , 485.
44
45
3 t i o . The c o o p o t i t i o n between t h e demenders} anil
4 t o . The e x t e n t of t h e f a c u l t i e s of t h e deaanders.
The f u n c t i o n t h e r e f o r e of money i s t o p u b l i s h
end make known t h e value of t h i n g s , as i t i t
r e g u l a t e d by t h e combination of e l l t h e s e
circumstances,2
In e s s e n c e , the above thought i m p l i e s t h e f o l l o w i n g
poi nts t
F i r s t , t h e r e a r e two elements i n a commodity sold ,
labor and raw m a t e r i a l s .
The p r o p o r t i o n of t h o s e elements
o r i g i nated i t a country i m p l i e s d i f f e r e n t r e s u l t s .
Second,
when t h e r e i s a s u r p l u s of labor exported t h e country g a i n s j
t h i s i s the c a s e of developed c o u n t r i e s .
In such a s i t u a -
t i o n a d e f i c i e n c y of raw m a t e r i a l s — w h i c h may be imported—
and a s u r p l u s of labor exported may be assumed.
This
I n v o l v e s a complete employment of f a c t o r s of p r o d u c t i o n ,
mainly l a b o r .
T h i r d , #hee raw a a t e r i e l s are exported—
because t h e r e i s a s u r p l u s of raw m a t e r i a l s and c o n s e q u e n t l y
unemployment of l a b o r — t h e n a t i o n l o s e s 3 t h e r e f o r e , labor
has to be imported, which c o n s t i t u t e s , i n i t s t u r n , a g e i n
f o r the country t h a t imports l a b o r .
This o b s e r v a t i o n should be viewed i n c o n n e c t i o n with
tiramp's
a s s e r t i o n on t h e p r i n c i p l e aim of raercanti l i s t s :
the
f u l l employment of the f a c t o r s of p r o d u c t i o n , mainly l a b o r .
The o b j a c t i v e i s not t h e accumulation of b u l l i o n but f u l l
eoployaent of l a b o r .
And, f i n a l l y , t r a d e , accordi ng to t h a t
d o c t r i n e , i n c l u d e s a l l economic a c t i v i t i e s *
2
I b i d . . p. 527.
Therefore a
46
brisk trad# Involves the oexiaaa amount of productive exports
which is what full t1p.lg.yw0.nt provides.
Exportation of work s i g n i f i e s l a essence the export
of qonsimebla presentations* with the consequence that the
b a l a n c e of wealth w i l l turn i s £ svor of the exporting nation,
namoly, it will have e "favorable balance of trade,"'5
It soeas thet the fluctuation of the balance of wealth
favors inUustrious end frugal countries—and individuals as
well—and consequently it is against the excessive and idle
consumer countries and i ndividttals.
Steuart explained that
consumption is the heart of the problem, M . . , it is not by
the importation of foreign cocmodities, and the exportation
of gold and silver, that s nation becomes poor j it is by
consuming these eoaaodities when imported."4
In another
passage he explained that,
. . . a balance may be extremely favorable without
augmenting the mass of the precious metals) to wit,
by providing subsistence for m additional nuaber
of inhabitants j by i noreasin^ the quantity of shippi ng, which is an article of wealthj by constituti ng
all other nations debtors to it j by the importation
of aany durable commodities^ which may be considered
also as articles of wealth.
foreign trade implies mutual dependence ocsong nations;
this dependence may be of two ki nds, a c c o r d i n g to Steuart,
3
Sen, j o i t . , p. 59.
^Steuart, Political Oeconoay. p. 410,
5
Ibld.. pp. 425-426.
4?
"necessary" and " c o n t i a ' j e u t T h e r o f o r e , under the assumption
that a action want* to be "powerful by trade" it aust proceed
to eliminate "contingent" dependence and restrain "necessary"
to a alaiwuo expression.^
Balance of Wealth and Trade
Thus, Steuart*s theory of price is both a demand and
supply theory and a cost of production theory giving emphasi s
to "work" (or labor).
In relation to his theory of balance sad wealth, he
stated*
as frugality and industry are in our days capable of
aaassl»0 the greatest fortunes is solid property,
so is dissipation, by the means of symbolical money,
as certain as expedient for the ennihilation of the<n.
For this I conclude that dissipation i«plios frugality, and frugality di ssipation, In every country
of great circulation, they balance and destroy one
anotherj end si nee there is no such thing as equality
of fortune to be preserved without prescribing
alienation, that is circulation, the next best
expedient for making people equal, I think, is to
enrich thea by turns
from this principle of balance of wealth, he developed
his theory of balance of trade, whose scope goes beyond a
nation.
In all trades two things are to be considered in the
commodity sold. The first is the aatterj the second
is the labour esployed to render this aatter useful«
The aatter exported f roa a country is what the
country losest the price of the labour exported, is
what it gains.
6
Ibld.. p. 273.
y
lbld., p. 511.
48
I f t h e v a l u e of t h o m a t t e r imported be g r e a t e r
t h a a t h e v a l u e of what I s e x p o r t e d , t h e c o u n t r y
galns.
I f a g r e a t e r v a l u e of labour be imported
than e x p o r t e d , t h e c o u n t r y l o s e s .
Why? [ S t e u a r t ' s
r e a s o n i s v e r y c l e a r on t h e b a s i s of p r i a c i p l e of
b a l a n c e . ] Because, in the f i r s t c a s e , strangers
must have p a i d Jj, B a t t e r t h e s u r p l u s of labour
e x p o r t e d ) and i n t h e second c a s e , b e c a u s e t h e c o u n t r y must have paid t o s t r a n g e r s i n m a t t e r , t h e
s u r p l u s of labour i m p o r t e d .
[The c o n c l u s i o n i s
evident.]
I t i s t h e r e f o r e a g e n a r s l s a x i m , t o di s c o u r s g o
t h e i m p o r t a t i o n of work f l a b o u r ] , and e n c o u r a g e t h e
o x p o r t a t i o u of i t
idaey
S t e u a r t * s a n a l y s i s of rmisey s«as v e r y s i g n i f i c a n t 1 n t h o
u n d e r s t andiug of t h e economy of e x c h a n g e ,
tJoney was l i k e
blood i n t h e organism of t h e econowy, and not b e c a u s e mo ney
and c o l n are synonymous a c c a r d i ng t o t h e o l d fnercantl 11 s t
idea,
and even l e s s , b e c a u s e t h e v a l u e of t h e m e t a l s g i v e s
v a l u e t o t h e money.
Me s t a r t e d h i s a n a l y s i s of money when
he t r i e d t o e x p l a i n t h a t one c o n s e q u e n c e of a f r u i t f u l s o i 1
« h i c h i s p o s s e s s e d by " f r e e p e o p l e " d e d i c a t e d t o a g r i c u l t u r e
end i n c l i n e d t o i n d u s t r y , would be u a i a i l i n g l y t h e p r o d u c t i o n
of i s u p e r f l u o u s q u a n t i t y of f o o d .
*1s a r e s u l t ,
inhabitants
would m u l t i p l y .
From t h i s o p e r a t i o n produced by i n d u s t r y , wo f i n d
t h e p e o p l e d i s t r i b u t e d i n t o c l a s s e s . The f i r s t i s
t h a t of t h e f a r m e r s who produce t h e s u b s i s t e n c e ,
. . . t h e o t h e r 1 s h e l l c a l l H f r e e hands"; b e c a u s e
t h e i r occupation being to procure themselves subs i s t e n c e out of t h e s u p e r f l u i t y of t h e f a r u e r s ,
6
? b i U . . p. 5 3 6 .
49
anU by a labour adapted to the wants of the society,
a t y v a r y accordi ng t o t l i e s e w a n t s , and tfeftse a g a i n
accord! ng to the spirit of the times .9
At that moment St swart big£« as Intsr®sti»g essumptioni
"If lit the country m
aro treating of, bolts ao ney and the
luxuries ere suppose'- unknown, then the superfluity of the
*arraer* w i l l be ia the proportion to the nuauber whose labour
w i l l be £ o « « 4 auffici ent to provide for a l l the other necessities of the inhabitants.* 1 0
Then, when consumption and
produce were balanced, population would increase no more,
"unless wants be multiplied."**
Steusrt coati aued his reasoning, relating these two
important concepts,
Money and luxury;
If the country we were treating . , . be supposed
of a considerable extent and fruitfulness > and if
the inhabitants hove s turn for industryj in short
time, luxury and the use of money (or of something
participating of the money) w i l l be i ntroduced.
By luxury, I understand the consumption of
any thing produced by the labour or ingeauity of
«?.«, which flatters our senses or taste of living,
and which is neither necessary for our being well
fed, w e l l clothed, well defended agai nst the injuries of the weather, nor for securi
us egoinst
everythi ny which c m hurt us. [Here Steuart makes
a f o o t n o t e s a y i n g that his cor.copt #£ luxury has
only p o l i t i c a l sense.j
Dy tooney, I understand any commodity, which
purely in itself Is of no raateri si uso to men f o r
the purposes ebove-mentio nod, but which acquires
such &a estimation frow his opinion
of it, a$ to
become the universal saeesure of what is called
value, end an adequate equivalent for anythi ny
alienable [exchangeable].**
p.
n
iblQ.
10
rn£-
l2
lbld.. pp. 31-32.
so
It will be aeaslagfttl to mention some comments of Sea
an this aspect,
i c e o r d i s g to Son, Stewart "does not believe
that tarietls«« in tho quant 1 ty of ?noney ha\'<? any di roct effect oa the g e n e r a l level ox p r i c e * except through particular
prices."***
Later on, he 1 nUic#te«l two important p o i n t s i
first, "the raoney of a country . » , bears no d e t e r m i s a t e
p r o p o r t i o n to c i r c u l a t i o n ; i t i s tho money c i r c u l a t i n g ,
m u l t i p l i e d by the number of t r a n s i t i o n s from bend to h a n d , w i *
S t e u a r t affirnedi
The c i r c u l a t i o n of every country » , * must ever be
i n p r o p o r t i o n t o the i n d u s t r y of the i n h a b i t a n t s ,
produeiag the commodity which comes t o markett what*
ever part of t h e s e c o a a o d i t i e s is consumed by t h e
very p e o p l e who produce them, e a t e r s tot i n t o c i r c u l a t i o n , nor does anywise a f f e c t p r i c e * . ^
The seoonu point concerned paper money, which means
c r e d i t f o r Steuart and not irredeemable f i a t caeney.
Steuart
was c o n s e q u e n t l y not concerned with i n f l a t i o n , p r i n c i p a l l y
- j c l l o p i n y I n f l a t i o n $ however, ho c o n s i d e r e d depreci a t i o n of
tho currency as a s e r i o u s problem,
furthermore, his real
p r e o c c u p a t i o n was with d e f l a t i o n r e s u l t i ag f r o o a s h o r t a g e
o£ c o i n s .
S t e u a r t was a s t r o n g advocate of paper taoney f o r two
reasons t
f i r s t , according to hira, money was an i n v a r i a b l e
13
S e n , ©&. c l t . . p. 0 0 .
14
S t e u a r t , 0&. c l t . .
lS
I b i d . , p. 6 1 .
VI, i i ,
531.
l0
Sen,
clt.,
p. 0 1 .
SI
m e a s u r e of value, therefore i t
wise) second, lie coulu H a d
c o u l d not be stressed other-
no rational relationship between
the amount of g o l d and silver a v a i l a b l e and the quantity of
money in circulation.
B u t this paper money he conceived was
neither fiat money e n t i r e l y , nor fully-backed gold or silver
certificates;it is nore like the modern convertible bank
note.
His aain idee was that banks should issue notes backed
with land securities and they should be convertible into
bullion on demand.
The kernel of his idea on banking was
that the basis of the convertible paper money was credit.
Credit is the reasonable expectation entertained
by hia who fulfilis his side of any contract, that
the other contracting party w i l l reciprocally make
good his @og@f©seat®, . . .
Credit, therefore, is no »or« than e well
established confidence between aen.
Therefore there is this sequence of concepts:
the baits
of paper money is credit, and that of the credit i s confidence t
Confidence, then, is the soul and essence of credit,
e»d i s every modification of it, we shall constantly
find it built on that basis; but this confidence
must have for its object a willingness and a capacity
in the debtor to fulfi11 his obligations, 19
Thus we have brought credit to the object under
which we are to consider it, v i z . the obligation to
17
Ibld.. p. 64.
lC
Steuart, Political 6eo0»oay, II, 105.
l9
Ibld.. p. 108.
z
pay money, either lor value received, or for some
consideration relative to the parties, whioh may bo
just fremiti! of a contract.
Credit and debt* ere therefore inseparable
•
«
«
20
Steuart related a framework of conceptsi
credit, con-
fidence and his theory of interest as important tools to
carry them on.
"The lending of money without interest was
very eomtaon before the iintroduction of trade sail Industry.
Money then was considered . . . iacapable of producing
fruit, w 2 1
The excessive quantity in circulation was **locked
up in treasure." 2 ^
"Things ire now changedi
no money is ever locked up)
end the regular payment of interest for it when borrowed, Is
essential to the obtai ning of credit as the confidence of
being repaid the capital."23
Thus, Interest has "now become
so absolutely essential to credit that it may be considered
as the p r i n c i p a l requisite and the basis on which the whole
fabric staaas." 24
For this reason the rate of interest
depended on the supply and demand for it, according to
Steuart.
The borrowers desire to fix as low as they canj
the lenders seek, from a like principle of selfinterest , to carry the rate of interest as high as
they can. From this combination of interests a
double competition arises . . . If more is demanded
2C
iby.., p.
a2
23
lM£«
P.
112.
Ibid.
53
to be borrowed, than thero Is found I© be lent, the
competition will take place among the borrowers
The same reasonieg was applied in the opposite ease.
He
considered the price of commodities extremely fluctuating,
whi le the price of money wa* aore stable.
"Commodity of
the s®ae kind differs la goodness} aoney is all, or ought
to be all, of tho sane value.
Steuart distinguished two kinds of borrowers, those who
borrow to profit by the loan, i.e., to do business, and those
who borrow to dissipate.
"The first class can offer an
interest which exceeds the proportion of their gainsj the
second, finding nothing but want of credit to limit their
expense, become 8 prey of u s u r e r s T h i s
distinction is
relevant is the context that "the profit $ la trade would
strike an averegc among industrious classes} and that average would fall and rise in proportion to the flourishing or
decay of commerce." 2 8
This distinction is also relevant in
terms of the nature of the expenditure.
Thus, if the class
that borrows to dissipate be "found to preponderate, as to
require more aoney to borrow than all that Is to be lent,
the consequence will be to prevent the borrowing of merchants;
to raise interest so high a« to extinguish trade; and to
destroy industry." 2 9
25
l b l d . . p. 115.
27
1*»*.&., P. i n .
29
1M£*>
p. H 8 .
In conclusion* there are cases in whi eh
^IblU.
m
m£-
54
interest aast be regulated, for "low i .iterest is the soul of
trade," 3 0
Thus the statesman should control the supply of m o n e y —
for isstfcttce, discouraging moaey for dissipation and onoour®§iag supply of money or credit for horae consumption of the
lower c las sag.
The purpose of the action of the statesman
will be the reduction 01 the rate of interest in order to
eneourayo invastraeat
If Money coasisteU only la procious metals "the possesort
of these taotalc would in s aeaiier be masters to establish
what rate of interest they thought best for thsir use
On the other
if money can be aaua of paper mt&
the
value of the solid property of the nation , . . the use of
metals comes to be . . .
8 standard.**33
Then the statesman
wi 11 have the power of increasing or ditsiuishing the money
supply which in turn will influence the rate of interest. 3 4
Steuart defined two types of beaks t
beaks of circu-
lation with the purpose of circulating notes, and b m k s of
deposits to transfer credits written in their books.
/II banks are founded on credit, and according
to the nature of their institution, I may divide the
30
I b i d . , p. 129.
32
lbld.
3l
I b i d . . p. 130.
^ I b i d . , pp. 130, 149. "So lie! property" is synonyaous
with personal estates which contain real values.
'^Ibld,. pp. 130-101. '©cause "the i m e r e s t fells in
proportioa to the vedund ency of money to be lent
p . 131 *
c r e d i t they a r e b u i I t 08 i nto t h r e e ki nds: p r i v a t e ,
raercantile
and p u b l i c . P r i v a t e c r e d i t i s when the
ground of c o n f i d e n c e i s r e a l property pledget! f o r
the s s e u r i t y of t h e l o e n . Mercantile c r e d i t e v e r y one understands. I t i s when the ground of c o n f i dence i s « fund secured by the p u b l i c f a i t h , In
favour of the c r e d i t o r s , for the i m e r e s t and
c a p i t a l due, which l a s t however I s never e x i g i b l e
from the s t a t e . P r i v a t e c r e d i t i s the n o s t s o l i d
of the t h r e e ) m e r c a n t i l e c r e d i t i s the most p r e c a r i o u s ; and p u b l i c c r e d i t depends e n t i r e l y upon the
aaxiias of every government with regard t o p u b l i c
faith.35
F i n a l l y , Sen made an i n t o r s s t i ng compari son with Keynes
in r e l a t i o n to monetary p o l i c y .
This i l l u s t r a t e ® the pro-
found i n s i y h t of S t e u a r t ' s thought.
In i t owphssi s t h a t fortiion trode end f o r e i g n
exchange are of f a r l e s s importance than the i n t e r nal economy of the country, Steuart reraiads us of
Scynus * T r a c t on fconet erv flof orn>. And then he goes
f u r t h e r sad s u g g e s t s t h a t moacy i s a very potent
t o o l f o r moulding the economic systera and f o r
b o l s t e r i n g up t r a d e , i n d u s t r y , and employment, h i s
general b i a s , as d i s t i n c t of course from t e c h n i c s !
c o n t e n t , i s s u r e l y not fundamentally d i f f e r e n t f r o o
t h a t of the other work by the author of t h e Tract
c i t e d above.
P u b l i c Borrowing and Taxation
P u b l i c borrowing» p u b l i c e x p e n d i t u r e , and t a x a t i o n play
an important r o l e I s economic d e v e l o p m e n t . 3 7
Steuert empha-
s i z e d that whatever raoney the s t a t e g e t s e i t h e r by borrowing
or by taxat ion i s spent and thus expands the c i r c u l a t i o n I s
55
I b l d . , pp. 599-600.
36
S e n , op., c l t . . pp. 104-105.
37
S e o , i b i d . . p. 129.
56
the nation, increase* the level ©f employment end transfers
wealth from one set of persons to another.'1®
U M 1 & 1 orrowing.--Concerning public borrowing, Steuart
wrote that "the interest of a private debtor is simple and
uneonpounded; that of the state is so complex that the debts
they owe, when due to citi zens, are on the whole, rather
advantageous than burdensooci
they produce a new branch or
circulation fitaoag individuals, but take nothing from general
p e t r i a o n y . " 3 9
public credit Is "a powerful tool to supple-
ment private credit for it makes the economy »ore liquid and
providing funds for trade and industry." 4 ®
Steuart considered that uonied-nen, or business raen,
were usually more industrious and thrifty when compared with
landlords, or landed m e n . 4 1
Furthermore, the growth of
credit per se was "a caothod of melting doivn, as it were, the
very causes of inequality, anu/or rendering fortunes equal,**4^
The state was an intermediary i a the matter of public
credit.
The money borrowed f roo private citizens was spent
among the people who paid taxes as members of society. 4 3
3e
I b l d . , p. 106.
^ S t e u a r t , Political Oettonotay,. II, 625.
40
S o n , OJ2., cit. , p. IOC.
^ « o Smith had this concept i n rai nj too. See
fidm Smith, Ati Inquiry into the Nature and Causes of the
health M l ( i « T T o W r M t e r T ^ m W T m m l T l f f i K T g o rET "TO?) f
pp, 314-332.
42
4
$teuart, Political Qeconoav. I, 367.
^Ibid., p. 511.
57
Steuart aede the distinction between borrowing is the country
sad abroad.
He rejected the second alternative, that Is,
external debt, because the balance of wealth would tura
"against the state in Xevor oT foreign nations."^4
Concerning
iaternel debts, he thought that their accumulation cannot
lead to the bankruptcy of the aation because it "implies
4
contradiction."
Froia a practical point of view, there it a liait to
public b o r r o w i n g . T h u s , "debts assy be increased to the
full proportion of ell that can be raised for the payment
of the Interest."^
Steuart recognized that the state sight
be faced with bankruptcy i§ case its tax revenues did not
cover the interest charges.
Taxation.—Steuart defined a tax as "a certain contribution of fruits, services, or money, imposed upon the
individuals or a state, by the act of content of the legislature, in order to defray the expenses of the government,"46
On the other hand, taxes imply i concept of public expenditure,
For, "taxes . . . may be considered as a sating out
of every private fortune, in order to procure a public find
to be expended lor the public b e n e f i t T h e r e f o r e ,
44
lbid. . II, 453.
46
Sen, ££. elt.. p. 110.
4
^51.bid... p. 455.
^Steuert, Political Oeconoay. II, 4S3.
46
Ibld.. p. 484.
'
49
Ibld., p. 524.
Raiting money by texes must always be b u r d e a s o a e ,
less or m o r s , to those who pay i t | and the advantages resulting £roa texes csii only proceed from
the right application of tit® noney when
r ei se<i. . » « [Steuart contiKued ] If the money raised
li© m o r e b e n e f i c i a l l y employed by the state then it
woaId have been by those who c o n t r i b u t e d , thea I say
the public lies g a i n e d , la consequence of the burden
laid upon the i n d i v i d u a l s :
c o n s e q u e n t l y , the
statesman had dene his d u t y , both in imposing the
, and in rightly expending thes.50
concepts involve the kernel of Steuart * s Idec oa
taxes, aa«elyf
the cooplete cyclo of co1lccti ng taxes and
speudiny t h © » , as well as the Management of the d e b t , siynifies the p r o m o t i o n of employment end industry.
In the
sea© manner the effect of this action on the matter of the
^1
domestic wealth is important•
T h e r e a s o n Is that " w h o -
ever pays a tax appears to pay for a personal service,"
n a m e l y , * h e receives no corporeal equivalent which can be
alienated
by hi® for the same veluej and he, who 1s employed
by the s t a t e , and is paid with the p r o d u c e of t a x e s , Requires
© balance in his favour egaiuit those who pay t h eu."
di&tely
after t h e t , Steuart indicctod
laia*e~
the case iu which
revenues f rou taxes 30 tbreed for foreign s e r v i c e s , then
" t h e r e ear. be no alteration upon the balance at Isoae, as has
been p a i d ; neither is there any when it r e a a i u s at hoaej the
people and the creditors are as rich as b e f o r e . " ^
50
I b i u . , p. 523.
5
* S e n , oj>, cit., p. 114,
5
^ S t e u a r t , P o l i t i c a l u e c o a o a v . XI, 377.
He
59
c o n c l u d e d by s s y i a g , " l e t t i l l s s u f f i c e s t p r o s e a t , as t o t h e
e f f e c t s of debt® sad t a x e s upou t h e b e l a n c e of n a t i o n a l
wealth
Tkae e l l t i l l s framework of tsixes
tad expendi-
t u r e s c o n s t i t u t e s q powerful t o o l to guide econo»ic a c t i v i t i e s I n t o a b a l a n c e d s i t u a t i o n of w e l f a r e sad w e a l t h .
T h e r e f o r e , i t s h o u l d be t h e o b j e c t of very c a r e f u l o p e r a t i o n
on t h e p a r t of t h e s t a t e s m a n .
The p r i a c i p a l " u s e of t & x e g / 1 a c c o r d i n g t o S t e u a r t , was
t o ui s t r i b u t e income toward es oqu® l i t c r i e r . ai t n a t i o n i a
i n c o a e "by urawiay f r o ei t h e r i c h , s fund s u f f i c i e n t t o employ
both t h e d e s e r v i s a i l
t h e poor in t h e s e r v i c e of t h e S t a t e § ft
<\ti«f t o " c o r r e c t t h e bed c o n s e q u e n c e s of d # » e $ t t e l u x u r y as
t o f o r e i g n t r a d e by p r o v i d i ny e fund f o r t h e peyrasnt of
b o u n t i e s upon e x p o r t a t i o n . * " ' 4
B e s i d e s a p r o p e r s y s t e a of
t a x e t i o n , i t would be n e c e s s a r y , o c c o r d i n g t o S t e u a r t , t o
u e v i s c & e u a p l e t e program of a l t e r n a t i v e p o s s i b i l i t i e s of
public e x p e n d i t u r e . ^
S t e u a r t b o i l e d down t a t h r e e p o i n t s h i s c o n c l u s i o n s on
t&xatiort.
These r e f e r t o t h e us© of t a x e s as & t o o l f o r
53
I b l d . . I , 372.
54
l b i d . > pp. 514-515.
«r,*%X. i n s t i l l W. Kaplan, e d i t o r , The. PfC.liet. A t . I f t o i l e .
t r a n s l aVtf"e d under t h e e d i t o r s h i p of
f». Ross (New York,
195C) s p . 204,
r i s t o t l e «»-as t h e f i r s t p h i l o s o p h e r who w r o t e
of t h e e x p l o r a t i o n of d i f f e r e n t c o u r s e s of a c t i o n t o f o r e s e e
t h e b e s t s o l u t i o n . He s s i d i "They [ t h e s t a t e s m e n ' assume
t h e e*»d cud c o n s i d e r how and by what useons t h e y c o n s i d e r I t
i s a o s t o a s i ly and b e s t p r o d u c e d , i f echi eved
*J>
60
cor treating a a f e e t s anu abuses l a Iscoet? d i s t r i b u t i o n e&d
e x p e n u i t u r e s , a® well as an i n s t r u a e n t t o improve economic
a c t i v i t i e s , i . e . , to i i i e r e e s e " t h e p r o d u c t i o n of s u b s i s t e n c e
and i a a u u i a c t u r e s , " ssu i i r ; a l l y f o r c i n g everybody t o cont r i b u t e t o t h e w e l f a r e of s o c i e t y i n r e l a t i o n t o b i s wealth
end irscoae.
. e c o r u i ng to S t e u r r t , t u x e s induce people to work h a r d e r
snU t h e i r e f f e c t on the n e t i on i s r e t h e r p o s i t i v e f o r they
aats# i t
lesteesi o£ p o o r e r .
Tuxes encourage
i u u u & t r i o b , but nfaeu t h e burdeu i t too heavy iu p r o p o r t i o n
to luceoe t a x e s aaay d i s c o u r a g e o o n s u a p t i o n , t h u s e f f e c t i n g
i n turr< p r o d u c t i o a . * ^
• n important p o i n t s t a t e u by S t e u s r t i s t h e balance
aechoni sta e x e r t e d by t e x e s end p u b l i c e x p e n d i t u r e s . "Every
a p p l i c a t i o n of p u b l i c money implied n want in t h e s t P t e j
end every went s u p p l i e s i m p l i e s an encourogeoeut given to
t h e industry." 5 ® 1
This balance s t c b e o l s a to be achieved must
imply two c o n d i t i o n s s
f i r s t , enough ooney i n c i r c u l a t i o n
out of which t a x e s cbb be p a i d ; second, the judgiaeat to pay
taxes.
Tlie f i r s t p o i n t brings
about t b e n e c e s s i t y o£ having
m e l a s t i c currency system f o r wbicfe pep or taouey i s r e q u i r e d .
s a c o r o l l a r y t o t h a t r e e s o a i a g , t h e development of paper
^steuert,
1 Mmmmi.» XI, 554.
££. cj_t., p. U S .
^ S t o u e r t , £'9,1,1,*,*£».*• Cecoqouiy, I I , HSi.
61
money goes p e r i passu with the or^-enizetion of e proper anti
sound tex s y s t e m . ^
Steiiert c l a s s i f i e s ©II t exes in t h r e e c a t e g o r i e s :
p r o p o r t i o n a l , cumulative end p e r s o n a l .
The f i r s t one " i s
paid ly the buyer who i n t e n s e to c&iisuua>, at tfee
of
c o c s u c p t i o n , whi le the bclanee oi wesltli i s t u r c i ag a§al»®t
bin sad Is eonsoliuctetl with the p r i c e of cojaooui ty . w u ^
second fci uo e£ t a x e s I s the cumulative which
M
The
is t b c cecusm-
l s t i o n of t h e t r e t u r n which every indiviciuel who cajoys eny
s u p e r f l u i t y owes d o i l y to the s t e t e f o r the eUvent ege he
r e c e i v e s by l i v i n g ir< t h e s o c i e t y . " 6 1
f i n a l l y , the third
one c o n s i s t s of t a x on personal s e r v i c e s
These f u n u a a e n t e l p r i n c i p l e s should be observed with
r e s p e c t to t a x e s .
H
Tbey ought to is.peire t h e f r u i t s
not
t h e fuiittf t h e expesses of the persons t a x e d , not t h e s a v i n g s |
the s e r v i c e s , not t h e persons of t h o s e who render it»eo."63
For t h e t purpose he d e f i n e u " t h e t c x s b l e fund"-—iu taodern
terrainoloyy, the t e x e b l e cnpecity—as t h e net proauce of t h e
e e r t h unu work, namely, the surplus of the i c c o s e 0; s o c i e t y ,
over whet Steuprt c e l l e d *phys4eei ae-cessery."^*
iiiiet toUay I s sfsae4 s h i f t i n g e»U itieitieocfc,
c e l l e d "Urewiny beck , H
S9
.^ccorcing to hi®, p r o p o r t i o n a l t a x e s
S©b, o£. s i t . . p. 117.
o 0
© « « t , ^o.U^jcal
P. 500.
6 S
M i . » P. 486.
I I , 465.
'
pp. 485, 637.
b4
I b l u . . pp. 4t>6, 487.
62
ere always s h i f t e d by the- laboring consumer end load to the
i ncrcagt" of p r i c e s .
other p e o p l e .
Taxes are shifted from
the
laborer to
The laborer cannot accumulate p r o f i t s t n i Is
c a l l e d by Steuart a "physical n e c e s s e r i a n . " 6 5
However, t o
the ex tent that he eerns no p r o f i t and bays t a x a b l e goods
t#hich in f a c t are not "physical necessaries'' for h i s incoae
group, &e cannot "draw the lax back
tilth
regard to proportional t a x e s , Steuart contendedi
"All the amount of proportional t a x e s i s refunded to the
i n d u s t r i o u s consumer, so far as they ere r a i s e d on a r t i c l e s
necessary for h i s s u b s i s t e n c e ; and when he i s e i t h e r i d l e
or consttctes a s u p e r f l u i t y , he I t c l a s s e d along with the i d l e
and r ich . w ( > 7
Steuart s t a t e d , with r e s p e c t t o cumulative t a x e s , that
"the nature of e l l these taxes i s to a f f e c t the p o s s e s s i o n s ,
i ncone end p r o f i t s of every i n d i v i d u a l , without putting it
in t h e i r power to draw thcc beck i n any way whatever ; COBe e q u e n t l y , such t a x e s tend very l i t t l e towards enhancing the
p r i c e of c o r a a o d i t i e s , " 6 e
On the other bend, "the tax upon
land a f f e c t s only the proprietor 1 ® share of the produce of
h i s land t
were he to attempt to r a i s e the p r i c e of grain in
proportion t o the tax he pays, h i s faraer--whe pays no land*
tax f o r h i s portion--would u n d e r s e l l hia i a the market, "^9
65
I b l d . . p. 491.
P»
493
•
67
l h i d . . p. 510.
P-
496
•
69
I b i d . , p. 552.
A tax ©8 money, in accord with Ills opinion, seems to be impractical.
F i n a l l y , he did not recommend & tax m p r o f i t s
due to the f a c t that " . . .
although they appear to be i n -
come, I rather consider thora e s t o c k , which ought not to b@
taxed," 7 ^
I t seemed that 5tousrt was seeki ng, In that view
on p r o f i t , e spur to i nvestaient.
Stou&rt was au advocate of progressive t a x a t i o n .
i#
stated that "accordiag to equity end j u s t i c e a l l impositions
howsoever ought to f a i l equally and proportionally on everyone, accord!ng to h i s s u p e r f l u i t y . " 7 * He called " s u p e r f l u i t y "
the amount of consumption beyond "the
necessary."^2
Concern!ag economic development and t a x e s , he contended
that for early s t a g e s of eeononic growth and l i k e w i s e for
p r i n i t i v e economy, that i s , barter economy, heavy t a x a t i o n
««y have detrimental e f f e c t s .
Contrariwise, the imposition
of heavy t a x a t i o n - * b i t according to a wise plan—may r e s u l t
b e n e f i c i a l l y for the economy as © whole.
The reason for t h i s
I s bcsed on t h e i r tendency to support each other in both the
volume of taxation nod the volume of c i r c u l a t i o n . 7 3
i t must be mentioned that Steuart wes
opposed
Finally,
to d r a s t i c
change In t a x a t i o n .
4 sudden a b o l i t i o n of t&xes would be advantageous
to nobody but to c r e d i t o r s upon mortgage and to the
70
I b l d . . p. 541.
71
72
I b l d . . p. 493. Co»weateu also by Sen, &&.. j&JjL.» p. 120,
73
S e n , 0£. c l t . , pp. 120, 460.
I b i d . . pp. 319, 520.
i & 1 e j not t o l a n d l o r d s because t h o i r incorae wo*Id
uirainish more then l a t h e p r o p o r t i o n of t h e p r e s e n t
land t a x , ©t l e a s t t h e i r iwprovesicnt would he i n t e r rupted and t h e i r r e n t s i l l p a i d { not t o t h e manuF e c t u r i c l a s s because at p r e s e n t t h e y pay HO t e x e s ,
but l a p r o p o r t i o n t o t h e i r i d l e n e s s . . . . The
reason Is p l a i n :
the money p«id f o r t a x e s c i r c u l a t e s
b e c a u s e i t i s demanded.
ere texes suppressed,
p e o p l e h a v i n g l e s s o c c a s i o n f o r aoney than f o r a e r l y ,
would c i r c u l a t e l e s s i o p r o p o r t i o n . " » 4
l a c o n c l u s i o n , p u b l i c borrow!ag, t a x a t i o n , and p u b l i c
e x p e n d i t u r e c o n s t i t u t e d an organ!zed body of c o n c e p t s and
p o l i c i e s in Steuart*s philosophy.
These c o n c e p t s were i n t e r -
r e l a t e d Iw a dynastic i n s t r u a e n t f o r economic growth.
This
v i e w p o i n t was i n Barked c o n t r a s t with t h e c o n v e n t i o n a l view
of a e r c e n t i l i s t s at t h a t t i m e .
In a d d i t i o n t o a t h e o r y of t a x a t i o n , S t e u a r t * s main
c o n t r i b u t i o n its t h a t r e s p e c t was t h e i n t e g r a l c o n c e p t i o n of
t a x e s and e x p e n d i t u r e s as a p o w e r f u l i n s t r u m e n t of s o c i a l
policy.
Sen comments as f o l l o w s :
S t e u a r t ' s r e a l c o n t r i b u t i o n was not i n d e v e l o p ! n g a
t h e o r y of t a x a t i o n p r i m a r i l y as e s o u r c e of p u b l i c
revenue but i n c o n c e i v i n g i t ( t o g e t h e r with p u b l i c
e x p e n d i t u r e ) ®s a p o t e n t t o o l of s o c i a l p o l i c y . The
mein s i g n i f i c a n c e of p u b l i c f i n e n e e l a y i n h i s view
isi t h e use t h a t would be aade of i t i n f u r t h e r ! n $
c e r t a i n s o c i a l p o l i c i e s end I s b e s t understood i a
that context.75
7
* S t e u a r t , P o l i t i c a l Oecofioity, I I , p. 4 6 1 .
75
S e n , £ £ . fiJU,., p . 129.
CBAPTSe VII
imrmimtn
OF M M I M
am
CMRNOT
Introduction
Steuart considered the s l l l t s r y communisa of ancient
Sparta a political and economic model which solved problems
of distribution of income and unemployment.1
Power end
security were the characteristics of the Spartan economy
beseo on compulsion.
However, he rejected such a system to
be applied in his time for two mala reasons t
first, slavery
was considered by him as in opposition to the present htman
conception of freedom} second, because its organisation and
its nature involved stagnation, that is, absence of progress.
On the other hand, he believed that the exchange economy needed c o n t r o l and guidance! it coulu not work slone.
lie believed in a free society which was
H
e general, tacit
contract from which reciprocal and proportional services
result universally among those who complete It,"54
He related freedom and control in this way:
"by peoples
being free, in understanding no more than their beiny governed by general laws . . , not depending upon tho ambulatory
*Steuart, Political Oeconoay. I, 250-258.
2
Ibld.. p. S3.
See «l#o 3«»# M&" S H « *
65
P*
66
will qX eny «8R or any set of ac», ©mi established so &s eet
to bo chcnyed, but in . . . f a ] uniform way . . , w a
explained it further s
Ho
M
> people hIio tiepea4 upon nothing
but their o»n industry for their subsistence, ought to be
under ae farther subordination then what is necessary for
their protection." 4
This protection should be for every
individual in an equal raanner. Thus "no person, no class
should be under a greater subordinotion then another
The Instruments of Regulation and Contra1
Steuart thought to regulate the economy with a set of
Those tools ia»y be grouped under four heeds t
tools.
sumptuary legislation, money, taxation, and public expeoUiture. &
Steuart believed in human f i-eedos} however, he did
trust in tho "aaturti f o r c e s w h i c h could not lead to welfare and px osperlty w'aeu they acted alone,
Thet was the
case in the use o£' credit--*, g t businoss or for dissipation,
and in the type of expenditure—for consumption, or for
luxury, as uiscussed lit the preceding chapter,
Concern!ng money, Steuart agreed tfeat "in the hends of
@ good statesoan [it] is an irresistible engine for correcting
3
i M £ . » P. 237.
5
lbld.
P. 242.
6fhis section i s guided by Sen * s research.
op. cit., pp. 148-152.
See Sen,
67
every a b u s e . " 7
T h e r e f o r e , money f o r him was so important
t o o l for economic p l a n n i n g .
In the f i r s t p l a c e , he thought
t h a t money wes "the u n i v e r s a l Measure of whet i s c a l l e d
value ana an adequate e q u i v a l e n t f o r anything alienable.***
Furthermore, t h i s concept of aoney had a dynamic framework, c i r c u l a t i o n was the foundation oi an exchange economy,^
ana any uexect in monetary p o l i c y would o b s t r u c t t h e whole
economic system.
For i n s t a n c e , a s h o r t a g e i n the q u a n t i t y
of ssoney would tend t o depress the econoay j namely, i t would
h i n d e r the f u l l employment of t h e f a c t o r s of p r o d u c t i o n .
&oney, banking, and c r e d i t c o n s t i t u t e d f o r Steuart a s t r u c t u r a l and important body of the economy.
ya the other hand, Steuart thought t h a t money was soraet h i n g e l s e then & medium of exchange, that i s ,
v a l u e , and a l s o aoney c a p i t a l .
a s t o r e of
IIo commented t h a t the "low
I n t e r e s t i s the s o u l of t r a d e j * 1 1 a o r e o v e r , he thought t h a t
•
7
5 t c u a r t , P o l i t i c a l oeconoay. 1, 32.
6
Ibid.
^Xbld., I I , 444. The whole p o l i c y i s d i v i d e d by Steuart
i n t o t h r e e p a r t s i "lmo, The o e l t i n g down of p r o p e r t y , and
keeping c i r e u l a t i o n f u l l at a l l t i t a e s . This i s t h e b u s i n e s s
of the bank. 2do, The providing of c o i n i s t h e b u s i n e s s of
the saint. 3 t i o , The granting of bi l i s on f o r e i g n p a r t s , f o r
v a l u e i n the n a t i o n a l currency, i s the b u s i n e s s of the
s t a t e . " I b i d . . pp. 6 1 1 - 6 1 2 .
i0
S t e u a r t affirmed t "Koney i s t h e i n s t r u m e n t of a l l
a l i e n a t i o n ) and when t h i s i n s t r u m e n t i s taken away, a l i e n a t i o n must c e a s e . .
^bld., p . 607.
U
Xbla.. II,
129.
t h e q u a n t i t y of money i n c i r c u l a t i o n would a f f e c t t h e volume
of t r a d e .
I s the t h i r d p l a c e , t a x a t i o n , which was r e l a t e d t o t h e
t h e o r y of c i r c u l a t i o n , c o n s t i t u t e d en important t o o l »
Thus,
by t h e use at t a x e s , the statesman would "produce the e f f e c t
he t h i n k s f i t ."***
The proper use of t a x e s c o n s t i t u t e d an
instruraent of c o n t r o l of e x p o r t , import, consuapti oo, and
p r o d u c t i o n , and i n t h i s way achieved the d e s i r e d e f f e c t .
"if tha i m p o s i t i o n of t a x e s , nati the r i g h t employment
of the amount of them, a statesman hes i n h i s power
to r e t a r d or to promote the consumption of any branch
of the i n d u s t r y . , . when 1oreiyn t r ?da b e g i n s to
bear a small p r o p o r t i o n to domestic consumption, he
may p r o f i t f r o a l u x u r y , and drew © part of the
wealth of the l u x u r i o u s i n t o the p u b l i c t r e a s u r y ,
by g e n t l y augmenting t h e i a p o s i t i o n upon i t , . , * 3
Furthermore, in the s t a t e of a u t a r c h y , t a x a t i o n was even
more o e a n i n g f u l .
The e f f e c t of f o r e i g n t r a d e on t h e c i r c u -
l a t i o n of money no longer e x i s t e d , and t h e r e n i g h t have been
danger of s t a g n a t i o n , u n l e s s the e f f e c t of t a x a t i o n and p u b l i c
e x p e n d i t u r e s took p l a c e by e p r o c e s s of pusipi ng aoney i n and
out of the economy.
The f o u r t h method to c o n t r o l t h e economy was p u b l i c
works.
In h i s book, C o n s i d e r a t i o n s of the .I.e.to.rest of the
Country of Lanark In S c o t l a n d . * 5 Steuart advocated a program
12
\ 41
•> X
• p . jp i
^ S t e u a r t , The Korks. V, 2 1 6 - 3 4 5 , See e s p c c i a l l y ,
"New Conal , w p p . 3 1 7 - 3 2 7 , and "The Hoods ox Tills Country,*
pp. 3 2 7 - 3 3 2 .
69
of p u b l i c warks t o c r e a t e the s o - c a l l e d (today) i a f r a t t r a c ting*. o£ the economy,
lie i n d i c a t e d the c o n s t r u c t i o n of roads
and c a n a l s to f a c i l i t a t e t r a n s p o r t a t i o n , a b o l i t i o n of I n t e r nal t o l l s to f a c i l i t e t e the 1nterchang* of products among
d i f f e r e n t r e g i o n s , as w e l l cs the e s t a b l i sh«ent of organised
markets*
i t h t h e same purpose, namely, to f a c i l i t e t e
cotaaeree and i ntorcbanye of gaodg, lie advocated the
of
e s t a b l i s h i n g a uniform national—and furthermore i n t e r natioB&l—tystesi of s e a s u r e s .
S. E« Sen summarised a group of measures proposed by
Steuart i a t h e sasie m a t t e r , I . e . , t o c o n t r o l the economy by
. , » undertaki ng p u b l i c works, expanding t h e number
of s o l d i e r s and o t h e r s t a t e employees, a s s i s t i n g
emigration t o c o l o n i e s i n t i m e s of d i s t r e s s , f u r n i s h i n g the embassies abroad with l o c a l raanufactures
so as to p o p u l a r i z e t h e s e i n f o r e i g n c o u n t r i e s j
s e t t i n g the f a s h i o n i n the oourt i n such a way as
to fiuide popular t a s t e i n t o d e s i r a b l e c h a n n e l s , e t c .
He would even sake use of chartered companies t o
f o s t e r t r a d e and i n d u s t r y provided t h o s e are
c o n t r o l l e d by the s t a t e so as to safeguard the
public i n t e r e s t .
In t h i s c o n t e x t Sen observed t h a t Steuart recognized
two important l i m i t a t i o n s i
F i r s t , natural f o r c e s should never be i g n o r e d , and
the s p i r i t of the people concerned should always be
given very c a r e f u l l y c o n s i d e r a t i o n .
Second, * a i l
sadden r e v o l u t i o n s aro to be avoided. * fiven the
best measures nay produce very u n d e s i r a b l e r e s u l t s
il' introduced suddenly. I®
^ S t e u a r t , "a t lan f o r Introducing an Uniformity of
heights and Measures over the World," The ^orks* V, 380-415.
l7
Sen,
18
Ibld.
c l t . , p. 151.
TO
Finally, Sen pointed out, Steuert "makes 'general welfare* the target of til «eonomic policy and iasiets that ell
p&rticul«.r 1 atorcsts must yive away bexor# the geaerial interest of ths aatioa." 1 ^
Ir» Steuart * u worUa t
"»\'heu the well
being of a uation coses is coMpetition with a tsiapor ury
inconvenience to some of ths inhabitants $ tha §enerei §&©4
SMSt I)© preievrea t o perticalar consideration*
* 9 Ibid., pp. 151-152.
^ S t e u e r t , Political ^economy. I, 2B6»
CHAPTER VIII
CONCLUSIONS OS S T E N T ' S THOUGHT
S i t James Stewart of C o l t n e s s was not a m e r c a n t i l i l t l a
a "conventional sense."*
Thus, b a l a n c e of t r a d e , f o r i n -
s t a n c e , was c o n s i d e r e d by h i a as a guide aid g a n g s , namely,
es a means t i d not as « g o a l .
I t fess been noted t h a t ha
c o n s i d e r e d t h e end of p o l i t i c a l economy, t h e "genaral w e l f a r e '
of t h e n a t i o n , over a l l p a r t i c u l a r i n t e r e s t s .
He was a
f u r i o u s n a t i o n a l ! s t and c o n c o m i t a n t l y advocated t h a t t h e
econoai s t should bo " a c i t i z e n of t h e w o r l d H o w can one
explain t h i s apparent inconsistency?
He was a n a t i o n a l i s t
i n t h e s e n s e of a need Xor governmental p l a n n i n g to develop
nations.
But t h o s e n a t i o n s should c o o r d i n a t e t U e i r e f f o r t s
i n f a v o r of t h e " g e n e r a l w e l f a r e . "
He was an advocate of
I n t e r n a t i o n a l agreements t o develop one t y p e of measurement
to f e c i l i t a t e i n t e r n a t i o n a l t r a d e . 2
He r e j e c t e d d i c t a t o r s h i p and s l a v e r y , l i k e a n c i e n t
Sparta,
as being i r r e l e v a n t In modern t i a e s ,
But he did
not t r u s t & c o m p l e t e l y f r e e market t o a l l o c a t e r e s o u r c e s .
* Sen, op• o i t . , p .
2
•
Ibld.
71
72
He advoceted s planned economy within ® framework of free
enterprise.
Therefore, he thought the market must b« reg-
ulated by © planni ng body, a net the only entity ia the society
that could perform this function was the government.^
How
one to reconcile security, full enployaent,
public welfare, with liberty and peace? 4
First, he defined
a free and perfect society as "a general, tacit contract,
from which reciprocal and proportional services result
universellv among all those who compose it.**5
supported by organization and reciprocality.
freedom m m
Freedom should
not perait e group, Is the naue of the society, to take over
resources and in
a framework of "free strket/* organize
resources for their own welfare at the expense of the public
welfare.
Second, to plan end to regulate the market was far
from depriving people of freedom.
for political ideas.
Steuart had no prejudice
He was very obj ective| for in his raiad
there was no fallacy of "black or white."
Thus he considered
a solution located in e spectrua whose extremes were the
completely free market and the completely planned economy.
His reasoning was both objective and pragmatic) he thus considered that compulsion brought about prosperity in antiquity,
but that now its application was outsodod and inconvenient.
3
Ibid.
4
Ibld.. p. 15S.
0
stettart# Political Oecenoaiy. 1, 83t.
13
He recogtiiz&d tho need f o r contro1 of t h e s e f o r c e * a c t i u$ l a
the w s r k c t , f r a a i a g i a such a way a s t r u c t u r e of governmental
planning eud f r e e s o c i e t y . b
Steuart wis a pioneer i s p h y s i c a l p l a n n i n g .
The l o c a -
t i o n of economic a c t i v i t i e s was r e l e v a n t to the achievement
of a n a t i o n a l and r e g i o n a l p l a n n i n g .
Ills s t u d i e s on popu-
l a t i o n sua a g r i c u l t u r e ar« s i g a i f l e a n t today f o r t h e economic
development of etaerging n a t i o n s .
P o p u l a t i o n l a d o t e r s i n e d by
the p r o p o r t i o n of food produced, and t h i s i s dependent on
• o i l f e r t i l i t y , c l i m a t e , and the " i n d u s t r y of the i n h a b i t a n t s .
His c o n c e p t s were o r g a n i s e d i n a p e r f e c t cbain of r e l a t i o n ships t
p r e s s u r e of p o p u l a t i o n led to a g r i c u l t u r e , t h e need
f o r a g r i c u l t u r a l s u r p l u s caused s l a v e r y } i n t h a t s i t u a t i o n ,
the m u l t i p l i c a t i o n of needs and wants 1ntrouueed the concept
of l u x u r y , which brought about the s t a g e of the exchange
econouy«
>•urthersiore, accordi ng to S t e w a r t , the 1 ncrease of
the supply of gold from tbo ' a e r i c a n c o n t i n e n t s t r e n g t h e n e d
the d i v i s i o n of the two branches of the s o c i e t y 9
and
H
fre*j hands
farmers
This encouraged the development of urban
p o p u l a t i o n s and c o n s e q u e n t l y — s i n c e the viewpoint of space
economics—the growth of urban c o n t e r s .
I'ox S t e w a r t , money was not a "vei 1" nor was i t r e a l
w e a l t h j i t Mas a poteBt t o o l f o r framing t h e economic system
and f o r supporting t r a d e , i n d u s t r y , and eraployaent.
6
S e e Sea, oj>. o l t . , p. 1S3.
This
boars as i ateresti ng resosab lance to Keynes* ideas ia his
•?
Tract 0}i k&aet&tv Keforw. *
Finally, Sen compared the different approaches to the
econoaic probleB of three outstanding writers of economic
thought: Suith, Ssrx, ana Steuarti
Acisu Smith believed that the existing social order
was e deplorable aberration fro® the natural order
of equilibriurn which CGuld be obtained if natural
forces were left entirely unfettered, and he waged
a crusade 1n favor of laissea faire. [Now, then,
the other extreae.] Karl Marx did not believe
that under the existing institutional order either
laissez-faire or state control could ever lead to
any stable or desirable situation. But he was fully
conscious of the extreme potencies of natural forces
and was convinced that in the long run these would
destroy the existing order and through a series of
theses and antithesis would lead to a synthesis such
as he really desired and was anxious to further.
[finally] Steuart does not believe in the
beaoiicence either of natural equilibrium or of an
ultimate s y n t h e s i s but is conscious that the natural
forces have e greet potency for good as M i l as for
evi1. He wants to control thea so as to obtaia the
best possible results within the context of the
existing social order [naaely, "free society" as he
uefined i t ] ,
od because the state is the only
authority capable of controlling these powerful
natural forces [ wi 11 it b e possible to image "something" without authority in order to control and
plan?], he entrusts it with the task and endows it
with u n f e t t e r e d authority—unfettered even by ethical
considerations, if necessary, because where the stake
is so great—aaaeiy, order or chaos—expedience I s
the only really relevant consideration.®
In brief, what is expressed in the above paragraph was
the kernel of Steuart's work.
7
Ibld.« p. 105.
6
Ibid.. pp. 23-24.
PART THREE
COMMENTS m. E&mmzc
KV.ULPTIOH £ £ VEHI2PELA
gray y us p a i t o r solo m suolo
tin »one*eo, un iiaperio, y uas eapaUe
if, f l o e k a»4 e siepberU aioaa on tho s o i l
» k i n g , an empire, end » snort! ]
H«raaaUo 4© £©*»&»
CHAPTER I I
INTS00OCTION
l a P a r t I I of t h i s study some a s p e c t s of t h e economic
e v o l u t i o n i n Venezuela mill
be c o n s i d e r e d .
This entire
p r o c e s s may be divided i n t o four s t a g e s c h a r a c t e r i z e d by
important economic and s o c i a l f a c t s .
The f i r s t s t a g e was the p r e - h i s p a n i c (
-1500).
The
p r i e i t i v e i n h a b i t a n t s of V e n e z u e l a — c a l l e d Indians*—lived
i n a p r i m i t i v e eeonoay.
This s t a g e ended at the moment of
the d i s c o v e r y of America.
The second s t a g e was the t s l s p e n i c or © o l o o i e l stag©
(1500-1810).
Spaniards f i r s t arrived in Venezuela i n 1500
and framed t new economy based on
raercantilist
i d e a s . Ouring
t h i s s t a g e a new nation was f o r g e d , with c o n t r i b u t i o n s fro®
three c u l t u r e s s
Inai aa, Spanish and A f r i c a n , with a p r e -
dominance of Indian-Spanish mixture—in both blood and
culture.
The economic base of the colony was a g r i c u l t u r e .
The t h i r d s t a g e was the r e p u b l i c , the c o f f e e era (10101920).
In t h i s era the s t a t e emerged, that i s , i t became
p o l i t i c a l l y independent.
that i s , c o f f e e .
The econoale base was a g r i c u l t u r e ,
The m e r c a n t i l i s t framework p e r s i s t e d and
»as manifested i n government r e g u l a t i o n and i n t e r v e n t i o n .
76
T7
The fourth stage was t h e r e p u b l i c , the petroleum ere
(1920-1956).
The ea®rge»c® of petroleum A c t i v i t i e s changed
the eeo notnic s t r u c t u r e of t h e n a t i o n which was no longer
agricultural.
The a e r c a n t i l i s t i d e a s playeu an i m p o r t a n t
r o l e in t h e economy.
government p l a n n i n g .
This i s seen i n r e g u l a t i o n and
CHAPTER X
THE F U S T STAGS I
<
PRE-HISF ANIC
-1500)
Til© first Venezuelan inhabitants were called Indiansj
under this general denoni nation several cultural groups were
included.
In America, the principal Indian cultures were
lace, -*ztec, Mays and Chibcha.
(See Map 1, p. ^5.)
They
reachea a relctively high level of civili zation when
Spanisrus came to th# American continent.*
The different Indian groups lived la Venezuela and were
comparatively lower in culture than the rest of the Spanish
Americans.
Among thea the Tiuoto-Cuicas, who were closely
related to the Chibchas (Colonbia), had the highest culture.
They were located Is the Cordillera de los Andes.2
Miguel Acosta-Saignes classified the primitive inhabitants of pre-hispaaic Venezuela in several cultural areas.®
(See Map 2, p. 66.)
1
M
Se© Victor 1. B«9«a v The
» n and Tribe (New
York, 1961), pp. 20-29. Also, Victor #. Hagen, Realm o£ the
Incas (New York, 1961), pp. 38-39.
2
Carlos Siso, Lj, Pormoci6n del Pueblo Veaezolano
(Madrid, 1953), I, 19-36.
^Gui 1 lermo Eoron, ,'listeria de veoesaela (Caracas , 1956),
pp. 32 ££, Cf. Miguel costa-Saignes, Sstudlos de Etnoloaia
ntlaua de Venezuela (Caracas, 1954), p. 80.
TO
19
1.
2.
3.
4.
5.
6.
7.
8.
9.
Costa Oriental end Ciperacotos
rrawacos Grienteles
Jlrajera £y*@an
Eastern collectors and fishers
Hesters CarIbbeans
otomacos
Guayana V'enezolane (Salibas and Pi aroas)
Collectors, hunters and fishers
Tiaoto-Cuicas (related to Colombian Chibchas)
There were two types of eeoaomie organisation® aaoftg
Venezuelan InUians in the stage of the pre-hispanic periodi
collector and sedentary.
The o o H e c t o r group was nomadic
and only knew hunting and easy fishing.
They constructed
very rudimentary shelters or none at a 11. ^
The historian Fray Pedro Simon (a Spanish priest) was
responsible for the first investigations of Indian culture.
He wrote the following on nomadic Indians (1626):
People naked, including sexual o r g a n s — a e n and woaen,
bandits, vagabonds—and without known settlement . . .
they spent four days under a tree and two days under
the shadow of another o n e — i n this way they spend
their life, idle, without farming . . . they only oet
fruits collected irora trees» which are saoy, , . .
venison which is abundant f as well as fish and certala seeds like mustard picked frosa a type of weed
which grows wild, and is used to prepare aeeaworras
[a kind of thick soup] for thair sustenance.^
In that primitive society the econoaic framework was
very simple,
cussed .
first, the priraordi al concepts wi 11 be dis-
What is the essence of economic problems?
answer i $ given by Professor Hei lbroner i
op.
An
**, , . the economic
9 pp. 2 7 * * *
% e d r @ Simon, Part I, Notice 3, Chapter V, quoted in
Ibid.. pp. 26-29.
80
problem itself, that is, the need to struggle for existence,
derives ultimately from the scarcity of nature.
If there
were no scarcity, goods would be as free as air and economics,
at least in the sense of the word, would cease to exist as a
social p r e o c c u p a t i o n . j 0 this case there were no economic
goods created, which employed factors of
labor, capital goods, and know-how.
production such as
These foods were
resources—natural resources—which were taken and used
without a sense of replacement or production on the part of
human beings.
Among the Caribbeans the base was the Interchange of
goods and slaves.
Salt was valued highly by all the sedentary
Indians? in fact, it was used ss the common denominator of
transaction, 7 which is one of the characteristics of money.
Shells and pieces of go Id were used for money among the
Achaguas, Salivas, Betoyes and Caribbeans.®•
One must remember that the Venezuelan Indi ans had no
animals to use for transportation.
As
a matter of fact,
the Inoas domesticated the 1lama and were the only American
^Robert Heilbroner, The Making, of 5conoetic Societv
(Englewood Cliffs, N.J., 1952), pp. 4-5.
Mr
'Cf. Leland J. Pritchard, Money and Bankinq (Cambridge,
1958). "The earliest rudimentary beginning of money was in
the form of a barter unit of value. The coramodity which
served An this capacity performed the function of a standard
of value but did not perform the functions of medium of
exchange or store of v a l u e p . 59.
®Moron, op. cit., pp. 31, 32.
61
I n d i t e # who did*
Venezuelan I n d i e n s ( s e d e n t a r i e s )
€1
domesticated f o w l s (ducks and t u r k e y s ) aad s m a l l mammals.
The a g r i c u l t u r a l p r e - h i spanic areas i n Venezuela weret
Andes, with a w e l l - d e v e l o p e d a g r i c u l t u r e } Costa ( A t l a n t i c
c o a s t ) , Indian with a midule l e v e l of a g r i c u l t u r e ; and
Orinoco, an i t i n e r a r y a g r i c u l t u r e . 1 0
The economic fraaework of t h e sedentary Indiana was
more cotaplex because they had a s e n s e of economic g o o d s ,
produced with land end l a b o r , and c o n s e q u e n t l y they were
faced with the problem of s c a r c i t y of economic goods on the
one hand and m u l t i p l e wants on the e t h e r ,
T h e r e f o r e , they
hed to s o l v e two problemsi production and d i s t r i b u t i o n . * *
Fi-tt lag men t o work i s only the f i r s t s t e p in t h e
s o l u t i o n of the production problem. Men lanst not
only be put to work, they aa$t be put to work l a
tli@ r i g h t p l a c e s . Thoy must produce the goods eod
s e r v i c e s t h a t s o c i e t y n e e d s . l a a d d i t i o n to
a s s u r i n g a l a r g e enough q u a n t i t y of s o c i a l e f f o r t ,
the economic i n s t i t u t i o n s of s o c i e t y must a l s o
a s s u r e the proper a l l o c a t i o n .of.
social
effort.12
b i d . , p. 30.
l0
lbld.
^ M e i l b r o n e r , o£. c l t • , pp. 4 - 6 . The problem of
s c a r c i t y i n v o l v e s the s o l u t i o n of two r e l a t e d and yet sepa r a t e fundamental t a s k s t 1, ?• s o c i e t y must o r g a n i z e a
system f o r productng the goods and s e r v i c e s i t needs f o r
i t s own p e r p e t u a t i o n . 2 . I t o u s t arrange « d i s t r i b u t i o n
of the f r u i t s of i t s own production among i t s members so
that store p r o d u c t i o n can t a k e p l a c e , p. 6 .
14
IMA*,
p. 7.
82
The T iraoto-Cui cas bad rudiment»ry actions of d i v i s i o n
end organization of labor in order to undertake mere e f f e c t i v e l y the teak of production.
Tho d i s t r i b u t i o n problea
was set in e pattern of t r a d i t i o n 1 3 vhieh oriented also the
organization of p r o d u c t i o n , 1 4
fsaoBf some Caribbean Indian®? Chtausas, Cuaana and
C h i r i b i c h i , the d i v i s i o n of labor p r e v a i l e d . fThus }
srttl® men went to f i s h , to hunt, or to make war,
women farmed the landj sad among Palenques, as a<aong
other Caribbeans, according to [ t h e h i s t o r i a n ]
C s s t e l l a n o s , en escort of eunuchs was charged to
guard the women of the caciques [ t h e c h i e f s of the
t r i b e s ] . . .15
Concerning the regime of work among the Aruacos, Rodrigo
Navarrete in 1560 informed the Spanish Crown that "These
Indians do not t o l e r a t e i d l e people.
They either taake them
«ork or within three days expel them frora t h e i r lands.
This i s equivalent to s compulsory p o l i t i c a l system.
From t h i s reasoning i t can bo doduced that in a c e r t a i n
way there was no sense of s c a r c i t y .
Go oils were given by
nature «nd when they became exhausted the people moved to
» PP« 7 - 1 7 . There are three s o l u t i o n s for the
a l l o c a t i o n problem: 1) t r a d i t i o n "the oldost and u n t i l a
few years ago, by far the most prevalent way of s o l v i n g the
economic challenge . .
Thus hereditary chain assures that
s k i l l wi 11 be p t s s e d slon§» w p. 10; 2) ©oswaiti, which
c o n s t i t u t e s "the method of imposed a u t h o r i t y , of econoaic
c o m m a n d p . 12] 3) the market organization of s o c i e t y ,
p. 14.
14
l5
io
» o r o « , 0£. c l t . . pp. 30-31.
/ r e l l s n o - H o r e n o , o£,. c l t . > p. 165.
Rodrigo ue Navarrete, Relacloa sobre los AtMiioos
(1560-70), quoted i n Arellano-Moreno, op. c l t . . p. 165.
83
another place where nature would provide otrs goods.
Accord-
ingly, the essence of b e i n g noaadic was the l a c k of a sense
of production of economic gaotls.
Their economic fr&nework
was siaple and It reduced th<* sense of struggle for their
exi stence, thus wastinj or using resources in a nomadic way.
The other type of people, the sedentary, was p l a c e d
and rooted to the a r e a where they lived and practiced agriculture .
The highest group of t h i s type was the Timoto-
cuicas who were located in Los Andes.
Their agricultural
methods were relatively advanced when compared to the other
people at that time.
They used devices to prevent soil
erosion and utilized ruditaentary irrigation.
They con-
structe.l storage f a c i l i t i e s to hold food which thay would
eventuelly need i n the future.
Maize (corn) was the basic food and was cultivated
extensively.
They a l s o raiseu some tubers (like yuca),
cotton with which they wove chinchorros (haoacas), but
they had no clothing, as did the more advanced Chibchss.
They also grew cocoa end tobacco.
Trade was carried on among different sedentary groups.
The Caribbean* were good, daring navigators, as well as
mil
<.m„ •
I
IT
•
Moron, 0£. clt., pp. 29-30.
*°Ibid.. p. 30.
-M.MM,..,.,,, nu,
excellent warriors.
Thtty carried on ea intensive trade
with other Istiian groups.
10
Siso, op. ctt.. I, 72-70. Caribbean* were good
warriors whose war ery was Ana garlaa Kota (unly Caribbean*
ere aen) andftj»«een11 aptro.ro itoto ( M l the rest are their
slaves)t expresses their doaiBant character and their
extraordinary pride. Two Indian "nations" (in the tense of
e large political and cultural area with the same language)
shared the hegemony of tropical Astericai Caribbean*
Quichuas. This laat "nation" integrated with the a
Chi bchas and Carat, and had a warrior spirit although
were wore like colonizers.
Cf. J. C. Terroro-ttoneya*, .^na Carl ne Rota (fin e
on
military practices of the Carribeans) (Caracas, 1933). This
suthor translates the cry i a jib Cirlw.a S.ote ®$
Oitljy 5
which in essence has the seme raaening.
85
iyULP 1
IBERQ AMERICA: LOCATION OF MAIN INDIAN CULTURES
. PRE-HISPANIC STAGE
^ Arawac
Chibcha
C-aribbe
. -'A Guaranis
Quichaa mpira-' .7 Diaguitas
E
•'] Apaucano
Source: Nqevo Pequeno Larrouse Illustrado.
uublishided
under the direction of, Claude y .haul Auge,. Spanish
adaptation by Miguel de Toro y Gisbert, thirty second
edition (Buenos *ires, 1958), pp. facing 13^9 and
facing 1U-23.
86
MAP 2
^CULTURAL AREAS. OP VENEZUELA; PRE-HISPANIC STAGE
Caribbean and
CjLparacotosWestern Apawacos
J ir aj ara-Ayaman
Western Caribbeans
Western collectors
and fishers:
Otomacos
Venezuela Guiana
Collectors, fis&ers,
and hunters
Timbtoco-Cuica
Source!'. Guillermo Moron,
fiii., facing p. 33
CHAPTER XI
TSE SEC0M5 STAGSi
HISPANIC U500-1010)
Introduction
The Hispanie stage was very significant la the formation of the Venezuelan people in both social ana economic
aspects.
placei
Luring that period the following S. acts took
the meeting la one place of three different cul-
tural ana ethnic groups i
native Indians , white Europeans,
and African Negroes, which resulted In their cultural and
physical integrations* the economic structure of the Indians
mas transformed by the Spaniarris who, after conquering the
native people, sought gold (El Sit© del Doraao),2 ana later
(during colonization) developed a more advanced agricultural exploitation than that of the Indians.
The econo«y of
the colony was oriented toward the ".netropolynamely,
*The integratioa of these groups produced throe bloou
groups* Mestizos (Spaniards a ad Indians), llttltttoi.
(Spaniards and fiefroe®), and ^siafces (Indions and Negroes) ,
See Soroa, £&* clt., pp. 145-154.
2
Siso, Ji£. sXJL' * *» 117. After the discovery,
Spaniards were motivated by the search for gold. This news
spread in Spain motivated Spaniards to cotae to Veneruela in
search of gold. El Mito del Dorado aeans The Golden Myth.
See r/ashington Irving,
SJt Cfc.nbrl.4oy (Caracas, n.d.),
quoted in Slao, oj>.. clt., p. I f f .
87
m
Spaia, io eccoruanfco with .-asrcenti list thought,^
This hi spanic
began.
s t a g e ended In 1010 when the Republic
This period can be divided into two parts:
sod colonization.
conquest
The conquest of the Indi en territory
occurred during the sixteenth and seventeenth ceaturies.
The conquest was the subjugation of the Indian people by
the Spaniard®, Mho took possession of the land for the
S p a n i s h Crown.
Duriag the conquest period ailitary encamp-
were e s t a b l i s h e d .
ments
fh©«® eucawpaeints a l g h t be c e l l e d
the first foundation stone f o r
the future urban settlements
which were developed during the process of c o l o n i z a t i o n . ^
.- s previously stated in this paper, the principal
fiotivation for conquest w a s the search for gold.
Uuring
t h i s search part of the Indian population w®« kilied.
were the negative aspects of the conquest.
These
On the othor
hend, "it is necessary to understand that the process known
os [conquest] during the sixteenth century wag p r e c i s e l y
the way irr which they built the foundation of e people and
even a nation.* 0
^Newuan, Gayer and Spencer, ©£» cit.. p. 23. "This was
an age of colonization (the age of aercantiliset), snd
colonies a w . [email protected] as e x l i t l a a for the b e n e f i t of the
mother c o u n t r y . I t i T i c a aine.
4
Cf . Jos& Gil-Fortoul, His.to.rla. Constltucional de
yenegttela (Caracas, 1930), I , 9 - 3 6 .
5
M o r 6 n , op. cl t.. p. 57. Cf. taureano Valient1le-Lanz,
Disareoacl6n e Inteoracion (Caracas, 1930), p. 129, In spite
of the destructive process of the conquest, when aany Indians
were kilied, their number was larger than Europeans and
African negroes) therefore, their contribution m m the most
important in the formation of the Venezuelan people.
69
One c h a p t e r
peculiar
of
t h e Spsnish c o n q u e s t
characteristic, namely, t h e
Venezuelan t e r r i t o r y
a d m i n i s t r a t i o n of
by Yelser, a f i r m o f
T h e y aaintained commerci al r e l a t i o n s
V was c r o w n e d H e
the
several
t h e k i n g w a n t e d economic a i d
of America.
loans,
a
the
German b a n k e r s .
with Spain
long b e f o r e Charles
Welser f i r m f o r
i n V e n e z u e l a had
and Genoa
was i n d e b t e d
and on t h e o t h e r
to
hand
to proceed with the conquest
The S p a n i s h Crown and the Welser firm agreed
7
on three import ant pacts,
The first was to bring ski lied
labor from Germany to work i n Santo D o m i n g o .
pact concerned the i m p o r t a t i o n of u n s k i l l e d
from A f r i c a .
The second
labor,
Negroes
The third pact pointed to the temporal cession
by Charles V of the provi nee of Venezuela to the Welser
firm, i n order to conquer and s e t t l e
was signed on March 2 7 ,
Venezuela.
1528, and ceased i n
ance with the terms of the pact.
T h i s pact
1556 i n
The Welser a d m i n i s t r a t i o n
of V e n e z u e l a was a failure b e c a u s e g o l d was s c a r c e
was a l l
accord-
and g o l d
the admini stration was interested in.
°Arellano-Moreno, op. cit., p .
^Mor6n, op . cit.. p p . 70-71.
op. cit. , p p . 95-97.
90.
See also Arellano-Moreno,
^Arellano-Moreno, op. cit., p. 107. See also Jose
Oviedo y BaSos, Historia de la Conqui sta £ P o b l a c i o n de l a
Provincla de V e n e z u e l a (New York, 1 9 4 0 ) , quoted i n
Arellano-Moreno, qb. cit., p . 1 0 7 .
Oviedo y B a l e s believed
that if Venezuela had not been under German administration,
she w o u l d have been the most opulent land of A m e r i c a .
90
flew Kcoaomic Structure
vhen the Spanish people conquered, explored, end consequently, settled the Venezuelan territory, their first task
we» to establi $h a new economic structure adequate to the
new situation, that'Is, the creation of wealth to taaint ain
o greater population with r aore adv&aceu culture.
Thus,
the first vitsl problem w»» the production of feed to feed
the settled population, both Spanish
Inuiou
The cre&tion of wealth signified the develops©at of the
factor* of production. 10
Lane was av&ilable la large quan-
tity, 1 1 hut it wag necessary to prepare the soil ia order to
make it productive in agriculture.
labor v m
For that purpose skilled
needed, but at that tiee it was not avallable iu
the required amount.
^Siso, £2,, oit.. 1, 406. "The vital problem of the
Colony from the economic standpoint const sted In production
of goods to feed the settled population."
*®Ad8m Smith said that "the real wealth [is] the annual
produce of the land and labour of the society.1* Saith, op.
clt., p. ix. Borgan says that the source of wealth (static
concept) is the flow of income (dynamic concept) originated
by the factor costs: labor, land, capital, and entrepreneurship. Theodore Morgan, Income .and Ea.ploYaeat (Ne* York,
1952), p. 4 ff.
|1
*V&n&%utslu say be divided la two main types of landt
first, the coastal range with snail f orti le valleys, which
in colouial tium» bau plenty of forests; seconc, &»d the
largest part, p l a i l i k e Texas, but crossed by l a r g e rivers
which flow during rai«y seasons. Of. Pablo i'erales,
feeotiraf fa SepBaalim ce ¥t»eg«.els Vie.l e a, Iss Re.«looe<
Eauinoeclales del Urn eve Continent!?. (Caracas, 1941), E. 11,
167-316.
x
91
The Spanish realms lacked . . , s u f f i c i e n t p o p u l a t i o n
t o send t h e r e q u i r e d aaount to t h e /.merlean c o n t i n e n t ,
and t h o s e who were aval l a b i a could not corae t o g e t h e r
because t h e r e were n e i t h e r means to t r a n s p o r t them at
once nor ways to f e e d the» . . . They had t o come
I n d i v i d u a l l y or In s n a i l groups, In accord with the
t r a n s p o r t a t i o n means and r e s o u r c e s a v a l l e b l e to s e t t l e
them.*2
Thus Spsalsti labor was s k i l l e d but s c a r c e .
£nd both the
X udian end Ne$ro p o p u l a t i o n s wero u n s k i l l e d and t h e r e f o r e
requires! t r a i ni ny.
Concerning c a p i t a l , the Spanish s t a t e was not in a
s i t u a t i o n to c o n t r i b u t e to i t .
C a p i t a l was n e c e s s a r y to equip e x p e d i t i o n s as w e l l
as to b u i l d c i t i e s and to p r o v i d e seed l o r the
s e t t l e r s * p l a n t a t i o n s f but i t s purchasing power was
not s u f f i c i e n t to carry out the huge work required
. . , labor was n e c e s s a r y , but i t was i m p o s s i b l e to
bring i t i n , 1 5
The accumulation of wealth was not p o s s i b l e i n the f i r s t
part of the c o l o n i z a t i o n . 1 6
However, i t was p o s s i b l e l a t e r ,
l2
S i s o , ojl. c l t • . I , 159.
13
I b i u . . pp. 4 0 7 - 4 0 6 .
* 4 I b i d . . pp. 1 5 0 - 1 5 9 .
* 5 I b i d . . p. 159.
I b l u . . p . 4 0 8 , "The most i t was p o s s i b l e t o
produce [ a t the f i r s t s t a g e of c o l o n i z a t i o n ] was goods to
s a t i s f y the e l e m e n t a l needs of the p o p u l a t i o n . But i t was
i m p o s s i b l e to t i l l flic of an accumulation of wealth which p e r m i t t e d production of a s u r p l u s to a e i n t a l a n o n - p r o d u c t i v e
c l a s s e s who might d e v o t e t h e m s e l v e s t o i n t e l l e c t u a l fand
t e r t i a r y ] a c t i v i t i e s . " I n t h i s c o n t e x t coiap&re James
S t e u a r t ' s conoept of t h e d l v i s i o n of l a b o r , in which he
d i v i d e s t h e s o c i e t y in two groupsi farmers and " f r e e hands
s e e t h i s paper, Chapter V. Saith a l s o d i v i d e d labor f o r c e
i n two groupst p r o d u c t i v e and non-productive l a b o r . C f .
Smith, oj>. c l t . . p. 314.
91!
when production of yyricultural surplus permitted the f eeaiag
of ether gro«pg of population, end In this way allowed other
groups to devote themselves to other activities, such ®s
1ndustry and services.
if
Instrutaents of Colonization!
Eneoaieai® and Klslones
The institution of the eticyal,® ad a was essentially au
instruoent uhi ch aided the formation of agricultural wealth
in ordor to feed the colonial p o p u l a t i o n . T h e formation
of an agricultural wealth involved a double task, the subj ugation of the Indiaa population and troi oing it la new
skills and in the learoing of a new language and religion.
In H i s process of education the Bislones played an important
role, 1 9
Thus t the establi shmunt of the encoalenda was imperative
in creati ng an economic structure in the Spanish-j'uerican
territories.
The search for gold and filter mining was the
point of departure of the conquest and exploration
l7
"The greatest improvement in the productive power of
labour, and the greater power part of ski 11, dexterity and
j udgaent with which it is anywhere directed, or applied
seem to have been the effects of the division of labour
Smith, ££. olt.. p. 3» Cf. Steuart, Political Qmomm.y«
p. 151.
>iso, 0 £ . olt., I, 1H4. M Gsta institucion [is
oncoiaiondaj fue un instruraeato cle presioa para forzar la
producci6n Bgrfcola y peouarla."
L&C. IllsiZSLSi., P. 95 of this paper.
93
50
activities*
However, in order to c a r r y ©at t h a t purpose
i t was necessary t o s e t t l e p a r t of the Spanish population
a»4 to s u b j u y e t e and s e t t l e the nat ive I n d i a n s . 2 1
,1s a
r e s u l t of t h i s i t was necessary to c r e a t e an a g r i c u l t u r a l
wealth in order to feed the s e t t l e d p o p u l a t i o n . ^
The purpose of the ancomlenda was to d i s t r i b u t e land
Huong the conqulstedores in the name of the Spanish C ro««.
The e.Bsomiea^s
WBS
" e c i v i 1 i s u t i t u t i o n in which a t a c i t
c o n t r a c t was es t abli shevi and formulated between the lei ng
enu the c o l o n i z e r s , through whi cb t h e s e became a a s t e r s of
the country with the o b l i g a t i o n of submitting to v a s s a l a g e
of f e u d a l c h a r a c t e r [ t o the Ki ng j . " 2 3
In the t i t l e issued by the Spanish e u t h o r i t i es s e v e r a l
poi nts were s t i p u l a t e d t the worth—price—-of the encoti
which should not be aoro than f i v e thousand pesos per year
to the Sftcoaead»r.o and a thousand to t h e King) the number of
Indians in the encoaieada or r e p a r t i t i o n — t h i s was labor
f r e e of payaent, t h a t i s , they were enslsved by the
20
I t was a o e r c a a t i l i s t i c i m p e r a t i v e . See d o u g h and
c o l e , op,. ci|.... p. 103 f f« See also the chapter on
M e r c a n t i l i s n In t h i s paper Chapter I I .
""^See Si so, 2JI. c l t . » 7 t 107-108,
Ib i u . , p . 160.
2
h M C , . p. 167.
94
eacoMitf txierot aad t h e " d l e K a o s " - - d u t i e s e f 10 per c e * i t — i n
f a v o r of t h e d o e i r i a e — - t h e C a t h o l i c f a i t h . ^ 4
The ea^oaleada was also a r e l i g i o u s i n s t r u o e n t t o
spread Catho l i c f a i t h * * " '
The Or.d.enanzas tic Burgos (Royal
d i s p o s i t i o n s ) a t i l i * « d the encomlendg as a means t o teach
the Catholic r e l i g i o n to I n d i a n s . * ^
o»tco.'aitgfcd£ c o n s t i t u t e d a saetstire
On the o t h e r hand, t h e
p u b l i c o r d e r j at m
e a r l y t i m e d » r i a g t h e e o l o a i z a t i o n , groups of Spanish
t h i e v e s - - w s i tily s o l d i e r s — p l u a d e r e d gjaall l a d i a n v i H a y e s
t o s t e a l food and s u p p l i e s .
T h e r e f o r e , Spanish a u t h o r i t i e s
t r i e d t o 'jroup s c a t t e r e d I n d i a n t r i b e s under t h e organiaa~
t i o a of e a c o t a i e a d a . ^
The e n t e r p r i s e o f c o l o a i z a t i o n was supported p a r t l y by
t h e Spanish Crows aad p a r t l y by p r i v a t e i n d i v i d u a l s .
For
both the s t a t e ead i n d i v i d u a l s , the p r i n c i p a l end was t h e
search xor g o l d ,
l a t h e case of p r i v a t e i a d i v i d u s l s , a
c o n t r a c t between them and the s t a t e was r e q u i r e d , aad was
2 * l b i d . The o b l i g a t i o n s o f Enaoaqadtre w o r e i a) t o
p r o t e c t I u d i ans ogai nst i aj a s t i c e because o f t h e i r i g a o r a a c e ,
b) t o s e t t l e l a d i aas i n an a g r i c u l t u r a l tow 3, c) t o rjive
C a t h o l i c i n s t r u c t i o n s t o l a d i ens aad t o b u i l d a chapel of
s t o n e , d) t o o r g a n i z e the domestic government, a c c o r i i i ay t o
the S p s n i t h s o c i a l Xsm-s, e a p h a s i z l n y p a t e r n a l fouthority,
c) to make t t i e s obey s o c i a l r u l e s , f ) to d e s t r o y t h e i r w i l d
custoraa and i n c l i n a t i o n s of t h e i r precediag l i f e ,
In addit i o n , t h e Ordonaazes do Buryos d i c t a t e d (Law I , to t i e
eaoftaenderos t h a t nv«ry I a t i i an iocsi l y should have a ssiifflll
piece of land t o c u l t i v a t e products f o r t h e i r own s u b s i s t e n c e . )
" ^ ' I b l d . , p . 162.
I b l u . » pp. 162-163.
^ I b j d . , p . 163.
95
called cBPltuleclon. 2 *'
This contract stipulated that the
coaqulstauores would receive "cortain honors and benefit# 1n
t!i©
new lands
The ia.j$ioaes was another institution which aided the
formation oi Venezuelan agriculture,
However, the tnsin pur-
pose of the mlsioaes »ts to popularize the Catholic
®«©it§ !«itlaes.
In other words, It wis a proeeas of trans-
culturation, naaely, the substitution of a type of religious
v a l u e — I n d i a n polytheist religions—for the monotheist type:
the Catholic religion.
The Catholic uograa^0 is based on
the teaching of an anthropoaorphic power which rewards or
condemns human beings according to their behavior, namely,
according to pre-established patterns of behavior.
Thus,
cetholic dogma is theocratic and the only representatives
of such a power are the Pope In Rome and priests.
Priests
taught Indians obedience to a hierarchy of powers t
God,
the Pope an-J priests, the Spanish Ki a<j with divine power,
end his representatives—-the Spanish authority.
The priests
eaphesized the patriarchal structure, the authority of the
f ether.
p. 160.
29
Iblci.
sJx* >
Tawney, ££.
PP« 1-83. See els®, Janet,
Bl.at.ftire. de Selene.# Pelltigue dans sea rapports evec 1®
morale. He says that the sovereign authority belongs to God,
who dictates laws aad commands kings and dictators.
Quoted in Siso, oj>. cit.. I, 205.
96
From the econoaic st&ndpoi nt, the institution of
developed 8 cotamunel sense of p r o p e r t y .
Conacos
SSSSSMlS, 31 constituted en interesting trial of cooperative work.32
The economic regime of &1sioneg l a agriculture
consisted of a mixed system of absolute community
end free labor, individuals of both sexes that
formed the "Pueblos de Indios,N were obliged to
work l a the "Coouco de C o n u n i d a d w h i c h belonged
to the people of the town, several hours daily end
the rest of the tiae to cultivate their own
conuco.33
On the smell conuco the inhe ^ r ants grew black beens
(caraotas), yaca (e type of tuber siailar to potatoes),
large bananas (pletanos), bananas, cotton for their own
needs, and also raised horses, swine and chickens.
Siailar products were cultivated on both the large
and community conuoo.
The crops were stored in convenient
depots, called barb.acoes by the I n d i a n s .
products were used i s times of drought,
Those stored
The priests
taught new methods of cultivation ana brought seed from
*11
Siso, ojg.. olt., 1, 219.
cultivated by @ family for its
coauco de eo»»ald®d is larger,
community for its subsistence}
it may be bartered for surplus
34£
Loauco is a portion of laad
own §tl£~§ai»gistimce. The
is cultivated and owned by a
however, in case ox surplus,
of other oosaunities.
fae (Bust remember that the Christian doetrfce is not
betaa on egotism, but rather on the concept of j u s t i c e -
p r i c e s and wages--as well as cooperative work and communal
ownership—similar to e monastic*! economy.
^ % t s © , j|&, cit.. 1, 219,
34
Ibid.. p. 220.
9?
Europe,
"fbi® progress transformed the economic structure of
the country.
Production
It has bean pointed out tSist the aboriginal inhabitants
of Venezuela were of two type*i
collector* and sedeattries,
The second group had a higher stage in the cultural process
8nd had developed—as discussed above—a rudimentary economic
structure.
In the new phase of econoraic development in the
veuezuelau territory, namely, tbo colonial stage, the
Spani arus hcti to create a new economic framework on the
consideratiun that the primi tivo Indian economy aided them
very little io such a task.
"His first intention was prob-
ably the creation of an economy of consumption on the basis
of the seeds and animals imported from Spain and by means
oi the utilisation of louian labor that ^uve little yield
i« the beginning."*^
However,
3 5 Ibld., pp. 220-221. Cf. Alex Seingrod, "Administered
Communitiesi Some Characteristics of New Immigrant Villages
in Israel," Economic ® ® v e M m ® ^ t m A CaHmiM.
. XI,
Number 1 (October, 1962), pp. 69-84. It is interesting to
notice thBt these communities in the modern Israel, called
aoshav. have a similar organisation to that of the Pueblos
Indies in Spanish America more than four centuries ago.
". , . the aeshav is a farming community whose organizational
principles combine the family-based production end consumption with community-wide fi nanci al and agro-technical
cooporation. . . each family lives on its o»n lend . . .
[but ] the land belongs to a national authority and car.not be
sold or subdivided . . . the !i i r i«g of labor is prohibited,M
p p . 70-71•
relleao-Moretio, ££,. cit.. p. 166 .
In spit© of the rudimentary economy of the Indians,
i t titled the conquist&dores, who used their canoes
to move f r o a one piece to another, and consumed pert
of the products cultivated by the Indians, as well
as what they obtained in fishing and hunting»
Large
quantities of pearls and gold, which were pert of
Indien property, passed into the hands of the
conquistadores. xith this they obtained ships,
weapons, horses end food in the markets of Santo
riorsi nco unci S p a i u. 37
Tike ilrsi thing that m v » 4 til© conquistador®# In America was
the search for |^reclo'«6 metals arid peer It
«Bd as a result
of this the territory was explored, routes el traffic were
opened, and finally, agricultural wealth was c r e a t e d . ^
These golu sines and peer1-Lreeding places contributed to the sett lenient of permanent urban
centers of Castillians in Venezuelan lands{ these
urban nuclei permitted in their t a r n the diversification of Venezuelan economy. Close to those
mines and pearl-breeding places, aany towns originated , a any of then: had en ephemeral l i f e . , .
but, i a general terns , when the ai ni ng economy
had vanished, the agricultural economy, which was
already developed. allowed the continuation o f
urban settlement
The Spanish Crown received a duty called the quinto.
the fifth, i'toa nil the yolti exploited,
The gold produc-
tion of Venezuelan foundries from 1529-1610 I s
shown in
Table I.
j7
l b M , . p. 166.
uV
l b | d « , p. 16?.
39
Ibid.
40
IMA'
* n 1530 the pearl export was estimated as
2,000,000 duros (approximately three ai1lion dollars).
99
TABLE 1
THE GOLD ruouUCTION IN V E N E 2 U E M
FROM 1329 TO 1610*
fconotcry Halts ««
Year
1529
1530
1531
#
*
«
#
•
,
. . . .
1 , U 6 pQSOS, 2 to^ittes
p e s o s , 6 toaittga
p e s o s , 6 tomi nes
1532
1533
1534
1535
1536
1537
*
»
«
p e s o s , 6 t o m i n e s , 3 graws
*
*
»
«
1536
«
» » « . »
pesos
<i f 2o3 p e s o s # 4 tomi nes
tomi nes
pesos j,
•••
p t s t f # 4 t o a i n e s , 9 yrams
pesos* 4 timings
pasts
p*80f
peso*
1564
1565
1566
1567
1568
1569
1571
1583
pesos
pesos
p#i#S
pesos
pesos
pa s o s j, 6 r e a l e ®
1584
1587
1590
1591
pesos
fits# §
pesos
1596
pesos
pttsos
pesos
p e s o s , 9 r e a l s of fine gold
pesos
319 p e s o s , 22 tomi nes 0 graaoft
pesos
1599
1600
1602
1605
1C06
1610
•Source j
Arellano-Moreno f o & • .gTI fc»
j I « 169.
••The "peso <ie minae"—golii cot a of 22 carats--11 parts
of fold and 0110 of copper.
Its weight was 4,018 grams of
gold. The peso tie taiaas was the unit of exchange from the
conquest to the third decade of the sixteenth century.
See
Roberto Moll, Leccloatis de Economfa Vftaegolaaa (Caracas,
1956), p . 95.
***For unknown reasons there are no data during the
Arellsno-Boreno, ££. clt..
gsp of 26 years (1539-1063)
p. 169.
100
v'eceatt#!®. mm r e l a t i v e l y p o o r l a yolU i n c o m p a r i s o n t o
r e r u en-si C4axioo.
T i t u s , 4b® «l#©llu© l a g o ! 4 p r e U u e t l o a b o y e e
©bout 1 6 0 0 , i t r e v e a l e d I n t h e above t a b l e .
r e d u a u e a c y ami r e p e t i t i o n ,
Despite
I t must b e s t a t e s ! Again thet t h e
p r i n c i p a l M o t i v e of t h e S p a n i a r U s Cor e x p l o r i a$ America was
Its# l u r e of p r e c i o u s s e t e l s .
Other e c o a o a i c a c t i v i t i e s were
t h e c o n s e q u e n c e of t h a t m o t i v e .
F o r t u n a t e l y , »b«a [ V e o o a u e l a a ] a i n e s Uia not c o r r e s p o n d t o t i e e a g e r n e s s of t h e S p a n i a r d s , t h e
c o l o n i s e r ' s work had begun t o t t a b i l i s e a ad a
t i i v e r s i f i e U economy o p e n e d up mw p r o s p e c t s t o o u r
territory* , . .
At t h e e x p e n s e of t b e b i r t h ana f l o u r i s h i n g
d e v e l o p m e n t of a g r i c u l t u r e end c a t t l e , a s o c i a l
c a s t e a r o a e w h i c h , s u p p o r t e d by t h e f i r s t laotf
a p p o r t i o n m e n t f oaoogtlentiaa 1. p l a y e d a s l a p o r t e n t
r o l e in colonial l i f e . 3 1
' g r i c u l i u r e and c a t t l e r a i s i n g d e v e l o p e d f t o m t h e v e r y
a o a e n t of t h e e s t a b l i s h m e n t of t h e u r b c o s e t t l e m e n t s .
To
i l l u s t r & t e i!j# p r o c e s s of c o l o a f c a t i o n i n f i g u r e s , m
e x e a p l e I s f l v t u by O e a i e l E e a u o s o i n t h e c o l o n i s a t i o n of
the Llanos*-plains,
I n 1530 C r i s t e b e l Hodriyues. t o o k
e i g h t e e n p r o g a a n t cows, t e o s e r e s ,
s a d two h o r s e s , and s s
a result,
, « . t w e o t y - x i v e or t h i r t y years l a t e r , t h a t i s ,
i n t h e l a s t t h i r O of t h e s i x t e e n t h c e n t u r y , t h e r e
w e r e i » G a a r i c o ana p u r e f s t a t e s of V e n e z u e l a n
plain.
See Map 4 , f»» 16© S, ft* a v e r a g e of t w e l v e
t o f o u r t o e n t h o u s a n d head of l i v e s t o c k , h a l f of
t h i s n u a b e r f 7 , 0 0 0 } w e r e h o r s e s and d o n k e y s . 4 2
41
i M £ « # PP. 171-172,
42
xi>ia.. p. i?4.
101
l a t h e middle o f the seventeenth century there were
137,600 head o f c a t t l e on the Venezuelan plai ns
Cattle activities In Gueyans, the southeastern pert of
Venezuela, were also very important.
Jaiguel Marmion esti-
mated that there were in that region 220,000 head of cattle,
of which 160,000 belonged to the Capuchin monks and the rest
to private i ndividuels
Agricultural production varied but one product predoainated in sucoessive periods, first tobacco, later cacao,
and so on.
At a setter of fact
. . . the Venezuelan econooy, since the beginning of
our history u n t i l the present tiae » a y be divided
into large periods characterised by the preponderance of one type of production, which nay define
Venezuela, for those who like generalizations, as
a aonoproducer country.*5
Gold and s i l v e r were the principal aims of the co
tadores.
However, cattle activities were important all the
time during the colonial period, along with other farm production.
ferbeps one of the reasons for monoproduction i s
found in the d i c t a t e s of the . a e r i c a n ^ and internationel
43
Relacion
Iti g . n « l w ( m §j\ let lasting para Su
Archivo Real de Arichunc.} (This report surveys
fourteen hatos.) Hato is « word that Is equivalent to
ranch. -A raacho in Venezuela means "shack." Quoted from
/"rellano-lftoreao, £g,. cit.. p. 175,
44
,*rellano-lloreno, oj>. cit., p. 179.
(June, 1786) is rather descriptive.
Maraion'a report
45
Eduardo Arcila-Farfas, "Evolucion de la Economfa en
Venezuela," in Mariano Picon-Sales and others,
Indettendientc. 1610-1960 (Caracas, 1962) , p. 345,
^Throughout this paper "Aoerican" Is used in the real
sense of the word, and not the mi snomer concerning one country,
102
aarkets.
•<»© cnjr i c u l t u r a l product was s o r e developed than
o t h e r s in order t o t a k e advantag® of t h e e x p o r t , 4 ^
•Vhoat was exported f r o a 1579 u n t i l 1701.
Since 1619
t h e c u l t i v a t i o n of wheat ha«i been d i s a p p e a r i n g f o r two » a f »
rossoas J
f i r s t , t h e i u t e n s i f i s d c u l t i v a t i o n of tobacco ;
aecOi. i , t h e e r o s i on of the Andes mount oi ns where wheat was
<jro«a.^ 6
eud t h e
C o n s e q u e n t l y , i t became n e c e s s a r y t o import wheat
k )rice
of breaa r o s e . ^
Sugar, was an export item d a r i n g ©olesiisl t i n t s ? in 1717,
114,126 k i l o g r a m s were e x p o r t e d .
From 1719 t o 1786 e x p o r t s
o s c i l i s t e d between 4,000 end 2,000 ki lew-rams, with a tendency
to dirsi nish .
Tobacco.—This* product a s r l s d an iraportent s t a g e i n
t h o p r o c e s s of development of the c o l o n y .
/rellono-Moreno
i ndiceted the following f actors that influenced the c u l t i v a t i o n of t o b a c c o :
f i r s t , i t s f a s t y i e l d ) second, h i g h e r
p r i c e s ana m u l t i p l e a a r k e t s j t h i r d , t h e f e e t t h a t i t was
c u l t i v a t e d by I n d i a n s b e f o r e Spaniards c a s e t o A m e r i c a . 5 1
^ D a r i n g t h e c o f f e e or cocoa p e r i o d , r e s p e c t i v e l y , one
of t h e s e p r o d u c t s was s i g n i f i c a n t i n t h e i n t e r n a t i o n a l t r e d e .
4fe
A r e l l e a o - l o r e B § , 0£. c i t . , p . 1«1. / r e l l a n o ~ « o r a n o
mentions t h e socond cause in a g e n e r a l way. He <loes not
mention t h e a c t i o n of e r o s i o n as « caus® of t h e p o v e r t y of
t h e rndes l a n d s . C u l t i v a t i o n on t h e s l o p e s of t h e h i l l s led
t o r a p i d e r o s i o n when no p r o t e c t i o n was b u i l t . C f . J o r y e All
Casanova, £&& P l a n l f i c a c i o n d e l ifedio Eural ( C a r a c a s , 1956),
pp. 7 - 9 .
^ T h e p r i c e of bread i s 1619 was t h r e e ki lograms f o r
one r e a l (67 r e a v e s equal a marco of s i l v e r ) , A r e l l a n o Moreno, op. c i t . , p . 161.
50 I b l u . . p. 102.
51
I b i d . , pp. 162, 163.
103
'"•« has been s e i u , labor was a problem both i n quanti~
t e t i v e and q u a l i t a t i v e a s p e c t s .
However, in the e a s e of
t o b a c c o , labor was already o r g a n i z e s for the Indians c u l t i vated i t and used i t to smoke and f o r medicine.
In the
b e g i n n i n g , the use of tobacco was censured by both the
p r i e s t s and the a r i s t o c r a c y as something from the d e v i l . 5 *
Perhaps, because of the c e n s u r e , i t s use spread u n i v e r s a l l y }
i t i n t e n s i f i e d smuggli ng by both the Dutch and the English
in Spenish America***®
The most important f a c t s in r e l a t i o n to i t s productiou
were i
1.
The Real Cedula (Royal Law) of August 26, 1606,
which p r o h i b i t e d the c u l t i v a t i o n of tobacco in t h o s e areas
a c c e s s i b l e to contraband.
2.
The e f f o r t made by the Spenish governors i n Flanders
to monopolize the Venezuelan t r a u e .
3.
In J u l y , 1621, the Spenish Crown t r i e d to monopoli ze
i t but t h i s i n t e n t f i l l e d .
4.
The estatsco or monopoly e s t a b l i s h e d in 1779 f o r
f i s c a l purposes was f i n i s h e d in 1632.
For that reason the
Spanish t r e a s u r y r e c e i v e d 700,000 pesos f u e r t e a per year
(1,000,000 d o l l a r s ) . 5 4
r 2
' f»ic6n-Salas and o t h e r s , og,. c l t . , p. 347
53
f . r e l l a n o - l i o r e n o , ©£. c l t . , p . 163.
54
Ibld.
104
The e x p o r t
of
t r a d e i s tobacco dated f r o ® the lest years
tli® sixteenth century.
From s e v e r a l
original
sources,
Arellano-Moreno found the following eaouots correspond!ng
to the export of tobscco.
T/ELE II
AMOUNTS OK EXPORT OF TOBACCO CORRESPONDING
TC SEVERAL YEARS*
Year
amount per year in Kgs.
1605
1606
1607
1615
16201654
(34 yrs.)
•Sourcei
5,291
42.5
17,900
42,155
156,000
Price per errobe
in reales*®
1.3
a. a.
2
U.S.
a. s.
Arellano-Moreno, ©&, cit.. p. 184.
••^n a r r o b a is equivalent to 11.5 kgs., sod a r a i l m m
34 marfeveciias. a aaravedi had 0.0094 grass of gold. In
present currency there is approximately half a bolivar or
17 cents of a dollar.
la 1731, 4,052 arrobes (55,796 kgs.) were exported at
40 reeles <20 bolivars or 6.6 dollars) for oach orrobs.
Kroa 1701 to 1731 the export of tobacco was as followsi
105
TABLE 111
AMOUNTS OF SIPCSf yf TOBACCO CORRESPONDI86
TO S6VESAL YBAKS*
Year
Amount per year in Kgs.
1701
1700
1711
1714
1717
1724
1726
1731
•Sourcei
Price per errotet
in reales**
49,105
401
299
4,600
23,701
5,359
13,096
55,798
32
32
40
24
40
10 end 32
46
40
/rellano-Moreno, ££. clt.. p. 184.
•tThe.sftne as in Table 11,
From these data on the cultivation of tobacco two
important things car* be noted t
first, the irregularity of
productionj for example, in 1701, olsaost 49,105 kgs. of
tobacco were exported and la 1700 auti 1711 401 and 299 kgs.
(there are no sources for the iateraealate years).
Is true for other years,
been fount! by any author.
The taste
as no statement on this matter has
?hi« seems to be an outstanding
character!stic, probably for these causesi
clandestine
production end export, inaccurate statistics, and leek of
organization in cultivation.
The second characteristic to be noted consists in the
rise in price,
<\n arrobs of tobacco for export in 1605 had
a price of a reel and a half$ by the middle of the next
im
century i t
had osci1lftteu b e t w e e n 40 and 50 reules.
This
rise was tins largely t o t h e i n f l o w of g o l d from American
colonies.
Cacao .—Later on, the l e a d i n g product was cacao.
How-
ever, the production of tobacco did oot disappear completely;
the substitution wee gradual, but it was no longer an export
product to support the Venezuelan economy.
This fruit, cacao, was the most solid foundation of
the Venezuelan wealth during the colonial period and
still in our day has an Important place in the volume
of export [more accurately, in the volume of agriculture export. which when compared to the oil export
is very little]. Cacao, together with corn and
potatoes, constituted one of the contributions of
the New World to the old one. . . , This product was
spread through Spain and Europe very fast unti1 it
was an item of first need for consumption. Thanks
to the production of cacao, the destiny of Venezuela
changed from relative poorness, in relation to other
eolonies at that time, to a prosperous agricultural
colony.
Bore precisely, in economic terms, the cultivation of
cacao gave "employment to thousands of s e t t l e r s ,
prestige to
egriculture, regularity to trade [irregularity of trade was
the characteristic before, as has been mentioned previously],
55
See Clough end Cole, 0£. clt., pp. 126-129.
also p . 10 of this paper.
See
^Eduardo Arci la-Jr arias, "Evolucion de la Economia de
Venezuela," in [email protected] ladependi.eate. 1610-1960 by
Mariano Pie6n-Salas and others (Caracas, 1962), p. 346.
Today the situation is different. Between 1952 and 1959
the percentage of oil export In relation to the total export
osci H a t e d between 90 end 95 per cent. And the share
corresponding to agriculture, for the same period, was
between 3.4 and 1.4 per cent. Kemoria (Caracas, 1959),
p. 203.
107
ami [soeicl; power to c c I r s s which aionopolizeU It by ami
lsrge."
There Mere several factors which contributed t® the
arrival of
the economy of cacao, thot is, the economy based
mainly upon the production of cacto.
first wag the active i nternaticn&l trade in cacao.
In
1631-1632, 2,000 fenoges (p. fanega hsg 2,220 squere inches)
were shipped to Spain end Mexico.
The largest export tiuri ng
the sevunteenth century corresponded to the year 1603, that
is # 23,470 fencgagj the; best price tluring the iaiae century
was 320 reeles' per feneya in 1660.
It oust be pointed out
that sixty years be-fore, the price was %
rutiles
per fanega.
This iacrecsse wes not steady but wes interrupted by cyclical
fluctuations
Second, the excel lent quality of Vcnezuel&n cecco ,
which w88 superior to others i n Spenish i-raorics, like that
of Peru and Coloabi a, contributed to the stimulation of
the Venezuelan production.*^
Third, thet £act led authorities to protect Venezuelan
cacao, prohibit!ng the shipping of Peruvian cac»o to Nueva
Ispsia (Mexico), thus reserving thet eree to Venezuelan
caceo.
In that way treue wes monopolised.6*
r.j
/re 11ano-Horeno, op. clt.« p. 185.
S0
Ibid.. pp. 165-167.
r)9
60
Ibiu.
61
lbio.. p. 185.
IbiU., pp. 185-186.
iOti
fourth, in addition to tills protectionist policy discussed o«i the precedi n£ paye, there was as extension of the
duties called alctoi art fezco» that is , duties on iaport and
export o f Venezuelan tobacco sent
to fhteva Espaiio and
Spsi
I;i suiaffiary, tbaal'3 to the interventionist policy of the
:?.paai#ii government a ad the eaUov«aent of nature, Venezuela
became an iwportaut center sf cacao production in Spanish
.Hierieu until the end of the eighteenth ceatury.
In order to illustrate the significance of tlie production of cacao oao must consider its total vol tin# of export
in oi'g'ity years Uariag the seventeenth century, thot is,
batteeos 1620 uad 1700,
Ouriay that period^** 357,766 i'anegas
were skipped to Mexico, 71,505 to Spain and 5,991 to other
places.
I» other words, a total exportation of 435,332
faaegas, without taking lata consideration the clandestine
traffic, was carried on.
Cl&variaya estimated that in 1720
the annual production of cacao was 76,123 fanegas, from
which 63,433 were exported and 3,690 ware consumed i»
Venezuela.^
62
I b l d . . p. 187.
63
lbld.
edro Jose tie C levari aye, I&strucciea general v
^articular del estaUo presente de 1a orovlncia de Venezuela
a i t t M t t t e M l M .
O u o t e ^ i n l b i d . , p. 187.
109
l a 1749 the production of cacao was estimated bstwuoa
120 f 000 sad 130,000 fanegas.
No control iaformation was
s v o i l a b i a ©a cacao pro«l«ef,I.o», ©aiy sporadic data.
Oa the
other haa4 f there iias also no reeor-J of c l a n 4 e s t i a c export *
However, by corapillfs*; several sources, i t can be seid that
during the -aiadle of the ei{?&toaath eo-ityrj there was an
nr.,!5*rujo •>C '.0,000 fn;-iog.'is ox;wrtou aajjasUy,
This a»at>«at
jialdfK.l 3,i» m i l l i o n pesos <f«a? nUH->a O l i v e r s or nera
t!iao osici m i l l i o n dollar# In
carroncy).
That amount
entered yonesuela i « aoasy a»4 goods', '.jfcich a.oant s real
aarniag for both producer* .am! t r a 4 0 * 8 , ^ a
As stated b e f o r e ,
labor -«as not .fresj workers roiaaincd la s s t a t e of slavery
and were oaid mostly l a goo.ls.
T!io employment of labor
i n c r e a s e ! aa«* by 1720 i t was ©stieatea that 10,000 Negroes
£ £
were working on tho ONE,BO fart-is.*-'
The production of cacao put l i f e into the economy, a ad
i t was the mala caase bahiad the f o l l o w i n g f a c t s
inten-
s i f i c a t i o n of trade aa« devtlopwent of a Venezuelan soaiaercial
navy; forsiatioa and str«agfc!s£Hiag of a c l a s s or landowners of
cacao f')tns (haciaaoas do cacao)—*t&ey were c a l l e d the
:;raRUes Cacaoai 0 0 advent of the woaey econoiay which In turn
65'i rollaao-Eoraao, op. ciJL., p. 186.
66
Ibid.
67
7be»e are mentioned i i t h o u t ooaiaeai in i b i d . . p. 139,
&
i a general, the c l a s s of
Spanish s e t t l e r s who received
of the Crown, namely, the
eneotalenda. See p. 94 above.
^0«e a i s t reraeaiber t h a t ,
landlords stems f rosa the f i r s t
much land ead s l a v e s on behalf
encoaeaderos who received the
110
f a c i l i t a t e d mare p r o d u c t i o n and t r a d e e n d
f i n a l l y , the
e s t a b l i s h m e n t of t h e Compatila Gulpuzcoana or t h e c o m p l e t e
monopoly of Venezuelan t r a d e .
I n d i g o . — I n t h e e i g h t e e n t h c e n t u r y two p r o d u c t s were
i n t e g r a t e d i n t h e Venezuelan a g r i c u l t u r e s
i n d i g o and c o f f e e .
The f i r s t one was known s i n c e t h e d i s c o v e r y and e x p l o i t a t i o n
f o r c o m m e r c i a l p u r p o s e s i n 1770,
I n d i g o was u s e d as c o l o r i n g ,
T h a t b r o u g h t a b o u t t h e c u l t i v a t i o n of
t o complement t h e t e x t i l e i n d u s t r y .
l i n e n and hemp i n o r d e r
I n 1786, t h e i r p r o d u c -
t i o n of i n d i g o amounted t o 3 0 8 , 3 8 0 p e s o s p e r y e a r ( o n e p e s o
i s e q u i v a l e n t t o one d o l l a r t o d a y ) .
t o 1 0 3 , 0 0 0 p e s o s i n 1790.
The p r o d u c t i o n d e c l i n e d
This value r o s e to 874,822 pesos
in 1793.71
I n d i g o was i m p o r t a n t b e c a u s e d i v e r s i f i c a t i o n i n a g r i c u l t u r e was d e s i r a b l e i n o r d e r t o o b t a i n economic s t a b i l i t y .
However, such d i v e r s i f i c a t i o n was not a c h i e v e d b e c a u s e
S p a n i s h m e r c a n t i l i s m d i s r e g a r d e d t h e p r o p e r p l a n n i n g of t h e
economy of t h e c o l o n i e s »
The main i n t e r e s t of t h e Crown was
t h e s e a r c h f o r go Id and t h e i n c r e a s e of r e v e n u e s by t a x a t i o n
I n order t o m a i n t a i n i t s b u r e a u c r a c y and i t s d e f e n s e p o s i t i o n
.
72
i n Europe.
^ M o n e y economy wi11 be d i s c u s s e d l a t e r i n t h i s p a p e r .
70
T h i s m a t t e r w i l l be commented on b e l o w , p . 120.
^ A r e l l a n o - M o r e n o , op. c l t . . p p . 1 8 9 , 190.
™ C t . Herbert J . M u l l e r , Freedom 1n t h e W e s t e r n Worldt
From t h e Dark Ages t o t h e R i s e of Democracy (New Y o r k , . 1 9 6 3 ) ,
pp. 1 7 6 - 2 3 3 .
Ill
M a n u f a c t u r e . — 3 p a i a wc* not I n t e r e s t e d In d e v e l o p i n g
manufacturing a c t i v i t i e s i n I t s colonies .
Mining p r o U u c t i o u -
e s p c e i a l l y of y o l t i , f i l t e r nnd c o p p e r — w a s t h e f i r s t p r e o c c u p a t i o n of s p e i a i n
'aeries.
Leter, far reasons already
u o t e u , c a s e a g r i c u l t u r e , B e c a u s e of t h e l a c k of s k i l l e d
l a b o r and t h e a b s e n c o of equipment on t h a one h a n a , and oil
this o t h e r h a n d , t h e l a c k of a s u f f i c i e n t consumer m a r k e t i n
t h e c o l o n y , t h e d e v e l o p u c . i t of t h e i n d u s t r i a l t e x t i l e s was
•Jif f i c a l t . ^
However, t h e aim&uence »f rfcu- m a t e r i a l s , e s p e c i a l l y
c o t t o n c u l t i v a t e d by t h e I n d i a n s , suci t h e naeu Tor c l o t h
tfcet S p e u i s h p e o p l e e a p e r i a s i i t e U w i t h , u a d e a l i t t l e t e x t i l e
production possible.
From 1599 t o 160? t h e f o l l o w i n g amounts of o r d i n a r y
l i n e n c l o t h Mere p r o d u c a c .
TABLE IV
FKWJOCTIOR OF mvimm
u$m
CLOTH IN VSNE^UEL* ,
FOR 1599, 1600, 1605 aad 1607*
Year
. taount of v a r a s Cl v e r a » 3 f e e t )
1599 . . . . . . . . . .
1600
1605
Z/Q
1,125
1607 . . . . . . . . . .
^Source:
'ifC
8
/ r e l l a n o - M o r o n o , o£. c i t . ,
t h i s p a p e r , pp. C 9 : f .
T/
. - y e l l a f a o - s i o r s n o , oi>, c i t . , p ,
'iSiia
192,
p. 192.
112
From 1599 t h r o u g h t h e f i r s t
tentury,
y e s r s of t h e s e v e n t e e n t h
l i n e n was useti as money f o r p r i v a t e t r a n s a c t i o n s and
f o r t h e r e l a t i o n s with t h e Span!sh T r e a s u r y . 7 6
«0 accurst©
d a t a a r e a v a i l a b l e on t h e t e x t i l e p r o d u c t i o n of th e r u s t of
the seventeenth century.
Concerning the l e s t
y e a r s of t h e
e i g h t e e n t h c e n t u r y , T u l i o f e b r e s C o r d e r o consente«i as
follows;
The g o v e r n o r , J o s q u i c i'riaiv de Hi v e r a , i n i t i a t e d eai*
e n c o u r a g e d i n S l a r e c a i b o t h e c u l t i v a t i o n of c o t t o n ,
w i t h such s u c c e s s t h a t i n 1790, 200 s p i n u i n g w h e e l s
were u s e u end menuf a c t u r i ng bui l d i ugs were c o n s t r u c t e d
i n v)hich p o o r g i r l s eat! d e c r e p i t o l d p e o p l e w o r k e d .
i\s a m e m o r i a l o£ t h a t p e r i o d , t h a t g o v e r n o r was
c e l l e d t h e f a t h e r of t h e M e p u M i c .7«
S h i p i n d u s t r i e s were l o c a t e d i n t h r e e i m p o r t o a t p o r t s t
La G i t a i r a , P u e r t o C e b e l l o and M a r a c s i b o .
Several iouudries
were e s t u b l i shed t o ©fist cetinous uod b e l l a f o r c h u r c h e s . 7 6
The a d v e n t of t h e rconev e c o n o m y . ' — ' a p r e v i o u s l y d i s c u s s e d , t h e p r i m i t i v e econouy of t h e I n d i a n p e o p l e wus
p r i a e r i l y e g e l f - s u f f i c i e n t ecoao.uy.
T h e r e was m a n i f e s t a -
t i o n of a m a r k e t e e o u o a y , b a s e d p r i m a r i l y on b a r t e r
sedentary Indian groups.
, in the
As a s e c o n d a r y h e l p i n t r a d e ,
c o m m o d i t i e s , " m o n e y , w as w e l l as g o l d were u s e d .
some
During t h e
S p a n i s h p e r i o d t h e Market econouy we® o a a 1 n which b a r t e r was
very i x p a r t a n t .
elt!io«ch t h e i r
7G
lbid.
77
Ibid.
7 b
Ibi4*
}
Gold c o i ns a c r e used i a t r a n s a c t i o n s
a u a b e r wits a o t s u f f i c i e n t t o s a t i s f y t h e n e e d s
p.
193.
us
i,
Ih.\i shiTv to an s a t i r e aoayy eeoncmy trorc a
cRowwy we.> a slofc pr*?c"«ss.
^'urtherMoaro, <Juri'».j- t h e
X i r s t ptirioCl o ! t h o roprt!>Ii<5 b a r t e r was s t i l l used i a goal®
r e g i o n s of Venezuela (Llanos)
The r e a s o n s bohlad t h i s slow p r o c e s s of ehaayiua t o a
)5t»ney economy wyres
. , , t h e a t t r c a n t i l i st p o l i c y t j e s i o u s y of t h e exoaus
of money from Spain t o I t s c o l o n i e s , and t h e t s r u y
organi z a t i o n of t i e Venezuelan p r o d u c t i o n . Neither
wss a saint e s t a b l i s h e d among u s , except & coin t o
isark gold ingots,, and e t h e r d i c e to i s s u e copper
c o i n s and o t h e r cruu e m e t a l s . L o g i c a l l y , a l l t h e
amounts oi gold and s i I t e r found i » t h e t e r r i t o r y
were s e n t t o Europe where they were r e g a r d e d as t h e
e s s e n c e of wealth,®®
The us a o.f marked p i e c e s of gold in commercial t r a n s a c t i o n s r e p r e s e n t e d a s t e p forward it on b a r t e r , but t h i s
occur rati during t h e e i g h t e e n t h o e a t a r y wlwn r/ioaoy economy
was mnve d e v e l o p e d .
The axpausion of p r o d u c t i o n
brought
about i n c r e s s c l a s p e c i a l i z a t i o n , ttfeieh r e s u l t e d ii» i n c r e a s e d
t r a d e aa-i ! a c r e a s e . i use of saoney.
€ •
v a r i e t y $£
|
-snu s i l v e r c o i n s were used.***
taar sveujf bo came t h e a o n o t a r y u n i t .
Tht
The p u r c h a s i n g power of
t h a t now«tary y.ii t .ievkluatou with t i in e , d«e to a p r o c e s s of
'
79
XfaiU., p . 231.
m
M M - » PP. 232-233.
^ o b e r t o S o i l , Leccio ues Ue Ceoiiosaf a do Venezuela
( C a r a c a s , 1944), pp. $4-101. The marco de JLja Colonl a"""hatl
230,0675 gyesas of gold) t h e aaraved'l h'ad .0094 g r a s s of
g o l d , t h e C a s t e l l e n o was worth 480 to 490 taaraveufes j peso
de ml oas correspond©*! to 480-490 mar a v e u f e s .
114
rxry
i Dilution, sad not to a change la the value of gold, ^
In
other words, curi ng colonial times e person with a ki logrssi
of
yold bought more things then a republican (a citizen
Uuring the '«©public of Venezuele, soy in 1840) could buy
oo
with the same amount of the precious aetal.
The amount of tuoney in circulation duri ny the colony
was icsrca in relation to the needs of the market, due to
reasons already discussed above.
Consequently, the Spanish
Government in Venezuela took several measures to impede
the exotius of money
Spenisli Sercasti lista
Spsni sh r,iorcantilist tendencies ivtre asnli'esteu la
Spai n from the thirteenth century on.
These actio ns were
/ r e 11 a no-.'^ ore no , op . cit. . p. 242.
va
lbit]. « psrepliresiay as example ci teu by 'rollanoUoreoo.
k^Ibiu.. p. 245. The measures were! 1) To permit the export of goods only under couditions of being paid with money
enu not with merchandise; 2) To free of export duties money
from abroad. 3) Export money only under license (pure
mercantilist measure),- 4) In 1804 the already generalized
as© of bills of exchange was encouraged, and others of
less importance. When Venezuela rose to political independent life, the money situation was aggravated with
issues of fiat money by the government. See, Kelici ano
I'acani ns , Evolucl^n Dencarla ea Venezuela (Caracas, 1962).
That author says that the first bank decree was made in
1825, but it failed due to the scarce circulation of money
and' the poor situation of the economy. After Many banks
were created, both private and national, they failed because
of political instability. ;fter 1920 the economic situation
was better for banks. In 1940 the Banco central, a government institution similar to the Federal Eeserve Bank System
in the United States, but with more power, was founded,
pp. 18f £ ,
115
aiaiiiiy h u l l i o n i s t .
prohibited
of
126(1, f o r i n s t & t t c e , A l f o n s o A
t h e e x p o r t o x y o l u and s i I t e r . "
the Cortes,
export
t h e old
laws i n
of m o n e y , out- C h s r 1 e a V r eacwed and e x t e n d e d
1520,
century,
1524,
enu 1 5 3 4 . L own I n t o t h e
Speiu e o u t i f t u c u her e f f o r t s t o cheek or
prevent
t h e e x p o r t of
but
o i i o r t s were ut.svai l i a s
all
e v e n of
*V,t t h e r e q u e s t
> e r i i i nanu 1 s t t e . a p t e u i n IH-1& t o s t o p t h e
Illegal
eighteeuth
"In
p r e c i o u s m e t a l s by d i r e c t
logisistion#
s i a c e t h e » e « 4 * oi' t r a d e
saa
r o y a l f i n a n c e loU c o n t i n u a l l y tit j; v r e i a si' iaer«ey
i'roffi t h e c o u n t r y .
" U n u e r I e r d i nanti cnu I s a b e l l a
and C i l e r i e s
V, r e p e a t e d
a t t e m p t s w e r e a g « e t o e n c o u r a g e S p s n i sh i n d u s t r y by l e g i s latioR,
E x p o r t of r e * m a t e r i a l s wss p r o h i b i t e d
heart
Spanish niercenti l i s t
of
i n i t i t e r ttal b a t r a t h e r
t o b e fouaci n o t
i n colon! al p o l i c i e s .
p r o b l e m was how t o c o n t r o l
empire,
policies "is
Its
TSie
Spei n * s y r e o t
suduenly gained c o l o n i a l
and p a r t i c u l a r l y t h e e m p i r e * s t r e a s u r e of
silver,
so as t o b e n e f i t t h e h o m e l a n d oad i n c r e a s e i t s w e a l t h ,'c"?
The b a s i c p r i n c i p l e
af t h e S p e a i s h
t h e u b s o l u t e power of t h e k i n g .
d i r e c t l y on h i?a a no w e r e r u l e J
acloi ni s t r o t i o a was
"The c o l o a i e s depended
by hius much as
i £ thoy
»f*i **5.
seporste
countries
Ia«ijh
a6
en« ColE,
I f e | g > . p. 207.
07
m
Ibid.,
um.
^'bicb bo was t h e monarch.** 0 '*
p. 200.
OP.
CIT.»
p.
206,
v, e r e
1 It
The B a s i c Legal S t r u c t u r e i*£ the Spani sh
Mercautilisra and I t s Instruments
The r e c o a p i l o t i o n of the Leves de l a d l e s c o n s t i t u t e d
the base of p r i n c i p l e s which o r i e n t e d t h e l e g a l o r g a n i z a t i o n
of t h e S p a n i s h power i n .mericB.
tilist
I t s content i s ciercan-
in t h e s e n s e of i n t e r v e n t i o n ana c o n t r o l , and with
some medieval p h i l o s o p h y of * j u s t l c o , M ^ ^
The l e g i s l a t i v e
p r i n c i p l e a p p l i e d i a t h e s e laws was t h e f o l l o w i n g *
"every
s i t u a t i o n was s o l v e d t h r o u g h r o y a l u i s p o s i t i o n s ( c e u u l t s
r e a l e s ) , which were enacted by t h e King, and l a t e r t h e y
acquired t h e c h a r a c t e r of coaaaion law, w ^O
Joequfn Gabeltion Marquez, a Venezuelan h i s t o r i a n
s p e c i a l i s t i s t h e t e r e s de Iitdias* wrote t h a t t h e y were a
" v a s t l e g i s l a t i v e monument, comparable t o the g r e a t e s t end
the most n o t a b l e of the U n i v e r s a l F : i Q h t . " T h e s e
laws
o r i e n t e u t h e ecouonic t p o l i t i c a l s end s o c i a l a c t i v i t i e s of
.bpaia i a (-u-aerica.
mercanti l i s t
The p r i n c i p a l i n s t r u m e n t s of t h i s
l e g i s l a t i o n were t h e €oti$®ie de I n d i e s , t h e
Case de Contratacion Ue S e v i l i e . ana t h e Consulado.
The
heau of a l l of t h e s e l e g a l o r g a n i z a t i o n s was t h e King,
^ % f . Thomas Aquinas* "Suama T h e o l o g i e s , " i E a r l y ^
to Auaa Smith. e d i t e d by Arthur Eli Monroe (Cambridge, 1 9 5 1 ) ,
p p . 5S-TT, Monroe commented t h a t Aquinas M never u i s c u s s e d
economic s u b j e c t s a b s t r a c t l y , but always i a c o n n e c t i o n with
l a r g e r problems of e t h i c s o r p o l i t i e s , " p . 5 2 .
90
tooron, 0 £ . c l t . , p . 193.
^ J o a q u i n tabeldors viarquez, Fuero l«u!
quoted i n i b i d . » p . 194.
11?
El Conae.io d% I n d i a s — T h i s depended d i r e c t l y upon t h e
Crown, i t s
it
c o m p e t e n c e c o n c e r n i n g t h e Xndiens was uni v e r s a l .
was t h e h i g h e s t t r i b u n a l l o r t h e S p a n i s h ^ a e r i e an i s s u e s .
T h i s C o a s e i o was t h e d i r e c t i n s t r u m e n t of t h e Crov»n f o r
f i nanclol
e«d a d m i n i s t r a t i v e proxies-is.
C o n t r a t a c i o n was t h e g r e a t r e c i p i e n t of
^erica,
Thus t h e Cesa de
a l l r e m i t t a n c e s from
ami t h e C o n s e io. de I n d i a s a d i r e c t i u s t r u r a e n t of
t h e S p a n i s h Crown, which b®t« t h e f i n a n c i a l d i r e c t i o n ni
revenues.
I t had t o a p p r o v e a l l
all
t a x a t i o n and e x p e n d i t u r e . * ^
" comment Must ue raoue on an i m p o r t c n t procedure'i
asiento.
which was © c o n t r a c t of
the
an gdmi ni s t r a t i ve ki nd by
which an i n d i v i d u e l was o b l i y e t i fay t h e S t a t e t o a c c o m p l i s h a
d e t e r m i n e d t a s k , w h e t h e r he p e r f o r m e d a p u b l i c s e r v i c e or
private enterprise.^3
i n such 8 c o n t r a c t t h e S t a t e was
r e p r e s e n t e d by t h e C o n s e.l o ,
La Cas^ de C o n t r e t a c l o n de S e v i 1 1 a . — t f i th t h e p u r p o s e
of r e g u l a t i ng e l l
d e t a i l s r e l a t e d with t h e t r a d e between
S p a i n end Speai sh A m e r i c a , cn org ai:i x e t i o n ,
C o n t r a t a c i o n , we$ c r e a t e d i n 1 5 0 3 .
Seville first,
ebolished,94
t h e Cos a de
I t was l o c a t e d i n
then l a t e r in Cadiz (1717) .
In 1790 i t
The law of c o n t r a t a c i o n s a y s :
To e s t a b l i s h i n S e v l l l a a s t o r e h o u s e In rchi ch a l l
m e r c h a n d i s e and n e c e s s a r i e s c e n be s t o r e d f o r s l l
€K«
" T louyh a«U C o l e , ojs,, c i t . . p,
92
£MA<*
p. s s .
^ o r o s i , ££« c i t . ,
p.
176,
wes
lie
tiae needed, in order to provide all the necessary
.things for trade with the Indias [^merice ] and the
other islsnd$,^°
Professor listing cef ined the Gas a de Contretacion in
this ways
Si nee that moment | 1511 ! the Case de Contrataci&u
v« cs definitely not £ firm open to the private
boaefit of tii© Crown, but a department of the
Government, a school ©i navigation, a nit a custom
house to the colonial trade."6
This organisation had the function of treasury for the
go ver niaent, for it received ell taxes levied ok merchandi se,
settled all conflicts related to commerce, and administered
inheritances from Speniards who died is the Indies.
It ^as
elso en advi sory body for the Crown on legislation related
to the c o l o n i e s . I t
was called "Heal Mudi enci a" and also
"Case de Contratacion."
The Cssa de Contratacion was a court of justice of high
grade in two fields — crime and co.araerci al conflicts.
The
Gas a de Contratacion *es au organization of creditors
initially, and later became a complex organization for
atuainiatr&tion, advice end judgment.
But tit© final authority
remained i a the Conse t& de Indies , ^
/o
Moll, op. cit., p. 47. This author quoted from Las
Urdanaasaa de la Casa de Contratacion« Seville, January 20,
1503.
(Translated into English from early Spanish.)
^ V « o t e d in ibid. « p. 50,
97
I b i d . , p. 51,
**%1 Consulado acted frora 1504 but was legally established iii 1524. See ibid.. p. 52,
119
S X ^ o a s u i a a o was s o o t h e r a d m i n i s t r a t i v e o r g a n i z a t i o n .
I t s p u r p o s e was t o r e s t r a i n p e r s o n a l i n i t i a t i v e i n o r d e r t o
b e n e f i t t h e community, sod t o p r o t e c t t h e i n t e r e s t s of a l l
a e r e h e s t s over t h o « e of e tingle
one.
The Consulado sought
a " j u s t d i s t r i b u t i o n of p r o f i t s " amony a l l m e r c h a n t s l a
t h e second p l a c e t h e Consulado a c t e d ©s t r i b u n a l of commerce
snd s h i p w r e c k s .
T3esides, t h e Consulado bs sb arirai n i s t r s t i v e
o r g a n i z a t i o n took c a r e of i n s u r a n c e , s h i p p i ng, c t c .
It
a p p e a l e d , as d i d t h e Cess de C o n t r s t a e i o n , t o t h e ConsoJo
lie I n d i e s , and r e c e i v e d some d u t i e s i n o r d e r t o e f f o r t i t s
expendi t u r e s .
11 of t h e s e o r g a n i z a t i o n s — L e Case <Jo C o n t r s t a c i t f n ,
C0Bsej0 U© I n d i e s , 8 8d SI Consulado*—sere i n s t r u m e n t s of
i n t e r t r e a t i e s ami c o n t r o l of t h e government i n economic
activities.
fcae
tsust keep i n mlna t h a t Spain* ®s o t h e r
European c o u n t r i e s , was i n t h e m e r c G n t i l i s t s t a g e .
This
d o c t r i ne sought s t r o n g s t a t e power in o r d e r t o u n i f y t h e
nation.****
Furthermore,
. . . t h e e s s e n t i a l p r i n c i p l e of t h e Spanish ndmini s t r a t i o n wes t h a t t h e c o l o n i e s s h o u l d not ask a n y tliing of t h e m e t r o p o l i , b a t on t h e c o n t r a r y , t h e y
s h o u l d e n r i c h i t , f o r i t was d e c i d e d not t o spend
a n y t h i n g oa i t s c o l o n i e s b e c a u s e t h e i r r e s o u r c e s
were devoted t o t h e needs of p u b l i c powers and t o
pay t h e a d m i n i s t r a t i v e s a l a r i e s ,
"ibid.,
p. 62.
* ° ° I b l d . , p. 63.
*®*5ee C h a p t e r I I I i n t h e p r e s e n t p a p e r ,
102
H o l l , 02.. £ i t . ,
p. 52.
120
Trade l a t e r v e a t i o a . - — F r o a 1503 to 1790 t h e Cssa ue
on, l o c a t e d i o 5evi i l a , S p a i n , r u l e d t h e t r a d e
between t h e I n u i 88 end S p a i n .
rionopoly was t h e base of t r a d e
both tiuring t h e R e i s e r p e r i o u and a f t e r w a r d s .
The main p u r -
pose of t h e Crown, as was brought out e a r l i e r , was to e x p l o i t
the colonies completely.
The Venezuelan c o l o n i a l t r a d e had t h r e e important
11*| «
**
1,0 4
markets i i a t e r a a l t r a d e between p r o v i n c e s i s v'enesuele;
t h e iraUc between Venezuela ana t h e "vest InUies } a ad i i t i s l i y ,
d i r e c t t r a d e with S p a i n .
.. z'oarth tvs£e should he taeationeU,
t h s c l a a u t j s t i a e t r a d e between t h e c o l o n i e s mid £nglan<l,
Holland ai'iti o t h e r Duropean c o u n t r i e s .
The c l a n d e s t i n e t r a d e
1 CI ^
yenei i t t e u t h e c o l o n i e s and i u j urev. t h e Speni sh i n t e r e s t s .
LB Cotapa^fa Guipuzco&na
The e s t a b l i shaent of t h i s Compeufa in 1728 r e p r e s e n t e d
a p o i n t of d e p a r t u r e of a n o t h e r s t a g e In t h e h i s t o r y of
t r a d e between Spain and Venezuela—the C a p i t a a e y of Venezuela.
B e f o r e t h e Cotapefif a Gulouzcoana. t h e raain comraerci a l
p r o d u c t s were g o l d , p e a r l s , s i e v e s , c o t t o n , c l o t h i ng, l e a t h e r ,
c a t t l e , t o b a c c o , end cacao,
d u r i n g t h e f i r s t y e a r s of t h e
e i g h t e e n t h c e n t u r y t h e p r o d u c t i o n and t r a d e of Span!sh
,(''.faeries was week ©s a consequence of t h e Succession "iar.
10 " S o r o n , op. c i t . .
p. 179*
10«?| t@ cap! tancy of Venezuela was i at e g r e t eu by s e v e r e !
proviaces .
p.
179,
Ill
T h u s , Venezuela at that tirae suffered a decline of agricultural production., &r.u s h e was a victim o f p i r a c y .
The
Spanish Crown c o n s i d e r e d the n e c e s s i t y et improving that
situation and thus on September 2f., 1 7 2 6 , t h e Besl € o taps fife
Cuipuscocuna was esteblishee by Koyal uecree with the p u r p o s e
o£ monopolist By ell the tre.de of Venezuela. *****
The Cotapafajfa's obligations sec-re, first, to exterminate
shmyQ 11
| second, to furnish V'e»eK«ela with g o o d s i*rou
Spain, au<* to t a k e the Venezuelan p r o d u c t s to Spain.
To
end smuggling the Coat* a life bed to patrol the Venezuelan
coasts or«U t o p e r s e c u t e pirates.
T h e Gulpuacoana contributed to t h e iapro vetaent of the
econosy,^® but its exaggerates monopoly iaaae it richer aa«l
crested reactions against it, and consequently against Spain,
on the part of t h e Venezuelan landowners and Negro s l a v e s
lv6
lbid., p p . 1 8 2 - 1 8 3 . C f . Arellano-fcorena, 0£. clt.,
p p . 2 5 1 - 2 6 7 . T h e Comp,?iifa Qujpuzcoana Mas organized w i t h
shares owned by business aea in Spain end Venezuela es well
as by t h e S p a n i s h Crown.
S e e Hor6n, ©£. cit. , p. 183.
Moros, ag.. cit., p. 103.
•^Ketween 1741? cacs 1749 the Cmapcuiifo exported 171,202
fano^as of cacao, eatf the Creole b u s i n e s s eeis. 255,024.
T h i s demonstrated the fact that the Cotapasfa. despite its
powerful c o n t r o l , die not produce iaprovement in t r a d e as
some writers have affirmed.
The traffic with Vera Crust,
M e x i c o , acs not saonopo lized by t h e Compaiifa. and It w a s
very import ant.
Prices declined and this hurt Venezuelan
landowners and sranl1 f e r m e r s .
trading with Vera Cruz.
They balanced their loss by
122
gad M e s t i z o s .
The landowners were t h e f i r s t ones to r e v o l t
a g a i n s t Spani sh a u t h o r i t y , as © r e s u l t of t h i s monopoly. *^9
The C o n t r o l of Spanish Government in t h e
Venezuelaa Econoay Ourlug
C o l o n i a l Times
t h i s c o n t r o l was ;BBnif e s t e d in seven f i e l d s :
1.
2.
3.
4.
5.
6.
B u r e a u c r a t i c adrai ni s t r a t i o n
yrice regulation
R e g u l a t i o n i n t h e di s t r i b u t i o n of u t i l i t i e s
Export c o n t r o l
R e g u l a t i o n In the d i s t r i b u t i o n of food
Control in i n d u s t r i a l a c t i v i t i e s
7.
D e l i m i t a t i o n of c u l t i v e t i o n e r e c t s . 1 1 "
The m u n i c i p a l government (Cabildo or Avuntaraiento)
appointed an of f i c e r c&lleu t h e F i e l E.lecutor. who was in
charge of e n f o r c i n g t h e law.
£raong h i s f u n c t i o n s were:
to
©heck t h e q u a l i t y of a e r c h a n d i s e i a s t o r e s , t o cheek s c a l e s
according to t h e o r d i nances of weights end m e a s u r e s , to
impose f i n e s on o f f e n d e r s of t h e lew, to imprison o f f e n d e r s —
in e s s e of absence of p o l i c e or guard at t h e given moment of
t h e o f f e n s e , end to t a k e c e r e of t h e supply of f o o d s — t o be
s u r e they were in goad, c o n u i t i o n and f a i r l y p r i c e d . * * *
^ ^ r e l l a n o - l & o r e a o , op. c i t . . pp. 167f f , di scusseu on
s e v e r a l pages t h e c o n t r o v e r s i a l views of s e v e r a l e u t h o r s
about whether t h o s e r e v o l t s produced o g s i a s t t h e monopoly of
t h e company were t h e e r a d l e of t h e iauependence which o c c u r r e d
i a til© second decade of the next c e n t u r y . He a r r i v e d at t h e
c o n c l u s i o n til at in f a c t they were t h e cause of the g e n e r a l
p o l i t i c a l d i s c o n t e n t s t t h e beginning of t h e n i n e t e e n t h
century.
110
11
l b i d . , p. 318.
* I b i d . , p . 319. Other e s s e s i n r e g u l a t i o n t >pri1 14,
1590, t h e p r i c e s of wise were s u b j e c t t o r e g u l a t i o n . Thus,
when i t s p r i c e was e x c e s s i v e - - e c c o r d i n g to t h e judgment of
a u t h o r i t i e s — i t s s a l e *as f o r b i d d e n ( I b i d . , p . 3 1 9 ) j shoe
123
The Cabi M o
through the Fi el Si ecutor« regulated prices .
They had to bts "moderate," that 1 &, they had to be .last.
For
instance, in April, 1590, the price of seat we* fixed, en
arroba (23 pounds or 11,502 kilograms) at fifteen grains (e
grain is equal to .049923 grasis) of flue gold.
i'rice r emu-
lation performed by raunicipcli ti es favored the consumers.
But that performed by the monopoly of the Coapefifa
Guipuzcoana. which consisted in aaintaia!ng high prices in
spite of the increase la production, was for the purpose of
benefitting the Company,
The m&xiaun of profit that businessmen could obt ai a
from re-selling was regulates! by the ordinances promulgated
in 1589.
The ordi nances permitted
a profit of twenty-five
per cent on those goodt transported frora the port of L® Gu&irB
to Caracas, except for w i n e , vinegar, oil or olives which had
a higher margin of
p r o f i t — 3 3 per c e n t — d u e to the risk
Involved in transportation. 1 1 **
There were occasions in which the Csbilao monopoli zed
the distribution of goods for the benefit of consumers.
"In
1733, the faunicipality of Caracas was granted the exclusive
distribution of firewood, for the suloeros [retailersj of
the city wanted excessive p r o f i t s . " 1 ^
Consumers reacted
prices were regulated according to their quality, thus
prices ranked from .80 out of a dollar to 2.25 dollars
Cibid., p. 320).
11
-Ibid.. , p. 322.
1*3uealeg Cedulas. San Ildefonso,
guotud from ibid.. p. 324.
.ugust 26, 1733.
124
a g a i n s t t h o s e r e g u l a t i o n s whose p u r p o s e was e x c e s s i v e p r o i i t s
f o r p r i v a t e a o n o p o l i e s , but not u y s i u s t t h o s e r e g u l a t i o n s
t h e t f a v o r e d them.
Control of e x p o r t had two i a p o r t a o t p u r p o s e s .
First,
"to impede the a r r i v e ! of some r e s o u r c e s i n the hands of
sraugglers, such as mules which m u l t i p l i e d a l l over the p r o v i n c e , and *hich vtere usee f o r land t r a s p o r t a t i o n of
s m u g g l i n g , " 1 1 4 second, to avoid " s c a r c i t y of good supply
In a d d i t i o n to p r i c e r e g u l a t i o n t h e r e was c o n t r o l i n
the d i s t r i b u t i o n of goods d i r e c t l y to t h e consumers i n order
to avoid t h e i r s t o r a g e by merchants f o r s p e c u l a t i v e purposes.
R a t i o n i n g of food was a p o l i c y c a r r i e d out not only during
the f i f t e e n t h and s i x t e e n t h c e n t u r i e s , when rudimentary
o r g a n i z a t i o n of the ecotiouy p r e v a i l e a , but a l s o during the
1 16
s e v e n t e e n t h c e n t u r y , wh en the econoray v.gs raore developed•
the
o b j e c t i v e of government c o n t r o l in p r i v a t e i n u u s t r y
was the p r o t e c t i o n of consumers * r i g h t s ,
f o r i n s t a n c e , the
M u n i c i p a l i t y of Caracas—in i t s s e s s i o n of February 9 , 1594—
ruled that c o t t o n c l o t h produced i n Venezuela, had to be of
a "reasonable width."1
The p r i n c i p a l purpose in l i m i t i ng c u l t i v a t e d e r e a s was
to avoid smuggling.
Thet was the case when t h e c u l t i v a t i o n
of tobacco near sea c o a s t s wes p r o h i b i t e d .
U4
ibid..
U6
Ibiu.
p. 322.
The purpose was
ll5
I k i d . , p . 324.
U7
Ibid.,
P. 329.
125
•to f e c i l i t s t e
government c o a t r o l
of
clandestine
activities.
s e c c i i d a r y p u r p o s e for t h i s was t o control a g r i c u l t u r a l
1 If*
production.
lfrO'..i the above eoir.sonts i b o m
Speed sii control of
Venezuela, the 101lowing conclusions c a n be drawn.
the principal
First,
characteristic of the Spanish a t i m i t i l s t r a t l o n
i n . i s t o r i c u wc* t h e p r c s c - u c e o£ U c e n t r a l
a u t h o r i t y exortiny
SMI p o w e r f u l
complete c o a t r o 1 -an oconomic ana polit-
ical activities ana c&rryiay out a policy with a strong
flavor ox mercantili sib .
Second, t h e m e r c a n t i l i s t
t h e f o l l o w i ag p o i n t s :
cracy | r e g u l a t i o n of
philosophy was aanif©$t@d la
coatrol of t h e sUntini s t r a t i ve b u r e a u prices? r e g u l a t i o n
i n the d i s t r i b u t i o n
of
uti l i t i e s j
of
f o o d } control i a industrial a c t i v i t i e s j
of
cultivation
Third,
ment c o n t r o l
oconoay,
export contro1j r e g u l a t i o n i b the d i s t r i b u t i o n
and d e l i m i t a t i o n
areas.
t h o m a r k e t was a more t o o l w h i c h n e e d e d g o v e r n in o r d e r t o
namely,
achieve desired r e s u l t s
convenient
in the
d i s t r i b u t i o n o f g o o d s among
people.
Conclusion
The S p c u i s h s t a g e involved the s o c i a l
f o r m a t i o n of
V e u e e u e l a n p e o p l e and t h e e s t a b l i s h m e n t o f
a g r i c u l t u r a l wealth,
* * ^I b i d.
and c u l t u r e l
during t h i s
stage mercantilist
ideas
126
prevailed* manifested by central power end yo vernment cootro1
and p r o t e c t i o n
for the b e n e f i t of the Spanish Crown,
t the end of litis stage, i n 1799, the population of
1 19
Venezuela was 800,000, which was distributed as follows s
TABLE ¥
DISTRIBUTION OF THE POPULATION Of V£NEZUEL/.
IN DIFFERENT TYPES IN 1799*
Type of Population
/mount of
Population
libit© people bora in Europe . . . . . .
Sp a n i s h-™mer i c e n or Creole
- 11 mixed groups
Negro slaves
Pure Indians.
Total
12,000
200,000
406,000
62,000
120,000
800,000
•Source : Jos£ <Ji 1-tT ortou 1, "El iiombre y la Historia,"
Filo so f fe Constitutional oe Venezuela. Vo 1. IV of the Obras
Coapletas(Caracas, 1956), p. 341.
The above table shows the small proportion of Spaniards
In relation to the Creole population.
Most of the highest
administrative positions were be Id by the Spoaiarsii, while
taost of the Creoles wera landowners who ««re disturbed by the
heavy buruen of Speni sh taxes.
This situation uxplofas the
discontent among the Creoles, who, beiny e great proportion
of the population, conducted the nation into the Revolutionary
«ars(1610-1020).
* i ^There are no reliable dot a before 1799,
^ c C f . Moroo, op.. cit. , pp. 150-152.,
CHAPTER XII
T H E THIRD STAGE»
REPUBLIC, COFFEE ERa
Introduction
The stage, between 1610 and 1920, was slgnifleant
because Venezuela was politically i ndependent fro® Spai n.
uuri ny this period the Venezuelan economy was agri cultural;
coffee was the principal product.
From 1610, when Venezuela declared her independence,
unti1 1619 was a period of wars between Venezuela and Spain.
In 1(519 Siatfn Solfvar integrated the Viceroy of Nueva
Grenade, the Capitancy of Quito, and the Capit8ncy of
Venezuela into one nation-state eelled the Republic of Gran
Colombia.
In 1021 the inuepenaence of Gran Colorable was
accomplished anu in 1S2G xiolfver consolidated the independence of Feru and Liolivia.
In 1C30 ttolfvar died, ostrccized
from Venezuela, and the Grcn Colombia disintegrated Into
three republics, Colombia, Ecuador, and Venezuela. 1
Between 1C10 and 1830 the agricultural resources were
practically destroyed as e result of the Revolutionary Wars.
The process of recuperation was hindered by civi1 wars, or
more accurately, by a period of rest less caudi1li sao.
l
3 e e ibid., pp. 231-233.
127
In
128
this period cjovernment was imposed by COUP ci' et at. and by
electionery p r o c e s s . "
P r o s 1830 to 1659, General J o s 6 Antonio ptfea Rind the
tv<o brothers M o n a g c s w a r e the principal cauUi 1 ios alio ruled
Venezuela."
T h e federal '-.evolution ( 1 0 5 9 - 1 0 6 3 ) wes In
essence a social r e v o l u t i o n ; nouely, its p u r p o s e we* to
obtein equal r i g h t s for all c i t i z e n s ,
In l a r g e p a r t , t h i s r e v o l u t i o n was f r u s t r a t e d , b u t
reforms.
it
and to achieve a g r a r i a n
achieved
a social
s e n s e of
equ&litarian society.4
G u z m a n - B i a n c o ruled t h e n a t i o n f r o m 1 8 7 0 t o 1699.
r e p r e s e n t e d a gooa example
were p o l i t i c a l ,
of
mercantili st p o l i c i e s j t h e r e
economic and s o e i e l a c h i e v e m e n t s .
After
Gu2tfl@n~0lanco came J o a q u f n C r e s p o who KCS o v e r t h r o w s
of w a r ,
minister
country
for
Juan
Vicente
fie
Goraez.
twenty-seven years.5
la
Goiaez r u l e d
by
his
the
1 9 2 0 p e t r o l e u a activ-
begp.n, end t h i s brought a s u b s t a n t i a l change in
ities
Venezuela's e c o n o m i c - s o d b 1 s t r u c t u r e .
mo-iernr
Each
ia
1T9T foenuel Q u e I
Bud J o s e fcicrCe Sspa£® otg&aizeu
the most import eat revolt cjfci n*t Spain before 1810.
revolt was saushed by the Spanish a u t h o r i t i e s .
The
h o w e v e r , this
revolt had the s i g n i f i c a n c e o f presenting a g o v e r n m e n t a l
progrens whi ch was considered later, I n 1810.
T h e p r o g r a m , in
^See i b l U . , p p . 4 3 7 - 4 4 0 .
°Cf. ibid . , p p .
4
5cf.
Ibid.
ibid..
pp.
347-427.
427-452.
129
c broad s e n s e , contained the following p o i n t s i
(1) Spanish
ships admitted under c o n t r o l sad i n s p e e t i o n ; (2> a b o l i t i o n
oi s l a v e r y j (3) suppression of soue t a x e s ; (4) /roeuoin to
c u l t i v a t e and to s e l l tobacco; (5) opening of Venezuelan
p o r t s to a l l markets of the worldj (6) encouragement of
a g r i c u l t u r e , i n d u s t r y end t r a d e ; (7) p r o h i b i t i o n of t a k i ng
sway go Id and s i l v e r , except to pay f o r war goods—this
measure showed a f r e a k b u l l i o n ! s t o r i ent at ion j (G) s o c i a l
e q u a l i t y among c l a s s e s and d i f f u s i o n of man*s r i g h t s which
was i n f l u e n c e d by the French devolution.* 3
The Junta Suurema. which was the f i r s t o r g a n i s a t i o n of
Creole government created when Independence was declared in
lfclO, s e t up the Socieaad de A g r i c u l t u r e £ Sconoaia. and
d i c t a t e d measures s i m i l a r to the program of Gual and Sspatia,
namely, freedom of t r a d e with f r i e n d l y n a t i o n s , suppression
of some t a x e s , ana Ireedora l o r vagrant and vi l l s i n o u s people
7
who were l a j a i l la order to l e t t h e«a work i n a g r i c u l t u r e .
This l o s t measure hud a strong
raercantilist
flavor.
curing the wars f o r independence t h e r e wes i n f l a t i o n
due to i n s u f f i c i e n t production and the i s s u e of f i a t money.
"Within f i v e months a f t e r Congress was i n s t a l l e d , i t enacted
the B i l l of /uyust 27, 1811, according to General Miranda's
suggestions.
That Law authorized the i s s u e of one m i l l i o n
r e l l a n o - K o r e n o , op. c i t . , p. 419.
7
I b i d . , p. 420.
130
pesos fucrtes [Bs. 5,000,000 or lis. 1,500,000 approximately]
In bills or eedulas of 2, 4, 6 or 16 pesos.
la 1612 the effects of two years of wsr were:
CD
stag-
astioa of sea trade and International traffic? (2) emigration
of taoney (gold) to Curasao-—iiuteh islsaci close to Venezuela
end other places) (3) decline of production) (4) excess issue
of fiat money by the revolutionary government sad rise In
prices; {5} scarce and expensive labor because nost of the
sea wore
enrolled in the Venezuelan end Spsoish armies.
A§
§ consequence of these facts, finsnci11 benkruptcy c em e. ^
as previously stated, in 1799 the population of Venezuela
•was estimated et 6 0 0 , 1 » * .
to ICC,GOO, tbst is, the
1$)£5 tbo population decreased
population was 701,63s. 1 1
resulted fro© tlie wars for independence.
This loss
Fourteen years
later the total population reached 944,932, which was distributed
as shown in Table VII.
This distribution had political and social significance.
f
ccording to the Constitution of Venezuela of 1830, Vene-
zuelans were those "free men born in the territory of
Venezuela."**
^Ibid., p.
la other.words, slavery couti nued, the
424.
^Ibid., p. 421.
^ J o s e bi 1-i" ortoul, filosoi'l'a Constituclonal. Vol. IV" of
(Caracas, 1956), p. 841.
1
A u g u s t ( n Codazzi, ubres Esoootaas (Caracas, I960), I,
256.
lfa
uiis«is PicoB-nivss , Iadiee Consti tucional de Venezuela
(CarECas , 1944), p. £95.
- -
131
colonial nobility di sappeareu, but the "ce«tert of landowners
replaced it,
TABLE VI
DISTRIBUTION OF TUB POPULATION OF VENEZUELA
IN 1839 INTO ETHNIC GROUPS*
Number of
Inhabitants
Ethnic Group
Jbites (Creoles aad
Mestizos (different
Negroes . . . . . .
Indians . . . . . .
foreigners) « . . .
mixtures) . . . . .
. . . .
. . . . «
fatal
•Source:
260,000
414,000
49,000
221,000
944,332
Mor4a, ££• cit.. p. 357.
The economic resources of the nation were depleted as
a result of the wars for Independence.
Therefore, the
Congress of 1830 approved (September 23) the contract of
an i nternal loan of 200,000 p e s o s . ^
Between 1880 and 1846
there was a tendency to economic recuperation due to right
measures of the government, like the internal l o o n — e n d sot
external—contracted by the government| the formation of the
Sociedad Aaiaos del Pais (1836), which oriented the public
©pinion of the country toward a controlled-market economy.
In 1830 the public revenues produced 1,666,170 pesos.
In 1631 there were 1,551,000 pesos, *bich represented a
l3
fcoronf oj>. cit. . p. 3Sfi.
l4
Ibici.. p. 359.
1
| t?k
d e c r e a s e of 115,170 p e s o s .
There *as a d e f i c i t both y e a r s ,
l a 1832 t h e p u b l i c revenues were as shows in t h e Table below.
TABLE VII
PUBLIC
VENEZUELA ON JUKfi 30, 1632
(in pesos)*
Sources
"aoaat in i-esos^m
Customs . .
I n t e r n a l Revenue#
Tobacco
£} 1 1 .
1,150,99?.?I
246,92£.S6
. .
llfi,644.Oe:
' ) . 1 (i
.| U ITotcl . . . . .
1,331,750.01
i e s i d u e of p r c c e a i ny yecr . . .
9S,71£.0l
Total
1,625,462.62
Public expenditures
Residue
•Source:
1,423,773.40
201,609.30
Mor^n, op. c i t . . p . 359.
*c." peso i s equal to f o u r b o l i v a r s ,
3.33 b o l i v a r s .
r- d o l l a r equ&ls
/•dffli n l s t r a t i o n of the Mo a eg as.—From 1847 t o 1657 t h e
two b r o t h e r s lloaagas governed t h e c o u n t r y in a d i c t a t o r i a l
way.
I'uring t h e i r sdiai ni s t r a t i o n t h e © b o l i t i o n of s l e v e r y
was d e c r e e d ; t h e autonomy of t h e ujunicipal power was c r e a t e d ,
and c e p i t e l puni shaent f o r p o l i t i c a l r e a s o n s ues a f c o l i s h e d . * 6
Tosses r o l e n c o - H a r t f n o z s y n t h e s i z e d t h e e d a i n i s t r a t l o n
oi t h e Monafjas bs a p e r i o d of s t s ^ n a t i c ^ i'rm
t h e economic
s t a n d p o i n t , a period oi* a d m i n i s t r a t i v e d i s o r d e r , end c period
15
m£-
16
I b l d . , pp. 371-372.
133
Q £ "person a l i e u " froia s h e p o l i t i c a l poi nt of vi ew. ^
As a
r e s u l t of t h e s t a g n a t i o n sad t h e conx used a d m i n i s t r a t i o n , t h e
p u b l i c t r e a s u r y hsU a u e i ' i c i t of o v e r 4 , 2 0 0 , 0 0 0 p e s o s and
t h e p u b l i c debt r e s c h c i 25 m i l l i o n p e s o s .
The F e d e r a l R e v o i u t l o a sod Guzui&n-Oloaco
The idoK of f e d e r a l organization steamed f r o a 1611 when
til© f i r s t
Venezuelan s t a t e was e r e c t e d .
lem* t h a t t h e n a t i o n had £aced
discontent.
The sconoaiic p r o b -
u n t i 1 1859 c a « s « a p u b l i c
Thus, some p e o p l e t h o u g h t t h a t f e d e r a l o r g a n i -
z a t i o n could s o l v e the p o l i t i c a l
and economic p r o b l e m s .
In
o t h e r w o r d s , " p o l i t i c a l p e r s o n a l ! s m H end "extreme c e n t r a l i s m "
i n t h e government were t h e c a u s e s of t h e f e d e r a l d e v o l u t i o n
(1859-1663).19
However, o t h e r w r i t e r s contend t h a t t h e r e e l c a u s e of
t h e F e d e r a l R e v o l u t i o n was a s o c i e l o n e .
The Venezuelan
p e o p l e were f r u s t r a t e d b e c a u s e p o l i t i c a l
i n d e p e n d e n c e did
not mean " s o c i a l f r e e d o m , " end " e q u a l i t e s o c i a l " f o r them.
B e s i d e s , t h e r e were few r i c h end many poor p e o p l e , o r ,
putting i t
i n modern economic t o r u s , t h e r e was g r e a t d i s -
p a r i t y i n t h e d i s t r i b u t i o n of n a t i o n a l i ncome.
T h i s was t h e
o p i n i o n h e l d by Leuresno V f i l l e a i l l a - L a u z , s s o c i o l o g i s t ?
17
/
>
Tomes Polanoo-Martlnevs, Esboso Sabre l a H i s t o r i s
Economics Venezolano ( n a d r i d , 1960) , I I , 2 2 0 .
l ^ I b i d . , p. 214.
i
% o r t S a , oj£. c i t . ,
pp. 3 9 0 - 3 9 1 .
134
L i s a n d r o nlver8do , s h i s t o r i sn; and Rotaulo G a l l e g o s , a
writer.^
Ezequiel ~a«aora was the leader of the p e a s a n t s , the
"motor" of the R e v o l u t i o n , cod Juan C. Falcon wes the i n t e l l e c t u a l leader who governed the n a t i o n u n t i l 1868.
Unfor-
t u n a t e l y , the " s o c i a l r e v o l u t i o n " was betrayed l a " p a l a c e
negotiations.*
trated .
Once more the Venezuelan p e o p l e were f r u s -
However, a l e g a l "facade" of s o c i a l e q u a l i t y paved
the way f o r f u t u t e s o c i a l achievements
/is a consequence
of the r e v o l u t i o n , t h e economy of the n a t i o n was weakened.
T h e r e f o r e , Falcon c o n t r a c t e d a loan i n London of four cud a
h a l f mi 1 l i o n p e s o s — o f which the n a t i o n r e c e i v e d only 1 . 5
million.22
Falcon was overthrown by Guzman-Bianco i n a m i l i t a r y
coup.
Guzm^n-Blenco governed the nation d i r e c t l y m a
P r e s i d e n t and I n d i r e c t l y through puppet P r e s i d e n t s from 1G70
t o IOCS.
During h i s t e r a i n o f f i c e the f o l l o w i n g p o i n t s
were accomplishes*:
enectsaent of the lev/ of p u b l i c aiui com-
p u l s o r y e d u c a t i o n f o r a l l c i t i a e n s j e s t e b l i s t u n e n t o£ c i v i 1
m a r r i a g e — b e f o r e that time a r e l i g i o u s ceremony was the only
requirement j enactment of the law of freedom of r e l i g i o n j
r e d u c t i o n of the power of the C a t h o l i c Church—which
•^Laureano V a l l e n i l l a - L a n z , C e s a r i s a o Democratlco
(Caracas , 1961), pp. 196-197 . Lisandro Alvarado, 111storia
ue la Revolucldn Federal en Venezuela (Caracas, 1 9 0 9 ) .
Kooulo G a l l e g o s , Pobre Xearo (Caracas, 1 9 3 7 ) .
O 1
/
**See below Guzaan-tUanco.
" H o r d n , QP. jjJLi** PP• 4 0 3 - 4 0 4 .
135
constituted "a state within a s t a t e " — G u z m a a - B l a n c o was
obliged to expel Jesuits from Venezuela.*^
The adraioistration of GusmSn-Clsnco was effective. "The
coffee production i ucreased, and its price was g o o d H ® r i y
public works were undsrtaken, end the public administration
was organised according to "modern patterns."
The Univarsl-
dad Central wes organi zed j new faculties and laboratories
were added.
In 1G73 e census of the population was taken
and it reaches! 1,784,194 inhabitant 8.
A credit institution
was organized is order to raise money to pay the d e b t . ^
I :i brief, the GuaaGn-fslanco adrai ni strati on was a serious
attempt to organise Bad piaa the national economy within the
f r ataework of a ruled market.
In other words , Gusnaa-Dlanco' s
adainistrutioa was a good exoople of enlightened moreentilis®,^
Castro and Gomez
From 1898 to 1935 two dictators governed the country.
They represented an unfortunate journey into the hi story of
Venezuela.
Cipriano Castro came to the presidency by a
iailitary coup end governed the nation between 1696 and 1908.
The economic situation in Venezuela was difficult because
2 Z
m£*>
P • 412.
^4Ibid .
•^'fcuzraan-Ulanco governed the nation indirectly through
other Presidents from 1870-1688.
la this period of indirect
influence by Guzraan-Ulanco, the efficiency of the adrai ni stratlon decreased, and ess a result, the economy of the
nation was weakened.
See ibid.. r»p, 4c0-424,
136
of a fall in the price o* coffee 1 «i the international
raarket,
In 1900 the public debt was
109,578,000 bolivers.
fall la the price of coffee brought
production aitti that in turn caused
The
shout 8 decrease in its
@ substantial decrease
in the national i n c o m e . ^
T A B L E ¥111
N/.TIONAL INCOME OF VENEZUELA
S E W S Ah FISCAL YEARS*
Fiscal Year
Notional Income
d o thousands)
1896-1697
.
1097-IC90 . . . . . . . . . . . . .
1698-1699
. . .
1C99-19QC . . . . . . .
•Sourcc:
IS
4 8 , 3 1 3 bolivars**
33,429
40,000
27,296
M o r o n , op. ci t. , p. 4S2.
**Une boliv«r is equal to
.33 dollars.
The economic crisis hindered the payment of the external
debt of the nation,
this produced an iinternational conflict?
England end Geroany demanded payment of the debt end threatened to take over the nation.
Castro had e nationalist
spirit and avoided the danger of e foreign imperialist
sion.
Inva-
Finally the situation was sett led between Venezuela
and the nations making claimsf the debt was oorapletely paid
O7
b y Go li b z *
A
~ M o r o n , 0£. cjj,,,
p. 432.
27ibid„ . pp. 433-436.
13?
Jitaa Vicente dS&es rulei the nation fro a 1905 to 1935,
He 438 Castro's s i n i s t e r of war and took power by a coup
d'etat.
Twelve years later potrolaura a c t i v i t i e s started j
this ts-as a fast which changed the economic organization ol
the nation*
G&aea was a cruel d i c t a t o r , ignorant and cunning,
Uo represented a retardIns force la the economic evolution
of the country.
fie died in o f f i c e C1935) j nobody could
overthrow him.
The writer Jos6 Hafael Pocaterra said
about G6mez ia 1936:
"There, under the stono of his grave,
lie twenty-seven years of th« history of Venezuela ann one
of III© aiost extraordi nary lives that lias produced, with the
sost pal a, the conceptual disarticulation of an era." ^9
Co i i co
Accordim«j to Uu&beldt, the f i r s t coffee plantations
were cultivated ia IT64,
vith the purpose of stimulatioy
coffee production, the Spanish Crown granted an exemption
in export duties on that product.
Coffee would replace
cacao later on as the leading product.
I*tiring that period
the Importance of agricultural production had this ranges
cacao, indigo and coffee.-'1® In 1830 eo££o« held the f i r s t
place in both agricultural production and export.
28
Ia 1899
C*. i b i d . . pp. 437-45
Josl Rafael 1ocaterra, Obras Select as (Madrid*
Caracas., I9fk>) . Quoted in Mordn, o,p. o.it. - p. 442.
OA
.-.rcllano-Moreno, oj). c l t . , p. 190.
138
Venezuela occupied the first place in the production of
coffee In the world.
Humboldt indicated the amounts of coffee export for
several years as shown in
fable E.
T/.tiLE Ik
eXPOfIT OF COFFEE FOR SEVER L YEARS*
Year
/mount In Kilograms
1796
1604 . . . . . .
IC10
.
. . . . .
220,GCO
460,000
230,000
•Source:
Aiejaadro
Humboldt, Vi.aJ.6. 6 1,8.9. Etgjimti.
Equlnocclalas uel Na.ev.ft C.o,tttl.aeil.e (Ceroccs, 1941), quoted la
•rellano-Uoreno, oj2,. cit., p. 190.
There were several factors which contributed to the
development of the coffee economy,
first, coffee had the
advantage over cacao in resitting better the inclemencies of
the weather, for it was convenient to store,
This aspect is
very important to trade because farmers can wait to sell
their product at the most convenient aoraent. 32
Second, other very valuable land was brought into cultivation, as was the case in Los
of Venezuela.
*ndes, the western mountains
On the other hand those lands were "tired" or
worn out in the cultivation of cocao ana now the rotation of
crops iaproved the soi1.
ilbid.
32ibid.
z
hbid.
im
Third, coffee coulu bo culti veted at higher temper at tires
then could caceo,
Th!$ fact interested sore people in coffee
activities and thus eacouragoti papulation settlease at m m
coffee plantations.*3^
In this way, as a result of the- coffee economy, there
wss a substantial incresse is the output of the economy, aor©
export, more exchange, in increase in the populetion-~aiyration from S p a i a — a n d an increase la the process of urbanization ss well.
In 1800, sixteen years after the first
cultivation of coffee, the population of the country was
800,000.
Mine years later Venezuela had 945,344 inhabitants,
that is an increase of almost 150,000 persons, or an increment of 16 per cent,3"
the cultivation of coffee did not enhance the social
caste of landowners es the cultivation of cacao had d o n e —
the cast© ass celled gran c & c a o . D u r i n g
—the
the "cacao economy"
last part of the Hispanic st.age---iBtifandj8, i.e.,
large farms under the owner ship of s xsaily, prevailed;
while daring the coffee eooaoay people of a variety of sociel
status participated in its cultivation as producers.
34
35
Ibid.
Cod#aa:i , 0£. cit.. I, 243-262.
aCi
See the preceding chapter of this thesis, p.
The reason for this Is, according to Arellano-SJoreao,
that coffee can be cultivated at higher temperatures, and
this fast attracted ooro settler# of different "social
status" (Spaniards, Creoles, and some mestizos) to cultivate
coffee ai producers. See ;relleno-Moreno, op. cit., pp. 190191.
140
Conclusion
In
brief* the stage of the republic, the ere of coffee,
was characterized by the £o1lowing facts,
First, Venezuela
vj&s constituted a Ration-state, i.e., independent politically
from Spain.
Second, Venezuela coulci not develop 8 diversi-
fied and strong economy; she depended almost exclusively oa
coffee production; therefore, her oconoay was completely
subject to i nternational fluctuation of one agricultural
product, coffee.
'fhi s situation brought about e tremendous
economic crisis.
Third, the political organization of the
action was unstable; it was aaseu on caadi.1.1 imo•
This
political Instability was added to the problem of aono~
p r o d u c t i o n — a n almost complete reliance oa the cultivation
of coffee, and as a natural result, economic crises were
siorc difficult to overcome.
Fourth, the Federal nevolatiea
was ia essence a social revolution whieh payed the way for
later achievements daring Guzraan-lilaaco* s administration.
However, the revolution was in part frustrated and this
eventually constituted the seed of social feraeuts of later
political disturbsnces.
Cf. Sduardo Sosa-Kodrfguess, "Hadicacion ue la
Foblacion Urbane Inestable," Cruz del Sur. May, 1950. This
was a paper for the "First Venezuelan Congress of Housing"
(1950). The author contends that the base of the h o u s i n g
problem is the A g r a r i a n Reform, namely, the subst&nti ve
reform of the rural land tenancy i n order to increase
agricultural production and to settle population in rural
areas, th J3 avoidi ag nitration t o w a r d urban centers.
141
F i f t h f t h e p r e v a i l i n g economic philosophy was merc c a t l l i s f t duriuy t h i s s t a g e .
This phi losophy was m a n i f e s t e d
i u t h e f a c t that tha market was viewed as a t o o l which seeded
yoveraacHt c o n t r o l i a o r d e r to p e r f o r m i t s f u n c t i o n as an
i n s t r u m e n t of a l l o c a t i o n .
S i x t h , t h e most s i g n i f i c a n t
example of p o s i t i v e s e r c s a t i l i s t p o l i c i e s was f ounu i a the
aciniuiatretioii of P r e s i a e a t G i z a s n - E l a n e o ,
Cil/'FTEfi Hill
THE FOUBTU STASS I
REPUBLIC, PETROLEUM EKA
Introduction
In
1920 petroleum production s t a r t e d
in
Venezuela.
that moment on eyriculture as a pri ncipal s e c t o r
end e x p o r t
of
From
production
was replaced by petroleum, which was exploited by
foreign tompanies.*
The export sector of petroleura was responsible for the
l a r g e revenue that the i'enezuelan government r e c e i v e d
i n the
form of taxes anu royalties from the oil corapsni es.41
However,
petroleuc was not an import ant
e srie 11 p o r t i o n
per c<2nt,J » s s
the l a b o r market j
oi the tot el lebor force i n V e u e z u e 1 e, 2 . 5
engaged i n p e t r o l e u s
U e e e u s e of
of
factor i n
the lsrger revenues f r o s a oil, the import ence
the government sector i n c r e a s e d
econoniic growth.
activities.
a s a siyuifica nt tool of
Tha p r e f a l e a i was how to use government
1
The contribution of petroleum to the G r o s s D o m e s t i c
P r o d u c t in 1950 was 3 0 . 8 p e r c e n t o f t h e total. B a n c o
C e n t r a l a e Venezuela, Memoria ( C a r a c a s , 1 9 5 9 ) , p p . 4 4 6 - 4 5 5 .
,ri
*7he petroleura companies pay almost two t h i r d s of t h e
national teix revenues. I n t e r t s g l i o n e l Bank
f o r Heconstruction end development, The Sconomic Development of Venezuela
(? ew York, 1 9 6 1 ) , p . 0 9 .
^iSeaori a, op . cit.. p .
29.
142
143
out lays j were they to bo used iu ostentatious public w o r k s —
monuments, statues, pyramids, etc.--or were they to be used
isi reproductive activities to promote development?
la 195C the total revenues received by the government
were ?,023,505 bolivars (60 j»er caut of this &uount was
received from the petroleum sector), of which 2,692,000
bolivars were invested by the yovernaeut in different i t « .
During the decade of the 1950'$, government i nvestaent in
capital expenditures represented roughly 50 per cent of the
gross total investments of the econoiay.
This showed the
importence of the government in the Venezuelan economy.
A comparison is made of government expenditures in
capital of two significant years| 1957, during the PerezJiraenez dictatorship, end 1959, during the democratic
government of Komulo Betancourt.
Frora the compari son of both years in Table X, page 144,
the following points can be drawn*
first, the difference
between total government capital expenditures and total
government revenues is larger in 19C9} this is due aai nly
to the increase iK 1959 of the bureeucr f.cy
second, in
1959 there v;as a substanti r;l curtei lnient in bousing sn« 1 a
other less important public works, es well as aa liter ease
in education.
4
l o 1957 the total ^overuraeat outlay for wage* and
salaries was 1,369,062 bolivars} la 1959 it was 2,551,741
bolivars. The small difference in total government revenue
between both years w&s due to a decrease in investment in
the private sector because of the political transition.
Ibid., pp. 465, 446-485.
144
WBLil X
CGKPAfvISt'?4 cr T-l€ Sl'lr£KN8EX? CoPlTrL SXl'SNBITURES
uF TOG ¥EM1S 195? ? m 1959®
<Killici;s of bolivers)**
11 eoi &
£yrieulture
Mi r.i a§
Industry
Electri ci ty
Transportatlott end Gocuauni catio a
ileelth
Euucrtion
services
defease
Uousing
Other edifications
other public works
Miscellaneous
Total government eepitel
expenditures {1}
Total government revenues (2)
Difference between C D sad C2)
•Source:
MemorIe, o p . £ i l . »
1957
1959
24£
226
...
• * #
i
•220
950
219
59
62
82
761
302
101
264
078
300
161
15
97
159
159
231
164
*J &•
bZ
2,692
? .,023
41 Oil 1
7,264
3 f 592
pp. 464-466.
**/• b c l i v o r Is equal to .S3 teller.
I in c o n c l u s i o n , p e t r o l e u i a ciilisncoa the role of t h e government
i a e c o n o m i c growth.
The V e n e z u e l a n gotrerasie«t, o a
the other h s n u , played a n i m p o r t a n t role as » f o r c e ia t h e
market price o f o i l .
A l l o f this m e a n t
that
ti 11 st ideas ac<i policies were s i g n i f i c a n t
stage,
the p e t r o l e u m
;n order to understand why petroleuo gave to th
Venezuelan government
economy
in
sorae $ e r c e n ~
en i m p o r t a n t role in the nations!
as well as power in the p e t r o lcusi m a r k e t , it w i l l
145
be accessary to coaiaent on soma legal aspects of t&e ownership of the Venezuelan subsoi1, as wel 1 as the process of
the organisation of petroleum prices.
Legal /spects
The ownership of the oil.--?• mean!ngful aspect la the
petroleua industry i» Venezuela, as well as that of the
other countries in South »nerica, was that the ownership of
ell the sub-soil ai nor a Is was vested i si the nation eat! Its
control was effected through the government.^
This law
steamed froa the decree of the Royal Crown of Spai n t
'• 11 the -ni nes of silver, gold, lead end a ay other
ki ?icl of met al, or of any other thing whatsoever, which
may be in oar ftoyel bomaias, belong to as [the Soyal
Crown 1, wherefore, no one shall dare to work ssld
rallies wi thout our special license or order .6
Its© Las«s of ths ladiss .--Las L&?e& Uo ladi&s. r?ro;aal^
gated in
1602, authorised the Hoyal Governors of the Spanish
Colonies to apply the mining laws to iho Sp?ni sh ^sac-riean
territories.
These lass were ratified ia the Constitution
of the Gran Co Iambi a j by a decree of the Sreafc Liberator,
SiaiOB 00liver, issued at $uito, Ecuador, on October 24, 1629.
The article read as follows s
Likewise I concede that there may have been discovered, solicited, recorded end denounced i» the
aetiaer aforesaid, not only the mi nes of gold 8nd
t:
Kjif
'Gui 1 leraso Zulosge, Petroleum Geography of Venezuela
(Ctraces, i960), p. 22.
ecree of the Foyal Crown, incorpcrateu ia Lt>s Leves
(Madrid, 1903), quoted from ibid.. p. 52,
146
silver, but also allies of precious lode®, copper,
lead, tin, si lver, antimony, calami ne, bismuth , rock
salt and any fossil .aatters, whether they sty be
perfect mlnereis, bitu&ens, or j uices of the earth,
and proper provision shel1 be made for the acquisitioa, enj oyment end development thereof
Theaks to thBt Royal Ordinance# part of the Spanish mercantilist tradition, Venezuela is not Mortgaged completely
to foreign c api t a 1 today.
Thanks to this Royal Ordinance,
Venezuela can or could plan end orgsnize its resources to
benefit the nation as a whole, and not to benefit the unknown
stockholeers only.
Legal aspects, of exploration e.od exp.,l..o.i,.ta,t.l.o,.a of. ol 1 . —
in Merely
1918, th© first petroleum ordinance of Venezuela
wes enacted.
It provision that the right of expioratioe ami
exploitation of siaerals and hydrocarbons coulsi te acquired
only through special contracts gr&nted by the Federal
iixecutiva.^
In 1920, an article was added to the law which vested in
the landowner the exclusive right to obtain from the federal
Government the riyht of exploration and exploitation of
hydrocarbons from the sub-soil of his property.
In thi s way
the right of the landowner was protected to obtain higher
royalty from the oil compenies for Ills property, in case he
coula hot exploit it because of lack of capital.^
7
I h l d . . pp. 52-58.
G
Ibiu., p. S3.
^Ibi.d»» p. 54.
147
This ia# which was liie object of subsequent modification
in 1922, 1925, 1926, 1986, 1936 anil 1943, keeping its original
sense of $i vinq to the federal Government the right of concession in accord with the benefit of the nation,lc> namely
the government of Venezuela, end not the landowners, wss the
principal lore© which bargained, contracted wages, together
with unions, and which granted con cessions with the
benefit of t h a
nation, if Venezuela had an honest Bnd proper
government.
Petrolepra taxes . — T h e most iaportant direct taxes levied
on oi 1 industries wore the following:
1.
Exploration tax of two bolivars (.46 of dollar) per
hectare per year duriny three years.
2.
Initial exploitation tax--a mlnimum of eight bolivars
(2.64 dollcrs) per hectare.
3.
Surface tsx on exploitation concessions, whi ch
increases d u r i n g
4.
t h e 40 y e a r s
ex the life of the concessions.
Exploitation tax, Cover Jiaent royalty—fixed at
16 2/3 per cent of the crude oil extracted.
5.
Tax on reflate! products used for consumption within
the country, equivalent to 50 per cent of the import duties
which they would have produced, if they had been imported.**
'"ibid.
PP- 55, 56
148
l a a d d i t i o n t o t h e s e t a x e s , p e t r o l e u m c o m p a n i e s had t o
pay o t h e r b u r d e n s and t a x e s such as i m p o r t d u t i e s , income
t a x e s , c o n s u l a r d u t i e s , r e v e n u e s t a m p s end o t h e r s , 1 * 5
;
.<i s t o r i c a l Background
O i l was d i s c o v e r e d l a
i ' e a e z u e l a by t h e S p a n i s h
c o n q u l s t a d o r e s v.ho were I m p r e s s e d by r s p h a l t f o u n d on t h e
c o a s t of Lake M a r a c a i b o .
t t h s t t i m e t h e u s e of o i l was
l i m i t e d t o c a u l k i n g s h i p s , as f u e l f o r l a m p s , end I n d i a n s
used i t
es a x t e r n a l a e d i c i n e .
I t was a long
process
b e f o r e o i l was u t i l i z e d es a s o u r c e of e n e r g y t o move a l m o s t
a l l t h e machi n e r y f o r t r a n s p o r t a t i on and i n d u s t r i e s , I n
' ' I b i d , , p . S6, "The i ncoae t a x law was m o d i f i e d raore
s u b s t a n t i a l l y l i t r e f e r s t o a s m a l l amendment i n 1948] OR
i eceraber I t , 1950, t h r o u g h a d e c r e e t h a t d r a s t i c a l l y i n c r e a s e d
t h e c o m p l e m e n t a r y t a x , l e v i e d on n e t i n c o m e .
The p r e v i o u s
law e s t a b l i s h e d a s l i d i n g s c a l e f o r c o m p l e m e n t a r y t a x , from
a minimum of 1 . 5 p e r c e n t t o a maximum of 26 p e r c e n t , t h e
maximum b e i n g c o l l e c t e d on n e t income i n e x c e s s of 8 s 26
million.
I t a l s o provided f o r e c e d u l a r t a x , a f l e t levy
of 2f| p e r c e n t on n e t i n c o m e . The new law l e f t t h e c e d u l a r
t a x , s e t t i n g t h e mlnisaum of 2 p e r c e n t end t h e maximum of 45
per c e n t .
A$ u n d e r t h e old l a w , t h e new maximum a p p l i e d t o
n e t income 1n e x c e s s of Bs 28 m i l l i o n . "
"The Income t a x c h a n g e a p p l i e s t o a l l i n d i v i d u a l s ond
b u s i n e s s f i r m s , not t o t h e o i l i a d u s t r y a l o n e . "
1 **
h o l s of t!i« c i a c t e o a t l i c e n t u r y
I t was a f t e r t h e s c c o n i was i n c r e e s e d . However ,
whea t h e u s e of ©II f o r l a a p s e a r t h * s s u r f a c e ; t h u s t h e r e
p e t r o l e u m was o b t a i n e d on t h e o i l went as h i g h es 20 d o l l a r s
was s c a r c i t y and t h e p r i c e of toell was d r i l l e d t o o b t a i n
6 barrel.
I n 1659 t h e f i r s t
a d e p t h of 65 f e e t , and i t s
p e t r o l e u m f r o m t h e s u b - s o i l e t d a y . T h i s was i « T i t u s v i l i e ,
p r o d u c t i o n was 25 b a r r e l s p e r T o d a y , o i l i s used p r i m e r i l y
P e n n s y l v a n i a , United S t a t e s .
m o t o r s , as w e l l es e l u b r i c a n t ,
as a s o u r c e of e n e r g y t o move h by - p r o d u c t s f o r a v a r i e t y of
and as a v a r l e t y of f o r m s , w i t
149
t h a t stag® of development petroleum p r a c t i c a l l y r e p l a c e d
caal,^
In
:
/eaesttola t h e e a r l i e s t eoti.jerel&i enterprise* was
launched i a ItTGg i t was c s a o l l
Venezuelan coapsay In tfee
S t a t e of Tuchirc which d r i l l e d a few w e l l s about s i x t y f e e t
d e e p , and produced and ref i ned f i f t e e n b a r r e l s per day f o r
l o c a l consumption, such as i l l u m i n a t i n g o i 1 .
More o r g a n i z e d a t t e m p t s were d i r e c t e d to t h e p r o d u c t i o n
of a s p h a l t .
Early i a t h e p r e s e n t c e a t u r y s e v e r a l United
S t a t e s and B r i t i s h companies s t a r t e d t h e e x p l o i t a t i o n of t h e
l a r g e a s p h a l t d e p o s i t s in both 2 u l i a and Mo nagas s t a t e s .
So,
i n 1910, t h e New York and ftertaudez Company began a l a r g e - s c a l e
uses.
C l a r e n c e F i e l d e n Jones and Gordon Derkenwald,
(Mexico, 1 9 5 6 ) , pp. 4 5 7 - 4 5 0 .
petroleum i n d u s t r y i n t h e p r e s e n t time i n c l u d e s
t h e p r o d u c t i o n of crude o i l , g a s , and a v a r i e t y of sub~
products i n v o l v i n g several phases.
( I ) E x t r a c t i o n of crude
o i l sad g a s , ( 2 ) t r a n s p o r t e t i o n of t h e s e raw p r o d u c t s to
r e f i n e r i e s through p i p e l i n e s or i a teak t r u c k s j ( 3 ) r e f i n e r y
and p e t r o c h e m i c a l a c t i v i t i e s product ng aiany p r o d u c t s and
s u b - p r o d u c t s of a l a r g e v a r i e t y j ( 4 ) f i n a l l y , t h e complex
d i s t r i b u t i o n to t h e co.-ssureer s .
Jones cud Darkeawald, op.
s i t . . p. 4 5 7 f f .
P e t r o c h e m i c a l s which account f o r about one q u a r t e r of
t h e t o t a l v a l u e of c h e m i c a l s are oryaoi&eti and Qanufactured
by t h e o i l companies. J o e l B. b i r l a n , "The I'etroleuat
I n d u s t r y , " i n The S t r u c t u r e of uaerlcao I n d u s t r y , e d i t e d
by Walter Adams (New York, 1 9 6 1 ) , p. 277.
lmost a l l t h e nachi aery of t h e p r e s e n t c i v i l i zation—t r a n s p o r t and i u d u s t r i e s — i s taoved with p e t r o l e u m .
In
t w e n t y - f i v e year s* tiiae t h e t o t a l e f f e c t i v e demand f o r coiarnerci al energy may be from 85 t o 167 per cent more than i t
i s t o d a y . J . B, Hartshorn, P o l i t i c s and World Oil
(New York, 1 9 6 2 ) , Chapter 2 , "Oil as a General Fuel,
l
~±.uloaga, oj£. c i t . .
p. 42.
150
exploitation <ȣ the fataous Cuanoco s s p b a l t
easters
Venezuela.
out#"
ttentio:* ssnst be c a l l e d
Jorld f-far I
that after
anu l a t e r
lake s i t u a t e d
on i t
to
in
tbe f a c t
the fespbalt industry he$an t o
was produced as a b y - p r o d u c t
"peter
of
oil.***
Mene Grande, located on t h e eastern s h o r e o f Mareceibo
L a k e , was t h e
earliest
It
Venezuela.
coraraerci al f i e l d
was discovered l a
mercial p r o d u c t i o n in 1 9 1 7 . 1 7
say that
©f
importance i a
1914, en4 wag p u t
Three y e a r s
later
in
com-
one could
Venezuela entered a new social and economic era.
Organising Prices aud Production
la
order
iavolved i n
to
better
understand t h e complex situation
establish!ng production and p r i c e s
1)0 «?i historical reviev: o f
'/caeziielBB #11 a c t i v i t i e s
I.
of
After
that,
tbe
principal
since tbe
United S t a t e s
there must
© v e n t s related t o
termination
companies b o l t e d
of : -forl«l -far
out
fa s e a r c h
aore protfaetioa aoii consequently of broader sierket#.**1
Thus, the Standard O i l
Company of New Jersey and Socony
looked toward t h e Persian Gulf for concessions; while
lb
thi4..
p. 44.
*^Ibid. T h e f i r s t area o f o i l e x p l o i t a t i o n i a Venezuela
was located i a the northwestern p a r t o f Venezuela (State o f
2.ulia, Mar acaxbo L a k e ) .
L a t e r ( f r o ® 1938 o n ) t h e northeastern part of Venezuela hecaae very important loo. See
Map 3:
feaaauela:
Fetrolouia f i e l d area, 1960 (p. 168).
See also, for general reference, Map 4 , which shows the
present political division of "enezuela (p. 169).
^Harvey
p. 261.
O'Connor, The
llmtstxe of Oil (Mew f o r k , 1 9 5 5 ) ,
151
Standard of
latiieuu
l o o k e d toward Venezuela.
found S h e l l - - - e n E n g l i s h
T h i s company
and Dutch C ompany-~elready e n s c o n c e d
on the ccust of Meraceibo Lelce,^*
At thet time Venezuela wag r u l e d
by J u a n Vicente Gomez,
a dictator who held the nation in a feudal regime.
ts6eez attitude wes not a g g r e s s i v e ,
ing his
to
The
rather suspicious.
Dur-
government a g r e e t many oil concessions w e r e g i v e n
t h e companies. 2 0
T h e bloody dictator died in 1935, then
The companies needed to confront the new rulers
unitedly. Moreover, the d e l i c a t e matter of pushing
i flto the U n i t e d States as such Venezuela fuel e l l
as the domestic producers w o u l d tolerate—-roughly
a third of the Venezuelan procuction—required 6
M.b.Ifie<*. p.o.Hcv by the B i g Three [jersey, "shell, end
Culf'M*
I n the 1930' $ the U n i t e d States "was s t a g g e r i n g
the blows of the depression, end the oi1 i n d u s t r y
wader
i n partic-
ular suffered frota the problems engendered by the vest new
East Texas f i e l d . " 2 2
They succeeded l a
obtaining a limit a-
tion on oil imports to 4 . 5 per cent of domestic production*
s s consequence of this, the bulk of Venezuelan petroleum
production was directed to European markets.
l9
Ibid.. pp. 261-262.
20
- rcila-Farias, C£.
companies had 30 M i l l i o n s
area of the nation. They
had many p r i v i l e g e s * s u c h
imported aachi nes, etc.
c l t . . p. C79.
In 1911 the o i l
of Ha., i.e. 33 per cent of the
obtained it a t lower prices and
as the abolition of taxes on
*> |
O'Connor, 0£, cit., p .
o Ibid.,
, y n
IMA*
p.
262.
263.
1C2
Caribbean
Shell,
u
and
j o i n t
f,.Qrcoaeiil
Gulf,
unified
by
Jersey
the
was
took
oastera
agreed
ir.terest
their
charge
is
Jersey
Calf's
were
paid
$100
Gulf's
Hone
Greade
Grande
each
to
50
by
be
to
sad
the
Jersey,
production
agreements,
unucr
to
do.
Power
and
prises,
as
well
as
control
G6m®%
Minister
was
of
ueaocrat.
a
Hydrocarbons
Law
concession
the
after
man
as
wore
they
barter
to
s e t t l e
to
the
death
in
and
workers
situations
1935,
by
his
Lopez-Contreras.
t r a n s i t i o n
and
General
o f f i c e ,
usee
This
In
the
to
companies
ills
which
d i f f i c u l t .
i f
be
production.
of
a»t
be
yovernment
gave
a
cent
and
to
in
Merie
woe
to
o i l
Goraea
eaected,
per
were
was
aarket
Lopez-Contreras*
was
25
i n t e r a c t i o n a l
Elassar
government
ignorant
During
irt
l e f t
however,
companies
of
their
Shell
This
Veaezuelan
Generai
typical
ead
power
end
interest
sold
and
decision
production,
succeeded,
half
then
Gulf
i t
one-half
concessions,
Shell,
i/eaezuelan
defense,
represented
bloody
ever
the
the
take
production,
sad
I)y
presented
1937-1936,
would
o i l l i o a .
of
which
nothing
In
disegreesaeats
heads
ia
and
Shell.
had
unified
$50
owned
the
problem
"pooled"
for
Jersey*®
exemplified
new
Shell
Company
equalj
disagreed,
This
assets
far
cent
Jersey's
referred
too
per
Jersey
end
raillion
interest
the
f i e l d s .
declered
Jersey
quarter
o i l
companies,
Uctr&cuibo
of
Venezuela
that
properties
a
three
agrees©at s
New
s e t t l e
.--The
fie
between
such
Medics,
a
1936,
the
a n t i ng
fceuefited
the
of
nation
T4
*" " U n i t e d
Business,
to
pp.
the
T2i£
Federal
171,
175,
States
Senate,
l a t ^ m a vi*?r.sl
Trade
Select
Commission
177,179,
ICO,
Coianittee
Petroleura
104,
C a r t e l .
C^efHisgten,
on
Swell
Staff
1952),
Report
153
as
e whale.^
But i a t h e s a t t e r o f i u p o s i t i o n o f t a x , t h e n a t i o n
g a l a s v e r y l i t t l e f o r t h e l e w m a i n t a i n s aa u n f i t s l i i ' t e d u e d u o t i o a o f 5 0 p e r c e n t ok e x p l o r a t i o n in
a r e a s c o v e r e d by w a t e r o r o v e r 2 0 0 m e t e r * d i s t a n t
Croat c o a s t s , ana t h e 1 2 , 5 p a r s e n t f o r e x p l o l t s t i a a
in s u c h a r e a s ; t h e p u r t i c i p u i i o n o i re<j6 l f a s u f f a r e d
& s l i g h t i a c r e a s e w h i c h r a i s e d i t t o 15 p a r c o o t ,
However, t h i s lew s i g n i f i e d t h e p o i n t of d e p a r t u r e
o f a r e ~ l e v y i u g a o v e i n e u t w h i c h i s o a l u portal t t h e
a c t i o n t o o b t a i n store r a t i o n a l u t i l i z a t i o n of l i s
p e t r o lotia w e e l t h . - ^
L d p & z - C o a t r o r a s was s u c c e e d e d
ngerita,
who w&s e l e c t e d
by G e a e r s l
by t h e C o n g r e s s
a ad who w&s a d e m o c r a t i c { - r e s i d e n t .
1 9 4 3 was t h e m o s t
important
legislation
that
partial
tation
up t o
exoneration
ia
these
ovor 200 m e t e r s
of
areas
because thet
s h r i n e of
private
developed
natioas.
:;icatio»*. o i
taxes
cuasidoral-ly,
.aoraent.
the
la
by w e t e r or
nation's
Vi4Z t h e r o v o n a e s
companies were
of
that
1940,
hoiivsrs
w«r« C Q l l o c t e d ~ ~ d u e
fact
under-
legislative
i'roa o i l
(£4.2 oillion dollars) j ia
the
exploiting
roveaaes
I'Olivars
to
inland
l e g i s l a t i o n ! Invaded t h e
and t h e r i g h t
the
a
and e x p l o i -
situatei.
The o i l
The c o n s e q u e n c e o f
rcised
i a mining
The l a w p r o v i d e d f o r
monstrous
vote,
The P e t r o l e u m Law o f
that occurred
coest.^
property
indirect
tux sa e x p l o r a t i o n
covered
from t h e
irritated
event
by
I s a i a s M@aiaa~
modi*
from o i l
t^ere CO s i l l i o a
1S5 aillion
thet
it
«c$
not
?<iare
" N o t i c e t h e a e r c a n t i l i s o c r i t e r i o n o f w e a l t h end w e l i n terras o f t h e n a t i o n , not i n t e r u s of i n d i v i u u a l s .
*-c . r e i l e - l - e s r f s s , o p .
^'lidLsL*
c i t . , p,
386.
R e q a l i a means r o y a l t y
If, 4
possible to a p p l y the lew c o m p l e t e l y .
However, i n 1944,
»vhen it was possible t o apply the law c o m p l e t e l y ,
the
28
r e v e n u e reached 242 u i l l i o n b o l i v a r s
<73.3 » i l l i o n d o l l a r s ) .
In 1945 K e d i n s - . n g o r i t e was o v e r t h r o w n by t h e political
party
c c 16 n D e u o e r a t i c o backeu by e group of mi U t c r y men.
For two y e a r s a J u a t a R e v o l u c i o R o r i a g o v e r n e d t h e c o u n t r y ;
i n e a r l y 1946 d i r e c t
e l e c t i o n s were held and /-cei^a
i ' e t s o e r a t i c a won by a» o v e r w h e l s i ay m a j o r i t y .
During tills
fp e r i o d
. , , t h e u n i o n s f l o u r i s h e d and wented more end s o r e ,
a progressive l a b o r law was passed which 1st e x c e e d e d
i n scope t h e Wagner /ct i n the Halted S t a t e s end
buttressed the
u n i o n s ' elsorts. Although Creoles
c o u l d a f f o r d t o he ^ e u e r o u s ( s t o c k h o l d e r s u s u a l l y
g o t more i n ui vi^erivS than e m p l o y e e s is wages) t h e
implications of u n i o n s t r e n g t h w i t h i n the governaent
were es disquieting to t h e ruling circles i » C a r s e e s
as i n Mexico City* There wes plenty el money to
a e e t wag© demands, but the power of management is
Indivisible, 1n 1 9 4 8 , t h e r e f o r e , the d e m o c r a t i c
Action Government was overthrown by an array c a b a l j
the o i l Workers * Federation later was outlawed, its
leaders i m p r i s o n e d , sad the power of the e m p l o y e e s
slashed.
The labor force of the Creole Coupany was
reduced fro® 20,500 In 1949 t o 14,400^1n 1954,
a l t h o u g h p r o d u c t i o n rose 35 per c e n t . 2 9
During 1945 and 1 9 4 6 , under .^ccion D e m o c r o ' t l c e . s e v e r a l
f i s c a l r e f o r m s were achieved, namely, t h e increase of goveraaent participation i a the oil earnings, "from 27.4 per
c e n t t© SO per cent, whose imraedi a t e effect is e strong
increraeat i n © i l r e v e n u e s . H ^
aCi
The coasoqueitoo of this
XMd., pp. 386-3S7.
•( oitrtor, 0£. ei.t, . p. 265.
rci le-^'erfas. o p . c i t . , pp. 386, 307.
1^
ch6tK;e ill the pefroJetia legislation wes discussed by the
economi st Juen Pablo i oroz- lfonso ss follows:
The j uap to 609 millions [Lolivers, ecch bolivar Is
eque1 to 0.33 dollars] psid to the State [Venezuela f
la the five years 1943-1940 aeaas an impulse of
multiple effects. The fi sctl revenues tnet errivod
at lis. 542 million ia 1944, which were Cs. 341
million la 1938, soar to Us. 1,776 la 1948. The
fiscal revenue per person had risen ia 1938 to
Bs. 97.20 from the effect of oil, almost four times
over the Bs. 25 of the fiscal average in 1917-1920.
In 1944 the revenues are Bs. 134.5 per person, but
thev increase four years later to Bs. 370 which
represents 273 per cent increase in these four years
and 318 per cent over the base year 1936.31
It is evident that the yovernment and unions together
constitutes 8 powerful force on taxes and revenues, ana as a
result, this force exerted action, indirectly, in the determi net ion of production, es well ss prices, taking into consideration, of course, other factors thet will be commented
©a later.
In 1st© 194i», ilosulo Gelletos-—Aocloa Deaocratica—» was
overthrown by 6 sailitery coup.
The President of the military
Junts, uelg&do Ch&lbsud, «e« assasslneted and another ra&mber
of the sera© junto suceeaac-d hla, Coaeadsnte Ferez-Jicieaea,
who goverae-i in e diet&toricl xiay
until Jenuery, 19GG.
f,di us t.aent of prices accord jet; to Ike. C.ari.bbesa bete..-The adj ustraent of prices in 1953 must be mentioned.
' For
the eoapenies, the proof of good production policies lies
is p r i c e . T h e
question was:
liow to settle price?
• 3l Jucn i'sblo teres-/- lfonzo, M Ei Petroleo en el I essrrollo
Ceononico de Venezuela,** Folfticfa. Ho. 3 (1955) , p. 112.
'Connor, op. cit.. p. 263.
For e t i m e , v'enezuelcn crti<i« o i l was s o l s at Texas
Gulf p r i c e s , t h u s a s s u r i n g f e t p r o f i t s j l a t e r , t h e
p r i c e s were a d j u s t e d to a C a r i b b e a n bcsc. q u i t e
sirsii l o r t o Texas C u l l . "Vheti t h e p r i c e of c r u d e
o i l went up £5 c e n t s i s; t e L n i t c . S t a t e s i n said1953, Venezuelan c r u d e o i l l i k e w i s e a d v a n c e d . T h i s
was I s harraony with t h e world c a r t e l ' s p o l i c y ,
Kithough i t could h a r d l y be p l e a d e d t h a t t h e a r g u ment f o r t h e 0 . S. p r i c e i n c r e a s e — t h s t ©f s t i m u l a t i n g d o m e s t i c p r o d u c t i o n so t h a t t h e r e would be
staple r e s e r v e s at home i a ess© of t s a r — a p p l i e d t o
Venezuela any more t h a s to t h e Middle E a s t . 3 3
i ML Profit i a
C r e o l e Company i a 1954
o b t a i n e d & net p r o f i t of 240 w i l l i o n d o l l a r s , of which 194
» i l l i o a d o l l a r s wss paid
out
in d i v i d e n d s .
"This roughly
matched I t s payments t o t h e Venezuelan Government unuer t h e
50-50 a y r e e o e n t j an e q u a l aisouat a c c o u n t e d f o r a l l i t s wages
and e x p e n s e s . " 3 4
"Assuming t h s t S h e l l and Gulf t o g e t h e r
p r o f i l e a t o t h e s ai.no e x t e n t , ®s t h e y should under t h e u n i f i e d p o l i c i e s p r e s i d e d over by C r e o l e , t h e t o t a l sinual
p r o f i t fro-a V e n e z u e l a ' s c r u d e o i l exceeded $400 s a l H l © o . " 4 j J
Thu I s s u e of t h e tiidcllo ft e s t C1954) . — a n o t h e r important
f a c t i n t h e e x e r t i o n o i power i s s e t t l i n g p r i c e s «as t h e
c o n t a c t saade with t h e s/eaemaelaa and t h e K i d d l e East gove r n m e n t s , namely, I r a n , I r a q and - r s b i a .
"The c e n s o r e d
p r e s s of C a r a c a s perrai t t e a guarded h i n t s t h a t Boasedefeh had
s o a e r e a s o n s oa h i s s i d e i n b a t t l i n g t h e B r i t i s h " i m p e r i e l i s t s , " t h e t n a t i o n a l i z a t i o n had a good b i t of a e r i t In i t ,
*2 4
t h a t Venezuela was b e i n g m i l k e d , even unuer t h e 50-50 d e a l , " " v '
3S
Ibld.
34
1 M I > . p . 264.
3£
Ibid.
36
I h i a . . p . 265.
3b i
f'"
In response to these raenaces 'for t&e future, oil
compenies is Venezuela shipped to the Dutch islands of Arubs
sail Curezso 60 per cent si the Venezuelan oil crude,
lb©
j tints considered this ess offense to Venezuela's pricie,
because the petroleum was Venezuelanj but perheps acre
importcfit at the moaet-t wes the treaienUous loss Is* revenues,
which accrued to tit© iHtteh,^"
Vf underlying concern to all Venezuela was the
country 1 s utter dependence on. the oil companies.
Three fourths of the country's $700 million annual
budget ease froia oil, yet Venezuela hau not the
slightest control over the policies of the world
cartel which adjusted product ion quotas to Its own
needs, not i'enezuels *s . 3®
& result, petroleuui, although e Venezuelan resource,
sllca to he* OKT» wealth.
control c.Rtl planning.
There was BO possibility of
To illustrate tills pot at,
The world recession of 1940-1949 hed cut government
revenues x'roa $206 mi 1 lion in 194€ to $147 mi lliou
a year later; by 1955 so UepenJent hed the juste
become on oil revenues and so heavy its coromitraents
that a cotapcr able drop in 1 ncome could have meant
disaster politically es well as economically.S*
u 'Connor asserted sententiously end eccur&tely on the
future Veuezuela.
.erst of all, there is riot hi ng the C &ri bbean lanu
f Venezuela J could do about it. The decision of curtailing production would be .sade, not in the Falsce
or the Capitol et Caracas, but is Rockefeller Pie?.*
in aistant Msnhsttsn. The j unte would hecr the deadly
veruict on the country's basic Industry fro® the seme
radios that, blared the news iu the upper cl&ss homes
of Caracas. Of such are the trappt ngs of national
sovereigntyH®
37
I b i d . , p. 266.
36
lbid.
59
lMa*
40
I k M . » p. 26e.
156
The P r e s e n t S i t i i a t l o a . - - ? o r a long time t i e w o r l d ' s o i l
market lies been I n f l u e n c e d hy two p r i n c i p a l f a c t o r s :
predominance o£ t h e United S t a t e s hs consumer
end t h e p o s i t i o n o£ the i n t e r a c t i o n s ! o i l
the
ea<* p r o d u c e r ,
companies as
proUuci-rs srid u i s i r i t u t o r s otrer tuo t h i r d s of t h e noacora.aani s1 worlt!.^*
Mow t h e n , t h i s s i t u f t S o . i iiss beers somewhat m o d i f i e d I s
the last f i f t e e n years.
U n t i l '-'-'or 1<1 V'ar I I ,
t h e United
S t a t e s oo&mnmleJ Un; o i l aarfcet as producer and d i s t r i b u t o r .
Oil p r i c e s were s e t i l e a ou t h e b e s a agreement of
i>eaa t r o i . . H o i * e v e r ,
hy i 9 4 6 - 5 0 t h e Kicl<ile Cast bed
o.perisactjw i t 3 production e p p r e i t y .
than Ccribbeftn a i l ;
the Curif---
T h i s o i l ^s:,s cheeper
40 tt> TO United S t a t e s c e n t s e b a r r e l
l e s s then t h e e q u i v a l e n t y»ite<£ S t a t e s Gulf p r i c e s .
Later,
q u a n t i t a t i v e * r e s t r i c t i o n s on United S t a t e s o i l p r i c e end e
s e r i e s o£ f . o . b . p r i c e s were msue.
Furtlierraore,
"the aejor
eompani es sad t h e government o l oi 1 - e x p o r t i ng c o u n t r i e s have
a vital
i n t e r e s t i n a v o i d i n g c o m p e t i t i v e p r i c e - c u t t i ng es
t h i s would r e d u c e both p r o f i t s sad t a x payments
In a u d i t i o n t o t h e I n c r e a s e d o i l
i •>
. t h e Middle - l a s t ,
t h e r e $sere two f a c t o r s l a r(•••-. ; \ t y e a r s which c o n t r i b u t e d t o
t h e a c c r u a l of a s u p p l y vt o i l :
41 International
p.p. c i t . . p . 120-.
; •#,
^"'XLLu*
$ p»
i2i.
ior
the f i r s t
of t h e s e was t h e
-^construction end
{
-9velopae«t.
159
i n d e p e n d e n t producers who i n c r e a s e d oil p r o d u c t i o n .
L'iilted States Govern,meet is response to t h a t
i m p o r t s to the U n i t e d States.
promoted o i l
The
curtailed oil
Secondly, several g o v e r n m e n t s
p r o d u c t i o n i n t h e i r respective c o u n t r i e s —
A#
t. anode, Argentina, Kexiee, Li bye. * *
The Sues crisis of 1 9 5 6 - 1 9 5 7 aggravated t h e oil situaIn this p e r i o d oil prices wer a increase.?!; lor i n s t a n c e ,
tion,
i n West "Voxas prices rase 25 c e . i t s per barrel in J a n u a r y ,
V e n e z u e l a oil o e r i - p e s s u was t h e object o f price
1957.
increase, so it rose from 25 to 30 cents,"®"
In J u n e ,
1 9 5 7 , w i t h t h e r e o p e n i n g of t h e Snea C a n a l ,
oil stock t e n d e d to be r e p l e n i s h e d ; consequently the Middle
fiasl
prices rose 15 c e n t s per barrel,
o n e ea» appreciate
tiie effects of the forces of s u p p l y sad demand of oil daring
t h e period of
crisis j h o w e v e r , one sees the a c t i o n of
the
oligopoly i n t h e fact that "these higher p o s t e d p r i c e s were
maintained despite t h e rapid increase of the U n i t e d States
arid V e n e z u e l a n prediction la 19S7 end i n t h e K i d d l e East in
t h e l a t t e r p a r t of 1957 and d u r i n g 1 9 5 8 .
P r o s p e c t s for $jtg 19CU * s . — I t
is e v i d e n t l y a feet t h a t
t h e w o r l d demand baa keen i n c r e a s e d end it seems t h a t t h i s
t r e n d w i l l c o n t i nue due t o the growi as need of oil for
t r a n s p o r t a t i o n , i n d u s t r i e s and t h e , i n c r e a s e d demand f o r i t s
44
Xuld.
4G
I f a i d . , pp.
46
Ibld.,
p. 123.
immmmmmmm
*
*
121-123.
160
Ly-jcsUajjts #
is:i th'i
ot!:er .'n-.uu, i t faes i aer e z$od
t h e ay;.ijjer
Oi -Ji 1 t ^-jpc-iies i'.'i th«-, s e c t o r s oi" f r o d u e t l o a nnu w i s t r i b u tint*, es troll £8-»*-E.:va t h i s i s very iEpcrtT:at--t!ia f p o t t h a t
t h e r e bas been sii i n e r e e s e l a t h e number ox yoverarasnt s
p r o m o t i n g , f o s t e r i n g , and a l s o e x p l o i t i n g o i l
tftetaselves*
This s i t u a t i o n w i l l continue
underdeveloped c o u n t r i e s in
Venezuela
oil
activities
for
t h e emerging
. s i ® , / - f r i e s , ®n«5 i n ."tiieriea,
f s c e s s e v e r a l d i ^ i i c a l t i e s wit h r e s p e c t to
industries.
There e r e iili'i &ronees i n e o s t c o n c e r n i n g
e x p l o r s t i o n , p r o d u c t i o n , anti x r e i y b t i « t h e d i f f e r e n t
existing oil
areas i s the world,
tor instance,
Venezuelan
o i l h e s h i g h e r c o s t s i n exp l o r a t i on sad p r o d u c t i o n than
t l i i t of t h e Middle E a s t , Que t o d i f f e r e n c e s i n wages and
p r o d u c t ! v i t y — h i g h e r wa^es i a V'enaa»ciR.^ 7
I..
Still
;/.rsr, t h e postc-a p r i c e s i a v e s e a a e l e u*c
w 00 it 1 y H f Q«i»j A £ 1S U'ij't O « l y «iU0
o hi QllOi' c o s t s Uut
r a t h e r %bet t&e s e t t l e m e n t o i p r i c e s I>usaa on t h e i,erib-«
beea . t g r e e n e o t f e v o r e u t h e i n t e r e s t of t i t o s e o i l ceiapenies
oper»ti.-i f c i«» 6eits^uc 1 o«
* urtuerKSore, t h i s i s stnotner piroox
t h a t o i l p r i c e s heve l i t t l e
to uo with t h e s u p p l y enu
demand Siiu More w ith s g r e e m e n t s .
47
Ibiu..
pp. 1 2 7 - 1 2 9 .
1 /„ 1
rr ^
r-.'.icus vr tZ'Ci'*" c i l r
IN nm m x , DEtEmm,
1959®
Si HQle Voy&qe Spot
S a t e Cln U . S . c o o t s
^3t _ b a r r e l )
Long Tersi Charter S e t s
Frlee
rxoia
Kuwait
i'Tijii
Caruoa83"®
I'losr,
Kuwait
STrca
Cardan
Posted
i• ri c c
1.67
2 . So
1.67
2 . tr i
freight
'1.19
.31
.46
. 10
2.86
i». His
e. . 1 3
2.65
e l i vereci
Price
• S o u r c e 1 f e l r o l e i i t s rrc-ss S e r v i c e acd r e t r o i o a s ieok
( t e k e u from l a l w r u a t i o a a l Seak f o r U c o s s t r a c t l o a »au
Uevelopiaeat, oj),. c i t . . p. 129,
**
araoc i s
'©n0su01 sa p 0 r t oa t h o (>-rientcl c o e s t .
a e t e r a i a u t i o o o i prouuctltfii s»tf p r i c e s on o i l i u veaessuwla,
as has batfa aoteicl i n t h e above; h i s t o r i c a l g i s o c e j , i s a
complex M a t t e r ,
I t i s t i e r e s u l t of waujr i » m » ,
one c a u -
••iot »«#^ute tile taarket pcn-,*er e x e r t e d hy all cmp^uias, l a ihs
ha.tf}£It 01 their
owa interests,
as t k e main f o r c e
s e t t iotastri of p r o d u c t i o n anti p r i c e s .
in
the
Tbe Venezuelan y o v -
ersafest eiul Venezuelan woi'!*ort ( o r g e n i z e a i s u n i o n s ) a c t i n g
t o g e t h e r have e x e r t e d t o
: osie e x t e n t power t o s e t t l e i n d i -
r e c t l y p r o d u c t ! o n ami p r i c e s by tseetis ot* t a x e s , s e t t lament
0£ wegos and s o c i a l b e n e f i t s ,
Finally,
t h e p r e s e n c e of
162
forces
oi
supply
e m i demand cu
exerteu
influence
la
auction
of
rssoci stioa
oil
aentioneii.
in
This
was
Canal
aheti p r i c e s
oil.
But
later,
became e v i - J e n t ,
erctely
high
the
the
went
the
with
the
a given period
the
cesu u u r i n ^
up c u e t o
when t h e
et
ueterui natioc
market
despite
oil
oil
increase
and p r o -
forces
crisis
of
diminishing
oi
price
prices
other
the
the
power
of
the
oil
have
already
the
Sues
supply
ox
companies
was m a i n t e i n e c i u e l i b of
production
after
the
Suez c r i s i s .
The Consequences
The
hs,se o i
1010 u n t i l
the
of
Petroleum
ecooosjy o f
1920,
e result
the
coli'ee
e x p a n s i o n oi'
t h e e x p o r t o i e o i ' i ' e o roechyu 1 , 3 7 3 , 0 0 0 s a c k s
amount
i ncreased
p a s s e d by
bo l i v e r s
a little,
almost
important
ueclineu
later,
a s m e l l e a o u n t t h a t of 1 9 1 5 .
item
tu
lr©«
pro192D*
a l l l i o a ) ; I n 1924 t h i s
($35
declined abruptly f o r e v e r \ t h u s , i t
abruptly
oil
In
115 m i l l i o n
decline
wes
coffee
produciuy
to
o£
cation
auction
19 I f .
started
the
activities
sad
iter
in
that
1926 s u r time
it
did not r e p r e s e n t an
ia Venezuelan e x p o r t .
J
s
fits been p o i n t e d
o u t , t h e f i r s t p l a c e i n e x p o r t was o c c u p i e d b v p e t r o l e u m ,
which
represented
export.
a t t h a t t i a e l e s s t h a n o n e t h i r t i of t h e
T h i s p r o p o r t i o n tves i n c r e c s i n§ p r o g r e s s i v e l y u>ui 1
r o u g h l y 60 p e r c e n t wes r e a c h e d i a i 9 6 0 , ^
4L , r c i l a - f e r i c s , o £ . c i t . .
4%
'Persies,
oo .
cit.,
p.
p.
372.
4051; f . .
• 163
Tims / e n e a u e i a conli nueu t o ue a a o n o - p r o d u c e r c o u n t r y
par e x c e l l e a c e . and p a r a d o x i c a l l y , t h e c o u n t r y was becoasiny
richer!
I t was becoming s o r e dependant upou p e t r o l e u m ,
n&ciely, dependent upon an a l i e n i n U u s t r y with r e s p e c t t o
lior own w e a l t h .
The ©ffiargence of p&troleusa c c t l v i t i e s onhanced the
liiipartaaes of t h e govor assent i n th& economic growth of the
n a t l o u fcjr i n c r e a s i n g i t s r e v e n u e s a«d i t s power ivs t i e
petrolsuta aarket."-'®
This brought sbotsi e cle@r jaorcen-
t i l i s t phi l o s o p h y , nm&ly,
t h e used f o r proper g o f e r assent
as a l e a d i n g i u s t r u a j e n t of n e t i o n B l p l e n n i i k j .
The e x p o r t of p e t r o l e u a p e r m i t t e d t h e i n c r e a s e of
o t h e r p r o d u c t s , as shown in Table XII or t h e f o l l o w i n g
page.
In T a b l e H I t h e amount oi import i n c l u d e s a l l i m p o r t s ,
The t a b l e i n d i c a t e s t h e a c c e l e r a t e d p r o c e s s of o i l e x p o r t
which raey l e e a to 8 c o l l a p s e i n t h e econocsy i a c a s e t h e o i l
e x p o r t s h o u l a be c u r t a i leu clue t o a v a r i e t y of r e a s o n s such
68 cheaper p r o d u c t i o n of t h e middle
fiest,
or 4fepletioB of
o i l r e s o u r c e s i a Venesuele which aay occur in t h e f u t u r e .
/The treideudous i n c r e e s e of Venezuelan p o p u l a t i o n s i n c e
1920 lias keen r e l a t e d , t o l e r c e part,
ties.
to p e t r o l e u m a c t i v i -
Oil e x p l o i t a t i o n a t t r a c t e d p e o p l e t o c o n c e n t r a t e d
e r e a s of p e t r o l e u m a c t i v i t i e s ,
revenues ss w a l l ©s arosso public
aad isci#epi8«U government
aiorfcs In c i t i e s . A c e o r u i o y l y ,
See t h e M I n t r o c u c t i o n " of t h i s c h a p t e r whore t h i s
point is discussed,
164
o t h e r eee aortic a c t i v i t i e s — s e r v i c e s , trfetio, e t c . - - w e r e
incresseti in a i l urban c e n t e r s ? t h u s , c i t i e s were, i s g e n e r a l
Magnet oX p o p u l a t i o n .
t r.-rn
Furthermore, preveative
r„cUi©ir.e h s s more UcvtilopeU P»d c o n s e q u e n t l y t h e aanu&l
ueatfc I'&tt; s l l « i a i s i i e ? ; . I n b r i e f , t i i e r o was an i n c r e a s e
i n p o p u l a t i o n , an inevetwi.- i n t h e p r o c e s s of url/Cnissstf oa
w i t h s. c o n s e q u e n t u e e r e s . s e l a raruX pops l e t lots, eaJ e c h a n g e
i n t h e y e o g r e p h i c c l d i s t r i b u t i o n of t h e p o p u l a t i o n ,
T/'BLE XII
K£LaTXOKSUXP BETH'KEN IMPOST 01* GOODS r.m EXPORT
OF fETRULKDN FROM 191© UNTIL 1956®
O n mi 1 l i o n s of b o l i v a r s )
Yeors
1910-1920
1920-1930
1930-1935
1935-1940
1940-1943
1945-1950
1950-1954
1955
1956
1957
19 SO
•Sourcej
r
/mount of I a p o r t
Index
125
290
160 '
295
415
2 * €'i3
2,509
2,960
3,430
5 , SCO
4,TGS
100
232
144
234
330
1,610
2,00?
,606
2,750
4,470
3,026
*-
f e r u l e s , op. g i t . ,
/mount of Export
Petroleum
Index
• * •
284
289
399
901
2,749
4,720
6,031
6,640
7.206
7,004
p . 44£.
'l
•
" See F r a n c i s c o L o p e z , M";ot »s s o b r e Ueraografi o
v ' e n e s o l e n e I n t e g r a l . No. ? ( 1 9 5 4 ? ) ,
l a t h e 1930' s
" b a t t l e " of s a n i t a t i o n a g a i n s t a a l a r i s was b e g u n .
a
#
#
100
116
160
363
1,106
1,903
2,431
2,000
2,'937
2,050
16;
The table below rcvuals that in tfco tUirty-yoar period,
iC9i -1720, tlis- v'eaoKucias yo|,-ui3tia a iacre&sau 41,571
inUchlne&ts,
that
is,
iiikobitaats pex y&ux,
s large scaic.
it iaci-ocsau «t sa $,v«ra$a o£ 1^433
la IV2G oii ^plalta^iou stcirtcU 00
Six jcars i&ter (1926), tfeo population
reached i,£90,T31 inhabitants, which represented ua iiiere—
went of 525,635.
la other uorUs, tlid avaraye per year was
L7,0OS- i ahabi tifeUie # that is, tae?o tiiasi forty times the
pr dcetli aj, average.
TABLE Sill
i-OPULATIOK CP VENEZUELA nCCOEDING TO SEt'EiinL
CENSUSES FROM 1691 UNTIL i960®
Yeer
Population
1691
1920
1926
1936
1941
19 GO
1960
1962
•Sources
2*323,527
2,365,098
. . . 2,890,731
C,364,347
3,050,771
4,9m J16
7,000,000**
0,000,000***
I'#rbie&, o&. cit.. pp. 39-41.
••{Jstiasatioa, ;,>.neauol.&. Up to i-ate. k,
.•pril, 1961), 4 ar»ci back cover.
So. 7 (Kerch-
*®*Sstiffletio«, ibid.
The process ol urhaoiaetioss and population growth
increase,i i>«ri-»passtt,
la oraer to illustrate this point
the exBffiple of metropolitan Carecas will be mentioned,
city hs.ti s population of 140,132 In 1920.
This number
That
it u
corres|;o«dci!. to 5.9 par ee.it o;.' t&o tot til p o p u l a t i o n of that
year
<2,36i>,09fe),
I» 1936, we tropelitea C u r a e a s had 2 6 3 * 4 1 8
i n h a k i t e n t s , that
iu 6 . 4 per cent of the station fer t!ie sese
fi? Q
year
(3,364,347) . 1 b
1960 m e t r o p o l i t a n C s r a o s s had
cent ©f the total populeti on of the n a t i o n .
almost 4 0 per
seat of the
15 per
Furthernore,
Venezuelan p o p u l a t i o n wes
located
io six n e t r o p o l i t c n areas l» 1960.
T h e p r o c e s s of u r b a n i z a t i o n lies been e n c o u r a g e u d i r e c t l y
and i n d i r e c t l y by oil a c t i v i t i e s D i r e c t l y ,
a c t i v i t i e s attracted
old towns grew and
b e c a u s e oil
labor to areas of e x p l o i t a t i o n , thus
now oa«s were c r e s t e d .
this c o n c e n t r a t i o n of
On the other h e nd,
l&her p o p u l a t i o n a t t r a c t e d a d d i t i o n a l
p o p u l a t i o n engaged is s e r v i c e s , trade and
the Ilk©.
/•§ 8
result of vlie e f f e c t s o:T nullijpiieatf t#u cad r e l a t i o n s h i p s ,
cities other than oil to.;t;s attracted p o p u l a t i o n i'rou r u r a l
areas and
sraoll testis,
T h e s e p e o p l e , saeislly u p r o o t e d ,
abandoned p r o g r e s s i v e l y the
£•/9
«
**
l a t i f u a d l e sad nilni fundi s''D v.hi eh
rci la-Far fas, op. cit. , pp. 3 7 3 f £ .
e ^j
\'enso N a c i o n a l tie iob 1 acion. 1960 (Caracas , 1 9 6 0 ) ,
c
-£
*""iSee
See O
a r c e n o - V e l l e n i 11lle,
c , " L o s t e O r i e n t a l del
Oc
ct
ta
av
vi
io
o W
Jiarceno-Velleni
L e y o da M a r e c e i b o :
Esiudlo cle sus 'Jucleos l i r b e n o s C a r a c a s ,
D e c e m b e r , 1956.
f*
ou
L a t i f u n d i a, large e x t e n s i o n of land under e x t e n s i v e
c u l t i v a t i o n and owned by en a b s e n t e e p r o p r i e t o r (In aost
eases).
M i n i f a n d l a , small p o r t i o n of 1 and p o s s e s s e d or
occupied by a family or a p e r s o n , and c u l t i v a t e d for s e l f subsistence.
Mi nifundi a stems from p r o - h i s p e n i c s t a t e —
c o n o c o — b u t w a s p o s s e s s e d by e t r i b e io © c o l l e c t i v e s e n s e .
ic: i
Aiileli aru still the patterns <y£ laud division in rural areas.
These people, lured by the prospect of aew joi>s, migrated to
larger i<mns.kfe
-ccurdi«yly, increase In population wes en i nuirect
result of tiie oil activities which generated better standarus
of living, i improved sanitary conditions, and attracted
population f roc other c o u n t r i e s — C o l o m b i a , Spain, Italy.
This lacrosse 1st population had a defined urban pattern,
since rural population decreased proportionately to the
increase in urLtas populctio.i.
Tr;LLC Al 7
I'lSIRlBUTIuK OF THE P W O L m W I IN RURAL i m
Ui.'BrH IN 1920, 1936, 1941, 1950®
Percentage
Year
1920
1936
1941
1950
i960
Population
2,365,096
3,364,347
3,650,771
5,034,636
7,000,000 est.
Urban
25.C© est.
34.05
39.25
53. m
60.OC est.
Rural
75.00 est.
65.15
60.75
46.20
• 40.00 est.
•Sourc* s LHUI&1M. Relatlv&s dej, £ r o M t a i & £ Jj.
VI vie M s (Caracas, n.d.).
^ S e e ftigvol Gtere-Siltre, ts.s Ccsas Knertss. (Carf-cas,
1956). *-.r interesting novel in i.-rtiicb these fsigratious are
dCSCrloiK. .
168
MAP 3
VENEZUELA:.. PETROLEUM FIELD AREAS? 1960
r
Caribbean &ea
QVKACAS
Ma.CCAenA
DO
+ +-+-,
f
f-
CtO!W> BoLWA**.
V
loo
2ooKh
Source: International Bank of Reconstruction and
Development, 3&S. Ecpftpp^ Development. &£ Venezuela,
p. 10
-
169
HAP k
VENEZUELA: PRESEWT P O L I T I C A L p W t S f O t f
A R I 6 B E A H
SSA
(loeVA £ SPARTA
^ t > c R*®
C"3 &J.
V . c o /
5 7
r " i-ARA ! J L
>- r." * V
;-vroj«u-O,'
v
y
^-VKe«,0A/
^
S
'
—
/ c
*
\
TRIHioao
C£*CLA»X>)
i
i
v
i Mom A.cvs
'
1
it
x
J
i-v &
s
>t,<r ' - •
" — ^Aha.cu r o /
V
,
4T
^ Jf
M.
6
*»
V
A
/
*
*
,v >
* .5
,*»
X*
V
*
•
£ A
H A X
O \ M ^ s*
loo
=db=
«>
Source:
( f olded
/
I n t e r n a t i o n a l Bank,
kal^ scale).
«g, o t t .
>
before
'Preface"
*
PAST F U O E
' INCLUSIONS
0a plea econ6mieo persnitiri a
coordin&r todas las actividades
economical del pa£s» tanto las
privcdaa como las publics*, y
oar lea Is direccion que ai$ se
acuerde coo log intereses p e r m a nentes de la Naoi6n.
[An economic plan would permit
the coorci nation of ell economic
activities of the country, both
public and private, and give
them a direction more in keeping
with the permanent interests of
the Katies.1
Alberto Adrieni
CHAPTER XII/
s o i u i m rm
CONCLUSIONS
Summary
fit t h e end of t h e f i f t e e n t h c e n t u r y Europe was ready f o r
a g r e e t t r a n s f o r a t i o n i n s o c i a l , c u l t u r a l and economic
aspects.
The
tucrican c o a t i nesst was d i s c o v e r e d , which
brought about t h e s h i f t ox t h e c e n t e r of c o u a e r c e from the
l i e a i t e r r a i e a o to t h e A t l a n t i c .
Europe changed from t h e
taedievsl pattern to the n a t i o n - s t a t e p a t t e r n .
The p o l i t i c a l
and economic i d e a s which framed t h e f o r m a t i o n of n a t i o n s t a t e s was m e r c a n t i l i s m .
Mercanti lisia was t h e attempt t o
a c h i e v e economic and p o l i t i c a l uni t y ,
and to seek power t o
make t h e n a t i o n s t r o n g and p r o s p e r o u s .
Bat m e r c e n t i l i s r a
had two meanings.
F i r s t , t h e "current" p e r c e n t i l i s ® which
was h u l l i o n i s t and sought oil l i t a r y power and c o l o n i c l e x p l o i tation.
T h i s kind of m e r e a n t i l i s r a was e x e m p l i f i e d by Spelti,
Spain l a turn shaped t h e economy of her c o l o n i a l c o u n t r i e s
i n Spanish / a e r i c e .
The o t h e r mecni
was t h e i n t e l l e c t u e l
attempt to d e v e l o p n e t i o n - s t a t e s in order t o o b t a i n economic
o ii«i p o l i t i c a l u n i t y .
This t y p e of mete s n t i II sa was «j«ia©d
by a " p h i l o s o p h y of tieveloptaeBt*} i t was e x e m p l i f i e d in
S t e u e r t ' s work.
171
172
S t e u a r t ' 8 thought in brief
to achieve p o l i t i c a l
was t h e i n t e l l e c t u a l
attempt
end e c o n o m i c u n i t y of t h e n a t i o n t h r o u g h
economic d e v e l o p m e n t .
according to Steuart,
political
econ-
omy had t h e o b j e c t of p r o v i d i n $ f o o d ami c a p l o y m o n t t o e v e r y
member of
t h e s o c i e t y — - i s modern t a n a s he a d v o c a t e d
©I C u l l employment etui w e l f a r e .
the aarket
aconoay.
He d i d
b policy
n o t r e l y e n t i r e l y on
lie a r g u e d t h e a e r k e t
s h o u l d be i m p l e -
m e n t e d by g o v e r n m e n t a c t i o a t o a c h i e v e t h e s e g o a l s of f u l l
employment and w e l f e r e .
Steuert
thought that
government
s h o u l d be an i m p o r t a n t i n s t r u i s e n t of p o l i t i c a l
G o v e r n a e n t i s " t h s power t o c o r a a s n d s a d
ecorioay.
political
economy
is "the talent
to execute.M
man s h o u l d f i t
a t t h e h e a d of t h i s o p e r a t i o n and t h e t h i s
Steuart
thought thet
the s t a t e s -
p r i n c i p a l c o n c e r n s h o u l d be w i t h t h e g e n e r a l w e l f a r e j t h e r e f o r e , he s h o u l d be " a t t e n t i v e , " " a b l e " enu " u n c o r r u p t e d " i n
o r d e r t o a c c o m p l i s h e n t i r e l y t h e o p e r a t i o n of c o n t r o l
planning.
Money, a c c o r d ! n g t o S t e u a r t , w«s n e i t h e r
t h e view o£ t h e c l a s s i c a l
per
econosiii s t s ,
se—the then current aiercanti li st
"a very p o t e n t t o o l
for
f o r b o l s t e r i n g up t r a d e ,
moulding
and
a "veil1*--
nor a p r e c i o u s m e t a l
view,
lie s r u a o n e y os
t h e e c o n o m i c s y s t e m , end
I n d u s t r y a»<S e m p l o y m e n t . "
c o n s i d e r e d .Monetary end f i s c a l p o l i c i e s
,>ty«art
sad p u b l i c e x p e n d i -
tures
as p o w e r f u l i n s t r u m e n t s of
cipal
u s e of t a x e s a c c o r d i fly t o S t e u a r t was t o d i s t r i b u t e t h e
national
social policy.
The p r i n -
i n c o m e more e q u i t a b l y "fay d r a w i n g f roia t h e r i c h
e
f u n a s u f f i c i e n t t o employ b o t h t h e a e s e r v i ng end t h e p o o r i n
ITS
th© s e r v i c e o l ifce s t a t e . "
ecceruioy to S t e u & r t ,
T o x a l l s y sitoulu be> r e l a t e d ,
to a p r o g r a m &£ t l t e r o K t i v e p o s s i b i l -
i t i e s of. p u b l i c <sxpt;uul t a r e s . *
*fee e v o l u t i o n of
stages.
The f i r s t
V e n e z u e l a any fee d i v i d e d i n t o i'oar
s t a g e was p r e - l l i s p a n ! e (
~iH90)| t h i s
a s s t h e p r i a i t i ve s o c i e t y of X a v i a n s bused m a i n l y on s e 11' consuraiacti vities.
The s e c o n u s t a g e ( 1 5 0 0 - 1 8 1 0 ) was
d e t o r a i r i e i i by t h e S p a n i s h c o n q u e s t aad c o l o a i z & t i o n ,
The
a a i n p u r p o s e of S p a i n was t h e s e a r c h Tor g o l d &m t h e c o n t r o l
by t h e S p a n i s h g o v e r a n e a t o i t h e economic a c t i v i t i e s oi t h e
p r o d u c t i o n b®4 d i s t r i b u t i o n of g o o d s ,
. a g r i c u l t u r e w s t ti*«
b a s i c e c o n o m i c a c t i v i t y Uuri ng t h e Spani sii p e r i o d .
tiiir*i s i e g e of
Tlie
" / e n e z u e l a a tie¥0lopt30$it < 1 6 1 0 - 1 9 2 0 was t h e
r e p u b l i c , t h e e r a o* c o i f e e .
Daring tUis t h i r d s t e ^ e
iuuependest
tvji- i c u i i u r C t
Zt-ya
j f e u e s a e l a 'jc casus p o l i t i c a l l y
S p a i n tnU h e r ecoticay wat s t i l l
cr c
i i l i *» w p o i i c <* &> i< cr o * i »j. n i i
c o n t r o l of t h e m a r k e t .
extmenl
l a t h i s s t e y e , os
I»a$e4 oa
^^
in
yov—
tl»«*
o r e c e d l u g o a e , t h e saerfeet was a a o r e t o o l , c o n t r o l l e a by
^overnmeat a c t i o n .
1
This s o - c a l l e d Republic ass c h a r a c t e r i z e d
S t e u a r t *s view ox t a x a t i o n c o n t r a s t e d w i t h t h a t of t h e
n a r r o w e r m e r c a n t i l i s t , which r e g a r d e d taxation
o n l y as e
s o u r c e of r e v e n u e t o u e i nt ei n t h e c e n t r a l c'over n»ae n t .
This
f l e w p r e v a i l e d . I s V e n e z u e l a d u r i n g c o l o n i a l t i a e s , soti
d u r i n g t h e two s t a g e s ot t h e K e p u b l i c . Cf. C a r l S . .She u p ,
The F i s c a l System of V e n e z u e l a * A R e p o r t ( S a l t i i a o r e , 1 9 5 9 ) ,
pp. 1-42. This r e p o r t eaphtsized t h a t Venesaela i a t h e t
y e a r s t i l l l a c k e d a p r o p e r s y s t e m of t a x a t i o a t o o i s t r i b u t e
p r o p e r l y t h e n p t i o n s l i ncome and t o p r o m o t e development*
174
by c a n a l l l i s i m o . n s a e l y government l e a d e r s h i p operated by
" m i l i t a r y coups1* sad not lay an e l e c t i o n e r y p r o c e s s
t t h e ena of the « i n e t e e n t h c e n t u r y , Guzman-Bianco,
P r e s i d e n t of Venezuela, e x e m p l i f i e s a good example ®£
enlightened taercsntillsis*
He improved e d u c a t i o n , p u b l i c
a d m i n i s t r a t i o n , and iito yur.erel l e v e l of p r o d u c t i o n .
He
a l s o i n i t i s t e t i p o l i t i c a l rei'oras to s t r e n g t h e n t h e r o l e of
the s t a t e over the C e t h o l i e Church.
F i n a l l y , t h e l a s t p e r i o d , the r e p u b l i c era or o i l ,
s t a r t e d i s 1920.
The base ol' the economy
c u l t u r a l a c t i v i t i e s to o i l p r o d u c t i o n .
$vm
agri-
Docouse the d i c t a t o r
Goiaea ruled t h e country from 1907 u n t i l h i s death l a 1935,
t h e r e was © lag i n the country *s economic development.
Frota
1937 u n t i 1 1958 the government consi st-ed of short p e r i o d s of
railitery
d i c t a t o r s h i p s with the e x c e p t i o n of one period when
H&aalo G e l l e g o s wis an e l e c t e d p r e s i d e n t .
However, during
the ©II s t s g e tiie government * s r o l e i n the economy i n c r e a s e d
because of the i n c r e a s e of revenue from a l l t a x e s .
This
c a l l e d f o r proper governmental p l a n n i n g .
In t h i s ere of o i l t h e l e a d i n g f i g u r e in economic a c t i v i t y was no longer the landowner; lie wes r e p l a c e d by the
businesstfan.
I b i s o b s e r v a t i o n should be viewed i n connec-
t i o n with S t e w a r t ' s o p i n i o n of businessmen. He regarded ifaeai
"See Gabriel u» Al&oiiu end Jcaaes S, Co 1 e r a s n , e d i t o r s ,
The i o 1 i t i c s of the : ' e v e l o s i no '-re as. (i'r i ncoton, 1960),
ppT 45C-531.
ITS
as more i n d u s t r i o u s and t h r i f t y t h a n l a n d o w n e r s , and t h e r e f o r e more l i k e l y t o c o n t r i b u t e t o 8 h i n h o r rat® of oconoraic
growth.
Conclusions
Prom t h i s b r i e f
i'ro« i t s
draws*
maimery of
beginning uuti 1 1956,
First,
V e n e z u e l a ' s eoonomic h i s t o r y ,
s e v e r a l c o n c l u s i o n s may be
t h e c o n c e p t of " f r e e a a r k e t " d i d not p l a y any
r o l e i n t h e e n t i r e p r o c e s s of such e v o l u t i o n .
i n t e r v e n t i o n end c o n t r o l ,
unions,
Government
end f o r e i g n o i l
enterprises
c o n s t i t u t e d t h e import ant f o r c e s s f f e e t i i i § " t h e market
S e c o n d , t h e p h i l o s o p h i e s and p o l i c i e s of t h e narrower
Mercantilist
c o n c e p t s have b e e n p r e s e n t
e v o l u t i o n of
the nation.
was i h f a v o r o f S p a i n j i t
colony,
d i s r e g a r u e d t h e development of
The mala o b j e c t i v e of
search lor g o l d ,
aent that
S e r c a n t i i i s a during c o l o n ! a l times
T h i s s a e r c a n i i l i sut was a u t h o r i t a r i a n ,
bullionist.
colonics.
i n a a a y ways i n t h e
and i t
the Creole groups—the
was
t h e S p a n i a r d s ws« t h e
but t h e y b r o u g h t t h e i r government
I t was t h i s p e t r i e r c h a l
the
ant
to t h e
authoritarian govern-
landlords---reacted
last.
They wanted more f r e e d o m and power f o r t h e i r own i n t e r e s t s j
t h i s was t h e mala c a u s e o f
the r e v o l u t i o n for indepenuenco,
T h i r d , t h i s k i n d of " S p a n i s h fflercatiti lisra" d i d not e x e r t
a p o s i t i v e e f f e c t on t h e economy of e i t h e r Spaisi or t h e
colony—Venezuela.
of
T h i s ruer c a n t i l i sas s o u g h t o n l y t h e power
t h e c e n t r a l g o v e r a n i e n t , t h e Crown, »nd r e g a r d e d w e a l t h as
b e i n g o n l y go I d .
T h i s a t t i t u d e b r o u g h t about a b e n i g n
n t
n e g l i g e n c e o l economic r e s o u r c e s in both Spain and t h e
colonies.
In a d d i t i o n t o t h i s , t h e i n t o l e r a n t r e l i g i o u s
a t t i t u d e of t h e Spanish s t a t e c o n t r i b u t e d t o t h e backwardness of S p e i s .
T h i s i n t o l e r & u c e was m a n i f e s t e d i a two
i m p o r t a n t e v e n t s f namely t h e mass e x p u l s i o n of J&ws i a
1492,3 which d e p r i v e d Spain of an i m p o r t a n t "human c a p i t a l * 1
(Jews were v e r y a c t i v e m e r c h a n t * ) , end t h e l e e k of r e s p o n s e
ia Spain to the Reformation—which has been connected to the
phenomenon of t h e i n d u s t r i a l r e v o l u t i o n in t h e l o t e
eighteenth century.^
r i n a 11 y, one cannot expect thet Spuifi -J airing the
s i x t e e n t h c e n t u r y wos s u f f i c i e n t l y s o p h i s t i c a t e d t o hsve an
e n l i g h t e n e d t y p e o£ s e r e a u f c i l t s i a .
How e v e r , one t,light e x p e c t
t h a t she was s o p h i s t i c a t e d enough i n t h e e i g h t e e n t k c e n t u r y
t o l e a r n toward S t e u a r t ' s t h o u g h t .
Out i n t h i s c e n t u r y Spain
was d e c a d e n t , e s p e c i a l l y between 1768 and 1606, when t h e King,
C h a r l e s IV, r u l e d t h e n a t i o n .
He was week and h i s m i n i s t e r
£?
Godoy v.as i a c o a p e t e n t . I n
audition Steuart published
h i s P o l i t i c a l ueconorav i n 1760, almost a t t h e same t i m e
t h a t Met® S m i t h ' s i d e a s were welcotaed i n E n g l a n d .
Spain had
f o r t y - t w o y e a r s , between 1766 and 1810, when t h e i n d e p e n d e n c e
of Spanish America b e g a n , t o u n d e r s t a n d S t e u a r t * s m e s s a g e .
n t o n i o B a l l e s t e r o s - K e r r e t a , S l a t e s ! s ue H i s t o r i a de
Kgp86s (B&reelosie, 1957), pp. 232-235.
One ITandred thousand
Jews were e x p u l s e d .
4
Ci.
Tawncy, o £ . c i t . ,
pp. 6 2 - 7 2 .
" b a l l e s t e r o s - S a r r e t a , op. c i t . , pp. 423-449,
177
However, Spain ignored St*»u&rt's thought, partly because there
wag little time to understand the new orientation In cconooic
philosophy end policies, partly because of the incapacity of
the Spanish government to understand this new orientation,
mm
partly because of the absence st that time of a Spanish
iatellectuel elite in economics and politics capable of
interpreting new thoughts or of creating new orientations.
The purpose of this stuJy is aat to recoisraead a specific
type of political sac! economic system to Veaezuolc today.
Its purpose is to suggest tb« importance ot the role el $overnmeat in promoting aevoloptaeot, given the nature of the
present economic and political structure, whieh is ® product
of the Venezuelan evolution.
That is to say, if Venezuela
is Qoiug to expand and to grow, she wi11 not find the
appropriate policies in a laissez-faire market economy, but
In a kind of econouiic framework is whi ch the market is
another too 1 — n o t the only tool--which needs to be implemented with government control to direct the economy toward
the desired yoals.
Economic policies cannot he viewed as a "black or white"
approach to solve economic problems.
The history of economic
thought has been a permanent attempt to solve current economic problems*
Economics is a "way of thinkingj" 0 It is not
'^Cl&reac# r.yres, Tlie Theory oT Economic I rocress :
S.t.».4.g. Qf, the Fandeiaeatals of Economic L'eve loptaent ana
Cultursl Cheage (Sew York, 1962), p. *4.
178
a stereotyped
world
which
realistic
"box of
calls
for
approach
to
s o l u t i o n s O n e
dynamic
l i v e s l a e ayisaaie
solutions.
Venezuelan
Therefore,
economy
wi 11 b e
p o l i t i c a l anti e c o n o m i c frauesvosrk Lssea o s
oh t l i o
si^iiiiicejit
economy
as a d e v i c e of
private
enterprise,
"vital"
industries.?
In
the
economic
ophy
provides
framework
of
has
co a t r o l
auu
conclusion,
f.i*l,r.€j e c o u o n y ,
pertlcipotioa
as
cm o w n e r
development
an
of
Interesting
8 contro 1led
of
th«
as
philosophy,
role
Venezuela,
poi nts
to
and
be
of
ssd
s
the
history
S t e u a r t *s
oil,
the
resourcos
not
Is
iu
ti p r o t i o t o r
considered
raarket.
planning,
government
eeoooaic
important
withi n a
flovenwaeot
aau p l e n n i n y ,
aercantilist
pleyeu
of
a
in
of
philosthe
everyone
lives
•fl
in
a world
of
Control
market
and
or
does
a tool
not
which
admi ni s t e r e i i .
devices
price
of
Is
autainistored
to
system
social
The
help
Joes
value
in
not
is
^• t t h e p r e s e n
Venezuelan sub-soil
t h e o r g a n i s a t i o n of
iron, electricity,
s i m i l a r t o t h e T . V.
"vital" industries,
of t h e c o u n t r y , and
by t h e g o v e r n o e n t ,
countries.
the
prices
necess &rily
must
be
market
the
meen
implemented,
Is
one
of
organizat ion
measure
loss
social
continuity
of
the
of
freedom*
oriented,
many
the
values,
the
of
planned
i us t r u & e n t s
economy.
for
social
The
the
The
essence
procuss.
tis.ie t h e b!e»e@«@les g o v e r n m e n t owns
s e a c o a s t s a n d r i v e r b e d s , as w e l l o s
Corporacioti ue Guayene, which produces
and o t h e r p r o d u c t s .
T h i s or g a n i d a t i o n i s
• . in the United States.
If© m e a n b y
those that are vital for the development
which "should" bo, t h e r e f o r e , controlled
e s p e c i a l l y in the case of u n d e r d e v e l o p e d
t
,
% o s s e r B» H e l t o n , L e c t u r e s ,
mentor., Texas, S p r i n g , 1964.
North
Texas
State
University,
179
Tomorrow oat' w i l l l i t e in e society of welfare sad l e i s u r e ;
o ue v i l l cehieve f u l l crap loyr.ient; t h i s moans the l u l l isiplication of tlie concept of welfera, »a«ely a way of l i v i n g for
everybody, that concept of e b e t t e r d i s t r i b u t i o n of output
one must reshape the economic system to consider welfare
unci f u l l employment as taeasingfal tasks to be achieved.
The
concept of freedom must be understood as a workable end
dynamic concept in order to avoid s o c i a l d i s a s t e r # hunger,
and the loss of human d i g n i t y .
Individual freedow i s &
valuable concept t h a t e l l people c h e r i s h , but i t i s important
to consider both the value of society as a whold and the
evolution o£ social and economic thoughts.
One must r e - s t r u c t u r e the systont If h« i s going to
achieve abundance j t h e r e f o r e , he taust Revise too Is for that
purpose.
Social values like t k r i f t , a balanced. budget,
saarfcoi, seat a Clavs, aati a a ay others are o b j e c t s of perseneat change.***
i'iiysicists do not use old books, old-fashioned
p r a c t i c e s , nor can one use past thouQht s t-7 d i r e c t his a c t i v ities.
.hat were s o l u t i o n s for y e s t e r d a y ' s problems cannot
be solutions for today's problems. 1 1
The system must be reshaped, not in terms of old p a t terns , not i a t e r e s of obsolete values, but in terns of the
Q
'handall I'i nn&y Cochra>», Lectures, North Texas State
University, F a l l , 1963.
10
Ibid.
1 1
m±-
I CO
"eolleetiva sue of soelai int^lligeace" isi order to obtain
febunuauce ami welfare*
'•Iiat Is requi rod today is the collective use of our
soci al intelligence to reap the social rewards which
are potentially available, Traditionally we have
abhorred governsiental or collective actios. Lalssez£ aire and free competi tioa wore all that we needed;
no decision which would affect the operation of the
entire ecoaoey wus to be made by anybody. Bat the
economy hat changed markedly from the tine when those
ideas ware formulated. The problems wfeiob society
feces today are not those of the eighteenth and
nineteenth centuri ds. Changi ng and dynaaic conditions
have posed new problems} and these new problems in the
view of institutional economists, require fresh
examination and fresh answers. They require in
1?
particular the soci ®1 use of soci&l intelligence.
Thus, this brief suouary of tho ©coaoaic evolution of
t'eaeeuela iawie&tes. th<a signifIcaace o£ Mercantilism ia
station that development.
Government has played an important
Ik frawisifj tlie wcosw>»y of V'euesuolu, aad wSist is more
siyailiesut %u that y^vertimet?i
must
piaaaou to
achieve gbuntiaace uw& s-aeiai w # j £ & y e , neaely, wtlio collectiv©
use of our ttocial intelligence" to reap the most cherished
social crop, abundance and ssselel welfare.
Kendall Finney Cochran, "The Concept of Economic
Planning in Institutional Economics," unpublished doctoral
dissertation, Department of Ecouomics, Ohio State University,
Columbus, Ohio, 1955, p. 380.
APP8N&IX
182
«&>
S-S8§*
^v'"*v*' "" ^ •* % ^ * \'C" ; \T *T
-
\-A V'\\ W * - \ V ^
St. W>$"
v . „
.. . "N "Ai'i'"' v Vv ";
** ~AV"?v IX- '
*"*"
-k
A
«-* »*1,S
A
vAOy-~*B'
•••'*--'.• •'<--.i-.'>'--i*Aj&* •
?k'-v,
, i v .fc,
• #.*»$? ,Tak J, > 1«v ^ si _* 5 t
b
v.'
• « V , m S «'| !
«.> * w \ . * ¥ , **» <»•!*•. , . . 4 i
% \% V & W f o ? * '
V- i"i*
i_.|*.
'(
{ <2
yy&.& g:1 •:>
.
.,
5« k:
, -
w W l l i l i
v \ir?!fi
Plate I
Venezuelan Indian *••«»
183
KX
T~"
Plate 2
The Spanish Conquistador
-
? '
184
#
Plate 3
P r i m i t i v e Farming P r a c t i c e s Which P r e v a i l e d During t h e
S t a g e s s H i s p a n i c and R e p u b l i c , The Era of Coffee
185
T
~r
Plat© 4
Petroleum T o w e n on.the Lake of Maracalbo
.1068 m i ¥
3I8LJe§KiftPUY
Bodies
. » o o i t 8 - S 8 i g n e t t l i p t l t E s t t t i l l o s do Etnol.ooi.a /Ift.t.itiil.l <-ls
V e n e z u e l a . C a r a c a s , " Uni v W s i d a d C e n t r a l de V e n e z u e l a ,
1954.
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i«SLBLSJ
MJJUKMiMtSL
£SMXlI&&S&SL
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SSUUL&kSJL* & £ & £ £ £
T r i a e e t y a l ue l e f a g u i t a d de £9jj>.ngM£& j e le. UnLtMSMAM.
k M M M E£
• N o s . 1 , St, 3 ( S o p t o s a b c r l a r e h , 1960), pp. 25-2?.
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;-yr a r i a
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