THE SIGNIFICANCE OF IN THE PROCESS

OF THE ECONOMIC EVOLUTION OF VENEZUELA

APPROVED,

iajor Professor

1 nor Profes

Director, Dejafortment of B»wr Sociology

Deah of the Graduate School \ THE SIGNIFICANCE OF IEEC#NTILIS» IN THE PBOCESS Of THE ECyNOSIC EVOLUTION OF VENEZUELA

THESIS

1 resented to the Graduate Council of the North Texas State University la Petti si Faifillaoat of tho Requirecseots

for the Uegree of

/••.STEE OF ARTS

Uy

Eciuartio Sosa-ftodrlgaez, 8,5.» ;*rcbitect (Professional Mploma), B.C.P. Denton, Toxas Key, 1964 TA8L*i vi> CONTENTS

Pace LIST OF T;-SLES , v

LIST fif ILL U ST r AT IG N S * vi

PAST ONEs CKGRWIND

Chapter I. GSIIESAL I NTS try OCT I ON 2

II. BUKOFS ;'T TOE MUm? 01? THE tlSCuVERY OF ASSBKIC €d ill. suae cumjspjts or: issjx/.ktiliss...... i:

PAP.? T':W i 5TSy.,AT' S TflOUGUT

IV. BACKGROUND Of STEUAIiT* .5 ;fOfcK . , 26

Introuuction Shy Ills Philosophy ;.'pg not "eceptco Steuart's Philosophy The Bole of the State

V. FOPMLmuN, ;;6RlCUiTiJSE, fiUZ PHYSIC -''L *L*miUQ . 33

1opuiati on anu Agriculture Process ol Urbeni zat io» The Sole of Foreign Is Stressed by Steuart

n, li/:.SIC ECOKtfMC CONCEPTS...... 44

Valise Balance of Kealtli nnu Traue Public P.orrowin$ obq Taxation

fIX. IKSTHUMEIiT WP th-UKim W CCKTXfeL 6;" Introduction, The Isgtraiaents of "emulation trad Control

111 Chapter Ps§e

i'lll, CONCLUSIONS ON STED/.ilT'S THOUGHT 71

»-/MT V«i; fX* COIMENT5 ON ECONOMIC s?v'OLOTIO N OF tfEKEZOKLi'.

Ia. INTRODUCTION ...... 76

x. tkb m$T st;:Gei i>sg~ms?A?iic ( -isoo) . . . ?e

il. ?I1 E SfiCCIl; ST.'GEi 8ISI ":iC CI 'OO-ICIO) « .... 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 ia the 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 and Production Hit* Consequences ©£ I'etroleuw ."-ctivitiess

iitv, SS1UAEY .AMD iA-'i Ih.SZi 'JS 171 Sumnery Conclusions

- t¥e,mi& . * . lei aiDLlOGS.-'Fliy 186

iv LIST of TABLES n£»abl e

I. The Goltl Production So Venezuela iroti 1529 tO lu10• « • . . • . . « • « • « . . . * * . ^V

11. Amounts of Sxport of Tobecco Coxrespontiiny to Several fears 104

III. Amouuts of of Tobecco Correspond!ng to Several Years 105

XV. Production of ordinary Linen Cloth io Venezuela, for 1599, 1600, 1605 and 1607 . . Ill

V. Distribution of the Population of Venezuela in Different Types in 1799 . 126

Ml, Distribution of the Populatio n oil Venezuela in 1039 into Ethnic Groups 131

I'll. Public Revenue# of Venezuela on June 30, 1832. . 132

VIII. National Income of Venezuela in Several

Fiscal Years 136

IX. Export of Coffee for Several Years ...... 130

X. Coiaperi sou of the Government Expenditures of the Yoars 1957 anu 1909. . . 144 aI. Comparative Prices o£ Crutfe Oil l;elivoted in Mew York, December, 1959. 161 XII, .''elatisnstitp Between laport o.'" C-soJs and Export of t'etroleua from 1910 until 190&. . 164 a111. Population of Venezuelo .ccoruiny to Several Censuses from 1891 until 1960 ...... 162

\IV, Distribution of the Population Is i:ural and Urban in 1920, 1936, 1941, 1950 167 LIST OF ILLOSTKSTICJ-IS

14 ap I" 8g0

1. Iboro mericc: Loeotloa of Moin Indian Cultures, Pre-OispRf?ic St ego 05

•0 Cultural Areas of Venezuela: Fre- 4* • 11 i 8 p 8 n i c Stage 06

3. Venezuelai Petroleum Field ross, 1960...... 160

4. Venezuela? Present Political Livigion 169

vi i' late Pege 1, Yenosuslan Intiian -^ornan . . . 182 2, The Spanish ConquistG'ior. . . . 183 3, trimitive Farrainy Practices hich Preveilea Daring tht St ages i Hi spanl c ami Republic, the Sre of Coffee . 164 4, Petroleum Towers on the Lake of Msracaibo .... 185

vii PART ONE

£©®ae»ta doctrine is ovary- wber© the uxpression o£ the coouitioog of tie Use to itliislt It «#@yg#«# taa Europe £rotf th# en« of ISie iiftoestb century onwerUc was i v®ry difftresit place froa the Kurope of the twelfth «s4 thirteenth centuries,

t-.%exuader Grey CHAPTER 1

GENERAL INTRODUCTION

The purpose of this thesis is to evaluate the econonic thought involved in the process of the economic evolution of Venezuela. When the conti nent of America* was discovered, Europe had emerged from feudalists and was living in the mer- cantilist stage. The ideas and policies of taercantili sm determined the character of the Spanish conquest of America attii prevei led duriny colonial times . Meroantili sm has two raeeni ngs. The first meeuiay sig- nifies bul lioni sva, a favorable , and exploi- tation of colonial countries by imperialist nations. The other meaning represents an orientation and philosophy for emerging nations, and for underdeveloped countries. The second seaning of mercantilism is exemplified pat excellence in the works of James Steuart of Coltness. The Spanish mer- cantilism was an example of the first meani ny. That is, it was characterized by , government intervention, and exploitation of .

In this paper the word "America" is used to mean the continent and the words "United States" to refer to the nation. 3

The war for independence brought about the formation of

an economic unit, the nation-stete, Venezuela, whi ch was in

part the product OF the raercaatilist ideas. AS a republic,

Venezuela lived the first hundred years with the same economic

base as that of the , that is, by agricultural activ-

ities. In 1920 a om emerged, the petroleum industry,

which was, and still is, the pri ncipel economic activity.

During the coloni al period and duriny the republic, the gov-

ernment played an important role in the economy, that Is, the

framework of the economy was the , but it was controlled

by government action.

Stewart's thought represented a defined orientation for

ewerginy nations. However, he lived duri ng the last part of

the ere of mercantilism, and this accounted for the xact that

he was ignored or neglected both in when she was a power-

ful imperialistic nation, and la Venezuela when that country

became independent.

The role of the government is important in directing the

development of emerging nations \ it is more significant when

the action of the government is oriented by e philosophy of

planning for development. In this context the philosophy of

Steuart is relevant.

This thesis will be developed in thi s order * the situa-

tion of Europe when America was discovered, some comments on

the two types of mereantili sra, i ncludi ng Steuart's ; then the

principal aspects of the economic evolution of Venezuela and

conclusions which stem from these observations. CHAPTER II

iUSOTE A J THE MOMENT OF THE

DISCOVERY OF AMERICA

At the end of the fi fteenth century Europe was livi ng i a

the finiil st age of , and was prepared for & §reat

transformation la cultural, economic and political aspect s.

Thus the discovery of America was not & casual accident , hut

rather en event that bad to occur at tbat time.

Several factors contributed to this economic, political

and technological change which made possible the expansion of

the Mediterranean Sea and the discovery of other lands.*

First, navigation had progressed not ably due to the i nvention

of the astrolabe, as well as to the construction of larger

ships equipped with sails to navigate against winds and with

stronger keels for better stability. Second, the improvement

of Gutenberg printing, and the simultaneous intensifieation

of the paper industry tuade the diffusion of technological

progress possible. This situation allowed more people to

participate i» cultural and economic progressIn other

*cf. Skepperd Bancroft dough ®«d Cltsrles woolsey Cole, ricaBoraic History of guror>e (Boston, 1941). From i486 until 1522 there were fourteen important Uiscoveries of new "worlds p. 109. 2'A. . Arellano-Moreno, Drifleaes de la Economia ypnasolana (Caracas, 1960) , pp. 21-22. 5 words, culture proyressed from a parochi el framework to a universal one. third, there was a general conviction of the terrestrial sphericity, thanks to contact with Arabs who, in turn, had inherited the Greek-Roman concept.3 Fourth, the spirit of niercanti 11 so** and the eagerness for created an anxiety for new and a desire for more gold. "Old schoo1 of mercantili st thought, bullionisra, emphasi feed that the nation's was to be measured by the amount of bullion it possessed."5 Uuring this period of raercantilism the growth of the Money economy was significant. It facili- tated the expansion of trade.6 Finally, the European nations were 1n the process of becoming unified nations. This is also associated with morcant1li st thought, In a broad sense, mercantili sn was a system of protection and policy of the "econooie unit"7 which was related to political unity. Had the medieval pattern prevailed, it would have been very difficult, if not impossible, to explode the Mediterranean framework of commerce and trade, which made It possible to conquer the Atlantic.

3Ibld.. p. 20. %@e Chapter III of this study. Philip C. Newman, Arthur D. Gayer, and allien II. Spencer, editors, Source leadings la Economic Ybouuht (New York, 1954), p. 22. 6&11 F. VJeckscher, "Mercantilism,* Encyclopedia of the Social Sciences, edited by Edwin R. A. Sellgman (New York, 1932), X, 337. 7Ibid., pp. 333-337. '-he t*asa chapter will coatcio uoanent's oti aereialilisai. 6 f'/b^n America was di scovcreu, the European nations were in various stages of political unification and economic power. Henri Pirenne asserted that, "France was ruined by the Hundred Years' s*ar, end it was not until Louis XI came to the throne [1461-1483] that measure* were taken to bring about its economical revivalwTjie political anarchy which reigned la Germany prevented it, in the absence of central government, from imitati ng its western neighbors. "Italy, torn between princes and republics all struggling for supremacy, continued to fall into independent economic areas » . . the supremacy of Italy in banking and luxury was still so marked that it was successfully maintained over the rest of Europe, la spite of its political disunion, unti1 the di scovcry of new routes to the Indies turned the main current of navigation and cowiaerce from the Uediterreneen to the AtlanticEngland was "the country which enjoyed a more powerful end united government then any otherj"** how- ever , as a consequence of the Hundred Years* H'ar, it was still weak. "In the small towns appealed to the Count against the tyranny of the great cities12 Finally, Spain and Portugal had developed by that time 1nto a new form of political life, the nation-state, aided by a strong

®Henri Pirenne, Economic a.ad Social History of Medieval Europe (New Xork, 1937), p.218.

9Ibid., p. 219. 10Ibid.

nIbid. . p. 217. l2Ibid., p. 215. ? nations! sentiment at sell as toy the resentful struggle between the bourgeosie on one aide and clergy sad nobility on the other.*3 This fact placed them in a relatively advan- tageous position concerning the discovery.*4 Was Spain the most advanced European country to undertake this task? Per- il aps not, but ®t that moment its strong political unit was decisive. The rest of Europe, as has been pointed out, was convulsive, weak,

x3,-rellano-»oreno, 0£. jjit,., p. 26. The author later mentions other meaningful facts. ''The principal preoccupa- tion of the Catholic Kings was to re-establish peace and to consolidate the royal authority by means of several resolu- tions with which they obtained political power over cities, nobility and clergy) military predominance by means of Holy Brotherhood and ailitary orders, and the racial and religious unity with the expulsion of Jews and the persecution of pagans.* The expulsion of Jews, who were very active In commerce, was one of the principal causes of Spanish back- wardness. This fact and the choice of Madrid as capital of Spain were disastrous to the future of that country. Cf. Kederic© Carlos Sain® de Robles, £q£ gjj£ tit drill ,ff> c.ipl.t.ll. (Madrid, I960).

14 Ibid.. p. 26 l'vCic>tstjf! and Cole, a&. clt., p. 103, "The expantloa of Europe wbi ch began in the fi iteenth century was e two-way process. On the one hand Europe exported to the other continents populations, ideas, language, institutions, end a way of ooing things; on the other, it iaported froa the oversees arens and ideas which pro foundly modi f1ed its own civi lization." § The crusades may be considered as an earlier expansion movement whieh began at the end of the eleventh century and lasted long enough to be linked with the Portuguese and Spanish explorations. Though superficially religious in nature, the crusades had ecosiomie bases snd results. They opened up trade with the Levant. They brought Europeans into contact with new peoples, new luxuries, new ways of lifej but they focmed ' attention on the tjediterraneaa world. known since antiquity This earlier expansion, therefore, strengthened the center of the Mediterranean Sea, while later, the expansion of Europe towara the American hemisphere brought about a shift of the economic center from the Mediterranean to the Atlantic. "The major factor in the decline of the Kedi- terraneen area was the shift in commerce occasioned by the ui scoverics fAmerica]."17 As « consequence of the shift of the economic center to the Atlantic, all the Mediterranean ports, such as and , declined.The new stronger states t Spcin, Portugal, France, England, and later Holland, ail had good harbors on the Atlantic coast.The types of coaaerce changed when the expansion of trade occurred. it wide variety of goods was exchanged ia Europet spices f roo the Sast, bullion from the West, porcelain from and cocoa frota America. The financial effects of expansion should be aentioned. From 1300 to 1450 the production of gold and silver was

16Ibld., p. 103. Italics are nine.

l7Ibld.. p. 120. l8Iblu., p. 119.

19Ibid.. p. 120. 2Qlbid., p. 121. cteclining In Europe as the olci sines were worked out. Besides, not® gold was going to the Orient in order to pay for the spices and luxury goods obtaitied frooi there.2* Thus the supply of gold from America helped that situation) however, it later brought about an incresse of prices. The first place in which the occurred was Spain. It general terms, the of gooeis went up faster than the wages.22 Siring this period many people were fami liar with the problem of i nflation but very few understood the causes of the problea. Thus, iu France, 1, Malestroit, in his book faradobes >bout Money (1S66), tried to explaia the situa- tion, stating that costs of goods did not vary in relation to gold but in relation to coins. In other words, it was a prob- lem of colnage (the asaount of gold In coins). Jean Rodin

21 Ibid., pp. 125-126. 22Ibld.. pp. 120-129. In order to Illustrate the increase la Spain, France and England the following are soate figures which appearod la the above-aentioned pagest Spanish Prices French Prices XMJUL ftii Mm®. MffiJ, TiMM, 1501-1510 100 100 1501-1525 100 100 1591-1600 303 277 ir-76-1600 219 138 1601-1610 340 361 English Prices XSLMJL IAAIJ. MM 1501-1510 100 100 1593-1602 256 130 1643-1652 34 C 139

9•"Ibid.0 « p. 130. 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 about political systems.25

Coanunicatioa and i ateractioa among i ntellectual writers Mere wore frequent.2**

24Jean 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, MMOiJES 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 . The third is , caused partly by export & partly by waste. The fourth is the pleasure of Kings 0

The field of knowledge was profoundly changed; the freraework of knowledge was aore ufti versal, and acthouology of iinvest!gaiitni hoc eric 00re objestiva.*' Religion (Catholic) as a state power, started its decline to the plsse of any othor Saitittttlaa after the ^reat Seforciatioa wUieh 1 nf la~ enced the formation 0/ nod era capitalist. Furthermore, "the

rapid development of was so intiaetely connected

with overseas expansion that it is difficult to consider the

results of the oae epsrt from those of the other,"^6

*" Cf. ft. II. Tewney, ieltale.ft «ad the A Histories! Study (New York, 1961), pp. 62-72, Section II The Economic Revolution."

26,. € lough and Cole, ££,. cit.. p. 139. 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 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 "raercan- tili8m doctrine" and "aercantili sm theory," yet aer- canti 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 mercan- tilist 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 mihq ©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 super- seded 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

Morcunti list.i was never rsore than a aaano. The true end wot political in Its character—the creation of c stress state; Mercantilists was tho »»a total $f the means on the economic sida 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 direc- tion to achieve the political unit. Therefore, to nsintain the state it was necessary to secure revenues. "The pos- sibility of securing u revenue by taxation was itself, however, one of tbe indirect consequences of the geographical ai scoveries, end is 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 tat© respectLater on,

p. <>9.

4Ibld., 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 is one of the most familier exemplifications of that dowdy platitude, the quantity theory of Money." Cf. 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, , scar- city of goods, willingness of princes administering prices, and westing of things which ought to be economized.

m Jlbici., p. 71. u be adds that the fundaments! a arrow for the aercanti list was

"the strength of bis country. This was the end to which all aeans wera subservient, 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 devel-

opment , and a generally accepted form of wealth is bullion, to possess §©M is st

classical example of clotted econoaic nonsense, sad he "is

responsible for the view so long prevalent that they confused money anu wealth. Here Ms® 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 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- T4. p. 75.

"Ii>U.. PP- %K A •lexander Grey conc iudwu that "mercentilisra was a policy of ubiquitous and perpetual yovermaeat activity. Mercantilist thought has a variety of manifestations according to the circumstances of every country. Put it may be said that there is a common denotairmtor which unifies ail of this thought into e real body of doetrine# naaely, the necessity of a potest tool of planning and control-state to c»rry out the development of the ccuatry, that It, the In- crease oi' actional income end wealth* To Illustrate the strong aatlonollsa manifested by a mercantilist writer, the follow!ay quotation Is sivee from iiontchrStion: Premi eremeat j e represent o vos Uaj e»te« que toate la quinquai llerie, I Is fabrique de laquelle sont occiipez, tint dedans que dehors le royaume, oon de villes seules, mais de prevince entiferes, se peut f aire aboodaaaent ot e prix tres raisooable dans le pays de vos Seigneuries, que d*y en admettre et recevoir d'ostrangere c*est oter la vie a plusiers nil 111 era de vos subj octs dont cette Industrie est 1*herit age et ca travail le fonds e leur reveau; c * est dioinuer d*autant votre propre ri chesse, laquelle se fait et s'au^aente de cells de vos peuples. Karl Polaayi„ another writer on this doctrine, affirmed that the iserceati lissa systesa mss 8 response to many chal- lenges » "Politically, the centralized state called forth by the CoMMercial devolutioa" which had shifted the Mediterranean to the tlactic framework and "compelled the backward peoples

9Ibid., p. 77.

10 ' ntoine de ao»tchr<5t i ea, Trelc.ti de 1* Oeconoale olltioue. Reprint of 1GS9, edited by ?unk-3rootano, pp. 51- ft: ** Quoted in Gray, 0£, elt.. p. 03. 16 ©f larger Agrarian countries to organize for commerce and trad®.*1 From the economic standpoint, "the instrument ©f unification we* capital, I.e., private resources available in form of money hoards and thus peculiarly suitable for the development of commerce." The national market i ntegrateii the local and foreign market. "The 'freeing* of trade per- formed by mereantilisa merely liberated trade from partic- ularism, but at the same time extended the scope of regu- lations; markets Mere merely an accessory feature of an Institutional setting controlled and regulated more than ever by social authority."11

The opinions of other writers on mereantilism will now be reviewed. Adam Smith termed mereantilism "the commereial

and mereanti le system."1** His atteek was based on two important points t the view of money and the commerci al pollcy defined as a system of protection. The real fist of mereantili am, according to Saith, is cast in the following statement t "Wealth consists In money, or in gold or si lver ,"13 This oversimplification which leads to the mereantilist insistence on excess of exports over imports was explsi ned as the inability to distinguish between money and wealth. A

11Kar1 Polanyi, The Sreat Transforaetioai The Political W.ftiBI &M. Xi&U. (Boston, 1957), pp. 65-67.

12Quoted in Heekscher, ojg,. cit., pp. 333-339.

13Ibld.. p. 337. 1? later mercantilist view considered the balance of trad© e desirable end.On the other hand, ... ft is especially noticeable that aercantili sm statesmen cod writers believed in whet was called "freedom of trade," or "," the utterances of Colbert to that effect are innumerable and in most cases quite seriously meant. . . . What they meant was that iinterference should aita at changing causes and not effects, thet it was useless to punish' unavoidable results without removing their causes. As a paradoxical but very typical mercantilist, wrote in 17141 "Private vices, by the dextrous management of a skillful politician may be turned into public benefits." . . . fHeckscher concluded] Generally, it may be said that mercan- tilism is of greater for what it attempted than for what it achieved.*° points out important aspects in "the expor- tation of our Honeys in Trade of Merchandize" which "is a means to increase our TreasureHe explained! . . . if we have such a quantity of wares as doth fully provide us ef all things needful fro® beyond the seas{ why should we then doubt that our moays Lsic] sent out in trade, must not necessarily corae back again in treasure; together with the great gains which it «»y procure in such manner as is before set down? /'nd on the other side those nations which sent out their monies do it because they have but few wares of their own, how come they then have so much treasure as we ever see in those places which suffer it freely to be exported at ell tines and by whomsoever? I answer, Even by trading with their Moneys i for by what other means can they get it, having no Mines of Cold and Silver? . . . For if we only behold the actions of the husbandman it the seed-time when he casteth away aueh good corn into the ground, we will rather account him a mad man than a husbandmant but when we consider his labours, in the

14Ibld., p. 336.

15lbld.. p. 339. m harvest which Is the end of his endeavours, we fiad the worth end plentiful encrease of his actions.^ Wi1lias D. Gramp, in a very interesting aad provocative article,*^ emphasized the goal of full of the as one of the most important alms of the mercantilist doctrine. The concept of trade for the mercantilist Includes all economic activity. A brisk traie involves methods of assuming the maximum amount of produc- tive efforts which is what full employment provides.16 The objactive was not accumulation of bullion, but a set of concepts i ncludingi a favorable balance of trade, the advancement of private Interest, the subordination of the working class, low interest rates, and the elevation of trade at the expense of other industries. Furthermore, »r amp states that a few of the mercantilists may hove

i6Ihosaas Stun, "England* s Treasure by forraign Traae," Miix g&itffMff, XMiaH> trm IMMSSMS. prior to A'ii lliam u. Grasp, "The Liberal Elements in English Mercantilism," M&Mi. IE ®dit®d by *?©sepfe Spongier and William R. Allen (Chicago, 1960), pp. 61-96.

ldIbid.. p. 66. 19 eonfused uoncv with wealth. ©ou thus sstle bullion!sm a goal. However, full eaployaent of the feelers of production con- stitutes the Marrow of tbe mercantili st doctrine.19 in order to achieve full employment the Mercan- tilists proposed a variety of measures. Most of the measures have often been called wonderful example® of what an economy should not undertake. However, they become sensible if related t© the objective of policy. The measures eta be grouped into those which affcctedi (1) the total spending of the economy, (2) prices, wages and the distribution of income, (3) Interest rates, and (4) the supply of labor. The measures In the first three groups were meant to Increase employ- sent mainly by increasing the demand for labor while those in the fourth group were meant to increase the labor supply.20 The total spendinq of the econoay-Most of the mer- cantilists thought the economy would flourish if all its sectors (Government was included by Petty) increased their spendings. However, nercantilists emphasized tbe spending on exports as a main support of employment.4:1 'vecies and prices. — '.'ages end prices were related to employment i n four ways, according to mercantilist thought. First, wages determined export prices and tbe amount of exports, and therefore determined both spending end ©splay- meat. Second, the relationship between money wages and prices—reel wages, determined i ncorae distribution which in turn influenced the volume of spending and employment. Third, selling prices determined the volume of spendi ng and

l9Ibit>.. p. 67. 20Ibid.

21Ibid. 20 employment. Finally, real wages determined the amount of labor supplied.22 file r&t® of interest .--Several mercantilist writers, including itisselden, Malyness, Temple, Borbon, Child and Law, advocated « low rate of interest which would sake it possible to increase the inventories of , and consequently would lower the price of exports, and that both these effects would in turn cause an inereaent in employment Increase of labor supplied.—This final group of meas- ures consisted of "means of increasing the quantity of labor supplied. . . , of increasing the labor supply, and of Increasing the productivity of labor."24 The fact must be emphasized that mercantilists looked at employment from both sides of the market—supply end demand—and this signifies that their policy "sought to increase the quantity of resources and was not a make-shift for creating jobs."25 The assumption underlying mercantilist labor policy is that "self-interest governs individual conduct, an assumption fully entertained today as it was two and three hundred years age ."26 Furthermore,. . . . the mercantilist labor policy consisted of measures to increase the population; to increase the siae of the labor force within e given population,

22lbl.d.. p. 69. 23Ibid.. pp. 71-72.

24Ibla. . p. 74. 25Ibid.

26T.. j JMe* 21 in number of worker® and is the aaoaat of work supplied by each laborerj and to Increase the productivity of the labor force. In order to in- crease the population some writers proposed that subsidies be given to large fami lies j end occa- sionally they attached the iogenious sefcesae of financing 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 tradesmen which, it was beli eved, would bet©asi©r if there were greater religious tolerance.2?

The increase of the labor force constituted an important challenge to be «et by mercantilist thinkers. A possible way to achieve it was to bring children 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- bilitate the poor and indigent 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 social framework} third, the anxiety for pecuniary rewards, that is, profit motivation.30

Finally, Gustav Schaoller, in his work 6..af. jUrkaptil- sestets in seiner atitftri«fth»«i aedeutuna (1664), regarded

27IMA. . pp. T4-75. 28Ibld.. p. 75.

29lMd. 30Ibid.. p. 76. mercantilism as essenti ally a "policy of economic unity," "to s large extent independent of particular economic tenets."31 A« opposite view was expressed by tfilliasis Cunninghsm ia The Growth of Ba.allsfa Industry sad Commerce (1682). He considered mercantili sm as "the expression of a striving after economic power for political purposes, manifest!ng Itself particularly in England."3^ The dis- crepancy between these views was fundamentally due to "a confusion between the ends end t.he means of economic policy; each of the® pointed to something of fund omental importance i H the development of economic activities end idee s i n the period between the Midole Ages end the Industrial Eevolutioo.11^ Several opinions on raercanti lisra, as well &« its impor- tant aspects, have been considered. Before arriving at coaoludino comments on this school of thought, t ©ontrsist of its view on government and market with that of the later classical will be given. The difference consists of two kinds t first, e difference la aeons , the classical economists proposed i completely and mercantilists proposed controlled markets. Second, a difference ia ends, the class!cal economists estphasi zed efficiency in the use of particular resources, end mercantilists stressed the full

310«oted in Heckscher, £&. clt., p. 333.

32Ibid.. pp. 333-334.

33lbid., p. 334. 23 eaployaent of the factors of production. la brief, the classical oeouoaists advocated i cosplei# aar&®t economy, and aereantilists stood for a planned and controlled economy, but both aoctriaes wer« framed withi n tit® concept of "private

BHterpri se."34

Furthermore, both doctrines stated that self~i titer est was the force to activate economic behavior, but mercan- tilists, especially Stewart, believed that individual self- interest did aot always coi nciue with the public , and as 6 result governaent was needed to protect public w«al.

In conclusion, raerccntilism w®$ the body of ecoaoaic thought and economic policies which had the sain purpose of pl&nniug sad developing nations which emerged from the invertebretsd situation of feudalism into a stag© of politi- cal and economic units, uaaely, modern nations, Mercantilism accepted "private enterprise* in » framework of a controlled market«

Today's nations, which are ia the process of develop- ment , have soucthing in coaaon with those emerging nations of the sixteenth century. Today, as in the past, such nations cannot rely on a completely free narket to solve the problems of allocation of resources. In both circumstances, the

a4Gramp, ojl> £&•» PP> 64-85.

*"Nawaan, Gayer and Spencer, 0£. cit., p. 49. 24 eaergifif fictions neeu e strony cm! adequate government to regulate the market, to solve problems of public interest, to plan their in order to achieve fill craploysent of economic resources, and to allocate properly the factors of production to achieve econonic development end public

/> / welfare.11,13 "The nost acture Lnyli sh mercantilist writing Is exem- plified la the works of Sir J««©§ StewartTherefore, the study of his work will be cctaic^ful in the undcr~ steading of the problem of the sixteenth century emerging nations, m wel 1 si that of the present ones.

36By proper ellocation of factors of production is meant that allocation that wi11 lead to aaximun public welfare.

Newman, Gayer and Spencer, 0£. tit.. 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 employ- ment to everyone of the society.

James Steuart CHAPTER IV

BACKGROUND Of STEO/Jlf« S SOBK

Introduction

'•» has been stated* morcanti lists emerged shortiy after the end sf the medieval period when bourgeois qoq end fet»§s unified their efforts against feudal lords to centralise the political power in order to create t political and economic unit called the nation-state. This was the coaatoo denomi- nator of different aercantilist thinkers during two tad c half centuries (1500-1750), but there *as a variety of policies ana strategic disagreements.

Tie extreme mercantilists attempted to increase national p#«r by encouraging a favorable balance of trade with every nation with which the nation traded. Manufacturing activ- ities for export were regarded with preference over those for the domestic raarket. Others coesidered precious metals

®s the reel aeasure of the uetionel weelth, thot is, bul- lioni$&. For that purpose they recoiasiended restrictions on the export of bullion because they mistakenly identified money—gold—with Health.

Stewart's philosophy represented the intellectual atteopt to unify ell of these policies on political econoray in order

26 2? to achieve tho politieel end of emerging 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 Steuart4s 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,

Scot land, on October 21, 1712. He studied law st the Uni- versity of Edinburgh. Later, he resided in Tubingen, Germany, a small town with a university which provided hia the proper atmosphere and intellectual which helped him in his work. There he wrote his famous book, fjn Inquiry Into the

Principles of Political Oeeowoav. published in by A,

Miller and T. Cade11 In 1767, who published wise years later the :/o tilth of ^©t.ioas by «tiaa Saith. Steuart also wrat

*. called to the Present State of the Coi n of Sencicl was published la 1772. /.ftor 1775 he wrote eight ©ore r.ork*

concern! tig , prices , regaletitas end finance. In

1780 ho died in Sdi nt»urgh while? preperlag his lest v.ork,

SJL ite i£MMk IMSMlBX MM>1

Why Bis Philosophy was Not Accepted

Bis book, £a Inquiry lists the frrlnelpleg. of Political

Oecoaoav. attracted the attention of the British intellectual

groups ox' the day. They recognized the "originality" and

"penetrati ng genious" of Stewart, as well as the "novelty"

of the subject.^

Cut a different ki nd of thought prevailed at that time

in England. This thought hindered attention being paid to

Steuert*s phi losophy of pleRSiing mu even more Its being

secepted. Thus, The Critical Seview. an important orgen of

public opinion of that tirae, stated»

We can have BO idea of any statesman interfering in the cosaercial concerns of a free country. . . . Nothing ought t© be wore 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 mistaken.3

lSsaitr Kanjan Sen, The Eeo.aoale*. of Six. St.es..ar t (Cambridge, 1957), pp. 6-17. All this Part on Steuart's throught has been heavily influenced by Sen's work, which con- stituted a guidance for the direct research on Steusrt's works.

2Ibid.. p. 13.

%he Critical Keview. XXXIII, 411. Quoted in Sen, m- MX'* P- l4- 29

That was a statement on the validity of the "natural force*" of the aarket, the condemnation of planning. The marriage between businessmen ana the state was deeaed ao longer necessary. On the other hand, the expand!ng economy of Great Britai n, due to both internal peace and fortunate

East Indi a trade, coutributeu to the rej ection of Steuart *s phi losophy and to the welcoming of the lalsaest-i;.»ire doctrine

advocateu et the saiac time by '.dam Snsith.4

Sea pointed out that "oae hundreC year* earlier Steuart's work might have beta acclaimed by the generation that had produced Hobbes. » » . Stewart was clearly out of tune with

hit contemporaries, especi ally ia his own country,"0 Is

addition to this, "'.dao Smith was teaching in Glasgow long

before Steuart *s return from ®xiIc, end hi s advocacy of

lalssea-faire had already gained considerable popularity

amongst the elite of Scotland.*^ On the other hand, Steuart

was associated early with "the Jacobite cause which did not

commend him to the progressive elements of his time."7

Furthermore, his writings are difficult to read, a fact

which added a hindrance to the understanding of his message.6

4Sen, oj>. clt., p. 14, , pp. 14-15,

6Ibid.. p, IT. 7Ibld.

hud. 30

Steuart's Philosophy

St#aart*s philosophical thought wet based on the plan- ning end control of the market within the framework of a free society, "/iccorciiugly we shall find In this inquiry 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 froa "sxperieoce, we shall find, that trade anu industry have been found mostly to flourish uader the republican foria.ni0

114s philosophy was east and framed in his outstanding work, J^B Inquiry late the f rln.elpl.eg of Political Oeconoav.

For Steuart was both 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 it a science. Steuart wrote s

In order to communicate an adequate idea of what I understand by political ecostony, I have explained the term by pointing out the object of the arti which is to provide food, and employment to every- one of the society.**

That is to say, political economy Is concerned prictetri ly with people. In this contest, full enploymont and a proper

Masses Steuart, The >orks (Londoe, 1005), I, Preface, vii.

arses Steuart, £» inquiry into the fry! acisles of Political Oeeoaorov (London, 1767) , 1, 242. Hereinafter referred to as Political Oeconoav.

P« 31 distribution of actional iscoia# ere indispensable. For that purpose Steuart, in the first bo ok, examines "the pri nciples which i nflueaco their [people's] uultiplication, the aothoJ of providing for their subsistence, the origia of thair labor, the effect of their liberty m4 slavery, the dlstri- bution of them into classes. . . ,"12

The scope of "political oeconoay" eabraeos the economic and political framework of a national planning, according t©

Steuart *• view, First, he said, "political oeoooosay" is a complex framework of art and science because it is an economic policy and because it also has principles, Second, the essence of "political oeconoay" is the provision of food and employment for every member of society. The emphasis on full employment enhances the importance of Steuartfs approach with! xi today *s economic goals of Keynes! an econoraists and others who consider full employment a ueaningful obj ective.

Till arts s, his "polit ical oeconoay" is comprehensive, and consti- tutes a unified body of concept* which are aeeningi'ul for the society as a whole, not only for individuals.*3

Knowledge of the relationship between government and

"political oeconoay" is very important to an understanding of

Steuart * s scheme. Governoent i s m important i ustrument in

"political ©economyhe believedj government is "the power

12Ibld.

lSIbld., Preface, p. viii. 32 to conuaendand "political oeconoray" is "the talent to cxecute," Government sast falsi© economic activities "by engaging ovary one of tho society to contribute to the ser- vice of the others. » . ,* *4

The operation of control sad plaaniag, Steuart wrote, is performed by the government, and "who fits ot the h«i4 of this operation, is celled the statesman," who aust "be constantly awake, attentive to his employwent, able and uncorrupted. . . . impartially just . • » for every class of inhabitants, and di sregartif ul of the interest of indi- viduals, wh0a thet regard Is inconsistent with tha general welitre

The Role of the State s a conclusion to the above comments, one may dyduce that the role of the State is relevant to achieve the welfare of the society, "Steuart does not elieve in the beneficence either of natural equilibriurn or ox an ultimate synthesis but is conscious that the natural forces have a great potency for good as well as for evil," Therefore, he seeks "to control them so as to obtei n the best possible results within the context of the existing social order."16

14Ibid.. p. 149.

l5Ibid.

L&Sen, OP. cife.. pp. 24, 25. CUM"TEE V

POPULATION, AGBICOLTUKE, ASD PHYSICAL PLANNING

Population and Agriculture

For Steuart, "popuiat ion tad agriculture ere the foun- dations oi the whole,"* Us divided the problem of population

into three partst (1) size) (2) occupation; and (3) regional distribution." In the list pert he anticipated the study of physical planning—regio sal planning—which later would be developed by Johann Heiarfcfa, Von Thuenen, Alfred Ueber, end

August Loesch, ea economists, and Patrich GeUdes and Lewis

Muoford,3 as regional planners.

(1) fitii respect to the factors that determine the size

of the population he arrived at the conclusion that food

supply is very important.

Food supply is partly determined by nature, the condi-

tions oi the soil, and partly by huaen efforts. Technology

*Steuart, Political Uecoaoay. I, 150.

2Sen, oja. clt., p, 32.

JThis is writer * s observation. Cf • Gayer and Spencer, op. c.it>. pp. 320-346 J Lewis ?iuraf ore!, The Culture of Cities (flew fork, 193C) , pp. 13-72 j and Patrick Geddes, 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 organisation increase productivity. However, Steuart foresaw ® limit. In the first place the supply of 1and Is restricted. Second, even consider!ng augcientetion in tech- nology ant! labor, there Is a physical iisait Is the produc- tion.** lu this reasoniny, Sea observed, "Steuart evidently ties the pbenomeaor Q£ uiainishing return to.

Thus, Steuart concluded his reason! ng on that Matter t

fie mny concluue that the uumbwrs of mmklu€ must depend upon the quantity of food producedj end th«t the food produced by the earth for their nouri sh- ment . , . will bo in the compound proportion of the fertility of the climate, and the industry of the inhabitants.6

(2) Concerning the distribution of population by occupation, Steuart added the following comments whi ch arc tho cooti nuation of the preceding paragraphi From this last proposition it appears plain that there can be no general rule for uetarnining whBt is necessary for agriculture, not even in the saae country. [A variety of circumstances determine ovaployment and population: ] The fertility of the soil when cultivated) the ease of cultivating itf the quantity of good spontaneous fruits) the plenty of fish in the rivers and sea) the abundance of wild birds and beasts, have in all ages and ever oust influence greatly the nourishment, and consequently, regulate tha multiplication of ae.nt and deterraine his employment.7

Steuart conti nuau his inquiry OR population end agri- culture; he observed s close relationship between thetat

*Sen, 0£,. clt., pp. 33, 34.

5 6 Ibid., p. 3f3« Steii»rt# Political Oocoattiav. I, 156.

7m£-, P. 24. 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 the one useful, the other abusive. ;\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

alllid.. P. 15C. 9Ibid.. pp, 156-157.

Ibiu., p. 40, 36 purchase the cyricultur£l surplus prGsactct by the f triers, wi th their poi-souel . i 1 The proiiuetioR of surplus brings about aore population.** People arc required to produce surplus for two aaln reasons; first, because they are compelled to do so, eg la the case of slavery* m4 second, beeeusc- they have some inducement. In both cases population will iacreage* rthat are the alternatives to slavory? The first alternative 1$ the method of multiply tag hue an noeUs, The second, is to encourage * luxury" and to intensify trade.*3 Steuart explained the incentives to work. In early times the «@ats of human beings were few, and "a simplicity of raannors established, to have encouraged industry, excepti ng in agriculture which in all ages has been the foundutioa of population, woulii have been on inconsistency." Therefore, concludes Steuart, Hto make aenklad labour boyoad their wants, to raoke one part of & state fcork to aai nteiu the other groluitiously, could only be brought about by slavery, ami slavery was then as necessary toward multiplication, as It would now be destructive of itThe reason is clear,

nibld.. p. 48. X2Ibia.. p. 114.

13Sen, olt., pp. 34-36. Sea had the same reasoning, steuart %iefines luxuryt "the of superfluity or the supplying of wants not essentially necessary to 1!fe." Steuart, Political Qeconoav. X, 152. See also pp. 37-3# of this thesis. l4Steuart, Political 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 to produce a surplus of agricultural goods by the t araicrs. Thus multiplication is "the efficient cause of agriculture." On the other hand,

"trade, Industry and manufacture only tend to multiply the number of raen, by encouraging agriculture,*1^

Thus the division of labor is started when society Is divided into two dependent groups having reciprocal needs end . So, Steuart affirmed J

Reciprocal wants excite to labourj consequently those whose labour is not directed toward the cul- tivation 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 aug- mentation of wants will 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.

16Ibld.. p. 151. 3fc

I define luxury to mean no aore than the con- sumption of superfluity, or tb© supplying of wants not essentially necessary to lifej and, X say, that a taste for superfluity wi 11 introduce the use of money, which I represent as the general object of want, that is 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 was not sufficient.In 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 industrial localization. The

l7Iblq., p. 152.

ieSen, op. clt., p. 36. Sen observed that "Money not only facilitates the process of exchange (or 'alienation1) 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 the 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—agri- culture. However, the "free hands" have more freed®® la the choice of their residence. Kost of them life close to the

In countries where labour is required for feeding a society, the sualler the proportion of labourers, the greater will 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 aty 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, til- lages 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 aust subdivide into two conditions. The first, to whom this surplus directly belongs, or who, with a revenue of aoney already acquired, can purchase it. The second, those who purchase it with their dally labour of personal service. Those of the first condition may live where they pleasei those of the second »att live where they can. The residence of the consusero, in eiany cases,

^°IbU., p . 46. 40 determines that of the suppliers .... These I take to be the principles which influence the swelling of the bulk of capitals [great cities 1, and smaller cities. When the residence of the consumer does not determine that of him who supplies it, other con- siderations are allowed to operate. They aret I. Relative to the place and situation of the establishment, which gives a preference to the sides of rivers . . . when machi aes wrought by water are necessary ... to the place which produces the sub- stance of the manufacture [raw aeteri els j} as in si nc®• * * • II. Relative to the convenience of transporta- tion, as upon navigable rivers, or by great roads. Ill. Relative to the cheapness of living, con- sequent ly not Cfrequently] in great cities, except for their own consumption.2*

Process of Urbanization The process of urbanization started with this initial division of labor between "free hands" and "farmers" which brought about the production of more surplus production. In its turn money was aore necessary as a mediua of exchange. Thus, as money becomes more plentiful, every agricultural surplus can be converted into money.22 But Stewart goes beyond that framework. The proper and fruitful employment of all members of the labor force

*"^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 diffsrontiation between farmers and * free hands * but also to a spatial speoretion. Farmers are necessarily confined to the land they culti- vate, but the 'free hands' have greater resident!al freedomj yet while those who have been able to acquire some money may live wherever they choose, the maj ority of * free hands * have to live where they can sell their personal services or their products." 22 Steuert, Political Oeeonoav. I, 75. 41 constitutes an important task to be achieved. "I think It is sbsurd to wi s h for new i ^habitants, without first knowi ng bow to employ the old. ... I shall then begin by supposing tbst inhabitants require rather to be well employed than increased in nurabera."23 As a consequence of this reasoning, according to Steuart, the increase ia population is closely related to the increase of the annual agricultural surplus.24 Agriculture should be conceived as aa activity producing enough surplus for trade and not as a means of subsisting, accomplishing in such a way "a source of food for the industrial classes and a good market for their products."25 from the concept of reciprocal wants and mutual inter- dependence of the two groupsi faraers and "free heads Steusrt develops the idea of the optiaum nuaber of peoplei the "number of husbandmen, therefore, is the best, which can proviae food for all the statef end that number of inhabi- tants Is best which is compatible with the full caploywent of every one of them."26

23ikiSL. * P* 60. Sen, op. cit., p. 3fc, "Stewart reserves the tern 'multiplication* for that increase in the population which is reciprocally serviceable to the com- munity. All other increase 1s aore 'procreation.It is not always thought a natural process but, more often than not, by a conscious control and guidance that 'procreation* can be converted into 'multiplication.,w 24Steuart, Political Qeconoav. 1, 83. 25Sen, oj>. clt.. p. 36.

26Steuart, Political Oeconoav. I, 69. 42 ConcluUi ny Coaaeats Steuart suggested that "it is not, however, necessary that every country should produce all the agricultural surplus it needs . . . the importent thing is that equivalents should be available for inducing either the hooe farmer or the foreign farmer to produce more surplusSteuart recommended that agriculture must be more efficient in order to produce a larger surplus of goods; on the other hand, if raenufacturing becomes more efficient, then there will be a larger supply of equivalents. Thus, Steuart strongly advocated the introduc- tion oi machinery in n»#nuf acturi ng.

Sen affirmed that "Stcunrt's population policy is more positive th&n that, of Mclthusbecause Steuert

. . . believes in this optimum [aise of population] and holds it is not only a "physical iiapossibi lity" but also a "moral ispossibility" of increase in nuabers which stay stand in its way. . . . He [ Steuart J is anxious to prevent not only over but also under- population; but oven his "ooral impossibility" as the cause of under-population is due, so he holds, to a restriction of subsistence, not to a deliberate choice between^"a baby and a baby car" or to any biological factor.2"

Thus, Steuart developed a complete framework of physical (location) and : division of labor, locali- zation of economic activities, optinum concept of population, full and proper employment of the labor force and his theory of luxury, which is essentially an attempt to emphasize the

210£. clt., pp. 30-39. ^'fiilci. . p. 39, , p. 44. 48 role of consumption and employment, that, as Sea indicated, aost of his contemporaries ignored,3® To Steuart Money was not a mere "veil" \ in hit system of reciprocal wonts the role of money wfes regsrded as important ©s other equivalents.31 Steuert was a broaduinUod econoaist who considered economic forces as responsible for the development of the different stages of society j in a nutshel1, bis work was « attempt at ce economic i nterpret eti on of hi atory, unu3uel et that time.32 Sen suaaerized Stewart's analysis as follows: Pressure of population leads to agriculture, the need for agricultural surplus brings about slavery, the multiplication of wants introduces luxury and that in turn exchange economy, the influx of preeious actal from America accentuates the spatial separation of farmers and "free hands'* and helps the growth of cities.33

^Ibid.., p. 48.

31 Ibid.. pp. 43, 48.

52IMA., P. 49.

33Ibid. CHAPTER VI

34SIC ECONOMIC CfiNCKPTS

Before discussing the instruments of planning sod con- trol , brief comments will be reviewed on none basic concepts ia economics which are inter-related in a body of concepts which represent, if they ere used by the statesman, important tools for development.

Value will be commented on first. Steusrt disti ngui shed between "prime cost," which is the cost of production, and "selling prioe." "The first depends upon the time employed, the expense of the workmen and the value of materi als. The second is the sua of these, added to the profit upon alien- ation. . . . [the cost 1 is invariable after the first de- termination, but tho second is constantly increesi ng, either frora delay in selling off, or by multiplicity of aliena- tions* The principles which determine the value are four, accordi ng to Steuart t loio. The abuadanoe of the things to be valued. 2do. The demand which mankind makes for them.

*Steuert, Political Oeoooomv. I, 485.

44 45 3tio. The coopotition between the demenders} anil 4to. The extent of the faculties of the deaanders. The function therefore of money is to publish end make known the value of things, as it it regulated by the combination of ell these circumstances,2 In essence, the above thought implies the following poi nts t First, there are two elements in a commodity sold , labor and raw materials. The proportion of those elements origi nated it a country implies different results. Second, when there is a surplus of labor exported the country gainsj this is the case of developed countries. In such a situa- tion a deficiency of raw materials—which may be imported— and a surplus of labor exported may be assumed. This Involves a complete employment of factors of production, mainly labor. Third, #hee raw aateri els are exported— because there is a surplus of raw materials and consequently of labor—the nation loses 3 therefore, labor has to be imported, which constitutes, in its turn, a gein for the country that imports labor.

This observation should be viewed in connection with tiramp's assertion on the principle aim of raercanti lists: the full employment of the factors of production, mainly labor. The objactive is not the accumulation of bullion but full eoployaent of labor. And, finally, trade, accordi ng to that doctrine, includes all economic activities* Therefore a

2Ibid.. p. 527. 46 brisk trad# Involves the oexiaaa amount of productive exports which is what full t1p.lg.yw0.nt provides.

Exportation of work signifies la essence the export of qonsimebla presentations* with the consequence that the balance of wealth will turn is £ 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 ship- pi 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, according to Steuart,

3Sen, joit., p. 59.

^Steuart, Political Oeconoay. p. 410,

5Ibld.. pp. 425-426. 4?

"necessary" and "contia'jeutTherofore, 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 , so is dissipation, by the means of symbolical money, as certain as expedient for the ennihilation of the

from this principle of balance of wealth, he developed his theory of balance of trade, whose scope goes beyond a nation.

In all 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.

6Ibld.. p. 273.

ylbld., p. 511. 48

If the value of tho matter imported be greater thaa the value of what Is exported, the country galns. If a greater value of labour be imported than exported, the country loses. Why? [Steuart's reason is very clear on the basi s of priaciple of balance.] Because, in the first case, strangers must have paid Jj, Batter the surplus of labour exported) and in the second case, because the coun- try must have paid to strangers in matter, the surplus of labour imported. [The conclusion is evident.] It is therefore a genarsl saxim, to di scoursgo the importation of work flabour], and encourage the oxportatiou of it

idaey

Steuart * s analysis of rmisey s«as very significant 1 n tho underst andiug of the economy of exchange, tJoney was like blood in the organism of the econowy, and not because mo ney and coln are synonymous accardi ng to the old fnercantl 11 st idea, and even less, because the value of the metals gives value to the money. Me started his analysis of money when he tried to explain that one consequence of a fruitful soi1

«hich is possessed by "free people" dedicated to agriculture end inclined to industry, would be uaiai lingly the production of i superfluous quantity of food. *1s a result, inhabitants would multiply. From this operation produced by industry, wo find the people distributed into classes. The first is that of the farmers who produce the subsistence, . . . the other 1 shell call Hfree hands"; because their occupation being to procure themselves sub- sistence out of the superfluity of the faruers,

6?biU.. p. 536. 49

anU by a labour adapted to the wants of the society, aty vary accordi ng to tliese wants, and tfeftse again 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* will be ia the proportion to the nuauber whose labour will be £o««4 auffici ent to provide for all the other neces- sities of the inhabitants.*10 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) will 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, well clothed, well defended agai nst the in- juries of the weather, nor for securi us egoinst everythi ny which cm hurt us. [Here Steuart makes a footnote saying that his cor.copt #£ luxury has only political sense.j Dy tooney, I understand any commodity, which purely in itself Is of no raateri si uso to men for 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. 10rn£-

niblQ. l2lbld.. pp. 31-32. so It will be aeaslagfttl to mention some comments of Sea an this aspect, iceordisg to Son, Stewart "does not believe that tarietls«« in tho quant 1 ty of ?noney ha\'

The circulation of every country » , * must ever be in proportion to the industry of the inhabitants, produeiag the commodity which comes to markett what* ever part of these coaaodities is consumed by the very people who produce them, eaters tot into cir- culation, nor does anywise affect price*.^ The seoonu point concerned paper money, which means credit for Steuart and not irredeemable fiat caeney. Steuart was consequently not concerned with inflation, principally -jcllopiny Inflation $ however, ho considered depreci ation of tho as a serious problem, furthermore, his real preoccupation was with resulti ag froo a shortage o£ coins. Steuart was a strong advocate of paper taoney for two reasons t first, according to hira, money was an invariable

13Sen, ©&. clt.. p. 00.

14Steuart, 0&. clt.. VI, ii, 531.

lSIbid., p. 61. l0Sen, clt., p. 01. SI measure of value, therefore it could not be stressed other- wise) second, lie coulu Had no rational relationship between the amount of gold and silver available and the quantity of money in circulation. But this paper money he conceived was neither entirely, 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 will 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 is confi-

dence t

Confidence, then, is the soul and essence of credit, e»d is 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, viz. the obligation to

17Ibld.. p. 64.

lCSteuart, Political 6eo0»oay, II, 105.

l9Ibld.. 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,w21 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 principal requisite and the basis on which the whole fabric staaas."24 For this reason the rate of interest depended on the for it, according to

Steuart.

The borrowers desire to fix as low as they canj the lenders seek, from a like principle of self- interest , to carry the rate of interest as high as they can. From this combination of interests a double arises . . . If more is demanded

2Ciby.., p.

a2lM£« 23Ibid.

P. 112. 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 , 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 usurersThis distinction is

relevant is the context that "the profit $ la trade would

strike an averegc among industrious classes} and that aver-

age would fall and rise in proportion to the flourishing or

decay of commerce."28 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."29 In conclusion* there are cases in whi eh

25lbld.. p. 115. ^IblU.

271*»*.&., P. in. mm£-

291M£*> p. H8. 54 interest aast be regulated, for "low i .iterest is the soul of trade,"30

Thus the statesman should control the supply of money—

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.34

Steuart defined two types of beaks t beaks of circu-

lation with the purpose of circulating notes, and bmks 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

30Ibid., p. 129. 3lIbid.. p. 130.

32lbld.

^Ibid., pp. 130, 149. "So lie! property" is synonyaous with personal estates which contain real values.

'^Ibld,. pp. 130-101. '©cause "the imerest fells in proportioa to the vedund ency of money to be lent p. 131 * credit they are buiIt 08 i nto three ki nds: private, raercantile and public. Private credit is when the ground of confidence is real property pledget! for the sseurity of the loen. Mercantile credit every- one understands. It is when the ground of confi- dence is « fund secured by the public faith, In favour of the creditors, for the imerest and capital due, which last however Is never exigible from the state. Private credit is the nost solid of the three) mercantile credit is the most pre- carious ; and public credit depends entirely upon the aaxiias of every government with regard to public faith.35 Finally, Sen made an intorssti ng compari son with Keynes in relation to . This illustrate® the pro- found insiyht of Steuart's thought. In it owphssi s that fortiion trode end foreign exchange are of far less importance than the inter- nal economy of the country, Steuart reraiads us of Scynus * Tract on fconet erv flof orn>. And then he goes further sad suggests that moacy is a very potent tool for moulding the economic systera and for bolstering up trade, industry, and employment, his general bias, as distinct of course from technics! content, is surely not fundamentally different froo that of the other work by the author of the Tract cited above.

Public Borrowing and Taxation Public borrowing» public expenditure, and taxation play an important role Is economic development.37 Steuert empha- sized that whatever raoney the state gets either by borrowing or by taxat ion is spent and thus expands the circulation Is

55Ibld., pp. 599-600.

36Sen, op., clt.. pp. 104-105.

37Seo, ibid.. p. 129. 56 the nation, increase* the level ©f employment end transfers wealth from one set of persons to another.'1®

UM1& 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 petriaony."39 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 men.41 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 ia the matter of public credit. The money borrowed f roo private citizens was spent among the people who paid taxes as members of society.43

3eIbld., p. 106.

^Steuart, Political Oettonotay,. II, 625.

40Son, 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 Ml (i«TToWrMterT^mWTmmlTlffiKTgo rET "TO?)f pp, 314-332.

42$teuart, Political Qeconoav. I, 367.

4^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 borrowing.Thus, "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 contri- bution of fruits, services, or money, imposed upon the individuals or a state, by the act of content of the legis- lature, in order to defray the expenses of the government,"46

On the other hand, taxes imply i concept of public expendi- ture, 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 benefitTherefore,

44lbid. . II, 453. ^51.bid... p. 455.

46Sen, ££. elt.. p. 110.

4^Steuert, Political Oeconoay. II, 4S3.

46Ibld.. p. 484. ' 49Ibld., p. 524. Raiting money by texes must always be burdeasoae, less or mors, to those who pay it| and the advan- tages resulting £roa texes csii only proceed from the right application of tit® noney when r ei se

concepts involve the kernel of Steuart * s Idec oa taxes, aa«elyf the cooplete cyclo of co1lccti ng taxes and speudiny th©», as well as the Management of the debt, siy- nifies the promotion of employment end industry. In the sea© manner the effect of this action on the matter of the ^ 1 domestic wealth is important• The reason Is that "who- ever pays a tax appears to pay for a personal service," namely, *he receives no corporeal equivalent which can be alienated by hi® for the same veluej and he, who 1s employed by the state, and is paid with the produce of taxes, Requires

© balance in his favour egaiuit those who pay t h eu." laia*e~ di&tely after thet, Steuart indicctod the case iu which revenues f rou taxes 30 tbreed for foreign services, then

"there ear. be no alteration upon the balance at Isoae, as has been paid; neither is there any when it reaaius at hoaej the people and the creditors are as rich as before."^ He

50Ibiu., p. 523.

5*Sen, oj>, cit., p. 114,

5^Steuart, Political uecoaoav. XI, 377. 59 concluded by ssyiag, "let tills suffice st proseat, as to the effects of debt® sad taxes upou the belance of national wealth Tkae ell tills framework of tsixes tad expendi- tures constitutes q powerful tool to guide econo»ic activ- ities Into a balanced situation of welfare sad wealth. Therefore, it should be the object of very careful operation on the part of the statesman. The pri acipal "use of t&xeg/1 according to Steuart, was to ui stri bute income toward es oqu® lit crier. ai t nation ia incoae "by urawiay fro ei the rich, s fund sufficient to employ

both the deservisail the poor in the service of the State § ft <\ti«f to "correct the bed consequences of d#»e$tte luxury as to foreign trade by providi ny e fund for the peyrasnt of bounties upon exportation.*"'4 Besides a proper systea of taxetion, it would be necessary, occording to Steuart, to uevisc & euaplete program of alternative possibilities of public expenditure.^

Steuart boiled down ta three points his conclusions on t&xatiort. These refer to the us© of taxes as & tool for

53Ibld.. I, 372.

54lbid.> pp. 514-515.

«r,*%X . instill W. Kaplan, editor, The. PfC.liet. At.Iftoile. translate*J> Vf" d under the editorship of f». Ross (New York, 195C) s p. 204, ristotle «»-as the first philosopher who wrote of the exploration of different courses of action to foresee the best solution. He ssidi "They [the statesmen' assume the e*»d cud consider how and by what useons they consider It is aost oasi ly and best produced, if echi eved 60 cor treating aafeets anu abuses la Iscoet? distribution e&d expenuitures, a® well as an instruaent to improve economic activities, i.e., to iiiereese "the production of subsistence and iaauuiactures," ssu iir;ally forcing everybody to con- tribute to the welfare of society in relation to bis wealth end irscoae. .ecorui ng to Steurrt, tuxes induce people to work harder snU their effect on the neti on is rether positive for they aats# it lesteesi o£ poorer. Tuxes encourage iuuu&triob, but nfaeu the burdeu it too heavy iu proportion to luceoe taxes aaay discourage oonsuaption, thus effecting in turr< productioa.*^ • n important point stateu by Steusrt is the balance aechoni sta exerted by texes end public expenditures. "Every application of public money implied n want in the stPtej end every went supplies implies an encourogeoeut given to the industry."5®1 This balance stcbeolsa to be achieved must imply two conditions s first, enough ooney in circulation out of which taxes cbb be paid; second, the judgiaeat to pay taxes. Tlie first point brings about tbe necessity o£ having m elastic currency system for wbicfe pep or taouey is required. s a corollary to that reesoaiag, the development of paper

^steuert, 1 Mmmmi.» XI, 554.

££. cj_t., p. US.

^Stouert, £'9,1,1,*,*£».*• Cecoqouiy, II, HSi. 61 money goes peri passu with the or^-enizetion of e proper anti sound tex system.^ Steiiert classifies ©II t exes in three categories : proportional, cumulative end personal. The first one "is paid ly the buyer who intense to c&iisuua>, at tfee of cocsucption, whi le the bclanee oi wesltli is turci ag a§al»®t bin sad Is eonsoliuctetl with the price of cojaooui ty .wu^ The second fci uo e£ taxes Is the cumulative which Mis tbc cecusm- lstion of thet return which every indiviciuel who cajoys eny superfluity owes doily to the stete for the eUvent ege he receives by living ir< the society."61 finally, the third one consists of tax on personal services These funuaaentel principles should be observed with respect to taxes. HTbey ought to is.peire the fruits not the fuiittf the expesses of the persons taxed, not the | the services, not the persons of those who render it»eo."63 For thet purpose he defineu "the tcxsble fund"-—iu taodern terrainoloyy, the texeble cnpecity—as the net proauce of the eerth unu work, namely, the surplus of the iccose 0; society, over whet Steuprt celled *phys4eei ae-cessery."^* iiiiet toUay Is sfsae4 shifting e»U itieitieocfc, celled "Urewiny beck ,H .^ccorcing to hi®, proportional taxes

S9S©b, o£. sit.. p. 117. o0©« «t, ^o.U^jcal II, 465. P. 500. ' pp. 485, 637. 6SMi.» P. 486. b4Iblu. . pp. 4t>6, 487. 62 ere always shifted by the- laboring consumer end load to the i ncrcagt" of prices. Taxes are shifted from the laborer to other people. The laborer cannot accumulate profits tni Is called by Steuart a "physical necesserian."65 However, to the extent that he eerns no profit and bays taxable goods t#hich in fact are not "physical necessaries'' for his incoae group, &e cannot "draw the lax back tilth regard to proportional taxes, Steuart contendedi "All the amount of proportional taxes is refunded to the industrious consumer, so far as they ere raised on articles necessary for his subsistence; and when he is either idle or consttctes a superfluity, he It classed along with the idle and r ich .w(>7 Steuart stated, with respect to cumulative taxes, that "the nature of ell these taxes is to affect the possessions, i ncone end profits of every individual, without putting it in their power to draw thcc beck i n any way whatever ; COB- eequently, such taxes tend very little towards enhancing the price of coraaodities,"6e On the other bend, "the tax upon land affects only the proprietor1® share of the produce of his land t were he to attempt to raise the price of grain in proportion to the tax he pays, his faraer--whe pays no land* tax for his portion--would undersell hia ia the market, "^9

65Ibld.. p. 491. P» 493 • 67lhid.. p. 510. P- 496 • 69Ibid., p. 552. A tax ©8 money, in accord with Ills opinion, seems to be im- practical. Finally, he did not recommend & tax m profits due to the fact that "... although they appear to be in- come, I rather consider thora e stock, which ought not to b@ taxed,"7^ It seemed that 5tousrt was seeki ng, In that view on profit, e spur to i nvestaient. Stou&rt was au advocate of progressive taxation. i# stated that "accordiag to equity end j ustice all impositions howsoever ought to fail equally and proportionally on every- one, accord!ng to his superfluity."7* He called "superfluity" the amount of consumption beyond "the necessary."^2 Concern!ag economic development and taxes, he contended that for early stages of eeononic growth and likewise for prinitive economy, that is, barter economy, heavy taxation ««y have detrimental effects. Contrariwise, the imposition of heavy taxation-*bit according to a wise plan—may result benefici ally for the economy as © whole. The reason for this Is bcsed on their tendency to support each other in both the volume of taxation nod the volume of circulation.73 Finally, it must be mentioned that Steuart wes opposed to drastic change In taxation. 4 sudden abolition of t&xes would be advantageous to nobody but to creditors upon mortgage and to the

70Ibld.. p. 541. 71Ibid.. pp. 319, 520. 72Ibld.. p. 493. Co»weateu also by Sen, &&.. j&JjL.» p. 120, 73Sen, 0£. clt., pp. 120, 460. i & 1 e j not to landlords because thoir incorae wo*Id uirainish more then la the proportion of the present land tax, ©t least their iwprovesicnt would he i nter- rupted and their rents ill paid{ not to the manu- Fecturiclass because at present they pay HO texes, but la proportion to their idleness. . . . The reason Is plain: the money p«id for taxes circulates because it is demanded. ere texes suppressed, people having less occasion for aoney than foraerly, would circulate less io proportion."»4 la conclusion, public borrow!ag, taxation, and public expenditure constituted an organ!zed body of concepts and policies in Steuart*s philosophy. These concepts were inter- related Iw a dynastic instruaent for . This viewpoint was in Barked contrast with the conventional view of aercentilists at that time. In addition to a theory of taxation, Steuart*s main contribution its that respect was the integral conception of taxes and expenditures as a powerful instrument of social policy. Sen comments as follows: Steuart's real contribution was not in develop!ng a theory of taxation primarily as e source of public revenue but in conceiving it (together with public expenditure) ®s a potent tool of social policy. The mein significance of public finenee lay in his view isi the use that would be aade of it in further!n$ certain social policies end Is best understood ia that context.75

7*Steuart, Political Oecofioity, II, p. 461.

75Sen, ££. fiJU,., p. 129. CBAPTSe VII

imrmimtn OF MMIM am CMRNOT

Introduction

Steuart considered the sllltsry communisa of ancient

Sparta a political and 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 econ-

omy needed control and guidance! it coulu not work slone.

lie believed in a free society which was He 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 gov-

erned by general laws . . , not depending upon tho ambulatory

*Steuart, Political Oeconoay. I, 250-258.

2Ibld.. p. S3. See «l#o 3«»# M&" SH«* P* 65 66 will qX eny «8R or any set of ac», ©mi established so &s eet to bo chcnyed, but in . . .fa] uniform way . . ,wa Ho explained it further s 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

tools. Those tools ia»y be grouped under four heeds t

sumptuary legislation, money, taxation, and public expeo-

Uiture.&

Steuart believed in human f i-eedos} however, he did

trust in tho "aaturti forceswhich could not lead to wel-

fare and px osperlty w'aeu they acted alone, Thet was the

case in the use o£' credit--*, gt 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

3iM£.» P. 237. P. 242.

5lbld.

6fhis section i s guided by Sen * s research. See Sen, op. cit., pp. 148-152. 67 every abuse."7 Therefore, money for him was so important tool for economic planning. In the first place, he thought that money wes "the universal Measure of whet is called value ana an adequate equivalent for anything alienable.*** Furthermore, this concept of aoney had a dynamic frame- work, circulation was the foundation oi an exchange economy,^ ana any uexect in monetary policy would obstruct the whole . For instance, a shortage in the quantity of ssoney would tend to depress the econoay j namely, it would hinder the full employment of the factors of production. &oney, banking, and credit constituted for Steuart a struc- tural and important body of the economy. ya the other hand, Steuart thought that money was sorae- thing else then & , that is, a , and also aoney capital. IIo commented that the "low Interest is the soul of tradej*11 aoreover, he thought that

• 75tcuart, Political oeconoay. 1, 32. 6Ibid.

^Xbld., II, 444. The whole policy is divided by Steuart into three partsi "lmo, The oelting down of property, and keeping cireulation full at all titaes. This is the business of the bank. 2do, The providing of coin is the business of the saint. 3tio, The granting of bi lis on foreign parts,for value in the national currency, is the business of the state." Ibid.. pp. 611-612. i0Steuart affirmed t "Koney is the instrument of all alienation) and when this instrument is taken away, aliena- tion must cease . . ^bld., p. 607.

UXbla.. II, 129. the quantity of money in circulation would affect the volume of trade. Is the third place, taxation, which was related to the theory of circulation, constituted en important tool» Thus, by the use at taxes, the statesman would "produce the effect he thinks fit ."*** The proper use of taxes constituted an instruraent of control of export, import, consuapti oo, and production, and in this way achieved the desired effect. "if tha imposition of taxes, nati the right employment of the amount of them, a statesman hes in his power to retard or to promote the consumption of any branch of the industry . , . when 1oreiyn tr ?da begins to bear a small proportion to domestic consumption, he may profit froa luxury, and drew © part of the wealth of the luxurious into the public treasury, by gently augmenting the iaposition upon it , . ,*3 Furthermore, in the state of autarchy, taxation was even more oeaningful. The effect of foreign trade on the circu- lation of money no longer existed, and there night have been danger of stagnation, unless the effect of taxation and public expenditures took place by e process of pusipi ng aoney in and out of the economy. The fourth method to control the economy was public works. In his book, Considerations of the .I.e.to.rest of the Country of Lanark In Scotland.*5 Steuart advocated a program

12 • > X \ 41 • p . jp i ^Steuart, The Korks. V, 216-345, See espcci ally, "New Conal ,w pp. 317-327, and "The Hoods ox Tills Country,* pp. 327-332. 69 of public warks to create the so-called (today) iafrattrac- ting*. o£ the economy, lie indicated the construction of roads and canals to facilitate transportation, abolition of Inter- nal tolls to facilitete the 1nterchang* of products among different regions, as well cs the establi sh«ent of organised markets* ith the same purpose, namely, to facilitete cotaaeree and i ntorcbanye of gaodg, lie advocated the of establishing a uniform national—and furthermore inter- natioB&l—tystesi of seasures. S. E« Sen summarised a group of measures proposed by Steuart ia the sasie matter, I.e., to control the economy by . , » undertaki ng public works, expanding the number of soldiers and other state employees, assisting emigration to colonies in times of distress, fur- nishing the embassies abroad with local raanufactures so as to popularize these in foreign countries j setting the fashion in the oourt in such a way as to fiuide popular taste into desirable channels, etc. He would even sake use of chartered to foster trade and industry provided those are controlled by the state so as to the public interest. In this context Sen observed that Steuart recognized two important limitationsi First, natural forces should never be ignored, and the spirit of the people concerned should always be given very carefully consideration. Second, * ail sadden revolutions aro to be avoided. * fiven the best measures nay produce very undesirable results il' introduced suddenly. I®

^Steuart, "a t lan for Introducing an Uniformity of heights and Measures over the World," The ^orks* V, 380-415. l7Sen, clt., p. 151. 18Ibld. TO

Finally, Sen pointed out, Steuert "makes 'general wel- fare* the target of til «eonomic policy and iasiets that ell p&rticul«.r 1 atorcsts must yive away bexor# the geaerial inter- est 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 to perticalar consideration*

*9Ibid., pp. 151-152.

^Steuert, Political ^economy. I, 2B6» CHAPTER VIII

CONCLUSIONS OS STENT'S THOUGHT

Sit James Stewart of Coltness was not a mercantililt la a "conventional sense."* Thus, balance of trade, for in- stance, was considered by hia as a guide aid gangs, namely, es a means tid not as « goal. It fess been noted that ha considered the end of political economy, the "genaral welfare' of the nation, over all particular interests. He was a furious national!st and concomitantly advocated that the econoai st should bo "a citizen of the worldHow can one explain this apparent inconsistency? He was a nationalist in the sense of a need Xor governmental planning to develop nations. But those nations should coordinate tUeir efforts in favor of the "general welfare." He was an advocate of International agreements to develop one type of measurement to fecilitate .2 He rejected dictatorship and slavery, like ancient Sparta, as being irrelevant In modern tiaes, But he did not trust & completely free market to allocate resources.

* Sen, op• oit., p. •

2Ibld. 71 72 He advoceted s 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 freedom mm supported by organization and reciprocality. 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. Steuart had no prejudice for political ideas. 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 con- sidered that compulsion brought about prosperity in antiquity, but that now its application was outsodod and inconvenient.

3Ibid.

4Ibld.. p. 15S.

0 stettart# Political Oecenoaiy. 1, 83t. 13 He recogtiiz&d tho need for contro1 of these force* acti u$ la the wsrkct, fraaiag ia such a way a structure of governmental planning eud free society.b Steuart wis a pioneer is physical planning. The loca- tion of economic activities was relevant to the achievement of a national and regional planning. Ills studies on popu- lation sua agriculture ar« sigai fleant today for the economic development of etaerging nations. Population la dotersined by the proportion of food produced, and this is dependent on •oil fertility, climate, and the "industry of the inhabitants. His concepts were organised in a perfect cbain of relation- ships t pressure of population led to agriculture, the need for agricultural surplus caused slavery} in that situation, the multiplication of needs and wants 1ntrouueed the concept of luxury, which brought about the stage of the exchange econouy« >•urthersiore, accordi ng to Stewart, the 1 ncrease of the supply of gold from tbo 'aerican continent strengthened the division of the two branches of the society9 farmers and Hfre*j hands This encouraged the development of urban populations and consequently—since the viewpoint of space economics—the growth of urban conters.

I'ox Stewart, money was not a "vei 1" nor was it real wealthj it Mas a poteBt tool for framing the economic system and for supporting trade, industry, and eraployaent. This

6See Sea, oj>. olt., p. 1S3. 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.] 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 synthesis but is conscious that the natural forces have e greet potency for good as Mil 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 it], od because the state is the only authority capable of controlling these powerful natural forces [ wi 11 it be possible to image "some- thing" without authority in order to control and plan?], he entrusts it with the task and endows it with unfettered authority—unfettered even by ethical considerations, if necessary, because where the stake is so great—aaaeiy, order or chaos—expedience Is the only really relevant consideration.®

In brief, what is expressed in the above paragraph was the kernel of Steuart's work.

7Ibld.« p. 105.

6Ibid.. pp. 23-24. PART THREE

COMMENTS m. E&mmzc KV.ULPTIOH ££ VEHI2PELA

gray y us paitor solo m suolo tin »one*eo, un iiaperio, y uas eapaUe if, floek a»4 e siepberU aioaa on tho soil » king, an empire, end » snort! ] H«raaaUo 4© £©*»&» CHAPTER II

INTS00OCTION

la Part II of this study some aspects of the economic evolution in Venezuela mill be considered. This entire process may be divided into four stages characterized by important economic and social facts. The first stage was the pre-hispanic ( -1500). The prieitive inhabitants of Venezuela—called Indians*—lived in a primitive eeonoay. This stage ended at the moment of the discovery of America. The second stage was the tslspenic or ©olooiel stag© (1500-1810). Spaniards first arrived in Venezuela in 1500 and framed t new economy based on raercantilist ideas. Ouring this stage a new nation was forged, with contributions fro® three cultures s Inai aa, Spanish and African, with a pre- dominance of Indian-Spanish mixture—in both blood and culture. The economic base of the colony was agriculture. The third stage was the republic, the coffee era (1010- 1920). In this era the state emerged, that is, it became politically independent. The econoale base was agriculture, that is, coffee. The mercantilist framework persisted and »as manifested in government regulation and intervention.

76 T7 The fourth stage was the republic, the petroleum ere (1920-1956). The ea®rge»c® of petroleum Activities changed the eeo notnic structure of the nation which was no longer agricultural. The aercantilist ideas playeu an important role in the economy. This is seen in regulation and government planning. CHAPTER X

THE FUST 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 inhabi- tants of pre-hispaaic Venezuela in several cultural areas.®

(See Map 2, p. 66.)

1 M n Se© Victor 1. B«9«av The » and Tribe (New York, 1961), pp. 20-29. Also, Victor #. Hagen, Realm o£ the Incas (New York, 1961), pp. 38-39.

2Carlos 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. Costa Oriental end Ciperacotos 2. rrawacos Grienteles 3. Jlrajera £y*@an 4. Eastern collectors and fishers 5. Hesters CarIbbeans 6. otomacos 7. Guayana V'enezolane (Salibas and Pi aroas) 8. Collectors, hunters and fishers 9. 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 ooHector 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 organs—aen and woaen, bandits, vagabonds—and without known settlement . . . they spent four days under a tree and two days under the shadow of another one—in this way they spend their life, idle, without farming . . . they only oet fruits collected irora trees» which are saoy, , . . venison which is abundantf as well as fish and cer- tala 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, first, the priraordi al concepts wi 11 be dis- cussed . What is the essence of economic problems? An answer i $ given by Professor Hei lbroner i **, , . the economic

op. 9 pp. 27***

%edr@ 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 preoccupation.j0 this case there were no economic goods created, which employed factors of production such as labor, capital goods, and know-how. 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 valuep. 59.

®Moron, op. cit., pp. 31, 32. 61 Indite# who did* Venezuelan Indiens (sedentaries) €1 domesticated fowls (ducks and turkeys) aad small mammals. The agricultural pre-hi spanic areas in Venezuela weret Andes, with a well-developed agriculture} Costa (Atlantic coast), Indian with a midule level of agriculture; and Orinoco, an itinerary agriculture.10 The economic fraaework of the sedentary Indiana was more cotaplex because they had a sense of economic goods, produced with land end labor, and consequently they were faced with the problem of scarcity of economic goods on the one hand and multiple wants on the ether, Therefore, they hed to solve two problemsi production and distribution.** Fi-tt lag men to work is only the first step in the solution of the production problem. Men lanst not only be put to work, they aa$t be put to work la tli@ right places. Thoy must produce the goods eod services that society needs. la addition to assuring a large enough quantity of social effort, the economic institutions of society must also assure the proper allocation .of. social effort.12

bid., p. 30.

l0lbld.

^Meilbroner, o£. clt •, pp. 4-6. The problem of scarcity involves the solution of two related and yet sep- arate fundamental tasks t 1, ?• society must organize a system for productng the it needs for its own perpetuation. 2. It oust arrange « distribution of the fruits of its own production among its members so that store production can take place, p. 6.

14IMA*, p. 7. 82 The T iraoto-Cui cas bad rudiment»ry actions of division end organization of labor in order to undertake mere effec- tively the teak of production. Tho distribution problea was set in e pattern of tradition13 vhieh oriented also the organization of production,14 fsaoBf some Caribbean Indian®? Chtausas, Cuaana and Chiribichi, the division of labor prevailed. fThus } srttl® men went to fish, to hunt, or to make war, women farmed the landj sad among Palenques, as a

» PP« 7-17. There are three solutions for the allocation problem: 1) tradition "the oldost and until a few years ago, by far the most prevalent way of solving the economic challenge . . Thus hereditary chain assures that skill wi 11 be ptssed slon§»w p. 10; 2) ©oswaiti, which constitutes "the method of imposed authority, of econoaic commandp. 12] 3) the market organization of society, p. 14. 14»oro«, 0£. clt.. pp. 30-31. l5/rellsno-Horeno, o£,. clt. > p. 165. ioRodrigo ue Navarrete, Relacloa sobre los AtMiioos (1560-70), quoted in Arellano-Moreno, op. clt.. p. 165. 83 another place where nature would provide otrs goods. Accord- ingly, the essence of being noaadic was the lack 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 placed and rooted to the area where they lived and practiced agri- culture . The highest group of this 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 facilities to hold food which thay would eventuelly need in the future.

Maize (corn) was the basic food and was cultivated extensively. They also 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 -M.MM,..,.,,, nu,

IT • Moron, 0£. clt., pp. 29-30.

*°Ibid.. p. 30. 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»«een 1 1 aptro.ro itoto (Ml 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 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 Empira-' .7 Diaguitas

•'] 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 CjLparacotos- Western Apawacos J ir aj ara-Ayaman Western Caribbeans Western collectors and fishers: Otomacos

Venezuela Guiana Collectors, fis&ers, Source!'. Guillermo Moron, and hunters fiii., facing p. 33 Timbtoco-Cuica CHAPTER XI

TSE SEC0M5 STAGSi HISPANIC U500-1010)

Introduction

The Hispanie stage was very significant la the forma- tion of the Venezuelan people in both social ana economic aspects. Luring that period the following S. acts took placei 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 agricul- tural 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.

2Siso, 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. Iff.

87 m

Spaia, io eccoruanfco with .-asrcenti list thought,^

This hi spanic stage ended In 1010 when the Republic began. This period can be divided into two parts: conquest sod colonization. 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

Spanish Crown. Duriag the conquest period ailitary encamp- ments were established. fh©«® eucawpaeints alght be celled the first foundation stone for the future urban settlements which were developed during the process of colonization.^

.- s previously stated in this paper, the principal fiotivation for conquest was the search for gold. Uuring this search part of the Indian population w®« kilied. These were the negative aspects of the conquest. On the othor hend, "it is necessary to understand that the process known os [conquest] during the sixteenth century wag precisely 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 aw. [email protected] as exlitlaa for the benefit of the mother country.ItiTica aine.

4Cf . Jos& Gil-Fortoul, His.to.rla. Constltucional de yenegttela (Caracas, 1930), I,9-36.

5Mor6n, 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 mm the most important in the formation of the Venezuelan people. 69

One chapter of the Spsnish conquest in Venezuela had a peculiar characteristic, namely, the administration of the

Venezuelan territory by Yelser, a firm of German bankers.

They aaintained commerci al relations with Spain and Genoa long before Charles V was crownedHe was indebted to the Welser firm for several loans, and on the other hand the king wanted economic aid to proceed with the conquest of America. The Spanish Crown and the Welser firm agreed 7 on three import ant pacts, The first was to bring ski lied labor from Germany to work in Santo Domingo. The second pact concerned the importation of unskilled labor, Negroes from Africa. The third pact pointed to the temporal cession by Charles V of the provi nee of Venezuela to the Welser firm, in order to conquer and settle Venezuela. This pact was signed on March 27, 1528, and ceased in 1556 in accord- ance with the terms of the pact. The Welser administration of Venezuela was a failure because gold was scarce and gold was all the admini stration was interested in.

°Arellano-Moreno, op. cit., p. 90.

^Mor6n, op . cit.. pp. 70-71. See also Arellano-Moreno, op. cit. , pp. 95-97.

^Arellano-Moreno, op. cit., p. 107. See also Jose Oviedo y BaSos, Historia de la Conqui sta £ Poblacion de la Provincla de Venezuela (New York, 1940), quoted in Arellano-Moreno, qb. cit., p. 107. Oviedo y Bales believed that if Venezuela had not been under German administration, she would have been the most opulent land of America. 90

flew Kcoaomic Structure

vhen the Spanish people conquered, explored, end conse- quently, 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, 11 hut it wag necessary to prepare the soil ia order to make it productive in agriculture. For that purpose skilled labor vm 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 entrepreneur- ship. Theodore Morgan, Income .and Ea.ploYaeat (Ne* York, 1952), p. 4 ff. | 1 x*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, plailike Texas, but crossed by large 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. 91

The Spanish realms lacked . . , sufficient population to send the required aaount to the /.merlean continent, and those who were aval labia could not corae together because there were neither means to transport them at once nor ways to feed the» . . . They had to come Individually or In snail groups, In accord with the transportation means and resources avalleble to settle them.*2 Thus Spsalsti labor was skilled but scarce. £nd both the X udian end Ne$ro populations wero unskilled and therefore requires! trai ni ny. Concerning capital, the Spanish state was not in a situation to contribute to it. Capital was necessary to equip expeditions as well as to build cities and to provide seed lor the settlers* plantationsf but its purchasing power was not sufficient to carry out the huge work required . . , labor was necessary, but it was impossible to bring it in,15

The accumulation of wealth was not possible in the first part of the colonization.16 However, it was possible later,

l2Siso, ojl. cl t •. I, 159.

13Ibiu.. pp. 407-406.

*4Ibid.. pp. 150-159. *5Ibid.. p. 159. Iblu.. p. 408, "The most it was possible to produce [at the first stage of colonization] was goods to satisfy the elemental needs of the population. But it was impossible to till flic of an accumulation of wealth which per- mitted production of a surplus to aeintala non-productive classes who might devote themselves to intellectual fand tertiary] activities." In this context coiap&re James Steuart's conoept of the dlvision of labor, in which he divides the society in two groupsi farmers and "free hands see this paper, Chapter V. Saith also divided labor force in two groupst productive and non-productive labor. Cf. Smith, oj>. clt.. 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 if 1ndustry and services.

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 population.The formation of an agricultural wealth involved a double task, the sub- j ugation of the Indiaa population and troi oing it la new skills and in the learoing of a new language and religion.

In His process of education the Bislones played an important role,19

Thust 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 Smith, ££. olt.. p. 3» Cf. Steuart, Political Qmomm.y« p. 151.

>iso, 0£. olt., I, 1H4. MGsta 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 carry ©at that purpose it was necessary to settle part of the Spanish population a»4 to subjuyete and settle the nat ive Indians.21 ,1s a result of this it was necessary to create an agricultural wealth in order to feed the settled population.^ The purpose of the ancomlenda was to distribute land Huong the conqulstedores in the name of the Spanish C ro««. The e.Bsomiea^s WBS "e civi 1 isut itution in which a tacit contract was es t abli shevi and formulated between the lei ng enu the colonizers, through whi cb these became aasters of the country with the obligation of submitting to vassalage of feudal character [to the Ki ng j."23 In the title issued by the Spanish euthoriti es several poi nts were stipulated t the worth—price—-of the encoti which should not be aoro than five thousand pesos per year to the Sftcoaead»r.o and a thousand to the King) the number of Indians in the encoaieada or repartition—this was labor free of payaent, that is, they were enslsved by the

20 It was a oercaatilistic imperative. See dough and cole, op,. ci|.... p. 103 f f« See also the chapter on Mercantilisn In this paper Chapter II.

""^See Si so, 2JI. clt.» 7 t 107-108,

Ib i u., p. 160.

2hMC, . p. 167. 94 eacoMitf txierot aad the "dleKaos"--duties ef 10 per ce*it—in favor of the doeiriae—-the Catholic faith.^4

The ea^oaleada was also a religious instruoent to spread Catho li c faith**"' The Or.d.enanzas tic Burgos (Royal dispositions) atili*«d the encomlendg as a means to teach the Catholic religion to Indians.*^ On the other hand, the o»tco.'aitgfcd£ constituted a saetstire public orderj at m early time d»riag the eoloaization, groups of Spanish thieves--wsi tily soldiers—pluadered gjaall ladian vi Hayes to steal food and supplies. Therefore, Spanish authorities tried to 'jroup scattered Indian tribes under the organiaa~ tioa of eacotaieada.^

The enterprise of coloaization was supported partly by the Spanish Crows aad partly by private individuals. For both the state ead i ndividuals, the principal end was the search xor gold, la the case of private iadividusls, a contract between them and the state was required, aad was

2*lbid. The obligations of Enaoaqadtre worei a) to protect Iudi ans ogai nst i aj astice because of their igaoraace, b) to settle ladi aas i n an agricultural tow 3, c) to rjive Catholic instructions to ladi ens aad to build a chapel of stone, d) to organize the domestic government, accoriii ay to the Spsnith social Xsm-s, eaphasizlny paternal fouthority, c) to make tties obey social rules, f) to destroy their wild custoraa and inclinations of their precediag life, In addi- tion, the Ordonaazes do Buryos dictated (Law I, to tie eaoftaenderos that nv«ry Iatii an iocsi ly should have a ssiifflll piece of land to cultivate products for their own subsistence.)

"^'Ibld., p. 162. ^Ibjd ., p. 163.

Iblu . » pp. 162-163. 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 value—Indian 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

p. 160.

29Iblci.

Tawney, ££. sJx* > 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 property. Conacos

SSSSSMlS,31 constituted en interesting trial of coopera- tive work.32

The economic regime of &1sioneg la 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 la the "Coouco de Conunidadwhich 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 Indians. Those stored products were used is times of drought, The priests taught new methods of cultivation ana brought seed from

*11 Siso, ojg.. olt., 1, 219. Loauco is a portion of laad cultivated by @ family for its own §tl£~§ai»gistimce. The coauco de eo»»ald®d is larger, is cultivated and owned by a community for its subsistence} however, in case ox surplus, it may be bartered for surplus of other oosaunities. 34£fae (Bust remember that the Christian doetrfce is not betaa on egotism, but rather on the concept of justice- prices and wages--as well as cooperative work and communal ownership—similar to e monastic*! economy.

^%ts©, j|&, cit.. 1, 219,

34Ibid.. 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,

35Ibld., pp. 220-221. Cf. Alex Seingrod, "Administered Communitiesi Some Characteristics of New Immigrant Villages in Israel," Economic ®®veMm®^t mA 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 consump- tion 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 pp. 70-71•

relleao-Moretio, ££,. cit.. p. 166 . In spit© of the rudimentary economy of the Indians, it titled the conquist&dores, who used their canoes to move froa 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 Spai u. 37

Tike ilrsi thing that mv»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 created.^

These golu sines and peer1-Lreeding places con- tributed to the sett lenient of permanent urban centers of Castillians in Venezuelan lands{ these urban nuclei permitted in their tarn the diversi- fication of Venezuelan economy. Close to those mines and pearl-breeding places, aany towns origi- nated , a any of then: had en ephemeral life . , . but, i a general terns , when the ai ni ng economy had vanished, the agricultural economy, which was already developed. allowed the continuation of 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 Is shown in

Table I.

j7lbM,. p. 166.

uVlb|d«, p. 16?.

39Ibid.

40IMA' *n 1530 the pearl export was estimated as 2,000,000 duros (approximately three ai1lion dollars). 99

TABLE 1

THE GOLD ruouUCTION IN VENE2UEM FROM 1329 TO 1610*

Year fconotcry Halts ««

1529 # * « # • , . . . . 1,U6 pQSOS, 2 to^ittes 1530 pesos, 6 toaittga 1531 pesos, 6 tomi nes

1532 * » « 1533 pesos, 6 tomines, 3 graws 1534 pesos

1535 * * » « « » » « . »

•Source j Arellano-Morenof o & • .gTI fc»j I « 169.

••The "peso

***For unknown reasons there are no data during the gsp of 26 years (1539-1063) Arellsno-Boreno, ££. clt.. p. 169. 100

v'eceatt#!®. mm relatively poor la yolU in comparison to reru en-si C4axioo. Titus, 4b® «l#©llu© la go!4 preUuetloa boyee

©bout 1600, it revealed In the above table. Despite reduaueacy ami repetition, It must be states! Again thet the principal Motive of the SpaniarUs Cor explori a$ America was

Its# lure of precious setels. Other ecoaoaic activities were the consequence of that motive.

Fortunately, »b«a [Veooauelaa] aines Uia not cor- respond to tie eagerness of the Spaniards, the coloniser's work had begun to ttabi lise a ad a tiiversifieU economy opened up mw prospects to our territory* , . . At the expense of tbe birth ana flourishing development of agriculture end cattle, a social caste aroae which, supported by the first laotf apportionment f oaoogtlentiaa 1. played as laportent role in colonial life.31

'griculiure and cattle raising developed ftom the very aoaent of the establishment of the urbco settlements. To illustr&te i!j# process of coloafcation in figures, m exeaple Is flvtu by Oeaiel Eeauoso in the colonisation of the Llanos*-plains, In 1530 Cristebel Hodriyues. took eighteen progaant cows, teo seres, sad two horses, and ss

a result,

, « . tweoty-xive or thirty years later, that is, in the last thirO of the sixteenth century, there were i» Gaarico ana pure fstates of Venezuelan plain. See Map 4, f»» 16© S, ft* average of twelve to fourtoen thousand head of livestock, half of this nuaber f7,000} were horses and donkeys.42

41iM£«# PP. 171-172,

42xi>ia.. p. i?4. 101

la the middle of the seventeenth century there were

137,600 head of cattle 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 pre- doainated in sucoessive periods, first tobacco, later cacao, and so on. At a setter of fact

. . . the Venezuelan econooy, since the beginning of our history until the present tiae »ay be divided into large periods characterised by the preponder- ance of one type of production, which nay define Venezuela, for those who like generalizations, as a aonoproducer country.*5

Gold and silver were the principal aims of the co tadores. However, cattle activities were important all the time during the colonial period, along with other farm pro- duction. ferbeps one of the reasons for monoproduction is found in the dictates of the . aerican^ and internationel

43Relacion Iti g.n«lw(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. Maraion'a report (June, 1786) is rather descriptive.

45Eduardo 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 icult ural product was sore developed than others in order to take advantag® of the export,4^ •Vhoat was exported froa 1579 until 1701. Since 1619 the cultivation of wheat ha«i been disappearing for two »af» rossoas J first, the iutensi fisd cultivation of tobacco ; aecOi. i, the erosi on of the Andes mount oi ns where wheat was

^Daring the coffee or cocoa period, respectively, one of these products was significant in the international trede. 4feArelleao-loreB§, 0£. cit., p. 1«1. /rellano~«orano mentions the socond cause in a general way. He

r'2f»ic6n-Salas and others, og,. clt., p. 347

53f.rellano-lioreno, ©£. clt., p. 163.

54Ibld. 104

The export trade is tobacco dated fro® the lest years of tli® sixteenth century. From several 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. Price per errobe in reales*®

1605 5,291 1.3 1606 42.5 a. a. 1607 17,900 2 1615 42,155 U.S. 1620- 1654 (34 yrs.) 156,000 a. s.

•Sourcei Arellano-Moreno, ©&, cit.. p. 184. ••^n arroba is equivalent to 11.5 kgs., sod a rail mm 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. Price per errotet in reales**

1701 49,105 32 1700 401 32 1711 299 40 1714 4,600 24 1717 23,701 40 1724 5,359 10 end 32 1726 13,096 46 1731 55,798 40

•Sourcei /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). The taste

Is true for other years, as no statement on this matter has been fount! by any author. ?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 it had osci1lftteu between 40 and 50 reules. This rise was tins largely to the inflow of gold from American colonies.

Cacao .—Later on, the leading 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 agri- culture 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 settlers, prestige to

egriculture, regularity to trade [irregularity of trade was the characteristic before, as has been mentioned previously],

55See Clough end Cole, 0£. clt., pp. 126-129. See also p. 10 of this paper.

^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 Hated 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 cIrss 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 in 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.

S0Ibid.. pp. 165-167. r)9lbio.. p. 185.

60Ibiu. 61IbiU., pp. 185-186. iOti

fourth, in addition to tills protectionist policy dis- cussed o«i the precedi n£ paye, there was as extension of the duties called alctoi art fezco» that is , duties on iaport and export of 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 produc- tion 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.^

62Ibld.. p. 187.

63lbld.

edro Jose tie C levari aye, I&strucciea general v ^articular del estaUo presente de 1a orovlncia de Venezuela aittMttteMlM. Ouote^inlbid., p. 187. 109 la 1749 the production of cacao was estimated bstwuoa

120f000 sad 130,000 fanegas. No control iaformation was svoilabia ©a cacao pro«l«ef,I.o», ©aiy sporadic data. Oa the other haa4f there iias also no reeor-J of clan4estiac export * However, by corapillfs*; several sources, it 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» million pesos a Olivers or nera t!iao osici million dollar# In carroncy). That amount entered yonesuela i« aoasy a»4 goods', '.jfcich a.oant s real aarniag for both producer* .am! tra40*8,^a As stated before, labor -«as not .fresj workers roiaaincd la s state of slavery and were oaid mostly la goo.ls. T!io employment of labor increase! aa«* by 1720 it was ©stieatea that 10,000 Negroes £ £ were working on tho ONE,BO fart-is.*-' The production of cacao put life into the economy, a ad it was the mala caase bahiad the following facts inten- sification of trade aa« devtlopwent of a Venezuelan soaiaercial navy; forsiatioa and str«agfc!s£Hiag of a class or landowners of cacao f')tns (haciaaoas do cacao)—*t&ey were called the :;raRUes Cacaoai00 advent of the woaey econoiay which In turn

65' i rollaao-Eoraao, op. ciJL., p. 186. 66Ibid. 677be»e are mentioned iithout ooaiaeai in ibid.. p. 139, &^0«e aist reraeaiber that, ia general, the class of landlords stems f rosa the first Spanish settlers who received much land ead slaves on behalf of the Crown, namely, the encoaeaderos who received the eneotalenda. See p. 94 above. 110 facilitated mare production and tradeend finally, the establishment of the Compatila Gulpuzcoana or the complete monopoly of Venezuelan trade.

Indigo.—In the eighteenth century two products were integrated in the Venezuelan agricultures indigo and coffee.

The first one was known since the discovery and exploitation for commercial purposes in 1770, Indigo was used as coloring,

That brought about the cultivation of linen and hemp in order to complement the textile industry. In 1786, their produc- tion of indigo amounted to 308,380 pesos per year (one peso is equivalent to one dollar today). The production declined to 103,000 pesos in 1790. This value rose to 874,822 pesos in 1793.71

Indigo was important because diversification in agricul- ture was desirable in order to obtain economic stability.

However, such diversification was not achieved because

Spanish mercantilism disregarded the proper planning of the economy of the colonies» The main interest of the Crown was the search for go Id and the increase of revenues by taxation

In order to maintain its bureaucracy and its defense position . 72 in Europe.

^Money economy wi11 be discussed later in this paper.

70This matter will be commented on below, p. 120.

^Arellano-Moreno, op. clt. . pp. 189, 190.

™Ct. Herbert J. Muller, Freedom 1n the Western Worldt From the Dark Ages to the Rise of Democracy (New York,.1963), pp. 176-233. Ill

Manufacture.—3paia wc* not Interested In developing manufacturing activities i n Its colonies . Mining proUuctiou- espceially of yolti, filter nnd copper—was the first pre- occupation of speia in 'aeries. Leter, far reasons already uoteu, case agriculture,Because of the lack of skilled labor and the absenco of equipment on tha one hana, and oil this other hand, the lack of a sufficient consumer market in the colony, the developuc.it of the industrial textiles was •Jif ficalt . ^

However, the aim&uence »f rfcu- materials, especially

cotton cultivated by the Indians, suci the naeu Tor cloth

tfcet Speuish people eaperiasiiteU with, uade a little textile

production possible.

From 1599 to 160? the following amounts of ordi nary

linen cloth Mere producac.

TABLE IV

FKWJOCTIOR OF mvimm u$m CLOTH IN VSNE^UEL* , FOR 1599, 1600, 1605 aad 1607* Year . taount of varas Cl vera » 3 feet)

1599 ...... Z/Q 1600 1,125 1605 1607 ...... 8'ifC ^Source: /rellano-Morono, o£. cit., p. 192.

this paper, pp. C9:f. T / .-yellafao-siorsno , oi>, ci t. , p, 192,

'iSiia 112

From 1599 through the first yesrs of the seventeenth tentury, linen was useti as money for private trans actions and for the relations with the Span!sh Treasury.76 «0 accurst© data are available on the textile production of th e rust of the seventeenth century. Concerning the lest years of the eighteenth century, Tulio febres Cordero consente«i as follows;

The governor, Josquic i'riaiv de Hi vera, initiated eai* encouraged in Slarecaibo the cultivation of cotton, with such success that i n 1790, 200 spi nuing wheels were useu end menuf acturi ng bui ldi ugs were constructed in v)hich poor girls eat! decrepit old people worked. i\s a memorial o£ that period, that governor was celled the father of the MepuMic .7«

Ship industries were located in three import oat portst

La Gitaira, Puerto Cebello and Maracsibo. Several iouudries were est ubli shed to ©fist cetinous uod bella for churches.76

The advent of the rconev economy.'—'a previously dis- cussed, the primitive econouy of the Indian people wus priaeri ly e gelf-suf ficient ecoao.uy. There was manifesta- tion of a market eeouoay, based primarily on barter , in the sedentary Indian groups. As a secondary help in trade, some commodities, "money,w as well as gold were used. During the

Spanish period the Market econouy we® oaa 1 n which barter was very ixpart ant. Gold coi ns acre used ia transactions elt!io«ch their auaber wits aot sufficient to satisfy the needs

7Glbid.

77Ibid.

7b Ibi4*} p. 193. us i, Ih.\i shiTv to an satire aoayy eeoncmy trorc a cRowwy we.> a slofc pr*?c"«ss. ^'urtherMoaro, Ii<5 barter was still used ia goal® regions of Venezuela (Llanos) The reasons bohlad this slow process of ehaayiua t o a )5t»ney economy wyres

. , , the attrcanti li st policyt j esiousy of the exoaus of money from Spain to Its colonies, and the tsruy organi zatio n of tie Venezuelan production. Neither wss a saint established among us, except & coin to isark gold ingots,, and ether dice to issue copper coins and other cruu e metals. Logically, all the amounts oi gold and si Iter found i» the territory were sent to Europe where they were regarded as the essence of wealth,®® The us a o.f marked pieces of gold in commercial trans- actions represented a step forward it on barter, but this occur rati during the eighteenth oeatary wlwn r/ioaoy economy was mnve developed. The axpausion of production brought about incressc la specialization, ttfeieh resulted ii» increased trade aa-i !acrease.i use of saoney.

€ • | variety $£ -snu silver coins were used.*** Tht taar sveujf bo came the aonotary unit. The purchasing power of that now«tary y.ii t .ievkluatou with t i in e, d«e to a process of

79XfaiU., p. 231. ' mMM-» PP. 232-233. ^ oberto Soil, Leccio ues Ue Ceoiiosaf a do Venezuela (Caracas, 1944), pp. $4-101. The marco de JLja Colonl a"""hatl 230,0675 gyesas of gold) the aaraved'l h'ad .0094 grass of gold, the Castelleno was worth 480 to 490 taaraveufes j peso de ml oas correspond©*! to 480-490 mar aveufes. 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 o o 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.

valbit]. « psrepliresiay as example ci teu by 'rollano- Uoreoo.

k^Ibiu.. p. 245. The measures were! 1) To permit the ex- port 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 inde- pendent 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 govern- ment institution similar to the Federal Eeserve Bank System in the United States, but with more power, was founded, pp. 18f £ , 115 aiaiiiiy hullionist. "In 126(1, for inst&ttce, Alfonso A prohibited the export o x yolu and si Iter." *V,t the request of the Cortes, > eriii nanu 1 stte.apteu i n IH-1& to stop the

Illegal export of money, out- C h s r 1 e a V r eacwed and extended the old laws in 1520, 1524, enu 1534.L own Into the eighteeuth century, Speiu eoutiftucu her efforts to cheek or prevent the export of precious metals by direct logisistion# but all oiiorts were ut.svai lias si ace the »e«4* oi' trade saa even of royal finance loU continually tit j; vreia si' iaer«ey i'roffi the country.

"Unuer I erdi nanti cnu Isabella and Cileries V, repeated

attempts were ag«e to encourage Spsni sh industry by legi s-

latioR, Export of re* mater i als wss prohibited TSie heart of Spanish niercenti list policies "is to be fouaci not

in i titer ttal bat rather i n colon! al policies. Spei n * s yreot problem was how to control Its suduenly gained colonial

empire, and particularly the empire*s treasure of silver,

so as to benefit the homeland oad increase its wealth ,'c"?

The basic principle af the Speaish acloi ni strotioa was

the ubsolute power of the ki ng. "The coloaies depended

directly on h i?a a no were ruleJ by hius much as i £ thoy v, ere

»f*i **5. seporste countries ^'bicb bo was the monarch.**0'*

Ia«ijh en« ColE, OP. CIT.» p. 206,

a6Ife|g>. p. 207.

07 Ibid., p. 200. mum. 1 It

The Basic Legal Structure i*£ the Spani sh Mercautilisra and Its Instruments The recoapilotion of the Leves de ladles constituted the base of principles which oriented the legal organization of the Spanish power in .mericB. Its content is ciercan- tilist in the sense of intervention ana control, and with some medieval philosophy of *justlco,M^^ The legislative principle applied ia these laws was the following* "every situation was solved through royal uispositions (ceuults reales), which were enacted by the King, and later they acquired the character of coaaaion law,w^O Joequfn Gabeltion Marquez, a Venezuelan historian specialist is the teres de Iitdias* wrote that they were a "vast legislative monument, comparable to the greatest end the most notable of the Universal F:iQht."These laws orienteu the ecouonic t politicals end social activities of .bpaia ia (-u-aerica. The principal instruments of this mercanti list legislation were the €oti$®ie de Indies, the Case de Contratacion Ue Sevilie. ana the Consulado. The heau of all of these legal organizations was the King,

^%f. Thomas Aquinas* "Suama Theologies," iEarly ^ to Auaa Smith. edited by Arthur Eli Monroe (Cambridge, 1951), pp. 5S-TT, Monroe commented that Aquinas Mnever uiscussed economic subjects abstractly, but always ia connection with larger problems of ethics or polities," p. 52.

90tooron, 0£. clt., p. 193.

^Joaquin tabeldors viarquez, Fuero l«u! quoted in ibid.» p. 194. 11?

El Conae.io d% Indias—This depended directly upon the

Crown, its competence concerning the Xndiens was uni versal. it was the highest tribunal lor the Spanish ^aerie an issues.

This Coaseio was the direct instrument of the Crov»n for f i nanclol e«d administrative proxies-is. Thus the Cesa de

Contratacion was the great recipient of all remittances from

^erica, ami the C o n s e io. de Indias a direct iustruraent of the Spanish Crown, which b®t« the financial direction ni all revenues. It had to approve all taxation and expenditure.*^

" comment Must ue raoue on an importcnt procedure'i the

asiento. which was © contract of an gdmi ni strati ve ki nd by which an individuel was obliyeti fay the State to accomplish a determined task, whether he performed a public service or private enterprise.^3 in such 8 contract the State was

represented by the C o n s e.l o ,

La Cas^ de Contretaclon de Sevi11a.—tfi th the purpose

of regulati ng ell details related with the trade between

Spain end Speai sh America, cn org ai:i xetion, the Cos a de

Contratacion, we$ created in 1503. It was located in

Seville first, then later in Cadiz (1717) . In 1790 it wes

ebolished,94 The law of contratacion says:

To establish in Sevllla a store house In rchi ch all merchandise and necessaries cen be stored for sll

€K« "T louyh a«U Cole, ojs,, ci t. . p,

92£MA<* p. ss.

^orosi, ££« cit., p. 176, 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 colonies.It 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 , ^

/oMoll, 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«oted in ibid. « p. 50,

97Ibid., p. 51,

**%1 Consulado acted frora 1504 but was legally estab- lished iii 1524. See ibid.. p. 52, 119 SX ^oasuiaao was soother administrative organization. Its purpose was to restrain personal initiative in order to benefit the community, sod to protect the interests of all aerehests over tho«e of e tingle one. The Consulado sought a "just distribution of profits" amony all merchantsla the second place the Consulado acted ©s tribunal of commerce snd shipwrecks. T3esides, the Consulado bs sb arirai nistrstive organization took care of insurance, shippi ng, ctc. It appealed, as did the Cess de Contrstaeion, to the ConsoJo lie Indies, and received some duties in order to effort its expendi tures. 11 of these organizations—Le Case

"ibid., p. 62. *°°Ibld., p. 63.

*®*5ee Chapter III in the present paper,

102Holl, 02.. £it., p. 52. 120 Trade laterveatioa.-—Froa 1503 to 1790 the Cssa ue on, located io 5evi ila, Spain, ruled the trade between the Inui 88 end Spain. rionopoly was the base of trade both tiuring the Reiser periou and afterwards. The main pur- pose of the Crown, as was brought out earlier, was to exploit the colonies completely. The Venezuelan colonial trade had three important

11*| «** 1,0 4 markets iiateraal trade between provinces is v'enesuele; the iraUc between Venezuela ana the "vest InUies } a ad iitisliy, direct trade with Spain. .. z'oarth tvs£e should he taeationeU, ths claautjstiae trade between the colonies mid £nglan

LB Cotapa^fa Guipuzco&na The est abli shaent of this Compeufa in 1728 represented a point of departure of another stage In the history of trade between Spain and Venezuela—the Capitaaey of Venezuela. Before the Cotapefif a Gulouzcoana. the raain comraerci al products were gold, pearls, sieves, cotton, clothi ng, leather, cattle, tobacco, end cacao, during the first years of the eighteenth century the production and trade of Span!sh ,(''.faeries was week ©s a consequence of the Succession "iar.

10 "Soron, op. cit.. p. 179*

10«?|t@ cap! tancy of Venezuela was i at egret eu by severe! proviaces .

p. 179, Ill

Thus, Venezuela at that tirae suffered a decline of agri- cultural production., &r.u she was a victim of piracy. The

Spanish Crown considered the necessity et improving that situation and thus on September 2f., 1726, the Besl €o taps fife

Cuipuscocuna was esteblishee by Koyal uecree with the purpose 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 goods i*rou

Spain, au<* to take the Venezuelan products to Spain. To end smuggling the Coat* a life bed to patrol the Venezuelan coasts or«U to persecute pirates.

The Gulpuacoana contributed to the 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 the Venezuelan landowners and Negro slaves

lv6lbid., pp. 182-183. Cf. Arellano-fcorena, 0£. clt., pp. 251-267. The Comp,?iifa Qujpuzcoana Mas organized with shares owned by business aea in Spain end Venezuela es well as by the Spanish Crown. See 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 business eeis. 255,024. This demonstrated the fact that the Cotapasfa. despite its powerful control, die not produce iaprovement in trade as some writers have affirmed. The traffic with Vera Crust, Mexico, acs not saonopo lized by the Compaiifa. and It was very import ant. Prices declined and this hurt Venezuelan landowners and sranl1 fermers. They balanced their loss by trading with Vera Cruz. 122 gad Mestizos. The landowners were the first ones to revolt against Spani sh authority, as © result of this monopoly. *^9

The Control of Spanish Government in the Venezuelaa Econoay Ourlug Colonial Times this control was ;BBnif ested in seven fields: 1. Bureaucratic adrai ni stration 2. yrice regulation 3. Regulation i n the di stribution of 4. Export control 5. Regulation In the distribution of food 6. Control in industrial activities 7. Delimitation of cultivetion erects.11" The municipal government (Cabildo or Avuntaraiento) appointed an of f icer c&lleu the Fiel E.lecutor. who was in charge of enforcing the law. £raong his functions were: to ©heck the quality of aerchandise ia stores, to cheek scales according to the ordi nances of weights end measures, to impose fines on offenders of the lew, to imprison offenders— in esse of absence of or guard at the given moment of the offense, end to take cere of the supply of foods—to be sure they were in goad, conuition and fairly priced.***

^^rellano-l&oreao, op. cit. . pp. 167f f, di scusseu on several pages the controversial views of several euthors about whether those revolts produced ogsiast the monopoly of the company were the eradle of the iauependence which occurred ia til© second decade of the next century. He arrived at the conclusion til at in fact they were the cause of the general political discontent st the beginning of the nineteenth century. 110lbid., p. 318. 11*Ibid., p. 319. Other esses in regulation t >pri1 14, 1590, the prices of wise were subject to regulation. Thus, when its price was excessive--eccording to the judgment of authorities—its sale *as forbidden (Ibid., p. 319)j shoe 123

The Cabi Mo 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 wine, vinegar, oil or olives which had a higher margin of profit—33 per cent—due to the risk

Involved in transportation.11**

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 profits."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, .ugust 26, 1733. guotud from ibid.. p. 324. 124 against those whose purpose was excessive proiits for private aonopolies, but not uysiust those regulations thet favored them. Control of export had two iaportaot purposes. First, "to impede the arrive! of some resources in the hands of sraugglers, such as mules which multiplied all over the prov- ince, and *hich vtere usee for land trasportation of smuggling,"114 second, to avoid "scarcity of good supply In addition to price regulation there was control in the distribution of goods directly to the consumers in order to avoid their storage by merchants for speculative purposes. of food was a policy carried out not only during the fifteenth and sixteenth centuries, when rudimentary organization of the ecotiouy prevailea, but also during the 1 16 seventeenth century, wh en the econoray v.gs raore developed• the objective of government control in private inuustry was the protection of consumers * rights, for instance, the Municipality of Caracas—in its session of February 9, 1594— ruled that cotton cloth produced in Venezuela, had to be of a "reasonable width."1 The principal purpose in limiti ng cultivated ereas was to avoid smuggling. Thet was the case when the cultivation of tobacco near sea coasts wes prohibited. The purpose was

U4ibid.. p. 322. ll5Ikid., p. 324.

U6Ibiu. U7Ibid., P. 329. 125

•to fecilitste government coatrol of clandestine activities.

secciidary purpose for this was to control agricult ural 1 If* production.

lfrO'..i the above eoir.sonts ibom Speed sii control of

Venezuela, the 101lowing conclusions can be drawn. First, the principal characteristic of the Spanish atimitilstratlon in .istoricu wc* the prcsc-uce o£ U central SMI powerful authority exortiny complete coatro 1 -an oconomic ana polit- ical activities ana c&rryiay out a policy with a strong flavor ox mercantili sib .

Second, the mercantilist philosophy was aanif©$t@d la the followi ag points : coatrol of the sUntini strati ve bureau- cracy | regulation of prices? regulation in the distribution of uti litiesj export contro1j regulation i b the distribution of food} control ia industrial activitiesj and delimitation of cultivation areas.

Third, tho market was a more tool which needed govern- ment control in order to achieve desired results in the oconoay, namely, convenient distribution of goods among people.

Conclusion

The Spcuish stage involved the social and culturel formation of Veueeuelan people and the establishment of agricultural wealth, during this stage mercantilist ideas

* * ^ I b i d. 126 prevailed* manifested by central power end yo vernment cootro1 and protection for the benefit of the Spanish Crown,

t the end of litis stage, in 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 ...... 12,000 Sp a n i s h-™mer i c e n or Creole 200,000 - 11 mixed groups 406,000 Negro slaves 62,000 Pure Indians. 120,000 Total 800,000

•Source : Jos£

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,

^cCf. Moroo, op.. cit. , pp. 150-152., CHAPTER XII

THE 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 indepen- dence 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. In

l3ee ibid., pp. 231-233.

127 128 this period cjovernment was imposed by COUP ci' et at. and by electionery process."

Pros 1830 to 1659, General Jos6 Antonio ptfea Rind the tv

it achieved a social sense of equ&litarian society.4

Guzman-Bianco ruled the nation from 1870 to 1699. fie represented a gooa example of mercantili st policies j there were political, economic and soeiel achievements. After

Gu2tfl@n~0lanco came Joaqufn Crespo who KCS overthrows by his minister of war, Juan Vicente Goraez. Goiaez ruled the

5 country for twenty-seven years. la 1920 petroleua activ-

ities begp.n, end this brought a substantial change in

Venezuela's economic-sodb1 structure.

mo-iernr

Each ia 1T9T foenuel QueI Bud Jose fcicrCe Sspa£® otg&aizeu the most import eat revolt cjfci n*t Spain before 1810. The revolt was saushed by the Spanish authorities. however, this

revolt had the significance of presenting a governmental

progrens whi ch was considered later, In 1810. The program, in

^See iblU. , pp. 437-440. °Cf. ibid . , pp. 347-427.

4Ibid. 5cf. ibid.. pp. 427-452. 129 c broad sense, contained the following points i (1) Spanish ships admitted under control sad inspeetion; (2> abolition oi slaveryj (3) suppression of soue taxes; (4) /roeuoin to cultivate and to sell tobacco; (5) opening of Venezuelan ports to all markets of the worldj (6) encouragement of agriculture, industry end trade; (7) prohibition of taki ng sway go Id and silver, except to pay for war goods—this measure showed a freak bullion!st ori ent at ion j (G) social equality among classes and diffusion of man*s rights which was influenced by the French devolution.*3 The Junta Suurema. which was the first organisation of Creole government created when Independence was declared in lfclO, set up the Socieaad de Agriculture £ Sconoaia. and dictated measures similar to the program of Gual and Sspatia, namely, freedom of trade with friendly nations, suppression of some taxes, ana Ireedora lor vagrant and vi llsinous people 7 who were la jail la order to let t h e«a work i n agriculture. This lost measure hud a strong raercantilist flavor. curing the wars for independence there wes inflation due to insufficient production and the issue of fiat money. "Within five months after Congress was installed, it enacted the Bill of /uyust 27, 1811, according to General Miranda's suggestions. That Law authorized the issue of one million

rellano-Koreno, op. cit., p. 419.

7Ibid., 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 . A§

§ consequence of these facts, finsnci11 benkruptcy c em e. ^

as previously stated, in 1799 the population of Venezuela

•was estimated et 600,1»*. 1$)£5 tbo population decreased to ICC,GOO, tbst is, the population was 701,63s.11 This loss resulted fro© tlie wars for independence. Fourteen years later the total population reached 944,932, which was distrib- uted 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."** la other.words, slavery couti nued, the

^Ibid., p. 424. ^Ibid., p. 421.

^Jose bi 1-i" ortoul, filosoi'l'a Constituclonal. Vol. IV" of

(Caracas, 1956), p. 841.

1 August(n Codazzi, ubres Esoootaas (Caracas, I960), I, 256.

lfauiis«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

Jbites (Creoles aad foreigners) «... 260,000 Mestizos (different mixtures) ..... 414,000 Negroes ...... 49,000 Indians ...... « 221,000 fatal 944,332

•Source: 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 pesos.^ Between 1880 and 1846 there was a tendency to economic recuperation due to right measures of the government, like the internal loon—end 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-.

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.

l4Ibici.. p. 359. 1

| t?k decrease of 115,170 pesos. There *as a deficit both years, la 1832 the public revenues were as shows in the Table below. TABLE VII PUBLIC VENEZUELA ON JUKfi 30, 1632 (in pesos)* Sources "aoaat in i-esos^m Customs . . 1,150,99?.?I Internal Revenue# 246,92£.S6 Tobacco . . llfi,644.Oe: £} 1 1 . ') . 1 (i .| U I- Totcl ..... 1,331,750.01 i esidue of prcceai ny yecr . . . 9S,71£.0l Total 1,625,462.62 Public expenditures 1,423,773.40 Residue 201,609.30 •Source: Mor^n, op. cit.. p. 359. *c." peso is equal to four bolivars, r- dollar equ&ls 3.33 bolivars.

/•dffli nlstration of the Mo a eg as.—From 1847 to 1657 the two brothers lloaagas governed the country in a dictatorial way. I'uring their sdiai ni stration the ©bolition of slevery was decreed; the autonomy of the ujunicipal power was created, and cepitel puni shaent for political reasons ues afcolished.*6 Tosses rolenco-Hartfnoz synthesized the edainistratlon oi the Monafjas bs a period of sts^natic^ i'rm the economic standpoint, a period oi* administrative disorder, end c period

15m£- 16Ibld., pp. 371-372. 133 Q £ "person a lieu" froia she political poi nt of vi ew. ^ As a result of the stagnation sad the conx used administration, the public treasury hsU a uei'icit of over 4,200,000 pesos and the public debt reschci 25 million pesos.

The Federal Revoiutloa sod Guzui&n-Oloaco

The idoK of federal organization steamed froa 1611 when til© first Venezuelan state was erected. The sconoaiic prob- lem* that the nation had £aced unti 1 1859 ca«s«a public discontent. Thus, some people thought that federal organi- zation could solve the political and economic problems. In other words, "political personal!smH end "extreme centralism" in the government were the causes of the federal devolution

(1859-1663).19

However, other writers contend that the reel cause of the Federal Revolution was a sociel one. The Venezuelan people were frustrated because political independence did not mean "social freedom," end "equalite social" for them.

Besides, there were few rich end many poor people, or, putting it in modern economic torus, there was great dis- parity in the distribution of national i ncome. This was the opinion held by Leuresno Vfilleailla-Lauz, s sociologist?

17 / > Tomes Polanoo-Martlnevs, Esboso Sabre la Historis Economics Venezolano (nadrid, 1960) , II, 220. l^Ibid., p. 214.

i%ortSa, oj£. cit., pp. 390-391. 134 Lisandro nlver8do , s histori sn; and Rotaulo Gallegos, a writer.^ Ezequiel ~a«aora was the leader of the peasants , the "motor" of the Revolution, cod Juan C. Falcon wes the intel- lectual leader who governed the nation until 1868. Unfor- tunately, the "social revolution" was betrayed la "palace negotiations.* Once more the Venezuelan people were frus- trated . However, a legal "facade" of social equality paved the way for f utute social achievements /is a consequence of the revolution, the economy of the nation was weakened. Therefore, Falcon contracted a loan in London of four cud a half mi 1lion pesos—of which the nation received only 1.5 million.22 Falcon was overthrown by Guzman-Bianco in a military coup. Guzm^n-Blenco governed the nation directly m a President and Indirectly through puppet Presidents from 1G70 to IOCS. During his tera in the following points were accomplishes*: enectsaent of the lev/ of public aiui com- pulsory education for all citiaensj esteblistunent o£ civi 1 marriage—before that time a religious ceremony was the only requirement j enactment of the law of freedom of religionj reduction of the power of the Catholic Church—which

•^Laureano Vallenilla-Lanz, Cesarisao Democratlco (Caracas , 1961), pp. 196-197 . Lisandro Alvarado, 111storia ue la Revolucldn Federal en Venezuela (Caracas, 1909). Kooulo Gallegos, Pobre Xearo (Caracas, 1937). O 1 / **See below Guzaan-tUanco. "Hordn, QP. jjJLi** PP• 403-404. 135 constituted "a state within a state"—Guzmaa-Blanco was obliged to expel Jesuits from Venezuela.*^

The adraioistration of GusmSn-Clsnco was effective. "The coffee production i ucreased, and its price was goodH®riy 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 debt.^

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 moreen- tilis®,^

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

2Zm£*> 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 s- tratlon 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. The

fall la the price of coffee brought shout 8 decrease in its

production aitti that in turn caused @ substantial decrease

in the national i ncome.^

TABLE ¥111

N/.TIONAL INCOME OF VENEZUELA IS SEWS Ah FISCAL YEARS*

Fiscal Year Notional Income do thousands)

1896-1697 . 48,313 bolivars** 1097-IC90 ...... 33,429 1698-1699 ... 40,000 1C99-19QC ...... 27,296

•Sourcc: Moron, 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 threat-

ened to take over the nation. Castro had e nationalist

spirit and avoided the danger of e foreign imperialist Inva-

sion. Finally the situation was sett led between Venezuela

and the nations making claimsf the debt was oorapletely paid O 7 b y Go li b z *

A ~ Moron, 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 sinister of war and took power by a coup d'etat. Twelve years later potrolaura activities started j this ts-as a fast which changed the economic organization ol the nation* G&aea was a cruel dictator, ignorant and cunning, Uo represented a retardIns force la the economic evolution of the country. fie died in office 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 ii co Accordim«j to Uu&beldt, the first 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 first place in both agricultural production and export. Ia 1899

28C*. ibid.. 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). clt., 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 220,GCO 1604 ...... 460,000 IC10 ..... 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 cul-

tivation, as was the case in Los *ndes, the western mountains

of Venezuela. 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. zhbid. 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 mm 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-~aiyra- tion from Spaia—and an increase la the process of urbani- zation 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 incre- ment of 16 per cent,3"

the cultivation of coffee did not enhance the social caste of landowners es the cultivation of cacao had done— the cast© ass celled gran c&cao.During the "cacao economy"

—the 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.

34Ibid.

35Cod#aa:i , 0£. cit.. I, 243-262.

aCiSee 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. 190- 191. 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~

production—an 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 housing problem is the Agrarian Reform, namely, the subst&nti ve reform of the rural land tenancy in order to increase agricultural production and to settle population in rural areas, th J3 avoidi ag nitration toward urban centers. 141

Fifth f the prevailing economic philosophy was mer- ccatllisft duriuy this stage. This phi losophy was manifested iu the fact that tha market was viewed as a tool which seeded yoveraacHt control ia order to perform its function as an instrument of allocation. Sixth, the most significant example of positive sercsatilist policies was f ounu ia the aciniuiatretioii of Presiaeat Gizasn-Elaneo, Cil/'FTEfi Hill

THE FOUBTU STASS I REPUBLIC, PETROLEUM EKA

Introduction

In 1920 petroleum production started in Venezuela. From that moment on eyriculture as a pri ncipal sector of production end export was replaced by petroleum, which was exploited by foreign tompanies.*

The export sector of petroleura was responsible for the

large revenue that the i'enezuelan government received i n the form of taxes anu royalties from the oil corapsni es.41 However, petroleuc was not an import ant factor in the labor market j

e srie 11 portion oi the tot el lebor force in V e u e z u e 1 e, 2.5 per c<2nt,J »ss engaged in petroleus activities.

Ueeeuse of the lsrger revenues frosa oil, the import ence of the government sector increased as a siyuifica nt tool of

econoniic growth. Tha prefaleai was how to use government

1 The contribution of petroleum to the Gross Domestic Product in 1950 was 30.8 per cent of the total. Banco Central ae Venezuela, Memoria (Caracas, 1959), pp. 446-455.

,ri *7he petroleura companies pay almost two thirds of the national teix revenues. Intertsglionel Bank for Heconstruc- tion end development, The Sconomic Development of Venezuela (? ew York, 1961), p. 09.

^iSeaori a, op . cit.. p. 29.

142 143

out lays j were they to bo used iu ostentatious public works— 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 it«.

During the decade of the 1950'$, government i nvestaent in

capital expenditures represented roughly 50 per cent of the

gross total 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 Perez-

Jiraenez 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.

4lo 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 in the 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®

11 eoi & 1957 1959

£yrieulture 24£ 226 Mi r.i a§ • * # ...

Industry *J &• i •220 Electri ci ty bZ Transportatlott end Gocuauni catio a 950 078 ileelth 219 300 Euucrtion 59 161 services 62 15 defease 82 97 Uousing 761 159 Other edifications 302 159 other public works 101 231 Miscellaneous 264 164 Total government eepitel expenditures {1} 2,692 Total government revenues (2) 7,264 ? .,023 Difference between CD sad C2) 3f592 41 Oil 1

•Source: MemorIe, op. £il.» pp. 464-466.

**/• bclivor Is equal to .S3 teller.

I in conclusion, petroleuia ciilisncoa the role of the gov-

ernment ia economic growth. The Venezuelan gotrerasie«t, oa

the other h snu, played an important role as » force ia the

market price of oil. All of this meant that sorae $ercen~

ti 11 st ideas ac

stage, ;n order to understand why petroleuo gave to th

Venezuelan government en important role in the nations!

economy as well as power in the petro lcusi market, it will 145 be accessary to coaiaent on soma legal aspects of t&e owner- ship 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 dis- covered, solicited, recorded end denounced i» the aetiaer aforesaid, not only the mi nes of gold 8nd

t: Kji'Guf i 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 acquisi- tioa, enj oyment end development thereof

Theaks to thBt Royal Ordinance# part of the Spanish mer- cantilist 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.^

7Ihld.. pp. 52-58.

GIbiu., 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 con- cession 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 tha nation, if Venezuela had an honest Bnd proper government.

Petrolepra taxes .—The 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 during the 40 years ex the life of the concessions.

4. 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 la addition to these taxes, petroleum companies had to pay other burdens and taxes such as import duties, income taxes, consular duties, revenue stamps end others,1*5

;.

Oil was discovered la i'eaezuela by the Spanish conqulstadores v.ho were Impressed by rsphalt found on the coast of Lake Maracaibo. t thst time the use of oil was limited to caulking ships, as fuel for lamps, end Indians used it es axternal aedicine. It was a long process before oil was utilized es a source of energy to move almost all the machi nery for transportati on and industries,In

''Ibid, , p. S6, "The i ncoae tax law was modified raore substantially lit refers to a small amendment in 1948] OR i eceraber It, 1950, through a decree that drastically increased the complementary tax, levied on net income. The previous law established a sliding scale for complementary tax, from a minimum of 1.5 per cent to a maximum of 26 per cent, the maximum being collected on net income in excess of 8s 26 million. It also provided for e cedular tax, a flet levy of 2f| per cent on net income. The new law left the cedular tax, setting the mlnisaum of 2 per cent end the maximum of 45 per cent. A$ under the old law, the new maximum applied to net income 1n excess of Bs 28 million." "The Income tax change applies to all individuals ond business firms, not to the oil iadustry alone."

1 ** hols of t!i« ciacteoatli century It was after the scconi was i ncreesed. However , whea the use of ©II for laaps earth * s surface; thus there petroleum was obtained on the oil went as high es 20 dollars was scarcity and the price of toell was drilled to obtain 6 barrel. In 1659 the first a depth of 65 feet, and its petroleum from the sub-soil et day. This was i« Titusvilie, production was 25 barrels per Today, oil is used primerily Pennsylvania, United States. motors, as well es e lubricant, as a source of energy to move h by -products for a variety of and as a varlety of forms, wit 149 that stag® of development petroleum practically replaced caal,^ In :/eaesttola the earliest eoti.jerel&i enterprise* was launched ia ItTGg it was c saoll Venezuelan coapsay In tfee State of Tuchirc which drilled a few wells about sixty feet deep, and produced and ref i ned fifteen barrels per day for local consumption, such as illuminating oi1.

More organized attempts were directed to the production of asphalt. Early ia the present ceatury several United States and British companies started the exploitation of the large asphalt deposits in both 2uli a and Mo nagas states. So, in 1910, the New York and ftertaudez Company began a large-scale uses. Clarence Fielden Jones and Gordon Derkenwald, (Mexico, 1956), pp. 457-450.

petroleum industry in the present time includes the production of crude oil, gas, and a variety of sub~ products involving several phases. (I) Extraction of crude oil sad gas, (2) transportetion of these raw products to refineries through pipelines or ia teak trucks j (3) refinery and petrochemical activities product ng aiany products and sub-products of a large varietyj (4) finally, the complex distribution to the co.-ssureer s. Jones cud Darkeawald, op. sit.. p. 457ff.

Petrochemicals which account for about one quarter of the total value of chemicals are oryaoi&eti and Qanufactured by the oil companies. Joel B. birlan, "The I'etroleuat Industry," in The Structure of uaerlcao Industry, edited by Walter Adams (New York, 1961), p. 277. lmost all the nachi aery of the present civili zation—- transport and iudustries—is taoved with petroleum. In twenty-five year s* tiiae the total for coia- rnerci al energy may be from 85 to 167 per cent more than it is today. J. B, Hartshorn, Politics and World Oil (New York, 1962), Chapter 2, "Oil as a General Fuel,

l~±.uloaga, oj£. cit.. p. 42. 150 exploitation <»£ the fataous Cuanoco sspbalt lake situated in easters Venezuela. ttentio:* ssnst be called to tbe fact that after Jorld f-far I the fespbalt industry he$an to "peter out#" anu later on it was produced as a by-product of oil.***

Mene Grande, located on the eastern shore of Mareceibo

Lake, was the earliest coraraerci al field ©f importance ia

Venezuela. It was discovered la 1914, en4 wag put in com- mercial production in 1917.17 Three years later one could say that Venezuela entered a new social and economic era.

Organising Prices aud Production

la order to better understand the complex situation iavolved in establish!ng production and prices there must

1)0 «?i historical reviev: of tbe principal ©vents related to

'/caeziielBB #11 activities since tbe termination of :-forl«l -far

I. After that, United States companies bolted out fa search of aore protfaetioa aoii consequently of broader sierket#.**1

Thus, the Standard Oil Company of New Jersey and Socony

looked toward the Persian Gulf for concessions; while

lbthi4.. p. 44.

*^Ibid. The first area of oil exploitation ia Venezuela was located ia the northwestern part of Venezuela (State of 2.ulia, Mar acaxbo Lake). Later (fro® 1938 on) the north- eastern part of Venezuela hecaae very important loo. See Map 3: feaaauela: Fetrolouia field area, 1960 (p. 168). See also, for general reference, Map 4, which shows the present political division of "enezuela (p. 169).

^Harvey O'Connor, The llmtstxe of Oil (Mew fork, 1955), p. 261. 151

Standard of latiieuu looked toward Venezuela. This company found Shell---en English and Dutch C ompany-~elready ensconced on the ccust of Meraceibo Lelce,^*

At thet time Venezuela wag ruled by Juan Vicente Gomez, a dictator who held the nation in a feudal regime. The ts6eez attitude wes not aggressive, rather suspicious. Dur- ing his government a greet many oil concessions were given to the companies.20 The bloody dictator died in 1935, then

The companies needed to confront the new rulers unitedly. Moreover, the delicate matter of pushing i flto the United States as such Venezuela fuel ell as the domestic producers would tolerate—-roughly a third of the Venezuelan procuction—required 6 M.b.Ifie<*. p.o.Hcv by the Big Three [jersey, "shell, end Culf'M*

In the 1930' $ the United States "was staggering wader the blows of the depression, end the oi1 industry in partic- ular suffered frota the problems engendered by the vest new

East Texas field."22 They succeeded la 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.

l9Ibid.. pp. 261-262.

20- rcila-Farias, C£. clt.. p. C79. In 1911 the oil companies had 30 Millions of Ha., i.e. 33 per cent of the area of the nation. They obtained it at lower prices and had many privileges* such as the abolition of taxes on imported aachi nes, etc.

*> | O'Connor, 0£, cit., p. 263.

o Ibid., p. 262.

,yn IMA* 1C2

Caribbean f,.Qrcoaeiil .--The three companies, Jersey,

Shell, and Gulf, unified their Uctr&cuibo production unucr u joint agrees©at s

New Jersey took charge of the new problem presented by the oastera Venezuela fields. In 1937-1936, it was agreed that Jersey end Shell would take one-half ir.terest is Calf's assets and production, end their were declered "pooled" concessions, Jersey paid $100 raillion for the half interest in Gulf's Hone Greade Company sad then sold Shell a quarter interest far $50 oillioa. This left Merie Grande 50 per cent owned I)y Gulf and 25 per cent each by Jersey sad Shell. Shell, however, woe a»t to be Jersey's equalj disegreesaeats were to be referred to the heads of the companies and if they too disagreed, Jersey*® decision was to be

This exemplified the power of interactional barter to settle agreements, ia which Veaezuelan yovernment and workers had nothing to do. Power irt the aarket to settle situations and prises, as well as production, gave to the companies unified control ever i/eaezuelan oil production.

G6m®% was succeeded, after ills death in 1935, by his

Minister of defense, Generai Elassar Lopez-Contreras. fie represented a typical government of transition between such a bloody ead ignorant man as Goraea and General Medics, a ueaocrat. During Lopez-Contreras* office, In 1936, the

Hydrocarbons Law was eaected, which usee the anti ng of oil concession wore difficult. This fceuefited the nation

T4 *" "United States Senate, Select Coianittee on Swell Business, T2i£ lat^ma vi*?r.sl Petroleura Cartel. Staff Report to the Federal Trade Commission C^efHisgten, 1952), pp. 171, 175, 177,179, ICO, 104, 153 as e whale.^

But ia the satter of iuposition of tax, the nation galas very little for the lew maintains aa unfits- lii'ted ueduotioa of 50 per cent ok exploration in areas covered by water or over 200 meter* distant Croat coasts, ana the 12,5 par sent for exploltstiaa in such areas; the purticipuiion oi re

Ldp&z-Coatroras was succeeded by Geaersl Isaias M@aiaa~

ngerita, who w&s elected by the Congress by indirect vote, a ad who w&s a democratic {-resident. The Petroleum Law of

1943 was the most important event that occurred ia mining legislation up to that .aoraent. The law provided for a partial exoneration of the tux sa exploration and exploi- tation ia these areas covered by weter or situatei. inland ovor 200 meters from the coest.^ The oil companies were irritated because thet monstrous legislation! Invaded the shrine of and the right of exploiting under- developed natioas. The consequence of that legislative modi*

:;icatio»*. oi taxes rcised the nation's roveaaes from oil cuasidoral-ly, la Vi4Z the rovonaes i'roa oil t^ere CO sillioa

I'Olivars (£4.2 oillion dollars) j ia 1940, 1S5 aillion hoiivsrs w«r« CQllocted~~due to the fact thet it «c$ not ?<-

"Notice the aercantili so criterion of wealth end wel- iare in terras of the nation, not in terus of indiviuuals.

*-c . rei le-l-esrfss, op. cit. , p, 386. Reqalia means royalty

^'lidLsL* If, 4 possible to apply the lew completely. However, in 1944,

»vhen it was possible to apply the law completely, the 28 revenue reached 242 uillion bolivars <73.3 »illion dollars).

In 1945 Kedins-. ngorite was overthrown by the political party c c 16 n Deuoeratico backeu by e group of mi Utcry men.

For two years a Juata RevolucioRoria governed the country; in early 1946 direct elections were held and /-cei^a i'etsoeratica won by a» overwhelsi ay majority. During tills periof d . , , the unions flourished and wented more end sore, a progressive labor law was passed which 1st exceeded in scope the Wagner /ct in the Halted States end buttressed the unions' elsorts. Although Creoles could afford to he ^euerous (stockholders usually got more in ui vi^erivS than employees is wages) the implications of union strength within the governaent were es disquieting to the ruling circles i» Carsees as in Mexico City* There wes plenty el money to aeet wag© demands, but the power of management is Indivisible, 1n 1948, therefore, the democratic Action Government was overthrown by an array cabalj the oil Workers * Federation later was outlawed, its leaders imprisoned, sad the power of the employees slashed. The labor force of the Creole Coupany was reduced fro® 20,500 In 1949 to 14,400^1n 1954, although production rose 35 per cent.29

During 1945 and 1946, under .^ccion Democro'tlce. several fiscal reforms were achieved, namely, the increase of gov- eraaent participation ia the oil earnings, "from 27.4 per cent t© SO per cent, whose imraedi ate effect is e strong increraeat in ©il revenues.H^ The coasoqueitoo of this

aCiXMd., pp. 386-3S7.

•( oitrtor, 0£. ei.t, . p. 265.

rci le-^'erfas. op. cit., 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 deter- mi net ion of production, es well ss prices, taking into con- sideration, 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 price.The question was: liow to settle price?

•3lJucn i'sblo teres-/- lfonzo, MEi Petroleo en el I essrrollo Ceononico de Venezuela,** Folfticfa. Ho. 3 (1955) , p. 112.

'Connor, op. cit.. p. 263. For e time, v'enezuelcn crti

3SIbld. 341MI>. p. 264.

3£Ibid. 36Ihia.. p. 265. 3bf'" i

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 country1 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. There was BO possibility of control c.Rtl planning. To illustrate tills pot at,

The world 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 cur- tailing 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®

37Ibid., p. 266. 36lbid.

59lMa* 40IkM.» p. 26e. 156

The Present Sitiiatloa.--?or a long time tie world's oil market lies been Influenced hy two principal factors: the predominance o£ the United States hs consumer ea<* producer, end the position o£ the interactions! oil companies as proUuci-rs srid uisiritutors otrer tuo thirds of the noa- cora.aani s1 worlt!.^*

Mow then, this situftSo.i iiss beers somewhat modified Is the last fifteen years. Until '-'-'or 1<1 V'ar II, the United

States oo&mnmleJ Un; oil aarfcet as producer and distributor.

Oil prices were set ilea ou the besa agreement of the Curif--- i>eaa troi..Hoi*ever, hy i946-50 the Kicl TO United States cents e barrel less then the equivalent y»ite<£ States Gulf prices. Later, quantitative* restrictions on United States oil price end e series o£ f.o.b. prices were msue. Furtlierraore, "the aejor eompani es sad the government ol oi 1-exporti ng countries have a vital interest i n avoiding competitive price- cutti ng es this would reduce both profits sad tax payments

In audition to the Increased oil i •.> the Middle -last, there $sere two factors la r(•••-. ;\t years which contributed to the accrual of a supply vt oil: the first of these was the

41 International ior -^construction end {-9velopae«t. p.p. ci t. . p. 120-.

; •#,

^"'XLLu* $ p» i2i. 159 independent producers who increased oil production. The

L'iilted States Govern,meet is response to that curtailed oil imports to the United States. Secondly, several governments promoted oil production in their respective countries — A# t. anode, Argentina, Kexiee, Li bye. * *

The Sues crisis of 1956-1957 aggravated the oil situa- tion, In this period oil prices wer a increase.?!; lor instance, in West "Voxas prices rase 25 ce.its per barrel in January,

1957. Venezuela oil oeri-pessu was the object of price increase, so it rose from 25 to 30 cents,"®"

In June, 1957, with the reopening of the Snea Canal, oil stock tended to be repleni shed; consequently the Middle fiasl prices rose 15 cents per barrel, one ea» appreciate tiie effects of the forces of supply sad demand of oil daring the period of crisis j however, one sees the act ion of the in the fact that "these higher posted prices were maintained despite the rapid increase of the United States

arid Venezuelan prediction la 19S7 end in the Kiddle East in

the latter part of 1957 and during 1958.

Prospects for $jtg 19CU * s.—It is evidently a feet that the world demand baa keen increased end it seems that this trend will conti nue due to the growi as need of oil for transportation, industries and the,increased demand for its

44Xuld.

4GIfaid., pp. 121-123.

46Ibld., p. 123. immmmmmmm * * 160 Ly-jcsUajjts # is:i th'i ot!:er .'n-.uu, it faes i aer e z$od the ay;.ijjer

Oi -Ji 1 t ^-jpc-iies i'.'i th«-, sectors oi" froduetloa nnu wistribu- tint*, es troll £8-»*-E.:va this is very iEpcrtT:at--t!ia fpot that

there bas been sii inereese la the number ox yoverarasnt s promoting, fostering, and also exploiting oil activities tftetaselves* This situation will continue for the emerging

underdeveloped countries in . si®, /-fries, ®n«5 in ."tiieriea,

Venezuela fsces several di^iicalties with respect to oil industries. There ere iili'i &ronees in eost concerning explorstion, production, anti xreiybt i« the different existing oil areas is the world, tor instance, Venezuelan oil hes higher costs in exp lorati on sad production than tliit of the Middle East, Que to differences in wages and product!vity—higher wa^es ia V'enaa»ciR.^7

I.. ;/.rsr, the postc-a prices ia veseaaele u*c

Still w 00 it 1 y H f Q«i»j A £ 1S U'ij't O «ly «iU0 o hi QllOi' costs Uut rather %bet t&e settlement oi prices I>usaa on the i,erib-« beea .tgreeneot fevoreu the interest of titose oil ceiapenies oper»ti.-ifc i«» 6eits^uc 1 o« * urtuerKSore, this is stnotner piroox that oil prices heve little to uo with the supply enu demand Siiu More with sgreements.

47Ibiu.. pp. 127-129. 1 /„ 1 rr ^

r-.'.icus vr tZ'Ci'*" cil r IN nm mx, DEtEmm, 1959®

Si HQle Voy&qe Spot Long Tersi Charter Sets Sate Cln U.S. coots F r lee ^3t _barrel) rxoia i'Tijii I'losr, STrca Kuwait Caruoa83"® Kuwait Cardan

Posted i • r i c c 1.67 2. So 1.67 2 . tr i freight '1.19 .31 .46 . 10

eli vereci Price 2.86 i». His e. .13 2.65

•Source 1 felroleiits rrc-ss Service acd retroioas ieok (tekeu from lalwruatioaal Seak for Ucosstractloa »au Uevelopiaeat, oj),. ci t.. p. 129,

** araoc is '©n0su01 sa p0rt oa tho (>-rientcl coest.

aeteraiautioo oi prouuctltfii s»tf prices on oil iu veaessuwla, as has batfa aoteicl in the above; historical gisocej, is a complex Matter, It is tie result of waujr i»m», one cau-

••iot »«#^ute tile taarket pcn-,*er exerted hy all cmp^uias, la ihs ha.tf}£It 01 their owa interests, as tke main force in the sett iotastri of production anti prices. Tbe Venezuelan yov- ersafest eiul Venezuelan woi'!*ort (orgenizea is unions) acting together have exerted to : osie extent power to settle indi- rectly product!on ami prices by tseetis ot* taxes, sett lament

0£ wegos and social benefits, Finally, the presence of 162 forces oi supply emi demand cu oil et a given period have exerteu influence la the ueterui natioc of prices and pro- auction of oil in rssoci stioa with the other forces already aentioneii. This was the cesu uurin^ the crisis of the Sues

Canal aheti prices went up cue to the diminishing supply ox oil. But later, the market power oi the oil companies became evi-Jent, when the oil price was maint eineci ueli b- erctely high despite the increase of production after the

Suez crisis.

The Consequences of Petroleum activities

The hs,se oi the ecooosjy of the cation wes coli'ee lr©«

1010 until 1920, e result o£ the expansion oi' oil pro- auction coffee started to decline almost abruptly tu 192D*

In 19 If. the export oi eoi'i'eo roechyu 1,373,000 sacks produciuy 115 million bo livers ($35 alllioa); In 1924 this amount i ncreased a little, ueclineu later, sad in 1926 sur- passed by a smell eaount that of 1915. iter that time it declined abruptly forever\ thus,it did not represent an important item ia Venezuelan export. J s fits been pointed out, the first place in export was occupied bv petroleum, which represented at that tiae less than one thirti of the export. This proportion tves increcsi n§ progressively u>ui 1 roughly 60 per cent wes reached ia i960,^

4L ,rcila-ferics,o£. cit.. p. 372.

4%'Persies , oo . cit., p. 4051; f.. • 163 Tims /eneaueia conli nueu to ue a aono-producer country par excelleace. and paradoxically, the country was becoasiny richer! It was becoming sore dependant upou petroleum, n&ciely, dependent upon an alien inUustry with respect to lior own wealth. The ©ffiargence of p&troleusa cctlvities onhanced the liiipartaaes of the govor assent in th& economic growth of the natlou fcjr increasing its revenues a«d its power ivs tie petrolsuta aarket."-'® This brought sbotsi e cle@r jaorcen- ti list phi losophy, nm&ly, the used for proper gofer assent as a leading iustruajent of netionBl plenniikj. The export of petroleua permitted the increase of other products, as shown in Table XII or the following page. In Table HI the amount oi import includes all imports, The table indicates the accelerated process of oil export which raey leea to 8 collapse in the econocsy ia case the oil export shoula be curtai leu clue to a variety of reasons such 68 cheaper production of the middle fiest, or 4fepletioB of oil resources ia Venesuele which aay occur in the future. /The treideudous increese of Venezuelan population since 1920 lias keen related, to lerce part, to petroleum activi- ties. Oil exploitation attracted people to concentrated ereas of petroleum activities, aad isci#epi8«U government revenues ss wall ©s arosso public aiorfcs In cities. Aceoruioyly,

See the MIntrocuction" of this chapter whore this point is discussed, 164 other eee aortic activities—services , trfetio, etc.--were incresseti in ail urban centers? thus, cities were, is general t r.-rn Magnet oX population. Furthermore, preveative r„cUi©ir.e hss more UcvtilopeU P»d consequently the aanu&l ueatfc I'&tt; sll«iaisiie?;.In brief, tiiero was an increase in population, an inevetwi.- in the process of url/Cnissstf oa with s. consequent ueeres.se la raruX pops let lots, eaJ e change in the yeogrephiccl distribution of the population,

T/'BLE XII K£LaTXOKSUXP BETH'KEN IMPOST 01* GOODS r.m EXPORT OF fETRULKDN FROM 191© UNTIL 1956® On mi 1 lions of bolivars)

/mount of Export Yeors /mount of Iaport Petroleum Index

1910-1920 125 100 • * • a # # 1920-1930 290 232 284 100 1930-1935 160 ' 144 289 116 1935-1940 295 234 399 160 1940-1943 415 330 901 363 1945-1950 2 * €'i3 1,610 2,749 1,106 1950-1954 2,509 2,00? 4,720 1,903 1955 2,960 *- ,606 6,031 2,431 1956 3,430 2,750 6,640 2,000 1957 5, SCO 4,470 7.206 2,'937 19 SO 4,TGS 3,026 7,004 2,050

•Sourcej ferules, op. git., p. 44£.

r'l • " See Francisco Lopez, M";ot »s sobre Ueraografi o v'enesoleneIntegral. No. ? (1954?), la the 1930' s "battle" of sanitation against aalaris was begun. 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, it iaci-ocsau «t sa $,v«ra$a o£ 1^433 iiikobitaats pex y&ux, la IV2G oii ^plalta^iou stcirtcU 00 s large scaic. 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 2*323,527 1920 2,365,098 1926 . . . 2,890,731 1936 C,364,347 1941 3,050,771 19 GO 4,9m J16 1960 7,000,000** 1962 0,000,000***

•Sources I'#rbie&, o&. cit.. pp. 39-41.

••{Jstiasatioa, ;,>.neauol.&. Up to i-ate. k, So. 7 (Kerch- .•pril, 1961), 4 ar»ci back cover.

*®*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, That city hs.ti s population of 140,132 In 1920. This number it u corres|;o«dci!. to 5.9 par ee.it o;.' t&o tot til population of that year <2,36i>,09fe), I» 1936, we tropelitea Curaeas had 263*418 inhakitents, that iu 6.4 per cent of the station fer t!ie sese fi? Q year (3,364,347) .1b 1960 metropolitan Csraoss had 15 per cent ©f the total populeti on of the nation. Furthernore, almost 40 per seat of the Venezuelan population wes located io six netropolitcn areas l» 1960.

The process of urbanization lies been encourageu directly

and indirectly by oil activitiesDirectly, because oil activities attracted labor to areas of exploitation, thus old towns grew and now oa«s were crested. On the other h e nd, this concentration of l&her population attracted additional population engaged is services, trade and the Ilk©. /•§ 8 result of vlie effects o:T nullijpiieatf t#u cad relationships, cities other than oil to.;t;s attracted population i'rou rural areas and sraoll testis, These people, saeislly uprooted, abandoned progressively the latifuadle sad nilni fundi s''D v.hi eh

£ 9 «•/ ** rci la-Far fas, op. cit. , pp. 373f£.

e ^j \'enso Nacional tie iob 1 acion. 1960 (Caracas , 1960),

c -£ i *""SeeSee Octavio Jiarceno-VellenWarceno-Velleni1lci 1 le,, "Loste Oriental del Leyo da Mareceibo: Esiudlo cle sus 'Jucleos lirbenosCaracas, December, 1956. f* ouLatifundi a, large extension of land under extensive cultivation and owned by en absentee proprietor (In aost eases). Minifandla, small portion of 1 and possessed or occupied by a family or a person, and cultivated for self- subsistence. Mi nifundi a stems from pro-hispenic state— conoco—but was possessed by e tribe io © collective sense. ic : i

Aiileli aru still the patterns

These people, lured by the prospect of aew joi>s, migrated to larger i

-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 countries—Colombia, 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 PWOLmWI IN RURAL im Ui.'BrH IN 1920, 1936, 1941, 1950®

Percentage Year Population Urban Rural

1920 2,365,096 25.C© est. 75.00 est. 1936 3,364,347 34.05 65.15 1941 3,650,771 39.25 60.75 1950 5,034,636 53. m 46.20 i960 7,000,000 est. 60.OC est. • 40.00 est.

•Sourc* s LHUI&1M. Relatlv&s dej, £roMtai &£ Jj. VI vie Ms (Caracas, n.d.).

^See 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 Ma.CCAenA

QVKACAS 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 POLITICAL pWtSfOtf

A R I 6 B E A H SSA

(loeVA £ SPARTA ^t> c R*® V.co/ C"3 &J. r" i-ARA ! JL 57 TRIHioao >- r." * V'—i C£*CLA»X>) ;-vroj«u-O,' / c i i Mom A.cvs v y^S* \ v ' it ^-VKe«,0A/ 1 x " — ^Aha.cu ro / 6 / J i-- V, 4T v & s *» ^ Jf >t, * * .5 * ,*» X* V * * •

£ A H A X O \ M ^ s*

loo =db= «>

Source: International Bank, «g, ott. > before 'Preface" (f olded kal^ scale). PAST FUOE

' 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 perma- 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/

soiuim rm CONCLUSIONS

Summary

fit the end of the fifteenth century Europe was ready for a greet transforation in social, cultural and economic aspects. The tucrican coati nesst was discovered, which brought about the shift ox the center of couaerce from the lieaiterraieao to the Atlantic. Europe changed from the taedievsl pattern to the nation-state pattern. The political and economic ideas which framed the formation of nation- states was mercantilism. Mercanti lisia was the attempt to achieve economic and political uni ty, and to seek power to make the nation strong and prosperous. Bat mercentilisra had two meanings. First, the "current" percenti lis® which was hullionist and sought oil litary power and coloni cl exploi- tation. This kind of mereantilisra was exemplified by Spelti, Spain la turn shaped the economy of her colonial countries in Spanish /aerice. The other mecni was the i ntellectuel attempt to develop netion-states in order to obtain economic o ii«i political unity. This type of mete snti II sa was «j«ia©d by a "philosophy of tieveloptaeBt*} it was exemplified in Steuert's work.

171 172

Steuart'8 thought in brief was the intellectual attempt to achieve political end economic unity of the nation through economic development. according to Steuart, political econ- omy had the object of provi din$ food ami caploymont to every member of the society—-is modern tanas he advocated b policy

©I Cull employment etui welfare. He did not rely entirely on the aarket aconoay. lie argued the aerket should be imple- mented by government actio a to achieve these goals of full employment and welfere. Steuert thought that government should be an important instruisent of political ecorioay.

Governaent is "ths power to coraasndsad political economy is "the talent to execute.M Steuart thought thet the states- man should fit at the head of this operation and thet his principal concern should be with the general welfarej there- fore, he should be "attentive," "able" enu "uncorrupted" in order to accomplish entirely the operation of control and planning. Money, accord!ng to Steuart, w«s neither a "veil1*-- the view o£ the classical econosiii sts, nor a precious metal per se—the then current aiercanti li st view, lie sru aoney os

"a very potent tool for moulding the economic system, end for bolstering up trade, Industry a»ty«art considered .Monetary end fiscal policies sad public expendi- tures as powerful instruments of social policy. The prin- cipal use of taxes accord i fly to Steuart was to distribute the national income more equitably "fay drawing f roia the rich e funa sufficient to employ both the aeservi ng end the poor in ITS th© service ol ifce state." Toxallsy sitoulu be> related, ecceruioy to Steu&rt, to a program &£ tlteroKtive possibil- ities of. public

*fee evolution of Venezuela any fee divided into i'oar stages. The first stage was pre-llispan!e ( ~iH90)| this ass the priai ti ve society of Xavians bused mainly on s e 11' - consuraiacti vities. The seconu stage (1500-1810) was detorairieii by the Spanish conquest aad coloaiz&tion, The aain purpose of Spain was the search Tor gold &m the control by the Spanish goveraneat oi the economic activities oi the production b®4 distribution of goods, .agriculture wst ti*« basic economic activity Uuri ng the Spani sii period. Tlie tiiir*i siege of "/enezuelaa tie¥0lopt30$it <1610-1920 was the republic, the era o* coifee.

Daring tUis third ste^e jfeuesaela 'jc casus politically iuuependest Zt-ya Spain tnU her ecoticay wat still I»a$e4 oa tvji- icuiiurCt c r c i i li *» w p o i i c <* &> i< cr o * i »j. n i i ^ ^ y o v — extmenl control of the market. la this steye, os in tl»«* orecedlug oae, the saerfeet was a aore tool, control lea by

^overnmeat action. This so-called Republic ass characterized

1 Steuart *s view ox taxation contrasted with that of the narrower mercantilist, which regarded taxation only as e source of revenue to uei nt ei n the central c'over n»ae nt. This flew prevailed. Is Venezuela during colonial tiaes, soti during the two stages ot the Kepublic. Cf. Carl S. .She up, The Fiscal System of Venezuela* A Report (Sal tiiaore, 1959), pp. 1-42. This report eaphtsized that Venesaela ia thet year still lacked a proper system of taxatioa to oi stribute properly the nptionsl i ncome and to promote development* 174 by canalllisimo. nsaely government leadership operated by "military coups1* sad not lay an electionery process t the ena of the «ineteenth century, Guzman-Bianco, President of Venezuela, exemplifies a good example ®£ enlightened taercsntillsis* He improved education, public administration, and iito yur.erel level of production. He also initisteti political rei'oras to strengthen the role of the state over the Cetholie Church. Finally, the last period, the republic era or oil, started is 1920. The base ol' the economy $vm agri- cultural activities to oil production. Docouse the dictator Goiaea ruled the country from 1907 until his death la 1935, there was © lag in the country *s economic development. Frota 1937 unti1 1958 the government consi st-ed of short periods of railitery dictatorships with the exception of one period when H&aalo Gellegos wis an elected president. However, during the ©II stsge tiie government * s role in the economy increased because of the increase of revenue from all taxes. This called for proper governmental planning. In this ere of oil the leading figure in economic activ- ity was no longer the landowner; lie wes replaced by the businesstfan. Ibis observation should be viewed in connec- tion with Stewart's opinion of businessmen. He regarded ifaeai

"See Gabriel u» Al&oiiu end Jcaaes S, Co 1erasn,editors, The i o 1 i tics of the :'evelosi no '-re as. (i'r i ncoton, 1960), ppT 45C-531. ITS as more industrious and thrifty than landowners, and there- fore more likely to contribute to 8 hinhor rat® of oconoraic growth.

Conclusions

Prom this brief maimery of Venezuela's eoonomic history, i'ro« its beginning uuti 1 1956, several conclusions may be draws* First, the concept of "free aarket" did not play any role in the entire process of such evoluti on. Government intervention end control, unions, end foreign oil enterprises consti tuted the import ant forces sffeetiii§ "the market

Second, the philosophies and policies of the narrower

Mercantilist concepts have been present in aaay ways in the evolution of the nation. Sercantiiisa during colon!al times was ih favor of Spainj it disregarued the development of the colony, This saercanii li sut was authoritarian, and it was bullionist. The mala objective of the Spaniards ws« the search lor gold, but they brought their government to the colonics. It was this petrierchal ant authoritarian govern- aent that the Creole groups—the landlords---reacted last.

They wanted more freedom and power for their own interestsj this was the mala cause of the revolution for indepenuenco,

Third, this kind of "Spanish fflercatiti lisra" did not exert a positive effect on the economy of either Spaisi or the colony—Venezuela. This ruer canti li sas sought only the power of the central goveranient, the Crown, »nd regarded wealth as being only go Id. This attitude brought about a benign nt negligence ol economic resources in both Spain and the colonies. In addition to this, the intolerant religious attitude of the Spanish state contributed to the backward- ness of Speis. This intoler&uce was manifested ia two important events f namely the mass expulsion of J&ws ia 1492,3 which deprived Spain of an important "human capital*1 (Jews were very active *), end the leek of response ia Spain to the —which has been connected to the phenomenon of the in the lote eighteenth century.^ r i n a 11 y, one cannot expect thet Spuifi -J airing the sixteenth century wos sufficiently sophisticated to hsve an enlightened type o£ sereaufciltsia. How ever, one t,light expect that she was sophisti cated enough in the eighteentk century to learn toward Steuart's thought. Out in this century Spain was decadent, especially between 1768 and 1606, when the King, Charles IV, ruled the nation. He was week and his minister

£? Godoy v.as iacoapetent.In audition Steuart published his Political ueconorav in 1760, almost at the same time that Met® Smith' s ideas were welcotaed in England. Spain had forty-two years, between 1766 and 1810, when the independence of Spanish America began, to understand Steuart*s message.

ntonio Ballesteros-Kerreta, Slates!s ue Historia de Kgp86s (B&reelosie, 1957), pp. 232-235. One ITandred thousand Jews were expulsed. 4Ci. Tawncy, o£. cit., pp. 62-72. "ballesteros-Sarreta, op. cit., 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 $ov- ernmeat 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—not the only tool--which needs to be imple- mented 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 econ- omic 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 "box of solutionsOne lives la e ayisaaie world which calls for dynamic solutions. Therefore, a realistic approach to Venezuelan economy wi 11 be withi n a political anti economic frauesvosrk Lssea os flovenwaeot planning,

oh tlio si^iiiiicejit pertlcipotioa of th« government iu the economy as a device of co atrol aau plenni ny, as ti protiotor of private enterprise, auu as cm owner of eeoooaic resourcos ssd

"vital" industries.?

In conclusion, aercantilist philosophy, not s f.i*l,r.€j ecouony, has pleyeu an important role Is the history of the economic development of Venezuela, and Steuart * s philos- ophy provides Interesting poi nts to be considered in the framework of 8 contro 1 led raarket. oil, everyone lives •fl in a world of autainistored prices

Control does not necess &rily meen loss of freedom* The market Is a tool which must be implemented, oriented, planned and admi ni stereii. The market Is one of the many i us tru&ents or devices to help in the organizat ion of the economy. The Joes not measure social values, for the essence of social value is the continuity of the social procuss.

^• t the present tis.ie the b!e»e@«@les government owns Venezuelan sub-soil, sea coasts and river beds, as well os the organisation of Corporacioti ue Guayene, which produces iron, electricity, and other products. This or ganidation is simi lar to the T. V. • . in the United States. If© mean by "vital" industries, those that are vital for the development of the country, and which "should" bo, therefore, controlled by the governoent, especially in the case of underdeveloped countries.

%osser B» Helton, Lectures, North Texas State University, mentor., Texas, Spring, 1964. 179 Tomorrow oat' will lite in e society of welfare sad leisure; o ue v ill cehieve full crap loyr.ient; this moans the lull isipli- cation of tlie concept of welfera, »a«ely a way of living for everybody, that concept of e better distribution of output one must reshape the economic system to consider welfare unci full employment as taeasingfal tasks to be achieved. The concept of freedom must be understood as a workable end dynamic concept in order to avoid social disaster# hunger, and the loss of human dignity. Individual freedow is & valuable concept that ell people cherish, but it is important to consider both the value of society as a whold and the evolution o£ social and economic thoughts. One must re-structure the systont If h« is going to achieve abundance j therefore, he taust Revise too Is for that purpose. Social values like tkri ft, a balanced. budget, saarfcoi, seat a Clavs, aati a a ay others are objects of perse- neat change.*** i'iiysicists do not use old books, old-fashioned practices, nor can one use past thouQht s t-7 direct his activ- ities. .hat were solutions for yesterday's problems cannot be solutions for today's problems.11 The system must be reshaped, not in terms of old pat- terns , not ia teres of obsolete values, but in terns of the

Q 'handall I'i nn&y Cochra>», Lectures, North Texas State University, Fall, 1963. 10Ibid.

11 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

Ik frawisifj tlie wcosw>»y of V'euesuolu, aad wSist is more siyailiesut %u that y^vertimet?i must piaaaou to

w achieve gbuntiaace uw& s-aeiai w#j£&ye, neaely, tlio 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 ," unpublished doctoral dissertation, Department of Ecouomics, Ohio State University, Columbus, Ohio, 1955, p. 380. APP8N&IX 182

«&> S-S8§*

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wWllili v \ir?!fi

Plate I Venezuelan Indian *••«» 183

KX

T~" - ? '

Plate 2

The Spanish Conquistador 184

#

Plate 3 Primitive Farming Practices Which Prevailed During the Stagess Hispanic and Republic, The Era of Coffee 185

T ~r

Plat© 4

Petroleum Towen on.the Lake of Maracalbo .1068 mi ¥ 3I8LJe§KiftPUY

Bodies

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M Hill, George H.t E1 ^aspesino Venezolano t «lgu»gt Coasid«racior»es Socio log ices per® una Verdodera Reforsaa ;-yr ar i a Eco-nomfa x Avista Trlmes^a\, dg. Jj, EMmMM ££ g££MFM M mjMMMA ^en^ral de Venecia, Year I, No. 1 (September, 19f£), pp. 5-11. 193 Lopez, Francisco, mHotm sobre Deciografia Veneaolana," Integral. PSo. 1 (1934?), Ho peges given. Perez-, lfonso, Juan I'eblo, "El Petr6leo en el Uesarrollo Econoeilco do Venezuela," folltfca. so. 3 (I9fi5), pp. 104-121. Soss-EourJTgaes, EiiuerCe, "Badlcacion tie 1© f-tbiaelon Urbejis Inestsble," :.'ork for the First Venezuela Housing Congress in 1950, Cruz del Sir. Key, 1958, no peges given* tela Ob to Pete, a, No, ? (SSarch-^prll, 1961), 4 and beck cotex. einyrou, . lex, ". dminlstereo Communities: Some Character- istics of Hew Ismai grant Vi Uages is Israel Economic Pty_felftiai.ftfl .ftM fi-MllaiAi X2» No. I (October, 1962), 69—84.

Encyclopedia Articles ileckscher, Eli f., "iiercenti lisra,* Encyclopedia of the Social Sciences, etilted by Edwin R. A. Seligman, Vol. X, New York, The liacaillsn Co., 1932. Nqqyo frequeao Larrouse IllustraUot lii&®iontrio $»ifeiclftP».d4c.ft.. published under the direction of Claud# and Paul Auge, Spanish adaptation by Miguel a© Toro y Gisbert, Suenos /ires, Editorial Lnrrouso, 1958. sella, Edgar, "Just Price," Encyclopedist of tki. Sociel Sciences, edited by Edwin f?. A. Seligmen, Vol. ¥11.1, Mew York, The Macai1lan Co., 1932.

Public Documents .. s»ectos T.elat.ivos a.e 1 i'gobloa.e ue 1®, VI vienvis. Cereces, lieace Centrcl at* vonzuelo, n.U. • •ooio't^l M, PoMeclon. Caracas, Sisigterio de "Voaaento, 196©. Las Leves 6e Recoplleci^i. Spenisb Laws, Statutes, etc., Madrid, Juaa ^uiige, 1745. (3 volumes) Meaorla. Caracas, Banco Central ue Venezuela, 1959. Meaorife v Cuenta. 1959-1960. Caracas, Corporacion Venezolana il© Fomento, i960. 194 r;.esafflfta 6© 7 Caracas, al I ufalTc^tToa," 1C91. United States Senate, Select Committee on Small Business, The International i'etroIt?ma Cartel. Washington, Government Printing Office, 1952.

Unpublished aleteri al« Cochran, Kendall H nney, unpublished lecture notes, t>epartaent of Econoai cs end Sociology, North Texas Stote University, Oenton, Texas, 1964.

§, "The Concept of Economic Plaining in Institutional Economics,M unpublished doctoral dissertation, Department o* Economics, Ohio State University, Coluabus, Ohio, 1955, aelton, Rosser Ii», "Schulta* s Theory of 'Human Capital*," paper presented to The Southwestern Social Scionce ssociation, / nnual Meeti nrj, Dal las, Texas , March 26-26, 1964. unpublished lecture notes, L'eptrtraeat of Ecoaoaios and Sociology, Korth Texas State University, Denton, Texas, 1964. Ksrcauo-i alleni 11 a, Octovio, "Costa oriental del Lego de Jicrucnibo s Katuuio Jo sus Muclcos Urbanosreport requested l>y the Shell ietroleura Compeny (2 voluraes), Caracas, December, 195b (mimeographed). Sose-Kourfguez, Eduardo, "Consents on Social Changes in the Costa uriental oX the Earacaibo Lake," unpublished paper for Croiessor Carl Zimmerman, Harvard University, Cambridge, Fall, 1961.

Newspapers Sosa-P.otirfguess, Eduardo, "La Hauicacion de la Poblacion y la Vivienda," El Noclonal. March 9, 1959.