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Financing a new nation: a comparative study of the financial roots of the USA and Gran Colombia*

Published online by Cambridge University Press:  24 February 2012

John Muse-Fisher
John Muse-Fisher
Affiliation:
2869 Tam O'Shanter Drive, El Dorado Hills, CA 95762, USA E-mail: [email protected]
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Abstract

The structure of the USA and the countries that emerged from the remains of Gran Colombia ultimately took different shapes from those suggested in the era immediately after independence, particularly in regard to the extent of each state's fiscal and monetary capacities. This article applies Oszlak's model of ‘stateness’ to the early financial and monetary histories of the USA (roughly 1776–93) and Gran Colombia (roughly 1819–35) to assess and compare the role of financial and monetary capacities in long-run state consolidation and economic development. The US was ultimately more successful than Gran Colombia at adapting its financial and monetary capacities and institutions, creating better conditions for the attainment of ‘stateness’, stronger economic growth, and greater endurance as a national entity. The comparison ultimately suggests a reciprocal relationship between the legitimization of a state's authority (that is, state consolidation) and the development and solidification of fiscal and monetary capacities.

Keywords

American Independenceeconomic developmentfinancial developmentforeign debtGran Colombia
Type
Articles
Information
Journal of Global History , Volume 7 , Issue 1 , March 2012 , pp. 3 - 26
Copyright
Copyright © Cambridge University Press 2012

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References

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81 Stabile, Origins, p. 12; Bordo and Végh, ‘What if Alexander Hamilton’, p. 474.

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85 Jaramillo, Meisel, and Urrutia, ‘Continuities and discontinuities’, pp. 425–6.

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91 Bushnell, Santander regime, pp. 84, 85. Bolívar noted that, even though the taxes were no more oppressive than under the colonial regime, ‘the old taxes had the advantage of being habitual and therefore were considered mild’. This underscores the way in which familiarity can create legitimacy in the collection of taxes. Bolívar from La Gaceta de Colombia, 17 December 1826, as quoted in Bushnell, Santander Regime, p. 107.

92 Ibid., pp. 86, 99.

93 Bushnell, Santander regime, p. 99.

94 Gouverneur Morris, a founding father, once wrote: ‘America having never been much taxed … and the contest in question being on the very Question of Taxation the laying of Imposts unless from the Last necessity would have been Madness’ (as quoted in Stabile, Origins, p. 23).

95 Ferguson, Power of the purse, p. 27.

96 Ibid., p. 51.

97 Bolles, Financial history, p. 121.

98 Ibid.,.

99 Ferguson, Power of the purse, p. 58.

100 Bolles, Financial history, p. 129.

101 Ibid., pp. 135, 141, 142.

102 Maria Alejandra Irigion, ‘Gresham on horseback: the monetary roots of Spanish American political fragmentation in the nineteenth century’, LSE Economic History Working Paper 96/06, December 2006, http://eprints.lse.ac.uk/22321/1/wp96.pdf (consulted 6 December 2011), p. 15.

103 Ibid., p. 13.

104 Ibid. As New Granada was less productive than Peru or Mexico, it received situados (subsidies) from other parts of the empire to help cover the costs of colonial administration. Once independence was achieved, Gran Colombia relied on foreign loans to bridge the gap between its expenses and its domestic revenues. See Irigion, ‘Gresham on horseback’. See also Fisher, John R., Kuethe, Allan J., and McFarlane, Anthony, eds., Reform and insurrection in New Granada and Peru, Baton Rouge, LA: Louisiana State University Press, 1990, p. 2Google Scholar.

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106 Ibid., p. 14.

107 Gresham's Law essentially states that bad money will drive out good money if both are required to be accepted as legal tender. When the quality of money varies, the incentive becomes to hoard higher quality currency, leading the lower quality money to be circulated more predominantly.

108 Bushnell, Santander regime, p. 107.

109 The military of Gran Colombia was dominated by Venezuelans whereas the government was more strongly influenced by Colombians. This was a persistent source of tension in the Republic. See, for instance, ibid., pp. 60–1.

110 Ibid., p. 107.

111 Dawson, First Latin American debt crisis, p. 22.

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114 Bushnell, Santander regime, p. 84.

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118 See, for instance, Bordo and Végh, ‘What if Alexander Hamilton’; Richard Sylla, ‘The political economy of early U.S. financial development’, in Haber, North, and Weingast, Political institutions, pp. 60–91.

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120 See for example Grubb ‘Creating the U.S. dollar’; idem, ‘US Constitution and monetary powers’; Perkins, American public finance; Ferguson, Power of the purse.

121 Sylla, ‘Political economy’, p. 85.

122 Ibid., p. 63.

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124 Oszlak, ‘Historical formation’, p. 7.

125 Ibid.

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142 Irigoin, ‘Gresham on horseback’, pp. 13–14.

143 Grubb, ‘US Constitution’, p. 59.

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145 Ibid.

146 Sylla, ‘Political economy’, p. 734.

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