Building Fiscal Capacity in Colonial Mexico: From Fragmentation to Centralization

Abstract

The success of fiscal centralization and military buildup in colonial Mexico contrasts with failed similar attempts elsewhere. Why did powerful elites comply with fiscal-military reforms in eighteenth-century Mexico? I argue that the Seven Years' War provided incentives for the Crown to centralize and elites to comply by accentuating the free rider problems inherent in the provision of military defense under fiscal fragmentation. Fiscal data and history document that reforms were more successful in regions more militarily vulnerable and where benefits were more aligned between the elites and the Crown. Centralization served the elites to commit to collective cooperation.