The London School of Economics and Political Science Social Networks
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1 The London School of Economics and Political Science Social Networks and Entrepreneurship: The British Merchant Community of Uruguay, 1830-1875 Peter Sims A thesis submitted to the Department of Economic History of the London School of Economics for the degree of Doctor of Philosophy, London, August, 2014. 2 Declaration I certify that the thesis I have presented for examination for the MPhil/PhD degree of the London School of Economics and Political Science is solely my own work other than where I have clearly indicated that it is the work of others (in which case the extent of any work carried out jointly by me and any other person is clearly identified in it). The copyright of this thesis rests with the author. Quotation from it is permitted, provided that full acknowledgement is made. This thesis may not be reproduced without my prior written consent. I warrant that this authorisation does not, to the best of my belief, infringe the rights of any third party. I declare that my thesis consists of 91,138 words. 3 Abstract This thesis provides an overview of the social and entrepreneurial careers and strategies of merchants during the first modern “commercial” era, 1830-75. It examines merchants as migratory entrepreneurs during the integration of peripheral regions into the transatlantic economy via commerce, technology transfer, and ideology. Merchants organized, operated and expanded overseas commerce, importing textiles and exporting pastoral products. They used a variety of strategies and firm structures to discover and exploit niches in a competitive, developing market. They also influenced the process of economic development and state building as capitalists and risk-bearers, financing both production and politics. Based on archival material from diverse collections in both the United Kingdom and South America, the research offers a qualitative account of the entrepreneurial activities of the British merchant elite in Uruguay. It uses case studies of British immigrant entrepreneurs, whose privileged access to capital and technology allowed them to expand the market for imported products and to exploit upstream opportunities in modernizing export production. Uruguay’s distinctive institutional and geographical characteristics allowed merchants to access markets, maximize their social and political connections, and to hedge political and market risks. British merchants used Montevideo as an alternative regional port to Buenos Aires, and the implications of this opportunity have been underexplored in the literature. In establishing and expanding their operations in Uruguay, merchants gained region-specific capital in the form of geographically fixed upstream investments, market knowledge, and positions in elite networks. The social connections of Anglo-Uruguayan merchants were essential in providing resources and influence for their entrepreneurial activities, but were also their point of entry into the contest over the economy and polity of the River Plate region. British merchants’ incentives changed towards engagement in the political and ideological struggles of the Uruguayan civil war, the guerra grande of 1839-51, as they contested political outcomes by acting as suppliers, financiers, and lobbyists. This involvement created an Anglo- Uruguayan subset of River Plate merchants, who went on in subsequent decades to reshape the economy through investment and entrepreneurship. 4 Acknowledgments The writing of this thesis owes a great deal to a great many people, both in terms of the research behind it, and the personal support given to its author over the years. First, and foremost, I would like to thank Colin Lewis for his excellent supervision, detailed suggestions, and unflagging support of the project. My research has benefited from innumerable discussions with scholars both in Britain and Uruguay. I would like to thank all the participants of the multitude of seminars I have presented parts of this work at, notably at the LSE Economic History PhD Workshop. From LSE, I would like especially to thank Terry Gourvish (and the Business History Unit), Leslie Hannah, and Alejandra Irigoin. I am indebted to Manuel Llorca-Jaña for data, encouragement, and a revitalized view of River Plate trade. I received invaluable guidance from a number of scholars I met in Uruguay, including Peter Winn, Benjamín Nahum, Jeffrey Williamson, Alfonso Herranz-Loncan, Álvaro Cuenca, Juan Oribe Stemmer, Ana Frega, Alcides Beretta Curi, and Alba Mariani. I would especially like to thank Luis Bértola, Reto Bertoni, Raúl Jacob, Maria Camou, Sebastián Fleitas and everyone else at the PHES in Montevideo for their advice, and for graciously hosting me during my research visits. (I hope one day to live down my shameful victory in the 2010 World Cup betting pool.) Extra special thanks are due to Werther Halarewicz and Enrique Bianchi, devoted railway enthusiasts and the best possible guides to the city and its historical secrets, as well as Antonio Di Candia for his friendship and the roof over my head. I would also like to thank all of the archivists and librarians both in England and Montevideo who have helped me unearth the material used to develop my arguments. Any errors in this thesis are entirely my own. My friends through these years have been the bedrock of my life. Thank you to everyone, but especially: Janita, Kevin, Chris, Anna, Marina, Steph, Greta, Eoin, Casey, Toby, and Bitsy. To Eric Golson: I owe you a special debt for these years, which will be repaid in London Dry Gin. To my mother, father and brother, I owe everything. This project has been a long time in the making, and it wouldn’t have been possible without you and your unfailing support. 5 Table of Contents Title Page 1 Declaration 2 Abstract 3 Acknowledgments 4 Table of Contents 5 Tables and Figures 7 Glossary 8 Map of Uruguay, 1875 10 1. Introduction 11 Motivation 12 Periodization 14 Methodology 16 Sources 17 Contribution 19 Overview 21 2. Literature Survey 24 Entrepreneurship 24 Firm Structure and Transaction Costs 30 Business History: The Latin American Context 36 Social Networks and Merchant Trade 42 Informal Empire and Business History 49 Uruguay and the New Institutional Narratives 52 Political Economy 55 Regional Historiography 57 Synthesis 64 3. Historical Background 67 Colonial Period 68 The Invasion of 1807 73 Artigas and the Patria Vieja 75 Cisplatine Period 77 Ponsonby and the Treaty of Montevideo 79 Oribe and Rivera 81 The Guerra Grande, 1838-51 83 Between the Wars 88 Flores and the Paraguayan War 91 The Revolution of the Lances and the Rise of 94 Latorre 4. Uruguay in Regional 96 Context Economic Geography of Uruguay 99 Demographics of Uruguay 103 Political Factions: Blancos and Colorados 106 Money and Credit 108 Tariffs 116 Commercial Overview 118 6 5. Social Networks and 124 Entrepreneurship The Entrepreneurial Community 125 Firm Structure: Networks and Partnerships 127 Being Inglés 128 Establishing the Community 130 Elite Connections: The Jacksons of Uruguay 133 Family Networks: Samuel Fisher Lafone 137 International Commercial Networks 140 The Case of Anderson Macfarlane and Co. 143 Immigrant Entrepreneurship: Richard Bannister 145 Hughes Conclusion 155 6. Crisis and Speculation 157 Literature and Background 158 Composition of the Sociedad Compradora 163 The Contracts and Returns 165 Neutrality versus Intervention 171 Aftermath and Legacy 174 Conclusion 175 7. Rural Entrepreneurship 178 Rural Modernization in Regional Context 181 Diversification and Upstream Investment 183 Rural Entrepreneurship among British Merchants 186 Land Prices 190 Management and Delegation 191 Saladeros and Rural Industrialization 193 Sheep and Wool 196 Labour Problems 199 Policing and Crime 202 British Merchants and the Asociación Rural 204 The Return of Crisis Conditions: 1869-1875 206 Conclusion 208 8. Conclusion 211 Contribution 212 Firms, Organization, and Networks 214 Entrepreneurship and Historical Contingency 215 The Role of Merchants in State Formation 216 Appendices 222 Sources and Bibliography 247 7 Tables and Figures Table 1: Capital Outlay for a Sheep Raising Estancia 189 Figure 1: Saladero La Teja 195 Table 2: Sheep and Cattle Owned by British Estancieros in Uruguay, 1864 198 Table 3: British merchants appearing on the List of Approved Merchants, Sociedad 222 Compradora de los Derechos de la Aduana, 1844 Table 4: Anderson Macfarlane and Co.: List of Correspondents 223 Figure 3: Siblings of Samuel Fisher Lafone 224 Figure 4: Samuel Lafone’s Connections in the River Plate 225 Figure 5: Figure 5: Family Network of John Jackson 226 Table 5: Population of Uruguay 227 Table 6: Rural Exports and Prices, 1829-62 228 Table 7: Import tariff rates, 1829-61 229 Table 8: Balance of Trade, 1829-42 230 Figure 6: Balance of Trade, 1829-42 230 Table 9: Imports, 1830-35 231 Table 10: Exports, 1830-42 232 Table 11: Wheat Production, 1855-72 233 Table 12: Maize production, 1855-72 234 Table 13: Balance of Trade by Destination, 1869 235 Table 14: Export Composition, 1869 236 Table 15: Tasajo Exports from the River Plate 237 Table 16: Buenos Aires and Montevideo hides exports, 1815-82 238 Table 17: Tasajo exports, Buenos Aires and Montevideo 239 Table 18: Wool exports, Buenos Aires and Montevideo, 1829-82 240 Figure 7: Tasajo exports, Montevideo, 1829-82 241 Figure 8: Hides exports, Montevideo, 1815-82 241 Figure 9: Wool exports, Montevideo, 1829-82 241 Table 19: British Exports to Montevideo, 1846-79 (2 pages) 242 Figure 10: Pictures of the British Community in Uruguay (part 1) 244 Figure 11: Pictures of the British Community in Uruguay (part 2) 245 Figure 12: Pictures of the British Community in Uruguay (part 3) 246 8 Glossary Arroyo Grande, Battle of: Fought Dec. 6, 1842. A decisive victory for the Blancos. Led directly to the siege of Montevideo. Banda Oriental: A term for the east bank of the Río Uruguay; a geographical reference roughly identical with the state of Uruguay. Barraca: A warehouse, typically owned by wholesalers of export produce. Blanco: Uruguayan political party, originally referring to the followers of Oribe during the guerra grande.