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diff --git a/.gitattributes b/.gitattributes new file mode 100644 index 0000000..d7b82bc --- /dev/null +++ b/.gitattributes @@ -0,0 +1,4 @@ +*.txt text eol=lf +*.htm text eol=lf +*.html text eol=lf +*.md text eol=lf diff --git a/75469-0.txt b/75469-0.txt new file mode 100644 index 0000000..e7d7d0e --- /dev/null +++ b/75469-0.txt @@ -0,0 +1,6288 @@ + +*** START OF THE PROJECT GUTENBERG EBOOK 75469 *** + + + + + + TRADING WITH + MEXICO + + BY + WALLACE THOMPSON + + AUTHOR OF “THE PEOPLE OF MEXICO” + + [Illustration] + + + NEW YORK + DODD, MEAD AND COMPANY + 1921 + + + + + COPYRIGHT 1921 + BY DODD, MEAD AND COMPANY, INC. + + + PRINTED IN THE U. S. A. BY + The Quinn & Boden Company + BOOK MANUFACTURERS + RAHWAY NEW JERSEY + + + + + TO + + ALBERT BACON FALL + + + A Statesman Whose Insight and Whose + Knowledge of Mexico Have Long + Sustained the Faith of Those + Who Love Her Best. + + + + + PREFACE + + +The book whose pages follow is the result of a conviction, firm-rooted +in observation and experience, that the American business man prefers +to judge for himself. He wishes the facts, and beyond all the +fundamental facts, and when he has them his judgment is sure, quick and +final. It is to men who think in this way that this book is addressed. +It is the story, told as concisely as the facts permit, of conditions +as they truly exist in the great land which, like a cornucopia, +stretches to the south of us. It is written for the business man of the +United States, definitely, with such limitations as exist for such a +book--its value to the European may be the greater because it does not +seek to straddle the national issue. + +I have written other books on Mexico. One has seen the light of +publication before this volume was written.[1] I have sought, in +these other volumes, one upon the people of Mexico and one upon the +psychology which governs their actions in social and in business life, +to lay a solid ground for the understanding of the country and its +people. In the book which is offered here I give, freely, openly, +without apology, the facts of a commercial situation which to me is +the most astounding condition in the business world to-day. I picture, +with the simplicity of truth, a country of vast natural mineral +resources, but virtually no agricultural wealth, a country with almost +no consuming population, a country of radical governments which have +sought, frankly, to destroy capital and the machinery of Mexico’s own +wealth. I have told but little of the famous resources of Mexico--those +are described elaborately in many works. I have told little of the +labor of Mexico, for this is yet to be harnessed. I have described none +of the great industrial needs of Mexico, because those are obvious to +all who run. + +I have sought, rather, to set down those phases of Mexican life to-day +which are the background of Mexican business. I have dared--what no +man with less faith in the American business man would dare to do--to +set forth honestly the truth about Mexicans of to-day, the secrets of +Mexican government, the facts of Mexican “bolshevism,” the horrors +of Mexico’s degeneration under the rule of her predatory _caciques_. +These to me are the fundamentals of Mexican trade, just as they are the +fundamentals of Mexican politics and of the life of the Mexican people +to-day. I have sought to set them forth in their relation to the grave +issues of world trade, to set them in their relationship with the ways +of men in business and with the ways of business in its relationship +to human life. + +I am a friend of Mexico. Few who have written of her life have been +more deeply interested in her welfare. I should like to lay here the +foundations for a solution of the Mexican business problem by setting +forth the unhappy picture, ignoring no detail, seeking no self-deceit, +as is too often the practice of those who write on Mexico. I believe +that more will be gained, more business of a solid sort won, by those +who realize and recognize the truth of conditions in Mexico, than by +those who deliberately close their eyes to those conditions. + +Let us have the truth, then! Let us face the Mexican trade problem +as it is, with its vast potentialities balanced, as they actually +are, by the sinister elements of ignorance, bitter poverty and racial +conservatism. Let us see the problem while we see the golden goal. For +this problem is no mere issue of beating the British or the Germans to +a thriving market. It is an issue of bringing into being the purchasing +power of a populous nation, which is bowed down to-day by the horrors +of revolution, of unthinking radicalism, of national degeneracy. He +who shall solve that problem will win the trade of Mexico when she +has trade. That is all which is to be known, and the only issue to be +faced. + +This book is not a radical document. It does not seek to explain the +problems of to-day in terms of to-morrow. The author finds in the +radical movements of the present the leaven of the future--little else. +He sees in the upheavals of our day a searching for some essential +truth which will be a clarifying factor in this time of chaos and +distrust. He does not see in them the final solution of any of the +difficulties which hatched them out into a too ready world. + +Nor is this book reactionary. The author believes that the day of +Diaz is long past in Mexico, that the day of the dreamer of utopian +visions--Madero--is past in Mexico. He seeks in the present and in +the future the sane, firm grasp of actualities which to the watcher +on the tower is the only hope of true progress. He sees in the orgies +of Carranza and his immediate successors not the upsurgence of mighty +ideals, but of personal ambitions and crass disregard of the bases of +all human progress. He seeks, in the whirling chaos of the present, a +firm footing. He seeks to give the direction of such understanding as +he may have to those who think with him. He believes that if he gives +such a direction to them, it will enable them to go forward to the +winning of some of the vast profits which await them in the Mexican +market. + +One word more I would add. There rules to-day in Washington +a government one of whose mighty maxims is the protection and +encouragement of those Americans who to-day go forth, as their fathers +went forth before them, to carve their way in the wilderness. The +Washington government knows, as we all know, that the only wilderness +left to us is the open field of the vast undeveloped lands to the +South. I believe that Washington plans definitely to support the +American pioneer to the fullest in his new conquest of the New World. +That his weapons of conquest are dollars and brains and energy matter +not, and that he battles in lands over which the flag shall never fly +matters less. The fact that he is an American, that he is honest, that +he is patriotic and sincere--these matter much in Washington. + +This book, then, goes upon its way, its record clear and envisioned +in deep frankness and in deep faith in the American business man and +in the American government of to-day. I offer it to those who must go +forth, to those who must perforce place the funds at the disposal of +those who go, and to those who, in the councils of our government, are +quietly, without ostentation or political apology, placing firm hands +to the backs of those who dare and who give. + + WALLACE THOMPSON. + + NEW YORK, + August 5, 1921. + + +FOOTNOTES: + +[1] _The People of Mexico._ Harper & Bros., New York, 1921. The +companion book, _The Mexican Mind_, is in preparation for publication +as this present volume goes to press. + + + + +CONTENTS + + +CHAPTER PAGE + +I TRADING WITH MEXICO 1 + +II NATURE AND THE MEXICAN MARKET 16 + +III THE PEOPLE WHO BUY 48 + +IV THE CREDIT OF MEXICO AND OF THE MEXICANS 69 + +V OUR BILL AGAINST REVOLUTIONARY MEXICO 96 + +VI MEXICO AND HER “BOLSHEVISM” 128 + +VII THE RAPE OF YUCATAN 159 + +VIII THE ROMANCE OF MEXICAN OIL 196 + +IX THE GOLDEN GEESE 240 + +X THE HIGHWAY TO SOLUTION 258 + + + + + TRADING WITH MEXICO + + + + + CHAPTER I + + TRADING WITH MEXICO + + +Three fundamentals determine and will determine American participation +in Mexican trade. Excursions, however wet, will not change those +fundamentals. Enthusiasm, however sincere, will not affect them. Above +all, promises should not be taken into consideration in our cool +judgment of them. American business men have never been noted for +sentimentalism in their own country; they should not be sentimental in +other countries. Let us take up the situation and look at it with the +sane judgment we would apply to the question of selling, say, a new +type of water meter in New York City. + +The three fundamentals of the Mexican trade question are not unique. +They are, first, the Market; second, the Credit, and third, the +Government and Laws under which trade must be carried on. Truly not +original, and the astonishing thing about American business men who +consider Mexico is that they apparently lose sight of them, and most of +all lose sight of the emphasis which must be given to each. + +First, the Mexican market. Three phases again: the people, the +industries and the need. There are 15,000,000 people in Mexico. +Of these, 6,000,000 are Indians, and Indians that are comparable, +literally, to our own reservation Indians in the United States, in +the things they buy and the things they make. There are 8,000,000 +mixed-bloods, a cross of Indian and Spanish, but of these 8,000,000 +fully 6,000,000 are almost as Indian as their full-blood cousins. In +other words, 12,000,000 out of 15,000,000 take and need nothing from +the outside world excepting food, at those times, like the present, +when they do not produce enough for their own needs. More than that, +the money or goods which would pay for imported food for the 12,000,000 +are created by the remaining 3,000,000--in other words, the actual +market in Mexico is not 15,000,000 people but 3,000,000. The rest wear +no shoes--only native tanned sandals. They wear no civilized clothes, +only white cotton woven at home. They wear only home-made hats, the raw +material the fiber of palm trees which grow wild. They have no need for +culture, for houses, for travel. Remember, then, a buying population of +3,000,000. + +The industries are limited almost exclusively to the extraction of +the riches of the soil by mining and through deep oil wells. In all +Mexico, with its vast sweep of territory, virtually nothing is produced +for export excepting those riches which come from Mother Earth, and +those overwhelmingly under the enterprising management of the foreign +companies and individuals who alone have ever sought to develop them. +Only one industry in Mexico puts human hands and human brains to the +wheel of progress and creates wealth--that is the industry of growing +sisal hemp in Yucatan. Sisal hemp is indispensable for the making of +binder twine for the world’s wheat crop, and is the basis of what was +once a great national and international industry. Yet to-day even +that commodity has been cut in production almost to the point of +destruction, by the machinations of Mexican government and graft, and +Yucatan is not to-day the great purchasing center that it once was. +Moreover, Yucatan is far from the Mexican mainland, a principality, a +country of its own, and its riches have never been a true part of the +resources of Mexico, for it buys and sells direct with the outside +world. + +Gold is the common medium of circulation in Mexico to-day. There is +not a peso of Mexican paper currency in use. All is gold, or foreign +bills, with low-grade silver and copper as subsidiary coins. The use +of gold is reassuring to the business man. It looks like prosperity +and it does assure a firm rate of exchange. But the gold in Mexico +does not mean these things. Its great significance is the absence of +credit. Gold circulates because no man trusts the government, and +every piece of gold that passes through your hands in Mexico tells you +that Mexico is far from being on a stable financial basis, either as a +government or as a business community. Gold is of value, really, only +because it makes credit possible. When you must ship boxes of gold +into distant states at an appalling rate of insurance against bandits +and highwaymen, it is not prosperity, but rather the lack of it. When +gold is in circulation, and there are no bills, the available money +of the country is limited, literally, to the total of the gold and to +not one cent more. When there is paper in circulation it means that +the gold supply has been increased many fold because the credit of the +government has been added to the gold to supplement the supply of money +to be used in trade. + +In Mexico there is not only no paper money, but there is practically no +commercial paper. The drafts of great foreign companies travel about +the land for weeks and months before they are cashed and when they +finally reach the bank on which they are drawn, the backs are covered +with endorsements, and on some an extra sheet of paper has been pasted +to carry more signatures. And that is not good business, and should not +be reassuring to the prospective trader. + +In Mexico to-day no one trusts the government, and as a result no one +trusts his neighbor. The business men of Mexico who are demanding +long-term credits abroad will not trust their oldest customers, and +cannot themselves get credit in their own country. Recently, when +the Mexican government wanted credit on a large supply of railway +equipment, it was told that if one young American, engaged in running +private trains at heavy cost over the Mexican railway systems, would +guarantee the bills, the Mexican government could have what it +needed. Otherwise, cash with order. The Mexican government is trying +to get railway equipment, and is making promising announcements. +But it is getting very little, and for what it is getting it pays +almost entirely in cash, or, strangely enough in this age, barters +commodities or prepaid freight tickets for it! These are facts, and +extremely significant facts. The railway equipment men want to know +how the government is going to pay--and that is what all Americans who +contemplate trade with Mexico should want to know. + +But the need of Mexico, the power we have to help her rehabilitate +herself! Ah, that is a strong bid, even with what we have called the +unsentimental American business man. He wants to give her a lift now, +when she needs it, and then he will not be forgotten when the big +splitting up of profits comes. Perhaps this is true. Let us look at +it. For some years now we have been following the very laudable and +beautiful system of going more than half way with Mexico. We are still +urged to follow this excellent method. The only trouble is that the +“more than half way” is getting longer and longer, and Mexico is asking +more and more and giving less and less. The kindly souls who have +sought to get into Mexico with their surplus stocks are not gaining +anything, except curses and distrust. So far, save for the promises +which have always been forthcoming, there is nothing coming out of +Mexico to help the trade we are hearing about. + +Most of the talk about Mexican trade for American manufacturers was +born, moreover, of our own need to get rid of accumulated goods. +Beginning late in 1919, there was considerable inflow of these cheap +goods into Mexico on good terms. Those who were fortunate enough to +unload talked of it, and the gossip went about that Mexico was a +fine place to sell off extra stocks. But after a year, the unloading +system began to glut the Mexican market, and to-day, when the same +manufacturers want to sell again, they find that Mexico will +take--only goods at sacrifice prices. They went half way and more, did +our manufacturers, and Mexico did not “come back.” Instead she sat +tight where we came to her, and insisted on our coming a little further +with concessions to her needs and wants. The result is that to-day +there is nothing like the demand for American goods that there was when +we first did the unloading which we thought would whet the Mexican +appetite. Mexico is like the customer of a “fire sale” store--she will +buy only the most obvious bargains. It is cash trade for a section of +a town where there used to be credit, and where there is no credit +to-day. But the customer is again demanding credit--and cash-trade +bargains at the same time. + +This question of credit is of necessity complicated. But perhaps the +answer as far as the American business man is concerned is contained +in the fact that while the Mexican merchant demands credit he himself +does not give credit--no country was ever on so thorough a cash basis +as Mexico is to-day. The merchant who is asking for credit is carrying +on his business from hand to mouth; he has no accounts on his books to +guarantee the goods for which he is promising to pay. He asks credit +on his character standing and on the possibilities of his market--he +offers literally nothing else. Personally, many Mexicans and many +foreigners in Mexico are reliable and honest men, but no sane business +man would take in the United States risks similar to those demanded +by his prospective customers in Mexico. And the possibilities of +the market--those are as yet thin air and enthusiastic hope, which +gain strength only from our national need to get a foreign outlet to +keep our plants going. Let the American manufacturer weigh these two +considerations with the additional realization that there is no reserve +credit in the background. + +Reserve credit, such as bills payable, sound real estate values and +prospects of peace and good business years ahead, are comparable to +the unseen sources of energy in the human body, on which that body +lives and thrives during lean periods. Mexico’s lean period has now +lasted for eleven long years, and in that period the country has been +living literally on its reserves alone. Again and again one hears the +expression, “Mexico is living on her fat,” and the continued marvel +is that she has lived so long and survived such lengthened calamities +through so many ghastly years of destruction. As this is written, there +has been some appearance of regeneration, a noisily announced period +of “reconstruction.” But as yet this is only an appearance. Actually +while the wheels of business and life are running more smoothly for the +moment, this is obviously a surface condition--deep down under the +surface of Mexican life the wasted tissue remains. Mexico is not yet +filling the interstices of her flesh with that reserve strength which +is business credit and business promise. + +But why not help in the rebuilding, and thus take a risk which will +probably bring great gain in the years of progress to come? + +The answer to this question must be based on a thorough understanding +of the third of our three great issues--Mexican Government and Law as +applied to business. The Mexican revolutions which began in 1910 had +for their announced object, “Mexico for the Mexicans.” The idea was to +bring the foreigner under control of Mexican law and government. This +was eminently just--if it were true, as assumed, that under the Diaz +régime the foreigners had been above the Mexican law. The facts were +largely otherwise, however, despite some glaring abuses. In the working +out of the idea of “Mexico for the Mexicans,” the revised as well as +the entirely new legislation and procedure went far beyond the normal +reaction against the alleged irregularities of the Diaz time. + +In the new “Constitution of 1917,” which is literally the most radical +written constitution of any country in the world to-day, the chief, if +not the only object was to make difficult the operation of foreigners +in any line of business in the country. The laws against their holding +land are drastic and final in their import; no foreigner may own +property within sixty miles of the border or within thirty miles of the +sea; foreigners may not control a Mexican corporation formed for the +purpose of holding such land unless they waive their citizenship rights +with respect to such companies; great estates are prohibited, so that +true agricultural industry is made virtually impossible; foreign plans +for irrigation projects--the one hope of the Mexican farmer--are nipped +and killed; most serious of all, such lands are virtually confiscated +through nationalization projects which have already been applied to +many great properties, some of them of foreigners, and have been kept +from affecting others only by active diplomatic protest. + +But, the casual observer of things Mexican asks, how is it that +business still continues? How is it that the oil companies to whom, +we are told, these nationalization laws especially apply, how is it +that the oil companies are still doing business, are still drilling +wells and taking out oil? Does this not mean that these laws are merely +provisions against a revival of the abuses of the old days? These are +the questions that occur, as the Mexicans planned them to occur, to the +outside observer. + +The Mexicans assure us that this is truly the case, but the effect of +the laws is very different. Their effect is to place all business, +Mexican and American, foreign oil wells and native merchants alike, in +the status of receiving the _privilege_ of doing business, in place +of the _right_ of doing business. In effect they make every foreigner +in Mexico, from the missionaries who conduct services contrary to the +law of the land which prohibits foreigners from officiating as priests +before their own altars to the oil men who dig wells under permits +wheedled out of a grasping government department, law-breakers or +receivers of special and “pernicious” privilege. To-day no business +man can defend his rights before the courts of Mexico, for all rights, +even the common rights of corporate business, are in some way or +another contradictory to the laws of the land. They receive privilege, +and privilege in great and generous measure--if they are friendly to +the ruling group or their satellites. They receive privilege by the +grace of government, not rights by the power of government. Government +theoretically exists for the protection of the weak, but government in +Mexico exists actually for the exploitation of the strong by officials +and for the suppression of the weak if the strong want and can pay for +such suppression. + +Strangely enough, the strong in Mexico are not altogether contented +with this condition. Somehow business, with its awakening consciousness +to its helplessness, is finding the situation irksome. The greatest +single industry in Mexico to-day is oil, and oil pays about $50,000,000 +a year in various taxes to the Mexican government--and for what? Almost +all of it for the privilege of doing business, and the result is that +oil is at the mercy, to-day, of government caprice and the caprice of +Mexican officials. The laws of the present era of Mexico are enacted +literally for the purpose of having a “club” of control over all forms +of business activity, laws to be enforced when it is convenient, or to +be “forgotten” when that is desirable. The oil companies spend time +and vast effort to keep their protests to the Washington and Mexican +governments in good order--so that the price of their privileges may be +kept low. The legitimate portion of their taxes is only about forty per +cent of the total sum they pay, but it is probably literally true that +they would pay all they now pay and more if they could dispense with +the rule of privilege and trade it for decent human rights to do decent +business in a decently governed country. + +In this, these companies are fighting the fight of the individual +business man as well as the fight of their own stockholders. It may all +be selfish, and doubtless is, but by a strange turn of affairs, the +laws of Mexico have worked out to the creation of salable privilege +instead of defensible rights, and this has thrown all business into +the same group. The business problem of Mexico is literally the +achievement of this exchange of privileges for rights. And until that +exchange is effected, he is but a gambler who goes into Mexico to seek +or to offer honest business, for even though he should gain much sure +profit in the beginning, those profits will be more than wiped out +later unless the legitimate business of Mexico is given the legitimate +rights of business. + +And how is this exchange of privileges for rights to be effected? This +is the problem that confronts American business and American government +to-day. The issue is joined clean and is simple indeed. The provisions +of the Mexican Constitution of 1917 and the laws which give it effect +remain on the Mexican statute books to-day because they are profitable +to the group in control of the government. They mean, literally, graft +and power, for where privilege is necessary for the carrying out of +business, there is a price on privilege, but where rights are provided +for business, the price and the prize are upon industry and activity. + +To the members of the American Chambers of Commerce on tour in Mexico, +to the American manufacturers who are invited to ship goods to Mexico +to-day, offers of privilege are made, privilege without graft or +price, now. But the price is there, and is clearly worked out in the +subtle Mexican mind. These American business men, pleased with their +reception, are to become boosters of the Mexican government, demanding +its recognition and scouting the great financial interests who are +their traditional enemies at home. That is price enough to the Mexican +mind. But when recognition is gained, and when those same individuals +seek to do business in Mexico under “normal” conditions, the laws +which ensconce privilege and give it into the hands of petty and high +officials for dispensation, will reap their toll. + +One way only remains--the removal of privilege, the establishment +of rights. Insistence on these issues alone will almost solve the +Mexican problems politically and commercially. But the Mexicans are +wise indeed when they seek to divide the counsels of this country, to +place the small American business man and manufacturer in a position of +antagonism to the issues that are set clear in Washington, the issues +of political privilege versus political rights, the issues of the +business privileges which those individual Americans seek to gain for +themselves versus the business rights that will include them and all +their fellows. + +The call is again for clear foresight and not for sentimentalism, for +a social conception of business and not for a selfish, individualistic +hope of getting in ahead of the next fellow. The Americans who have +been longest in Mexico are begging to-day for rights in exchange for +privilege. They know, as those who look upon Mexico from outside or as +newcomers do not know, that until Mexico mends her ways with business, +business can never rescue Mexico from the slough of her present +unhappiness. They know that no business in any nation can long prosper +without the prosperity and the good sense of the government of that +nation. They are not pirates, and they know that piracy, in government +or in business, leads but to the destruction of both. What they know we +may have for the listening. If we do not take it, we, too, must learn, +as they learned, in the costly school of experience. + + + + + CHAPTER II + + NATURE AND THE MEXICAN MARKET[2] + + +Every land upon this globe owes to nature that predetermination of its +products and its needs which are the vital factors of its commerce and +its industries. Even the nature of its races, which has so much to do +with the standards of living which affect the quality and volume of +business, is determined to a certain extent by climate and geography. +It is therefore a fundamental need of all who have a deep interest in +Mexican business to grasp something of the location, the formation, and +the climate of that country. For few nations in the world have a more +wonderful location, and few have a more disastrous climate. + +The vast cornucopia-like triangle of land which comprises the territory +of Mexico lies south of nearly three-quarters of the southern boundary +of the United States. Its western tip touches Southern California at +the Pacific and its most easterly point is 500 miles south of the +Pensacola, at the western end of Florida. For 1,833 miles Mexico’s +northern border is contiguous to the United States, 693 miles eastward +along arbitrarily marked lines from the Pacific Ocean to El Paso, +Texas, and the remainder southeastward along the sinuous course of the +Rio Grande to the Gulf of Mexico. Its jagged southern border is hardly +400 miles long, touching Guatemala and British Honduras (Belize). + +This cornucopia, grasping the Gulf of Mexico on the east like a great +hand, swings southeastward from the Pacific contact with the United +States until the most westerly point of the Guatemalan border is 500 +miles _east_ of Mexico’s easternmost contact with the United States on +the north. + +Set apart, as Mexico is by her boundaries, she seems in form much like +a great peninsula, but she has, herself, two important peninsulas as +part of her territorial extent and configuration. One is the Peninsula +of Yucatan, which forms the eastern end of the cornucopia, the thumb +of the curving hand which grasps the Gulf of Mexico, an area of about +50,000 square miles. The other is the long, narrow peninsula of Lower +California, with 58,343 square miles, extending directly south of the +American state of California and connected with the Mexican mainland by +only a narrow strip. + +That mainland comprises, with the two peninsulas, 765,762 square +miles, and the 1,561 square miles of coastal islands under Mexican +sovereignty bring the total area of the country up to 767,323 square +miles. The greatest width of the mainland is 750 miles, and the +greatest length is 1,942 miles, from the northwestern tip of Lower +California, where it joins the United States, to the southernmost point +in the jagged Guatemalan border in the Mexican state of Chiapas. The +narrowest point in Mexico is 120 miles, at the Isthmus of Tehuantepec, +once discussed as the possible site of an interoceanic canal, and in +the time of Diaz the route of a great transshipping railway between the +Pacific and the Gulf of Mexico. The Atlantic (Gulf of Mexico) coastline +of Mexico is 1,727 miles long, that of the Pacific (including the long +border of Lower California) 4,574 miles. + +Lying between 32° 30′ and 14° 30′ North Latitude and 86° 30′ to 117° +Longitude west from Greenwich, the triangular form of the Mexican +territory places it about equally in the temperate and torrid zones. +This is a primary factor in Mexican climate, but far more significant +is the contour of the country itself. + +This is largely mountainous, for if we include the high but fertile +table-lands, nearly two-thirds of the country is covered with mountain +ranges. The Rocky Mountains of the United States, the great backbone of +the Western Hemisphere, cross the Mexican border into Sonora, in a low, +narrow range. Almost immediately south of the international line they +begin spreading eastward. A long, slowly rising valley a hundred miles +wide continues southward from El Paso, narrowing rapidly, while to the +eastward of this valley rises an apparently new range of mountains, +obviously a part of the great Rocky Mountain range, but unconnected +with it in the United States and south, indeed, of the broad flat +plains of Texas. This is the _Sierra Madre Oriental_, or Eastern Mother +Range, the continuation of the Rockies in Sonora and Durango being +called the _Sierra Madre Occidental_, or Western Mother Range. Further +south, these two join together, and spread to virtually the whole width +of Mexico, excepting for the Gulf coastal plain, some 300 miles wide, +to the east. All of Central Mexico is mountainous, flattened only by +vast plateaus which, according to the accepted geological theory, were +created by alluvial deposits and lava dust from the mountains which +rise still above them. At the Isthmus of Tehuantepec, the Sierra Madre +flattens out till, save for the relatively easy grades which climb from +the Gulf and from the Pacific to the summit of the low divide (less +than 300 feet above sea level) the mountains might be all but gone. The +narrow plane of the Isthmus passed, the mountains rise again until the +center of the state of Chiapas is once more a vast plateau accented +with towering peaks, a formation which continues southward through +Central America, lowers again at Panama, but joins directly, at last, +with the South American Andes. + +In this sweep of mountainous territory are hundreds of deep cañons or +_barrancas_, great fertile plateaus, and many wonderful mountains. +Of these last those about the Valley of Anahuac, the site of Mexico +City and for ages the center of Mexican government and population, are +the most famous. Here are Popocatepetl (17,520 feet) and Ixtaccihuatl +(16,960 feet) the snow-peaked volcanoes, and to the eastward the still +more beautiful cone of Orizaba (18,250 feet). Virtually at the same +latitude, but far to the west, is Colima, (12,991 feet), a still active +volcano. Toluca (14,950 feet), close to the Valley of Mexico, Malinche +(14,636 feet) in the state Tlaxcala, the Cofre de Perote (13,400 feet) +in the state of Vera Cruz, and Tancitaro (12,664 feet) are those of +greatest height. Only the already great altitude of the plateaus +of Mexico from which most of the striking mountains spring keeps +hundreds of others from filling the eye of the traveler. The scenery +which results from the mountainous formations of Mexico is literally +unsurpassed, for Popocatepetl and Ixtaccihuatl can give the climber all +the thrills of the Alps, and the crater lakes to be found in one or two +sections of Mexico rival in splendor the more famous resorts in Europe. + +The deep and wide _barrancas_ which mark the mountainous formation all +through Mexico are magnificent to contemplate, but the day’s journey +down and up the sides of such a geological spectacle as the Barranca +of Beltran brings home to even the unscientific observer the terrific +handicaps which these vast cuts put upon the industrial development of +the country. Much of the conquering of these handicaps was achieved +under the broad railway policy of President Diaz, and the work done +still remains, but many years must now pass before the final conquest +is achieved. Such a work as the building of the Colima branch of +the Mexican Central, completing the only direct line for the first +time from the Capital to the Pacific, will hardly be repeated when +revolution threatens, for here, in less than 100 miles, twenty great +bridges had to be built, most of them crossing _barrancas_ and cuts of +mere geological formation, with virtually no streams filling them even +in the rainy season. The Southern Pacific line from the northern border +in Sonora lacks but sixty miles of linking up with the Guadalajara +branch of the National Railways, but thirty of those sixty miles are +through a mountainous territory cut with deep _barrancas_ which will +cost close to a million dollars a mile to build. + +Such _barrancas_ and valleys do not, of themselves, indicate either +great natural water power or navigable streams. There are wonderful +water power possibilities in Mexico, to be sure, which come from two +factors, the sheer drops which give ideal power sites with tremendous +heads of water, and the heavy torrential rainy season. But the streams +themselves do not carry sufficient water the year round to justify any +plant, and tremendous reservoir development is vital to any power plant +design. Such reservoirs have been built in various parts of Mexico, +but at appalling expense, such as only great financial interests can +swing--only foreign capital or the government has been able to handle +them. There is an added and unexpected element of difficulty--the +porousness of much of the soil of Mexico. The mountains, indeed, are of +igneous rocks, but underneath the valleys is often soft limestone, and +more often still, under those places where a great impounding of water +might be made with a relatively low and inexpensive dam, is the soft, +porous alluvial and volcanic-ash land with which the valleys have been +filled up. + +This porous soil and limestone are factors bearing on the absence of +navigable streams. Even in the lowlands the streams run underground in +Mexico, and while they can be tapped by shallow wells, they deprive +Mexico almost entirely of the advantages of river transportation. Even +the Rio Grande, on the northern border, is useless for navigation most +of the year. The Panuco, at whose mouth is located the great oil center +of Tampico, is navigable only a short distance above that port. The +broad, rich coastal plain along the Gulf of Mexico is watered by tiny +streams, all of which, excepting the partially navigable Papaloapam, +are useless for steamers and even for launches most of the year. Not +until we reach the Isthmus of Tehuantepec do we find a river worth +considering for transportation. The Coatzacoalcos, at whose mouth +on the Gulf of Mexico is Puerto Mexico (the eastern terminus of the +Tehuantepec National Railway), furnishes a highway which made possible +the relatively great development of American tropical plantations +during the years of peace under Diaz. Its mouth was then the port of +loading for great ships, but only by continual dredging was it kept +open, and to-day the port is abandoned except for light-draft coasting +ships. Further south, emptying into the Gulf at Frontera, is the +magnificent system of which the Grijalva and the Usumacinta are the +chief streams. Here indeed have plied and in the future will ply great +river steamers, for upon the banks of the Usumacinta, at least, are +rich oil fields and the fairest farming land in all tropical Mexico. +Both the Grijalva and the Usumacinta are magnificent streams, and +the latter is comparable, in its majestic volume, to the Mississippi +itself. Only the bar at Frontera keeps them from being navigable to +ocean steamers. For a brief period under President Madero this bar +was dredged so that fruit boats could enter and go to the docks of +banana farms, encouraging a promising industry which was killed by +heavy taxation and government neglect of the dredging, under the +revolutionary presidents of recent years. But this one system of rivers +offers virtually all there is of navigation in Mexico. + +Yucatan, the peninsula which separates the Caribbean sea from the Gulf +of Mexico, is virtually without rivers, the water from the abundant +rainfall of its interior finding its way to underground streams in the +porous underlying coral limestone. + +On the west coast there are a few rivers. The most important is +the Lerma, which waters a large territory on the Pacific side of +the continental divide, and allows some local transportation. The +Balsas, in the states of Oaxaca and Guerrero, reaches far inland, but +rapids and shallows make its use for navigation expensive and all but +impossible. In Sonora is the Yaqui river, navigable for small boats and +of some value for transportation. The Fuerte is also in this class. + +Another phase of the geography of Mexico which affects transportation +is the complete absence of good natural harbors well located. +The chief port of Mexico, Vera Cruz, has a harbor which was built +artificially around a partially protected bay. Tampico is a port solely +because of the jetties which narrow the mouth of the Panuco and, with +the help of dredges, keep the channel clear. Puerto Mexico has a +similar problem, but the smaller river makes dredging absolutely vital. +Frontera is solely a dredging proposition, as the Usumacinta and the +Grijalva, emptying together into the Gulf, have formed a vast delta in +the lowlands which can probably never be narrowed to take advantage of +the great volume of water which they pour out. Yucatan has literally +no semblance of a harbor, and its great crops of sisal hemp are loaded +from lighters at appalling expense. + +On the Pacific coast, Acapulco has one of the ideal harbors of the +world, completely landlocked, and open for medium-draft ships. But it +is relatively small, and moreover as yet almost inaccessible to any +railway survey, although it was used by the galleons from Manila as a +port for trans-shipment of the treasures of the Orient across Mexico +to the galleons from Cadiz which came to Vera Cruz. Salina Cruz, the +Pacific terminus of the Tehuantepec National Railway, was built from +an open roadstead with two lines of jetties and seawalls, a work which +inattention has now all but ruined. Manzanillo, the terminus of the +only direct railway line from Mexico City to the Pacific, was also +built with seawalls and opened by dredges. Mazatlan, further up the +coast, and the chief port of the Southern Pacific Railway of Mexico, +is an open roadstead. Guaymas, the port of the state of Sonora, is +accessible only to light-draft ships. + +These are all great natural handicaps, and have affected the life of +Mexico probably more than it will be possible to estimate. The mighty +and costly work of the Diaz régime in building harbors is a monument +to that “materialistic” era which will last through many years and has +already played a tremendous part in furnishing the sinews of revolution +to succeeding governments, for without that work Mexico would be far +from capable of sustaining herself in the period of her agony to-day. + +But beyond all these factors of mountains and rivers and sea looms +a yet greater problem, and still more far-reaching--the problem of +climate. As noted, Mexico lies in about equal parts in the temperate +and torrid zones. But the geological zones are far more important, for +climate is affected not alone by latitude but by altitude as well. +These geological zones are three, the hot country or _tierra caliente_, +the temperate country or _tierra templada_ and the (relatively) cold +country or _tierra fria_. The hot country is the lowland section +along the coasts from sea level to 3,000 feet altitude, where the mean +annual temperature varies from 76° to 88° Fahrenheit. The Mexican +terminology includes not only the lowlands of the torrid zone, but the +whole coastal plain up to the northern border. The _tierra templada_ +lies along the mountain slopes and in the lower plateaus, between 3,000 +and 6,500 feet altitude, where the temperature is between 65° and 76°. +This zone takes in the higher northern sections which are within the +temperate zone proper. The _tierra fria_ takes in the high plateaus +and the mountains, between 6,500 and 12,500 feet, the yearly average +temperatures varying from 30° to 60°, although the important sections +record 50° or more. The three geological zones each include about equal +portions of the country, but half of the inhabitants live in the cold +zone, and only a quarter each in the temperate and hot sections. The +mean temperatures of the cold zone are approximately those recognized +as the most favorable for physical exertion, but in the hot country the +body struggles against a handicap of almost 20° F. more than the 65° +at which it normally functions best. More significant still are the +temperatures of all the zones in their relation to mental activity. +The human mind is at its best under the stimulus of a mean temperature +of about 40° F., but even at Mexico City, 7,600 feet above sea level, +the mean temperature of winter is as high as 53°. In the temperate and +hot countries the handicaps under which the brain functions run to 20° +and up to 45° above the 40° at which the human mind works at highest +efficiency. No stimulating winters, no clarifying cool spells, even, in +the midst of the endlessly beautiful summers of Mexico! + +Only the cold zone has any advantages in temperature, and these +advantages are equally important with the fertility of the soil in +accounting for the predominance of population there. Yet even where +the temperature is favorable to at least physical work, there is the +debilitating sameness of the tropics, the assurance that there will +always be more difference between day and night than between the +seasons. There, on the heights, too, the nervous drain of altitude +and of lack of moisture in the air takes the place--with no advantage +to the human machine--of the humidity and heat of the hot country. At +every turn in Mexico climate takes toll of human energy, even if we +ignore the undoubtedly debilitating effect of tropical and sub-tropical +light upon the white men and upon their mixed-blood descendants as well. + +All these climatic factors, then, have continuous influence on the +health of all the Mexican people as well as upon Mexican business. The +hot, humid weather of the hot country makes those who live there low +in resistance of disease, while the nervous strain of the altitudes and +dryness of air in the better portions achieves a not dissimilar result +in lowering resistance. It is axiomatic that the Mexicans as a people +are seldom well and, as has been recorded in detail elsewhere,[3] +this ill-health has been and is to-day one of the determinants of the +relatively low state of progress of the country. No people who are +continually sick and upon whose energies their climate is a continuous +drain can work well or achieve greatly. + +The relation of this thoroughly recognized factor of ill-health to +Mexican trade and commerce must not be overlooked. It is at the root +of much of the apathy which keeps the Mexican people at their low +ebb of business enterprise. It determines with peculiar insistence +their predilection for the easy road, the “_mañana_ habit,” even for +the dominance of outworn traditional methods in agriculture and in +business. It has a great deal to do with the ease with which foreigners +develop a land which has for centuries lain virtually fallow. But it +places vast difficulties in the way of that development, for it keeps +the labor problem continually in the foreground and vitiates much of +the great advantage which the relative cheapness of that labor seems to +offer. It has and will continue to have a powerful effect on trade, +for it keeps even the enterprising among Mexican business men at a low +standard of efficiency and makes it almost imperative that foreigners, +for the present, do most of the jobbing and export and much of the +retail trade and export buying of the country. This element is too +likely to be lost sight of, because it is not a condition common to +other lands. But it explains much that seems at first inexplicable in +the difficulties of the American exporter and importer in getting the +adequate representation in Mexico which he must have. + +Another vitally important effect of Mexican geography is the +uncertainty and untoward distribution of rainfall. This has forced +upon the Mexicans their diet of corn and with it their use of fiery +condiments which are probable causes of the digestive disorders which +ravage all classes. Moreover, the rainfall conditions have been vitally +important in the determination of the entire agricultural tendency of +the country. + +The seasons in Mexico are marked, not by winter cold and summer heat so +much as by seasons of rain and drought. The winter is the dry season, +roughly between October and May, and the summer is the salubrious rainy +season, from June to September. The distribution of rain throughout +the year and the failure of the rains in the important growing seasons +in some of the otherwise fertile sections is due primarily to the +geography of the country. Professor Ellsworth Huntington, of Yale, the +great American climatologist, finds that Mexico’s summer rains are due +to the vertical rays of the sun which cause the rapid rising of the +heated air, with sudden expansion and condensation, first over the +low-lying hot country and later on the rising uplands of the _tierra +templada_, where the function of the mountains in bringing about +condensation is amply proven by the well-watered eastern slopes and the +dry western sides of the ranges. + +This mountain contour and the peculiar shape of the Mexican mainland +(very wide at the north in proportion to the south) create another +important climatological effect--the broad stretches of desert in the +northern sections. The so-called continental type of climate which +forms the American deserts further north combines with the mountain +contour and the distance from the eastern seashore (driving the +rain-clouds southward) to make immense sections of Mexico desert, +capable of supporting, at best, only wandering herds. These deserts +lie between the broad arms of the great “Y” of the Mexican mountain +ranges, and combined with the mountainsides themselves render nearly +three-fourths of the area of Mexico unfit for cultivation, even if +irrigation were general. + +The result is that of the 500,000,000 acres of land in Mexico, not +more than 25,000,000 acres are arable. Great sections are useless, so +that in the state of Chihuahua, 90,000 square miles in extent, only +about 125,000 acres, or less than two-tenths of one per cent can be +cultivated--and most of that arable portion is irrigated. + +The most fertile sections of Mexico are rich indeed, and in the plateau +valleys, where alluvial deposits and lava dust have been poured in +together to form the soil, great crops can be raised--when there is +rain. Only in a relatively limited section, however, is rain sure to +come at the times needed by the crops. Often when it does come, it is +in torrential downpours which are likely to wash cultivated fields +away in a single night. It is this condition which makes the so-called +_tierra templada_, on the slopes of the mountains, in many ways the +least desirable of all the farming land of Mexico. + +Uncertainty of rainfall is, then, one of the outstanding results of the +Mexican climate as influenced by Mexican geography. This uncertainty +works forever upon the mind of the Mexican farmer, making him a +hopeless fatalist, making it less than worth his while to attempt +scientific cultivation. If there is rain, his crops are good anyway, +and if there is not rain, the cost of labor and fertilizer and good +seed are lost. The Mexican farmer is the worst of gamblers, and his +fondest hope is that his average crop over a period of years will be +twenty-five per cent of normal! + +Famine has ravaged Mexico periodically for thousands of years. It is +most interesting, in looking at the present stage (when the largest +items of import are foodstuffs), to realize that it has probably been +only the much-abused hacienda system which has saved Mexico from severe +ravages of recent famine. The hacienda system, which is the operation +of huge estates under an elaborate overseership, approaches as nearly +as the living conditions of the country permit to a businesslike +administration of the farming of the land. It was the stable factor in +Mexican food production in the time of the Spaniards and in the later +era of Diaz. + +The small farmer of Mexico has worked, since the beginning of Indian +history, without a thought of supplying the market and thus feeding +the industrial workers of the towns. He has lived from hand to mouth, +and only when he chances to have a surplus does he transport it or +sell it on the ground for the needs of the city market. So true is +this that in the period of mining and industrial expansion under Diaz, +the draining of the labor from the haciendas to the mines and to the +few factories had an immediate effect on the food production, and the +imports of foreign corn and wheat grew almost in exact proportion +to the diversion of this labor to industry. The small farmers, the +Indians and peons, who had places of their own or worked in the village +commons, did not go to the mines, but continued their relatively easy +existence on their own little _fincas_. They learned only slowly the +possibilities of the increased market for their product, and only to an +infinitesimal degree did they rise to meet that market. + +To-day, with the shutting down of hundreds of the haciendas, and the +return of the country to its primeval agriculture, the situation has +become extremely serious, and the food importations have grown out of +all proportion to the industrial growth of the country; in fact, almost +in inverse ratio to the industrial depression of the country. + +This presents a serious problem, but it also presents a promise of +new opportunity when peace comes to Mexico. For then there must come +a revival of large-scale farming, the growth of a new farming system, +and with it a tremendously increased market for modern farm implements. +There has been much talk, on the part of the revolutionary governments, +of the needs of the new small farmers for agricultural machinery, +but this is almost entirely talk, for the new small farmers are only +falling back to the way of their ancestors, and are not in any sense +taking the place of the ruined haciendas in food production for the +cities and industrial sections. That development will probably come in +the form of an entirely new system of agriculture, in which foreign +machinery and of necessity foreign capital must have a vital part. + +One of the inevitable developments of Mexican agriculture must be +in the direction of irrigation. There is literally not enough good +accessible land which will produce without irrigation to feed the +country or, what is more important, to make an increase of population +possible. This land must be created by irrigation, and irrigation, +owing to the geographical formation of the country, must of necessity +be carried out by great capital. Many of the village communes have +irrigation systems, of a crude sort. Water is brought from distant +streams, where it flows after the rainy season, and in some places +it is brought up from the underground streams by means of crude +water-wheels operated by man-power. But the total area watered by such +irrigation is relatively insignificant, and as dams can be built in +Mexico only at large cost, the true development of Mexican irrigation +waits on peace, on foreign capital and government investment and +encouragement. + +Something of this sort had been begun before the present era of +revolutions. In the closing years of the Diaz régime (before 1911) +many franchises were granted to large private companies which planned +irrigation projects, and the sum of 90,000,000 pesos was ordered +expended on government irrigation over a period of years. A few of +the private companies had put their plans into execution, and many +others, on the way to accomplishment, were nipped and destroyed by the +subsequent revolutions. For the past ten years, nothing has been done +toward solving the problems of irrigating the fertile but unwatered +lands of Mexico, and it seems hardly likely that anything will be +done under the threats of confiscation which now hang over all great +enterprise there. + +Rainfall conditions have had much to do with the overemphasis on the +land problem and indeed with the failure of succeeding governments +to solve that problem. As in all arid countries, water rights were +originally more important to the natives than were land rights. In +hundreds of the Indian communes which still persist, the communal +rights of the Indians are distributed, not on the basis of land +assigned, but of the water allowed; each Indian receives a proportion +of the water brought by the communal irrigation ditches, and may +take three or four times the amount of land which his water will +irrigate--for crop rotation, forage, etc. This inevitable emphasis +on water has perhaps had its part in directing the attention of the +Indians in their demands for land distribution, toward the cultivated +haciendas where water is available. But it also gives promise for +a future which will make possible the rehabilitation of the country +through great irrigation projects creating thousands of rich small +tracts available for distribution to industrious natives--and foreign +small farmers as well. In the government franchises given under Diaz to +private irrigation projects, provision was made that about one-third +of the land brought into cultivation should be turned over to the +government for distribution to small native farmers. + +Aside from the indirect effect of these rainfall conditions, they +have determined, with imperative insistence, the type of agriculture +which is followed in Mexico, and so have affected her trade in foods +and raw materials. They have made corn (maize) the staple food of the +country, as wheat is the staple of the lands where there is winter +snow and regular rainfall throughout the year. They have allowed the +development of only the tropical products like coffee, sugar and rubber +in the rich districts of Vera Cruz and Oaxaca which were partially +opened by foreign stock companies under Diaz. They have, more than +all, enthroned, as the only important agricultural export of Mexico, +the sisal hemp of Yucatan. This desert product, which requires slow +growth for the maturing of the long stout fibers which make rope and +binder twine, is the greatest export of Mexico which is the product +of Nature’s bounty and human enterprise. Coffee and some rubber and +tobacco and a little sugar were raised for export in happier days, +but only sisal hemp, the product of the desert _henequen_ plant, has +become a wealth-producer in any great quantity. Mexico has long been +an importer of foodstuffs, for, as I have noted, before the days of +modern commerce, famine came with terrible regularity. Under Diaz, food +was imported in increasing quantities, and since his fall, Mexico has +been utterly dependent on the outside world for a large portion of the +nutriment of her people. + +It is impossible now to predict when and how Mexico will become an +agricultural country in fact as well as in potentialities. Irrigation +must come, for only when it does will agriculture and the prosperity +of agriculture fill the land. In one section where irrigation has +been carried out on a large scale--the Laguna district near Torreon, +Coah.--cotton is grown in quantity. This product feeds into the native +industry of cotton weaving which flourishes near Orizaba and in other +sections where local, direct water-power is available. + +It seems inevitable that the increase in irrigated lands will add +to the acreage of cotton and also to the number and importance of +agricultural products of the class of raw materials. The country +which irrigation will water in Mexico is of vast extent, and is +safely comparable, even at its worst, with what the lands of Utah +and California and the Imperial Valley were before water was brought +to them. Again, however, we wait on peace and on the great works of +modern scientific irrigation. And, however enthusiastic we may be as +tradesmen, our capital will not be rushing to seek Mexican investments +of this sort until civilized government again rules, with a promise of +relative permanency. + +The desert character of the country in the north was responsible for +the establishment of a great cattle-raising industry, for the land was +cheap and the ranges were vast. This has to-day been virtually wiped +out, and Mexico imports meat from the United States--all the result of +revolution, so that when peace comes the cattle industry will surely +be revived. But always the cattle of northern Mexico have been of the +range, still unfit for profitable slaughter, and sections suitable for +their fattening have been badly needed. There was, in other days, much +shipment of range cattle into the United States, and to the better +watered southern sections of Mexico. But although peace will bring a +revival of the ranges, Mexico cannot look forward to becoming a great +meat-producing country until the irrigation problem is solved. + +There are rich, well-watered sections of Mexico--this must not be +overlooked--but these have resulted in a crowding of population on +the plateaus and through the rich valleys such as that of the Lerma +river in Jalisco state, and have contributed but little toward the +broad development of the country. In fact, one of the characteristics +of Mexico’s population distribution has been the tendency to gather +into groups, so that a great city like the capital or like Guadalajara +or Puebla will have a dozen cities and villages of considerable size +close about it--and then stretches of sparsely populated country for +leagues until another group is found. This is essentially climatic--and +geographical. + +The mountain contour of the country and this same grouping of the +important centers of population have been the chief influences in the +location of the railways. Owing to the absence of navigable streams, +the mere possibility of Mexico’s industrial and of even her true +national development had to wait upon the coming of the railways. The +first line was that completed in 1872 by English capital between Vera +Cruz, the chief port of the Gulf of Mexico, and the City of Mexico, +some 400 miles inland and a mile and a half above the level of the +port. This “Mexican Railway” touches the groups of cities along the +old Spanish highway, and gave them an industrial primacy which was +unchallenged until the very last years of the Diaz peace. + +After the building of this first line railway construction turned to +follow the great natural avenues laid out by the mountain valleys. +There were, as we have seen, two main valleys, that between the Eastern +and Western Mother ranges, and that to the east of the Eastern chain. +Looking at a map of Mexico, the most casual observer is struck by +the fact mentioned more than once by Mexican revolutionists, that +both these valleys lead directly to the heart of the United States. +The railroads which were built there might indeed be taken to have +been built to drain Mexico’s resources into the United States. But it +was only because these roadbeds had been laid out by Nature herself +that the lines came to be built there, with the inevitable result of +increasing immeasurably the importance of the United States to Mexican +development. One early Mexican president (Sebastian Lerdo de Tejada, +1872-76), in fact, refused to allow these obvious roads to be built, +explaining, in a much-quoted phrase: “Between the weak and the strong, +let the desert remain.” + +The roads were both built by American companies under President Diaz, +the Mexican National on the east, the Mexican Central on the west. +They had a mighty part to play in the modernizing of Mexico, and in +her development through the trade in the minerals and in the building +of such industries as followed them. Throughout their history to the +present, they have been of far greater importance to Mexico than to her +allegedly covetous northern neighbor. + +After these lines were built, others came, to follow the mountain +valleys. One went from Mexico City westward to Guadalajara, tapping the +rich Valley of the Lerma, the granary of Mexico. Narrow gauge lines +twisted through the rich states of Mexico and Michoacan, lines which +when modernized and extended in some future time will open agricultural +and mining territory comparable to anything yet known to commerce +and Mexican industry. Another line found its way to Oaxaca, deep in +the mountains to the east and south of Mexico City. Others followed +the seacoast to the Isthmus of Tehuantepec, and crossed that narrow, +shallow neck of land to the Pacific. + +Along the western slope of the Sierra Madre other lines were built +through Sonora, and then the Southern Pacific of Mexico, an American +company, pushed these roads still further southward, opening new +territory, not to the commerce of Central Mexico, but to that of the +United States. And last of all, the line to Guadalajara left its easy +grades and smooth roadbed to leap the _barrancas_ and climb down the +mountains to achieve the contact with the Pacific at Manzanillo. A +mighty hand, indeed, has nature had in the locating of Mexico’s +railway lines, and with their connection to the United States and our +trade. + +The mountainous character of the Mexican territory has upturned vast +mineral resources, whose effect on the development of the country +has been greater perhaps than any other single fact. These minerals +gave the wealth of the Aztecs which tempted the Spaniards to take +and to develop the country so thoroughly. They were drained for the +three centuries that Spain ruled, and their exploitation shaped all +the policy of the colonial régime. They were the greatest of the +attractions to foreign capital at the beginning of the Diaz rule, +and they paid most of the revenue of taxes upon which the material +civilization of the Mexico of that day was built. It seems safe +to promise that when there is lengthened peace again in Mexico, +mining will take its place with the greatest industries of the +country--although oil may still retain its present primacy when it, +too, can spread out and develop itself. + +Mining camps and groups of mining camps dot the country, and whole +distinct territories are devoted to the mining, here of silver, +there of gold, there of copper, lead, etc. Indeed, the geography of +Mexico has had a tremendous effect in the creation there of a country +primarily rich in minerals as she is poor in agriculture. Oil is to-day +the greatest single wealth of Mexico, but the other minerals have had +and will again have their important bearing on her development. + +The mineral wealth (oil as well as metals) has as I have noted been +the chief attraction which has brought foreign capital to Mexico. +The Spaniards and to a lesser extent the Indians before them, mined +the mountains of Mexico, but it remained to foreign enterprise in +the time of Diaz to open up the great bonanza sections to scientific +development. In the train of this development, came more foreign +capital of every sort, for agriculture, for industry, for oil, and for +public service investment. This foreign capital, developing Mexico’s +latent wealth, opened her to the world, and brought forth her great +promise of the future, even though it also gave to the revolutionists +who overthrew Diaz a handy battle cry of anti-foreignism. + +It seems unlikely that without the geographical and geological +conditions which offered the wealth of minerals to the development +of capital, Mexico would or could have entered upon the modern stage +of her development. In that was the hope of the past and in it, +too, is the hope of the future regeneration of Mexico. The tempting +possibilities of such development are the only bait which will bring +back to Mexico the stream of foreign capital to which alone she can +look for her prompt salvation, when peace comes at last. + +The geography and climate have had their hand, too, in the industrial +situation in Mexico. Mining, in the time of Diaz, drained the available +labor away from the farms and away from the small factories which then +existed. The oil fields have more recently taken a large proportion of +the available workers. The supply of labor in Mexico is astonishingly +small--the development of the latent labor supplies in the Indian +communes waits on peace and education. Temperamentally (and in this we +find the hand of climate) the Mexican is not a good factory worker. +The raw products which the land produces, sisal hemp, cotton, rubber, +etc., all demand for their profitable manufacture large and intricate +plants, such as Mexico has not built and for whose operation she has +never trained her people. Therefore, save for the cotton factories +(which produce only the coarser staples) there is to-day in Mexico +almost no industrial development. The lists of industries of which +such a manufacturing town as Monterey boasts, include, for instance, +candle and match factories employing thirty or forty people, brass bed +“factories,” where the products of American foundries are put together, +soda water factories--the industries which no city in any other land +would find worth mentioning. Mexican industry, indeed, waits surely +upon the development of the crops of raw materials, upon the education +of her laboring classes, and upon the solution of the problems of +irrigation and water power. + +Geography and climate have been cruel to Mexico,--of this we need +not seek to deceive ourselves. But throughout the list of unhappy +conditions which has been set down here there runs a promise of +advancement and of better things--when peace comes and when foreign +enterprise shall again be welcomed. All of the advance which Mexico has +made in her long fight against an unkind Nature has been made with the +help of foreign energy. First was Spain, and the 300 years in which she +built up the colony to a semblance of a modern state, creating great +cities and peace and prosperity. Then, after fifty years of destructive +revolution, Diaz, and his wise invitation to and use of foreign +enterprises and foreign money. Only in these two periods has Mexico +been prosperous. + +The greatest advance was under Diaz, when in thirty years Mexico +rose from the ashes of her revolutions and flew toward the heights +of commercial advancement. In that time her railways were almost +all of them built, all the water power which she now has developed, +the one great and productive irrigation section--the Laguna cotton +district--reclaimed from the desert, the sisal hemp industry created, +the factories, such as they are, built and set in operation. Virtually +all of these advances were made with foreign capital and under the +control of foreign engineers and managers. Success rewarded the faith +and the efforts of all who devoted themselves to these developments and +it was their conquering of the great natural handicaps of Mexico which +made possible the glowing tales of her “treasure-house.” When such +times as those come again, and only when they come, will the battle +against Nature be resumed, and in its resumption, the signs of man’s +great conquest reappear. + + +FOOTNOTES: + +[2] This chapter is based upon the author’s article on Mexican +Geography contributed to the important _Mexican Year Book for 1920-21_, +published in Los Angeles, Calif., concurrently with this volume. + +[3] _The People of Mexico_, Book I, Chap. V. + + + + + CHAPTER III + + THE PEOPLE WHO BUY + + +A bamboo hut with a clumsy thatch of grass, a hovel of sundried +bricks, made, as the Israelites made them, of straw and clay, a shack +of unfinished lumber or rotting railway ties topped with a roof of +laminated sheet-iron--these are the symbols of the social level of +Mexico. Within them all a dirt floor, a box filled with earth for a +brazier, two or three earthenware pots, a _metate_ over which the woman +bends at her endless task of grinding meal for the family cakes of +unleavened corn, a few rush mats for beds and a tawdry shrine with a +dim light before it--the inert millions of Mexico live to-day as they +have lived for a thousand years. + +Their minds untutored, their thoughts and desires confined literally +to the animal plane, their religious instincts almost entirely +superstition, their government the support of rulers upon the vast +misery of the lowly, Mexico finds her parallels only in China and in +Turkey. And Mexico is at our own back door, the cynosure of our most +hopeful tradesmen! + +Up until ten years ago, there was an aristocracy in Mexico counting in +its make-up many able men, groups of able men, devoted as far as their +lights allowed them, to a paternalistic care of the Indians and peons, +and to the development of Mexico as a great, modern state. Under Diaz +there was also a slow building of a material civilization, looking, in +the future, to the filling of the peon stomach and the lifting of the +peon mind through education to the light of the white man’s world, to +a place in the white man’s commerce. It has been the common usage, in +this past decade since Diaz fell, to excoriate that aristocracy, to +blame it for all the evils of the country, to point with bitter scorn +at its wealth, at its material monuments of churches and palaces and +mines and railways. And yet, although these ten years of revolutions +have been devoted most effectively to the elimination of the Mexican +upper classes and of their materialism and its monuments, the condition +of the lower classes has not been alleviated by one tiny burden, nor +has it been lifted by one hair’s breadth. + +The Mexicans of to-day are worse off than they were in the days of +Diaz; they are worse off than in that wild revolutionary period before +Diaz; I am not so sure that they are not in worse condition than they +were under the Spaniards, for they seem literally to be sliding back to +an era of barbarism like only to that misery which was theirs before +the Spaniards came. + +We lose sight of the essential fact of Mexico, commercially as well as +socially, if we lose sight for one moment of the lowest of the Mexican +people. They present to us our first and greatest problem, whether +we are traders, missionaries, or those who seek to develop Mexico’s +resources or to sell her our goods. + +It is they who must buy our merchandise or aid our work or operate our +factories, mines and oil wells. They were, and are, a vast potential +market, a great, slow-moving force for us to re-shape by education into +an advanced people, civilized, progressive, using the products of the +world and pouring their own products back into the stream of commerce. +They offer us an immense, a wonderful well of labor, perhaps a greater +contributant to the nation’s future wealth than anything else in all +Mexico. Because of these potentialities and because of our inability to +understand why such possibilities do not find their development, it is +vital that we look, clear-eyed and sympathetically, on the one great +and overwhelming factor in that hopeless inertia--the ignorance of the +mass of the Mexicans. + +Mexico is a land of innumerable children. A land where there are twice +as many children under ten years old as there are in the United States +(in proportion to population). And a land where not one child in six +has even the chance to go to school, because there are no schools for +them. + +The depth of Mexico’s ignorance, in childhood and in adulthood, in life +and in business, literally passes comprehension. The active, curious +minds of the Indian youngsters grow quickly into sodden stupidity; the +keen and vivid intelligences of the children of the middle and upper +classes expend their growing forces in sensuality and plunge themselves +and their country into debilitating excesses--because there is no +training to give them a life above the animals. + +I have seen, in the seats of government in Mexico, men who know less +of world history than a boy in an American high school; I have talked +with “experts” of government departments who knew less of their special +subjects than did I, a layman. I have seen in the presidential chair +men who believed, literally, that the shrunken, sick Mexico of to-day +was one of the great, advanced countries of the world--because they had +no conception of the development of world civilization. + +I have seen, in Mexican homes, the slow murder of Mexican babies, +because neither I nor any one else could change the round of tradition, +unrelieved by training of any sort, which takes an annual toll of child +life in Mexico that is perhaps not surpassed even by the toll of the +famine in China. + +The chain of tradition links Mexico together, and links her, too, to a +past which goes back into the furthest reaches of prehistoric legend. + +The ways of modern agriculture are those of the early Aztecs, and +modern tools, even, are introduced with the greatest difficulty. The +round of life is a brief cycle of dull days, unlivened by any thought +or knowledge beyond the confines of a village or a township or a few +blocks of a city. The schools, such as they are, are patterned after +models long abandoned everywhere else in the world, and are stifled +by a traditional belief that war and revolution and the erection of +imposing buildings are more important to the progress of the country +than the education of its youth. + +All this has driven Mexico on through the years handicapped with a load +of illiteracy that can well be recognized as the most potent factor in +the degeneration that marks her every manifestation to-day. + +Only figures can tell, even in part, the depths of that ignorance. Back +in 1895, the Mexican government reports (which one must always remember +speak as favorably as they dare) showed that only 2,000,000 out of +a population of 12,500,000 could read and write! This means that 82 +per cent of all the people of Mexico were without these rudiments of +learning. By 1900 this percentage had been reduced to 80 and in 1910 +the Diaz government claimed that it had been reduced to 78, in other +words that of the 15,000,000 population of that year, a little over +3,000,000 could read and write, while nearly 12,000,000 remained in +the depths of their ignorance. In 1919, the Carranza government issued +a report claiming but a slight advance over these figures in the nine +years since the fall of Diaz. + +It is literally true that not a tenth of all the people in Mexico have +what we would call a common school education, and three out of four +cannot read a street sign or scrawl their own names. Indeed, one great +British mining company reported that of its 595 Mexican employees, +including scores of what we would call skilled workmen, only six, or +about one per cent could sign a receipt for the money they were paid. + +To those of us who look on through foreign eyes, this condition +explains much of Mexico’s dilemma, and the point is further clarified +when we know that the greatest claim ever made for Mexican education +showed but 12,000 schools, with 850,000 pupils enrolled--while the +population of children of school age was more than 4,000,000! No single +issue is greater or more pressing than education. Yet education waits, +as everything in Mexico waits, on peace and better times, on food +and on health. And these wait--and more than all, from our selfish +interest, business and commerce wait--on education! Around and around +the problem swings, and each issue is dependent upon another, and that, +then, upon the first. + +Of all the complicated, interwoven factors of Mexican life and of +the tendencies, this very day, of Mexican business and trade none, +however, offers so true an understanding as race. The basis of Mexico’s +ignorance and the basis of her steel-bound traditions is Indianism. +For Mexico’s 15,000,000 people include 6,000,000 pure-blooded Indians, +of some fifty tribal strains, literal aborigines in their life and in +their thoughts. There are, as I have noted, 8,000,000 mixed-bloods, +three-quarters of whom are virtually Indians in their way of life and +in their outlook upon the world. And there are only 1,000,000 of white +strain, mostly Spanish, a group which is to-day without voice in the +affairs of the country. Two-thirds of Mexico is Indian, and most of the +other third a mixture of Indian and white, a mass with the dark Indian +sea below it and virtually no light coming to it from above. + +To-day there sifts into the Mexican ruling classes--these same +mixed-bloods--hardly a ray of culture, hardly a gleam of a truly +broader outlook, to lift them and their people out of the dull cavern +of their circumscribed life, or to lead them to the better things of +modern civilization and commerce. We talk of the heathen of China, of +the darkness of ignorance and superstition in Africa, but in Mexico +the churches and the foreign industrial concerns seem to me to face a +greater need than in any other country in the world. + +For Mexico is at our door, and the cultural traditions of Mexico are +those of our own world, the white. For 300 years she was a subject +state of Spain, and for all the mistakes of the Spaniards and the Roman +Catholic Church, the foundation-stones they laid are as the foundation +stones of our own life. + +The Indian mass was the great problem of Spain; it was the great +problem of Diaz; it is the great problem of all those who would lead +her to the ways of the world of to-day. For the past ten years it has +been forgotten, lost in the struggles of individual men for personal +power. But always those individuals have been swallowed up, without +their realizing it, in the mire of Indianism, for Indianism, the +very epitome of ignorance, lies there always beneath the Mexico that +the world sees, waiting to engulf its own masters and to destroy all +social and business progress. The Spaniards and Diaz built above these +shifting sands, ever conscious of them, providing against them always. +Diaz fell because after he built his foundations he did not reach +down into the Indian mass to up-raise them. He fell in his old age, +forgetting, as old men forget, the dangers which have been with them +through all their life. But before he fell he had laid the foundations, +building upon those of the Spaniards and erecting new ones of his +own, among them foundations of foreign business, of foreign missions, +of foreign schools, business and missions and schools which by their +own enterprise and perhaps as much by the examples which they set for +Mexican business, Catholic churches and native school teachers, were +beginning the great uplift of that vast, inert Indian mass. + +The brief rule of Madero (1911-1913) was the link between Diaz and the +upheaval of radicalism and Indianism which was to begin with Carranza, +in 1914. Then commenced the process of casting away, bit by bit, all +the slow-built civilization, all the shallow foundations of commercial +prosperity, of Diaz. With Carranza began the upsurgence of the Indian, +the terrific push upward of the long-hidden forces of destruction which +had been held in check, not only for the thirty years of the Diaz +peace, but for all the four centuries since the Spaniards had first +come to Mexico. + +Primarily, this destruction was marked by the wiping out of the fabric +of the promising Mexican educational system--for Diaz had made sound +beginnings toward raising the Indians out of the depths of their +ignorance. His rule was building a foundation for business and for +progress by creating an intelligence which would demand and would +develop the better things which white civilization had to offer. + +Under Carranza the ideal was not of slow uplift by education and the +creation of a substantial economic existence which would make life and +peace worth striving for. Carranza and those who followed him under the +banner of the revolution have thought little of solid progress. Their +ideal has been revolution--the political remedy for the economic ills +of the land. + +So, despite all the sweeping promises of Carranza and his immediate +successors, education and the progress of business, of trade and +of development have gone into the discard. With the pressure of +the needs of the revolutionary “generals” for greater and greater +appropriations for their armies (and for the graft which ate up most +of such appropriations), with the ever-widening circle of vampires who +fattened on government patronage in every other conceivable way, the +money available for education as well as for industrial advancement +shrank steadily. Where under Diaz the total annual budget of the +government was $50,000,000 a year, with a total appropriation for +schools, federal and state, probably less than $4,000,000, Carranza +had nearer $100,000,000 and spent less than $2,000,000 a year on +education. For Carranza, when the demands of his “generals” for their +“share” increased, shut off the federal support of the schools of the +City of Mexico and its neighboring villages, and also the sums which +in other days had gone to help the poorly provided state governments. +He threw the school systems on the hands of absolutely bankrupt cities +and towns, with the result that in the City of Mexico alone some 120 +schools, half the former number, were closed, and 25,000 children, +despite crowding into other buildings, were deprived of education. All +this is history. And statistics do not show that there has been any +recovery since that day. + +The Obregon government, on paper, re-established the federal department +of education with a cabinet officer at its head, which was abolished +by Carranza as an economy measure. There was some more of the endless +Mexican discussion of systems of education, but so far as can be +found, no increase in appropriations or in plans for better support +of the public schools. All those wait, perhaps, as I have said, on +the improvement of business conditions, as the final solution of the +business problem waits, I believe, upon them. + +But they all wait on something else, which I have mentioned above, +and that is the improved physical condition of the Mexican people. +Comfort, food and health are as important to mental and moral +development as the training of the mind by education. The misery of +Mexico is so profound, her crashing inertia so deep-rooted and so +self-perpetuating, that it sometimes seems that she can never be cured +from within herself. Some outside force must break the circle and this +I believe is the great opportunity of the American missions, working in +conjunction with the great civilizing energies of American business. + +Already something has been done, by great American business concerns, +and by American trade unions along the northern border and even within +Mexico itself, to improve living conditions. But the terrific chasm of +the Mexican mass remains utterly unplumbed, and the childhood of Mexico +and the manhood and womanhood of Mexico wait, hungry because their food +does not feed them; in discomfort because their long traditions do not +let them even desire comfort; in sickness because of utter ignorance of +the foundations of human health. + +Of this last a word must be written here. I have compiled, +elsewhere,[4] the astonishing figures bearing upon this question, and +have found, in the mass of Mexican official statistics, that the death +rate of Mexican babies under one year is nearly twice that of the +United States; between birth and ten years, three times that of this +country, and that clear through the whole range of Mexican life, from +two to four times as many Mexicans die in each thousand as die in the +United States at the same ages. The average life of every Mexican born +is but 15 years, while in the United States it is about 35 years, and +half of the Mexicans born this year will be dead before they are 7 +years old, while in the United States half of all the babies born will +live to be 42 years old. + +High death rate means sickness. Experts estimate that for each death in +the United States there are 300 days of severe illness and 6,000 days +of indisposition or slight illness, spread over the average 35 years of +American life. But in Mexico the average age of death is 15 years, so +that the days of sickness must be crowded into less than half the space +of time they cover in the United States. + +In Mexico, almost no care, as we conceive it, is given to the sick. +The government reports show that only one-quarter of all the deaths +reported in the country are listed as “classified by the doctor”--in +other words, there is no medical attendance at all in three-quarters +of all the fatal illnesses in Mexico. It is well known to those who +know that unhappy land that in the case of illness, the priest and the +doctor are sent for at the same time, the priest to administer extreme +unction, the doctor to do what he can with a dying patient. + +This factor of ill-health in Mexico is one of the most terrible of +all the pictures of her misery, perhaps the most potent element in +the national ineptitude. No one who is continually ill can be greatly +interested in progress, mental, or moral, or industrial, for illness +is the greatest force working against the material advancement of the +people and of the country. And upon material advancement, upon the +increase of income and the increase of needs physical and cultural (as +the money comes to procure them) we must build the solidity of the +Mexican people that are to be, as well as the trade which we seek to +gain from them. + +Out of this picture of darkness, then, comes opportunity and with +opportunity the dawning of a new day in Mexico. Because ill health is +so great a factor as it is, there is something that we can attack and +can conquer. Because education is at the low ebb that it is, there is +something which we can do that is direct and tangible, when the means +are put into our hands. + +There is hope in Mexico, and that hope is tied up with the opportunity +for foreign help, which is actually, and even more potentially, the +most disinterested and direct force working on conditions in Mexico +to-day. The land is so torn by personal politics, so nearly ruined +by the exactions of unthinking government, so much the football of +well-deserved calumny, that this single ray of clean, clear light can +be recognized by all as one of the great hopes in the horizon to-day. +That hope must be made to dawn, and it is well for us to consider how +that dawn may be assured, and how the day which must follow may be +firmly grounded on economic permanence, on social stability and on +the comfort, health, education and industrial progress of the Mexican +people. + +This is the field wherein I believe that the coöperation of the +American companies established in Mexico and the American missions +operating there will bring about a solution of the ultimate Mexican +problem. For the companies, ready and anxious as they appear to be to +serve, would, through the missions, find a means wherein their money +and the great force of their prestige would have efficient direction. +The foreign oil, mining and railway corporations will not hesitate, +I believe, to place their resources and their opportunities at the +disposal of workers whom they are convinced can truly improve the +morale and thus the productive capacity of the workers upon whom their +business depends. Heretofore there has been mutual misunderstanding. +The companies have not always found the mission workers as efficient as +they would like, and the missionaries have been quite ready to suspect +the companies of representing “predatory capital” with the ambition, +not merely of making their business profitable, but of putting down the +“devoted” leaders of the people or of forcing American intervention at +once. + +I have faith in both the companies and the missionaries, and I believe +that in the new political crisis which Mexico is bringing upon herself +as this is written (and which she may have tumbling about her ears +before it is printed) these two must reach out, and will reach out, to +clasp hands and go on together. + +Both have done wonderful things for Mexican education, the missions +through the conscious development in Mexico of the ideal of education +for service, and to the end of raising and training leaders for the +Mexican masses, and the companies through isolated examples of truly +constructive welfare and educational work. + +Probably the most outstanding example of the educational achievements +of American corporations was that of the trade schools which were +organized and operated by the National Railroad between 1890 and +1912, under the direction of E. N. Brown, president of the National +Railways--one of the “pernicious foreigners” who were exiled under +Carranza’s “nationalization” of the railway properties in 1914. These +railway schools trained between 15,000 and 18,000 Mexican mechanics +and engineers, taking boys of 14 and 15, paying them first 62 cents a +day and gradually increasing that until, after four years’ training, +they were receiving three and a half pesos a day. They were then +ready to take positions as skilled workers in the railway shops or on +the locomotives or, if they chose, in other industries. The railway +placed no limitation on them, holding that the company benefited in the +increase of the efficiency of the Mexican worker wherever he might be. + +The whole scheme of this work, including the paying of apprentices +while learning, was the broadest kind of educational service, taken +up, to be sure, because the railway company needed mechanics and +trainmen, but with an effect on Mexico and on the creation of the +so-called Mexican “middle class” (the buying and building as well as +the elevating element in any population) which is still felt through +the chaos of revolutionary destruction. + +To-day the greatest industry of Mexico is the production and refining +of petroleum, and foreign companies, of course, control it. Much +genuinely helpful welfare work is being done by them, including not +only schools for children but training schools for workers as well. In +addition the very conscious plan of increasing wages until unskilled +labor now receives a minimum of $2 a day is having a remarkable effect +upon the standard of living and upon the buying capacity (as well as +upon the efficiency) of the Mexicans of the Tampico oil section. There +is much undigested prosperity, and agitators are creating trouble as +far as they can for the foreigners, but on the whole the effect on the +material well-being of the peon has been advantageous. It is inevitable +that a continuation of this attitude should bring forth a vastly +increased civilization at least in this one section of Mexico. + +Education has been pushed forward by the companies, and in the model +villages such as the town of Terminal (across the river from Tampico +on the property of the Doheny companies) really excellent schools are +maintained with Mexican teachers under American supervision. + +Conditions in the oil country outside the private company towns are, +however, deplorable, presenting a contrast which is not without its +mighty lesson for us all. The graft and incompetence of the present +ruling classes of Mexico have regarded the prosperous oil towns only as +the most luxurious of posts for influential favorites. The educational +conditions of Tampico, where in a city of more than 100,000 people +there are only twenty government primary schools with an attendance of +4,500 pupils, beggars description. Yet the foreign companies have been +called on regularly to support the Tampico schools, just as they are +called on to pay for pavements, sanitation, etc. And this money has +gone, hardly a single dollar into the work for which it was collected, +but countless thousands into the bottomless pit of revolutionary graft. + +But for all the unfortunate conditions of the moment, the possibilities +of the foreign corporations aiding in the uplift of the Mexican +mass throughout the country is one of the encouraging phases of the +Mexican trade and business problem. It links up definitely with the +solution (on which we shall touch, in later chapters) of the parts of +the question which deal with other elements than the human equation. +The beginning which has been made in Tampico, chiefly by the great +American companies, carries with it an import far greater than the +mere contrast between their trim little company villages and schools +and the ugly squalor of the Mexican towns. Somehow, out of the dark +present, American business has learned how closely it is linked with +the welfare of the human element in its scheme. They have learned how +the simple man, how his happiness and prosperity, are wrapped up with +the prosperity and success of every enterprise which remotely touches +him. + +Until these recent years, and through these American corporations, +there has never been scientific welfare work in Mexico, there has +never been considerate treatment of the workers, little study of +their weaknesses and their needs. If we contemplate that, in its bare +truth, we can begin to understand something of the importance of even +the relatively little work which has been done of late. Perhaps the +greatest potentiality of the future of the human side of the Mexican +market lies in the broad extension of that genuinely American attitude +toward the masses of the country. + +I have advocated the union of the forces of American missionaries and +American corporations in Mexico. I believe that this will bring great +good and will eventually, as it has done in this country, bring a +higher efficiency of labor and a larger market for the things which +this country can export to Mexico. The desertion of the masses by the +revolutionary government and the exile of the natural aristocracy, have +brought the human problem of the country home with tremendous force to +the foreigners. It lies to-day almost solely in their hands, and seems +likely to wait long for a rescue or aid from any other source whatever. + +For the missionaries, education and improved economic conditions +amongst the workers is indispensable--they are the tools and the signs +of their great plan of regeneration. For business, the encouragement +of religion and education which the mission schools give promises that +improvement in the laboring population and in the buying capacity of +that population which is demanded by the advancement of their business. +Somehow that buying population which I have set at 3,000,000 must be +increased. Somehow the efficiency of the laboring group (which numbers +little more than the buying public) must be increased. Only one way +is open--to make the masses better men, happier men, more cultured +men. The ignorance of Mexico, the inefficiency which results from that +ignorance, the low standard of living which keeps the people from those +“wants” which make luxuries into necessities and so improve trade by +widening the eddies of demand--all these affect us all in Mexico. + +Trade follows education. It follows the missionaries of business and +of religion. It thrives alone on the prosperity of peoples. To-day +these factors of trade in Mexico are only depressants--in the future +they must and surely will be changed slowly into booming creators of +trade. But so long as the chief item of import is food and so long as +the productive capacity of the Mexicans is only half developed, so long +will the market in Mexico swing at its lowest ebb. + + +FOOTNOTES: + +[4] _The People of Mexico._ Mexican health is treated directly in the +chapter on “Vitality,” pp. 86-109, and indirectly in the chapter on +“Climate,” pp. 131-151. + + + + + CHAPTER IV + + THE CREDIT OF MEXICO AND OF THE MEXICANS + + +The Mexican government to-day is bankrupt, and Mexican business +is bankrupt. The most sanguine propagandists of the revolutionary +governments can offer nothing better than promises to offset the +obvious facts of Mexican finance. The government to-day owes nearly +a billion dollars--including unpaid interest on her debts for eleven +years. Commercial credit has reflected the ghastly vision of government +bankruptcy, because the ingrained principle of Mexican politics has +been the subservience of economic progress to political exigencies. + +The history of Mexican revolutionary government has been marked by the +steady suction of business into the maelstrom of political horror. This +began in the earliest years of the rule of Carranza (1914-1920). For +five years Carranza carried on a deliberate campaign to destroy the +banks, as the representatives of the capitalists. He succeeded, despite +all the magnificent resiliency of business. He swamped the country with +paper currency; he withdrew the metallic reserves of the banks until +their bank notes reached almost the degradation of his own issues. He +made Mexico into a land of thieves, and gave their thievery the cloak +of government sanction--as of one thief underwriting the ventures of +another. + +When her banks were gone, Mexico had nothing left but her mines and +her oil, for Mexico creates virtually no wealth. She manufactures +nothing and exports nothing save the ultimately exhaustible resources +of her soil. Mining flourished during the war, with allied governments +supporting the lead and silver markets, and oil has flowed on and +continues to flow, giving Mexico herself only the curse of incalculable +unearned wealth for the personal loot of her government officials. + +Credit was Mexico’s great asset under Diaz--he spent years in +establishing it and upon it he built the nation. To-day in Mexico there +is no credit. There is gold in circulation and the sight of gold is +encouraging to the business man. But the gold in Mexico circulates +because there is no credit; no man trusts another and none trusts the +promises of the government. Mexico cannot to-day issue paper money, and +her heavily alloyed silver coin is on a par with her gold only because +an artificial scarcity is maintained in order to increase the value of +silver as the change needed in business. + +Mexico is one of the great potential markets of the world. The American +manufacturer can justly look to it for an outlet for his wares. But +a market is useless until the buyer can pay for his goods. Mexico is +not yet a place to dispose of what we make until she can pay for what +she takes. The credit situation is the crux of Mexico, and the crux of +the credit situation is the political chauvinism which, eight years +ago, set out deliberately to destroy that credit, because credit was +capitalism and capitalism was unfriendly to the self-appointed leaders +of the proletariat and, more important still, was said to be the enemy +of that world radical movement to which the Mexican revolutionary +leaders look so smugly to save them from interference in their orgy of +loot and glory. + +When Diaz left the presidency in 1911, there were $35,000,000 in the +national treasury, and Mexico’s credit was such that she could float +at par a national bond issue drawing 4¹⁄₂ per cent. To-day the unpaid +interest on her public obligations exceeds $150,000,000 and she cannot +at any price borrow a cent on any security less than the indorsement of +the government of the United States of America. + +This is the way the situation is expressed in cold figures. But Mexico +is a land of infinite resource, both natural and diplomatic, and +nations in worse condition than this have been taken in hand by great +bankers and placed upon their financial feet. Any Mexican official can +explain Mexico’s condition convincingly--the long years of revolution, +the paralyzation of industry through destruction and through the prices +and want brought to all the world by the Great War. It is therefore of +no really deep significance, they say, that Mexico owes millions of +dollars, and that she is to-day suing for favor in the world’s money +markets. But there is a deep and fundamental cause which is back of +her financial bankruptcy, back even of its merely economic causes in +wrecked mines and abandoned factories, in ranches stripped of millions +of head of cattle which bandits have killed for their hides. + +The real bankruptcy of Mexico goes deep down into the minds of +men, Mexicans and foreigners, government officials and rabid +interventionists alike. The bankruptcy of Mexico is a sickness born +of broken faith, a moral bankruptcy that is ugly with human greed and +hopeless with nervous fear. + +The trouble with Mexico to-day is that Mexicans as well as foreigners +have ceased to believe in Mexico. + +At the time of my several recent visits to Mexico, I did not go as a +stranger to the country. I had watched her develop during six years +prior to 1910, under the peace and prosperity of the Diaz régime. +Understanding something of the native psychology and much of that +of the foreigners, I was prepared to find that a good deal of the +seriousness of the situation was due to panicky fear and distrust one +of another. What I was not prepared for was a condition where every +incident, every situation, every tight-strung nerve of potential +strength or weakness led down pell-mell paths to a deep ravine of +utterly blasted faith not only in present conditions in Mexico, but in +the possibility of the country’s ever crawling back to her old serenity +and strength in any measurable time. + +Mexico, as most Americans do not realize, considers herself to have +been at peace for the past five years, for the bandits were in the +hills and most “revolutionary” outbreaks were being successfully +nipped. Yet in the important city of Monterey, typical of the interior +of Mexico, the damage done “in the revolution” remains untouched. On +the main plaza the stones that are left of the beautiful old Casino, +burned by Carranza’s soldiers six years ago, have barely been moved +from the roadway. Smoke-stained shells of buildings rise here and +there, and in the suburbs bullet-ridden windows still remain in fine +private houses and factories. The once paved streets are full of +unexpected bumps, the roads leading to the smelters and out into the +country are cut deep with ruts and puddles and railway crossings are +all but impassable, even to skipping Fords. The street cars limp and +bump and leak, and the very civic improvements seem installed with a +fatalistic certainty that they will soon be destroyed. + +There is industry and there is business in Monterey, each of a kind. +In the old days there were two great smelters, foreign owned, a steel +plant and a brewery, besides three railway shops and miscellaneous +other factories. Most of the miscellaneous factories closed long ago, +but the smelters and the steel plant kept going in good order--as long +as war prices sustained them. Now, one of the smelters has closed, for +London has ceased holding up the lead market, and the other (owned by +the American Smelting and Refining Company) continues only because it +uses the ore from its own mines. During the war the steel plant was +handled by the United States War Trade Board, the great organization +which harnessed our own industries to war needs, and 80 per cent of its +product was, by agreement, sold in the United States and in Cuba--at +war prices. When the war ended, the Monterey steel plant was forced to +curtail, and to-day the great blast furnace is cold and only a Mexican +government order for a few thousand tons of steel rails keeps the +rolling mill moving. + +The railway shops are content with the most perfunctory of repairs, +and are more remarkable for the appalling array of rusted and rotted +engines (I have counted 150 engines out of commission in the Monterey +yards) and for the wrecks of burned freight cars which fill their +sidings than for any activity which inspires their machinery. + +The few factories which operate are sustained, in their turn, by the +high prices which even the staples of existence command in Mexico. +Three small cotton goods factories, reopened five years ago, get +prices only a few cents below those paid for imported goods, to whose +cost in this country is added a heavy import duty. The brewery keeps +running, although it pays the government a tax of 100 per cent on its +product--estimated to be $1,000 in American gold per day. + +Retail trade goes on, throughout Mexico, but the sales are greatly +curtailed and the prices are out of reach of the masses, being twice to +five times those of the last normal period, 1912. Stocks are hopelessly +depleted, for no merchant will keep a large supply of goods on hand, +for fear not alone of the long-promised drop in the world market, but +of what will happen in Mexico to-day or to-morrow or next week. + +Moreover, all business is on an absolutely cash basis, and for “hard” +money--gold and silver--alone, whether the trade be wholesale or +retail. In Mexico to-day credit is practically unknown, either amongst +Mexicans or between Mexican houses and those with whom they deal +abroad. There is a stringency of currency, due to the destruction (for +various reasons soon to be noted) of all forms of paper money. Mexico +is spending literally her economic life blood, gold and silver, and her +great resources are wasting and rotting because there is no money with +which to develop them or to move them. + +Those are simple conditions, patent to any observer who stays longer +than the few hours or a day allowed the busy junketer on his trip +through “prosperous Mexico.” Back of these conditions, however, are +facts which are as incontrovertible and menacing. The closing of +the smelters has back of it the conditions of mining, in a country +which for centuries has depended on its mines for its existence as an +economic entity. Even through the war, with war prices for metals, the +mines which were producing were only those with high grade ores, which +could bear the risks of banditry, the cost of ponderous freight rates, +or could maintain their private railway trains to transport ore which +the run-down government rolling stock could not handle. Moreover, even +war time prices did not make possible the proper development of the +properties, and when the bottom dropped out of the lead and copper +markets, many of the richest mines closed, because they had not been +able or had not dared do enough normal development to keep ahead of the +work on the rich veins. + +Back of the hand-to-mouth operation of factories and wholesale and +retail stores is the situation with regard to currency and banking. +Money in Mexico is worth, at legal interest, 1 per cent per month (12 +per cent per year) but if you have money, and will take a chance, you +can get 5 per cent a month and even more on as good security as the +country affords. So few are the men who believe enough in Mexico to +take the chance that there is not enough capital even to satisfy the +needs of speculators. And can legitimate business expand or even carry +its normal load when the money it ought to borrow, the money it has +already invested, is worth so much as that? The only form of business +which thrives in Mexico is speculation, and I think I am safe in saying +that virtually every sign of business activity which any visitor to +Mexico sees to-day is speculative at its source or dependent upon +speculation. + +This speculation finds its chief manifestation in the marketing of +food--the distribution of the necessities of life is in Mexico, as +elsewhere, the source of sure profit. But in Mexico, so great is +the fear of men of what may happen, that the profits of speculation +transcend anything known to our busiest food profiteers. The farmers +will not take the chances (which include the uncertainties of costly +graft) incident to getting freight cars or pack animals as well as the +fear of bandits. This allows the speculators, in quick turnovers, to +make as much as 200 per cent on a car of corn in a fortnight, and this +condition has lasted for nearly eight years. + +Another phase of speculative activity is in the importation of foreign +goods. The Mexican customs laws are complicated with elaborate +classifications, and at best it is something of a speculation +for a merchant to import goods in the days of sudden changes in +classifications and boosts of tariffs without notice. In addition, +however, many favored henchmen of government officials have been given +concessions to import all goods free, privileges which it is said they +sell to any one who will take the risk for a fixed charge of one-half +of the customs fee that would otherwise have been collected. Now and +then these favored persons take a flyer of their own and one of them +once sent in a carload of shoes, most of which were dumped in Monterey. +Having paid no duty, the shoes were sold at prices which demoralized +the local market, for the normal duty on a pair of shoes averages $1.50. + +Other things “happen.” For instance, a favored group gets a trainload +of goods--say foodstuffs--at an entry port. Then the government +suddenly announces that, effective at once, the high duties on these +foodstuffs are to be removed. The goods of those “in the know” go +across duty free, and if other merchants telegraph orders to take +advantage of the open port, as like as not they find, when the goods +reach the border, that the high duties have been put back as suddenly +as they were removed. + +Such things as these happened with great frequency in the days of +Carranza. Perhaps they are not happening now, for Mexico is on her good +behavior. But all this has occurred frequently enough to have shaken +the faith of simple men. The fear of what may happen to-morrow--things +of this sort or something else--stifles business, for business is a +timid spirit, and does not recover its confidence quickly. + +I hold no brief against the present governments of Mexico. They have +been and still are revolutionary governments. They have a natural faith +in their own vital importance to Mexico, and consider that whatever it +may have cost the country to get such government is money well spent. +But for her own sake and for the sake of those of us who are sincerely +interested in knowing what troubles Mexico, it seems that we should +realize by this frank analysis the lack of faith which I describe. + +The situation which I have just outlined is economic, but back of the +economic and basically more important is the financial situation. The +cause of the economic bankruptcy is to be found in the new conception +of the financial organization of Mexico which the Carranza officials +have pronounced, and upon which Mexico has been acting for the past +seven years. + +Let us look for a moment at the financial side of the foreign +investments in Mexico, for recent activities on the part of the +government seem to admit that Mexico recognizes that an important +factor in the present national bankruptcy is the loss of foreign +capital. This damming up of the flow of foreign investments has been +the result of two distinct situations. First is the outrages, the +wanton destruction of foreign property and foreign lives by bandits and +revolutionaries. The other is the enactment and partial enforcement of +drastic anti-foreign laws. + +One of the strongest pillars of the material prosperity of the Diaz +time was foreign investments. The bonanza mines had to become paying +low-grade business propositions in order to preserve mining as a +national asset. The barren agricultural lands had to be irrigated, +with water that fell in mountains hundreds of miles away. More than +that, Mexico had to begin to build an industrial machine of railroads +and factories which would create new national wealth--the economists +of even a generation ago realized that no land, however rich, could +prosper from her natural resources alone. These were the axiomatic +bases of the economic need of foreign money. + +The financial need for foreign capital was yet more pressing. At +the beginning of the Diaz rule, the trade balance against Mexico +was apparently insurmountable, and although year by year it was cut +down through the economic development of the country, each year the +trade balance has to be evened up. This was the function of foreign +investments, and this was the financial reason for its continued +encouragement under Diaz. To the last year of his reign, this inflow +of foreign money kept coming evenly, in tens and twenties of millions +annually. As it came in, balancing the outgo of interest on the +national debt and on private loans, it became itself a producer of +Mexican wealth, so that in time it would have eliminated the necessity +of further forced-draft encouragement for outside investment. + +That time had not come in 1911, however, when Diaz left Mexico. But the +net result of the stoppage of foreign investment in the revolutionary +period which followed is to be found to-day in that unpaid interest of +nearly $200,000,000 on government securities alone. + +This is no apology for the mistakes of the Diaz régime. The great men +of that day built a vast commercial enterprise, the Business of Being +the Republic of Mexico, but like many commercial enterprises of the +period before the Great War, it had left out the human equation. It was +this failure which wrecked the Diaz government in the end, and made +such purely paternalistic régimes virtually impossible in Mexico again. + +To-day the rulers of Mexico, awake at last to the need for the foreign +money which their revolutionary predecessors shut out so stubbornly +under the “Mexico for the Mexicans” policy and the socialistic +constitution, have been carrying on an active campaign of publicity and +official conciliation. The junkets of Chambers of Commerce from all +over the United States are part of the big plan. Yet in the hearts of +the people, of this country and of Europe, who hold the purse strings, +be they bankers or enthusiastic investors of little capital, there +lingers and will linger many doubts. It seems likely to be a long day +before the foreign investor finds any new faith in Mexico. + +But what of Mexico herself? Where lie the financial roots of her lost +faith in Mexico’s own future? After the economic conditions noted +above, they lie in the Mexican currency situation. + +To-day Mexico has no currency but gold, silver, nickel and copper +coins. There are no bank bills, there is no bankable paper, there are +no promissory notes, no checks, no credit. Seven years ago there was no +metallic currency whatever, only banknotes, depreciated till a peso +(normally worth fifty cents) would hardly pay carfare. During that +time the banking business was all but wiped out, and bankable paper +disappeared. + +Yet back of that period, in turn, was the time of Diaz, when paper +money was as good as gold, and the ordinary processes of exchange +went on as in any civilized country. Diaz had found, when he came to +power, a condition similar to that which exists to-day, with only +metallic currency in circulation. He brought in a new financial régime, +establishing sound banks, which under government control issued paper +money. In 1910, the circulating medium of the country was $150,000,000, +of which $65,000,000 was banknotes, accepted on an absolute parity +with the $85,000,000 of gold and silver. This money was, as noted, +supplemented by active bankable paper circulating freely in business. +To-day, by contrast, the government admits that there is less than +$50,000,000 (I personally think it is very much less) of gold and +silver money in the country--to transact the business (on a cash basis) +of nearly 15,000,000 people! + +The loss of $100,000,000 of the circulating medium of the country (to +make no estimate of the loss and inconvenience due to the destruction +of credit) is the work of the revolutions of the past eleven years. + +It was Carranza who started the paper money orgy. In the course +of three years he issued probably 2,000,000,000 pesos of paper +currency--the exact records, if kept, have never been made public. +Through this means he destroyed the confidence of the public in paper +money, and ultimately, when he came to full power, wiped out of +existence the whole system of Banks of Issue established by Diaz. + +The first of the Carranza paper money was issued in Chihuahua, and was +accepted at its face value. Diaz had taught the people, down to the +humblest peon, to accept paper money, and the bayonets of the Carranza +troops convinced any who doubted the quality of the new issue. It was a +good scheme for financing a revolution--till Villa drove Carranza out +of Chihuahua and declared Carranza money worthless and its possession +a political crime. Now Villa money was issued, and was forced upon the +people at the points of new bayonets, and as the various chieftains +chased each other over the country the money of the towns fluctuated +with the identity of the conqueror. Metallic currency disappeared +completely and the value of paper money fell by jolts to a few centavos +on the peso. + +These were the days when men who were paid in American money lived like +kings. House rent was fifty cents a month; light, gas and water cost +a dime. You could travel hundreds of miles in a Pullman for a dollar, +and settle all your old debts for two per cent of the original figure. +Food prices went up, of course, and the natives, mostly paid in the +depreciated paper, suffered terribly. Starvation followed in waves, and +the mortality in the cities was appalling. + +The value of paper money fluctuated over night, and after closing hours +each day, there was a scampering of merchants to sell the currency +taken in during the day. They bought New York drafts, worn American +bills, diamonds, carriages and real estate, at prices whose rise could +not possibly keep up with the fall in the value of paper money. + +Early in the excitement Carranza had begun to repudiate his various +issues of currency. The reason given was a real one--that they were +being counterfeited everywhere, a process simple enough, for the +original issues were themselves crudely printed on ordinary paper. At +first the Carrancistas had attempted to keep up with the avalanche of +counterfeits by requiring that all paper money on hand in banks, stores +and private tills be submitted regularly for inspection. Not even the +government “experts” could tell the bad from the good, however, and +they ended by declaring all of the money submitted by their political +friends to be all right, and confiscating, as counterfeit, a large +and fixed percentage of that owned by men of doubtful “loyalty.” +The process did not tend to increase the public confidence in the +administration. + +The final issues of Carranza revolutionary paper money came from +Vera Cruz in 1915. This money alone was recognized as a part of the +Carranza government obligation, and $8,000,000 was set aside in the +Carranza financial plans for its redemption. This last paper money, +issued after Carranza was recognized by the United States, consisted +of engraved notes, known as “infalsificables” or “uncounterfeitables.” +These were issued at 10 centavos on the peso, and the government was +pledged to “redeem” them. This is being done, but not by anything +so simple as paying honest money for them (which would put them, +perhaps, into general circulation). Instead, all who pay direct taxes +are required to return a surtax of the face value of their taxes in +these “infalsificables.” A friend of Carranza wrote that “this was a +beautifully simple and ingenious scheme.” It is that still, for those +favored ones who control the remaining supply of the notes and sell +them at advanced prices to the taxpayers who have to have them--mostly +the big foreign mining and oil companies. + +The story of the paper money days in Mexico, and the fact that of the +billions issued but $8,000,000 is recognized as a just debt, may +stir the indignation, and it certainly clarifies our understanding of +Mexico’s lost faith in her rulers. But in point of actual fact, the +destruction of the banking and credit system of the country, which was +a corollary of the paper money orgy, was far more terrible and cast an +even more lasting blight on the standing of the government. + +Early in his revolutionary career Carranza was at odds with the +banks. He considered it an unfriendly act, one “taking advantage of +the unlettered,” for the banks to use their knowledge of financial +conditions to profit from the fluctuations of his paper currency. +He also found the banks “reactionary” in their refusal to use their +standing to assist him in making his money popular, and he charged +openly that the banks had “combined to discredit the government.” On +his entry into Mexico City he endeavored to coerce banking officials +personally, and jail was sometimes the boarding place of bank managers +and bank presidents, when they refused to unlock the vaults to +government “inspection.” + +The wrecking of the banking system extended over more than a year. +Huerta, who preceded Carranza in the presidency, took the first forced +loans of $5,000,000 from the banks, allowing them to issue new paper +currency to cover this coin taken out. Carranza, on gaining control of +Mexico City, found the forced loan idea convenient, for he was in sore +financial straits. As one chronicler has it, “Money had to be found.... +The money in the banks was the only money available, and it was taken +as the only way out of a very difficult situation.”[5] In its statement +of debts, however, the Carranza government recognized these forced +loans to a total of $20,000,000, none of which has been paid in six +years. + +The Carranza “loans” from the banks inevitably shook their credit and +with it the credit of every business man and business organization, +and inevitably the credit of the Mexican government itself. Banknotes +dropped in value and although they never reached the low mark touched +by government paper, their fall to 75, to 50 and finally 30 per cent of +their face value reduced in like manner the value of all bank deposits, +and finally brought banking transactions to a stand-still. The process +of final destruction of the banks began with the edict of September 26, +1915, abolishing out of hand the Huerta concession which had allowed +some of the banks to issue additional paper currency to cover the +Huerta “loans.” The banks were required to bring their reserves up to +the old basis in forty-five days, and despite the blow to their credit, +this was accomplished. On November 10, however, another Carranza edict +reduced the recognized bank reserves by requiring that silver coins be +estimated at their bullion, instead of their face value. This storm was +weathered, in its turn, and nothing further was done for nearly a year, +although during that time the breach between Carranza and the banks was +continually widening. + +An edict of September 15, 1916, required that the banks should have +in their vaults within sixty days enough gold and silver to redeem at +par every banknote which they had in circulation, currency which had +been issued under concessions allowing a banknote circulation twice +the total of the bank reserves in metal and bankable paper. The decree +also prohibited the banks from doing business with the public until +the conditions set down were fulfilled. In other words, liquidation +of notes and deposits was stopped, and the life blood of banking, the +active turning over of funds in the course of business, was cut off. +Finally, on December 14, 1916, the _coup de grace_ was given, and the +banks were officially closed to all business excepting the collection +of bills receivable in the depreciated currency of the banks themselves. + +Thus by a series of cumulative blows the whole Mexican national banking +system which had been built up under Diaz was destroyed utterly. At +the time the final blow was given, banknotes were accepted at about 30 +per cent of their face value, and had apparently reached stability. +Bankers assure me that had they been allowed to operate, even under +the conditions then prevailing, they could eventually have pulled +themselves and much of the business of the country out of the hole. It +is also interesting to remember that the franchises of the Banks of +Issue were to expire in 1922, time sufficient, under careful government +leadership, for them to wind up their affairs and furnish a solid +financial basis for the erection of some new form of national currency. + +The Mexican governments, one after the other, have lent what prestige +they had to a proposed and elaborate new banking law, based on a +“Sole Bank of Issue.” From Carranza’s time the men in charge of the +government finances apparently believed that this system could be +established on the wrecks of the ruined Banks of Issue. Up to the +present this has not yet been attempted, for Mexico was and is in no +mood to receive any form of paper currency or government banking, +however it may be guaranteed. + +It was inevitable, after the banks were closed, that the country should +go back to a metallic basis. This was made more difficult, however, by +the government’s decree, recently reiterated in the summer of 1921, +making illegal the circulation of American silver and banknotes. This +plan, although it brought out the Mexican gold and silver which had +been hoarded, inevitably cut down the circulating medium of the country +to absolutely inadequate proportions, even though American money could +easily have been obtained to provide enough currency to tide over the +crisis. + +There were many difficulties connected with the establishment of gold +and silver again, but most of them had to do with the scarcity of +these mediums. There was a further complication for which no one was +responsible. This was the phenomenal rise in the price of silver during +the Great War. This early became a crisis, for first the silver pesos +became more valuable as bullion than the fifty cents (American money) +at which they had been fixed in the time of Diaz, and soon even the +subsidiary coins, of a lower silver content, became worth more than +their legal value in gold. The export of silver coins had to be stopped +by government order, and under the guidance of American monetary +experts the recoinage of silver in smaller pieces was begun. To-day +this money is in general circulation, accepted at face value for the +simple and deliberately created reason that it is issued only as the +crying demands of business for change force it out. The new pesos are +about half the bullion value of the old, and the subsidiary coins are +even less valuable in proportion. + +Needless to say, this change in the size of the silver coins had an +unfavorable effect on the public mind, already on edge over the various +financial coups of the Carranza government. This was aggravated by a +destructive form of favoritism by which a few men were allowed, under +Carranza, to buy up and export the old silver coins, a form of graft +which amazes and disgusts the observer and also, be it noted, made the +money shortage greater and less easy to endure. + +The ruin of the economic structure of Mexico lies bare for any one +to see, and beneath it is the rotted structure of the old financial +system. The closing of the banks, the destruction of credit, the +shutting off of the relief which might have been given by the use of +American currency, seem at the root of most of the ills which then +beset Mexico, because they are at the root of the lack of faith of the +people and their fear of the caprices of the morrow. For instance, +to-day in Monterey, the great industrial center of northern Mexico, +there are no banks save two private houses where money can be left on +deposit, and a few exchange offices. Where, in 1910, the four Banks +of Issue had more than $10,000,000 out in industrial, mining and +farm loans, there is hardly as much as $250,000 loaned to-day, and +that is by American banks on the border. The safe commercial paper +which circulates in Northern Mexico is checks on American banks. The +drafts of strong mining and oil companies form the chief basis of +money transfer, and are shipped from place to place all over Mexico. +Optimists call this a peaceful penetration of American credit into +Mexico, and so it is, but all that can be done from outside of Mexico +is but a drop in the bucket compared with her financial needs. Credit +within and without must be established, and that is a problem which +rests with Mexico alone. + +To understand at all the mountain of distrust which looms before her, +it is necessary to set down, briefly, the condition of the Mexican +foreign debt. + +The external government debt is $173,000,000, and on this interest +has been defaulted for more than eight years, a total of $50,000,000 +remaining unpaid. The internal national debt is $67,000,000 and the +defaulted interest $20,000,000. State and other debts (save railroads), +which have been guaranteed by the government are $33,000,000 and +$10,000,000 in interest. + +The bonds of the National Railways of Mexico, guaranteed by the Mexican +government, total $239,000,000, the interest defaulted being about +$75,000,000. + +With other items, and counting alone the debts guaranteed by the credit +of the government, these obligations total $603,000,000, and the unpaid +interest thereon is over $155,000,000. Unguaranteed state and city bond +issues, the $20,000,000 recognized as due the banks for “loans,” and +$8,000,000 with which to redeem outstanding fiat currency bring the +total up to a principal of $779,120,915. Nearly eight hundred million +dollars, and defaulted interest to nearly two hundred million! + +From time to time, and government after government, treasury officials +have come to New York to arrange for the refunding of this debt. The +plan is usually for New York bankers to loan Mexico $300,000,000, +refund the whole debt, eliminating some items (notably by a reduction +of the bond issue of the railroads) and take as security the Mexican +government’s pledge of a portion of the customs duties. + +The answer to this proposition has been astonishingly to the point. +No Mexican guarantee of customs receipts has interested the bankers +unless it was backed by the United States government, presumably with +a collection agency of American marines, as in Haiti and Honduras +to-day. The most interesting development in answer to the Mexican +suggestions of refunding was the appointment of one of the most +impressive international banking committees ever created some three +years ago. This was headed by J. Pierpont Morgan and announced that its +purpose was “the protecting of the holders of securities of the Mexican +republic and of the various railway systems of Mexico and generally +of such other enterprises as have their field of action in Mexico.” +It would seem that the probity of the Mexican government, both as to +its debts and as to its willingness to repay the losses of foreign +investors was slightly under suspicion in the financial circles of the +world, a suspicion which is shared by no other Latin-American country +save those in actual and admitted bankruptcy. + + +FOOTNOTES: + +[5] E. D. Trowbridge. _Mexico Today and Tomorrow_, p. 198. + + + + + CHAPTER V + + OUR BILL AGAINST REVOLUTIONARY MEXICO + + +The American after-dinner orator roars his boast of “two billions +of American dollars in Mexico” and moans his claim of “a billion of +damage” done to those pioneer American dollars. Whereupon the Mexican +(of whatever political complexion) wails protest that three-quarters +of those American dollars were made out of Mexico herself, and our +State Department, which alone might clarify the matter, perforce keeps +silence. Up to the present time few have attempted to bridge the gulf +between the orator and the Mexican and no one that gulf between the +orator and the State Department. We live in an age of “convictions” and +we choose our figures according to our beliefs. + +Fifteen years ago an American consul in Chihuahua, Marion Letcher, +wrote a report in which he estimated (frankly without figures) that the +total foreign investments in Mexico were $1,641,054,180, distributed as +follows: + +American $1,057,770,000 +British 321,302,800 +French 143,446,000 +Various 118,535,380 + -------------- +Total $1,641,054,180 + +These figures have been assailed, especially as regards the +comparatively small sum alloted to the British, but they remain to this +day the only official estimate available. I have, however, been able +to find another compilation, worked out also by Americans, but this by +the research departments of several large banking groups, with full +access to all Mexican government figures and to the stock books of most +of the great American companies. The total, which is for 1914, before +the vast bulk of the investment in oil, is almost identical, but the +distribution is startlingly different: + +American $655,000,000 +British 670,000,000 +French 285,000,000 +German 75,000,000 +Spanish, Dutch, etc. 190,000,000 + ------------- +Total $1,875,000,000 + +These figures claim to include the foreign investment in the National +Debt of Mexico and are said to estimate the actual distribution, +as far as can be worked out, of the holdings of the securities of +all companies operating in Mexico. Consul Letcher’s figures were +conceivably based largely on the nationality of the corporations alone. +On the other hand, Europe contributed more than half the invested +capital of such important groups as the National Railways of Mexico, +made up of companies which were all incorporated under American laws. + +When this new compilation of investment distribution first came to +my hands, I was, I may admit, inclined to “split the difference.” As +careful a study of the American investment field as it is possible to +make has, however, convinced me that the new figures are much more +nearly correct than those of Consul Letcher with one exception. I +do not believe that they include all the American investment in the +Mexican government, state and municipal bonds held abroad. + +On the other hand, neither Consul Letcher’s figures nor the other +compilation represent the actual full value of American investments in +Mexico at the fall of Diaz in 1911. It is important that this fact be +remembered because by that date the moneys which had gone into Mexico +for foreign enterprise had increased many fold through the energy +which went with them and pushed them forward to success. I believe +that the original American investment had grown, by 1911, to fully +$2,000,000,000, but in order to be absolutely just from the Mexican +viewpoint we can discuss the damages on the basis of the actual cash +invested--the loss, incidentally, looms even greater. On the other +hand, we must not forget that however the Mexicans may claim that the +increase in values represents an “exploitation” of their country’s +resources, the concomitant advance in all values throughout the land +in the era of Diaz was almost entirely the direct result of those same +foreign enterprises. + +From many sources, including of course the two authorities which have +been quoted, I have estimated the American investment of actual cash +capital and have set against it the losses in actual physical damage +and in ruined business, since 1910, as follows: + + AMERICAN CAPITAL IN MEXICO + + Original Physical Actual + Investment Damage Losses +Railroads $150,000,000 $30,000,000 $60,000,000 +Oil 200,000,000 5,000,000 100,000,000 +Mines 200,000,000 15,000,000 100,000,000 +Lands and cattle 50,000,000 10,000,000 20,000,000 +Industries and public +service 50,000,000 10,000,000 20,000,000 + ------------ ----------- ------------ +Total $650,000,000 $70,000,000 $300,000,000 + +Damage claims aggregating $500,000,000 are said to have been filed with +the American State Department, but no official confirmation of this has +ever been forthcoming. However, the claims which Americans have against +Mexico, whether filed in the State Department or not, must be divided +into two categories, the actual and the potential damage, and perforce +includes also the claims due for loss of life and personal damages. + +The actual harm already done includes: physical damage to property; +unwarranted and illegitimate taxes which approach confiscation; +destruction of property values through such taxation and through the +prevalence of banditry; destruction of property values by the driving +out of stable government; destruction of the financial and credit +system of the country through government decrees and repudiations; +losses in legitimate profits which would have been made during the +recent eras of high prices; actual loss in market value of property +through the estrangement of the foreign capital which alone, in Mexico, +presents a reliable buying element; destruction of property values +through the exile of the foreigners who formed the industrious and +capable organization which maintained those values. + +The potential damages are chiefly those which come from the fact that +there hangs over all foreign property in Mexico to-day, and has hung +for five years, a sword of Damocles in the threatened confiscation +of such property under the radical “nationalization” plans of the +revolutionary governments. These, briefly, provide that: foreign +corporations and individuals are incompetent to own property in Mexico +unless they renounce their citizenship and appear only as Mexicans +before the Mexican law; the government may appropriate all large +tracts of land, giving in return unguaranteed state agrarian bonds of +virtually no value; the government may “nationalize” the oil in the +ground, making it subject to the denouncement of any one, whether the +property owner or not, when the whole oil-producing organization of +Mexico to-day is founded on the principle of the oil belonging to the +land itself; no foreigners, under any conditions, may own any land +within sixty miles of the frontier or thirty miles of the seacoast. + +Lastly, and in a group by itself, are the damage claims arising from +the killing of nearly 600 American citizens in Mexico since the Madero +revolution began in 1910. The claims for these outrages and for the +maiming and raping of many hundreds more occupy a class by themselves, +and will, we may confidently believe, be the first which will be paid +when Mexico returns to the ways of civilization. + +Just here we can imagine the official Mexican “press department” +preparing to state that “Mexico has always paid her bills, including +all damage claims.” This, however, is not quite literally true. She +has paid foreign damage claims at the muzzles of foreign cannon, to +be sure, and President Diaz, in that long rule which many call “the +anomaly of Mexican history” paid all the bills presented to him. But +the only “convention” which ever sat to adjudicate American damage +claims was hardly the success that would justify any such sweeping +assertion of Mexico’s probity. In 1840, after years of turmoil, +and after a show of force, President Jackson called a convention of +Americans and Mexicans together to consider American damage claims. +They sat from 1840 to 1842, allowed $2,000,000 in damage claims, +rejected $1,000,000 and when they adjourned left $3,000,000 still to +be considered. Under an arrangement of twenty installments, Mexico +paid three and defaulted the rest. The cash was paid by the United +States, and the slate was wiped clean after the Mexican war of 1847-48. +Finally, this war, which as schoolboys we were taught to regard as a +sort of “blot on the national escutcheon” was the result of continued +outrages to Americans and continued diplomatic jockeyings with an Uncle +Sam who even then was much the same model of patience which he is +to-day. + +In the public discussion of the damage which has been done to American +properties in Mexico, there has been much emphasis on the potential +harm from the so-called “socialistic” or “bolsheviki” tenets of the new +Mexican constitution. There have been vast, crippling losses, yet it +seems as if most of what we have heard has been the things which will +happen if Mexico is allowed to proceed along her present road. There is +reason enough for this fear and for this emphasis, and one of the great +battles being fought in the world to-day is that which these Americans +are putting up not alone for themselves but for the very principles of +property rights. But so far Mexico and particularly the wily gentlemen +who have occupied the Mexican presidential chair have always tried to +get all they could and have often carried the mis-named “American” +bluff to astonishing lengths--but have almost as often retired when +the game turned against them. They have used the potential damage as a +means of extracting an increasing toll of taxes and of loot, and for +little else, as yet. + +In this chapter I am, as already mentioned, intentionally avoiding +taking these “potential damages” into consideration. I feel that we +must have, as a starting point, a comprehensible picture of what has +already actually happened to American investments in Mexico. + +Most of the American money in Mexico went to that country during the +thirty-four years of Diaz rule. This period was marked not by blind +adoration of the foreigner, as the revolutionists now state, but by +a sane and far-seeing realization that foreign capital must come +to Mexico if her national and economic potentialities were to be +developed. Foreigners were encouraged generously by laws recognizing +the privileges of pioneers in protection and in assistance in the form +of exemption from taxes during their development period (the term +was usually for ten years). The idea was to allow them to import +machinery without duties and get on their feet as quickly as possible. +Practically none of these companies was given land, for there is no +vacant Mexican government land worth having. + +The first and the greatest American corporations to enter Mexico were +the railroads. These held concessions, made according to law, but +Mexico had profited by the American government’s experience with its +trans-continental lines, and the subsidies and grants were small indeed +compared with those given to our Union Pacific, for instance. It is +worth noting also that there have never been such scandals as our great +railroads reveled in, and that virtually every cent was invested in the +lines themselves. The Mexican railway companies which were consolidated +in 1907 into the National Railways of Mexico were never paying ventures +for the builders, and until the merger few dividends had ever been +paid by any of the lines. For about four years following the merger +conditions improved greatly, but in 1912 troubles began, and by 1913 +all was chaos and destruction. + +From then on to to-day, the story of the railways of Mexico has been +a tragic romance. It can be reduced to figures, necessarily cold in +the telling, but every figure the result of dramatic and crushingly +realistic incident. The National Railways of Mexico, a property worth +over $250,000,000 as a physical plant alone, was taken over by the +Carranza government on December 4, 1914, and since that time the +bondholders have received no cent of interest and the physical property +has been crushed and battered and all but destroyed. On January 1 of +1921 over $75,000,000 of back interest was unpaid and the defaulted +payments on fixed charges is still piling up at the rate of $1,000,000 +a month, while the Mexican government is collecting from the operating +commission $1,500,000 a month--a sum set by Carranza for the commission +to turn in by any means available, as higher rates, scrimping on +repairs, deterioration in upkeep. + +The confiscation of the railway properties by the Mexican government +under Carranza is one of the most astonishing and illuminating +pages in the whole story of Carranza’s campaign against capital and +the foreigners. But although it began with him, it apparently has +continued into the rule of his successors--for they seem a part of +the revolution of which he was and still is the dominating, sinister +genius. Under the terms of the merger of 1907, the Mexican government +was given the voting power--but not the title to--50 per cent of the +stock of the company, under certain definite conditions laid down by +the bondholders. This 50 per cent interest represented no capital +invested, nor was it a recognition of any debt which the railways +might have imagined they owed the government. It was given outright in +consideration of one thing, the guaranteeing by the Mexican government +of a return of 4 per cent interest on the bonds of the merged lines. To +the merger the government contributed nothing of tangible value--save +one short line of railway worth about $5,000. Its permission was +needed, perhaps, for the transfer of the railway concessions to the +merger, but this would probably have been given without question had it +been asked alone. The interests back of the merger believed that the +Mexican government guarantee of the interest on the bonds was worth +the gift of the voting right of half the common stock--and on this +understanding alone it was given. + +The taking over of the physical property by the Mexican government +followed the American occupation of Vera Cruz in 1914, and shortly +afterwards Carranza made his claim official, on the ground of the 50 +per cent voting right! On the basis of this right alone the Mexican +government to-day holds control of the National Railways of Mexico, +a right once given on the solemn guarantee of the interest on the +bonds--which has not been paid for eight years--and with the recognized +provision that the bondholders should name the president of the lines, +and various officials and members of the board--and to-day there is +not one official who is not a creature of the government which happens +to be in power in Mexico! + +Upon such a basis rests the title of the Mexican government to the +National Railways. The subsidies paid by the Diaz government in years +gone by for construction were given as the subsidies were given to the +American railways which crossed the prairies to the Pacific coast--to +make such construction possible in recognition of their benefit to the +country. The Mexican subsidies were less than those given to the Union +Pacific by the United States government and not one touch of scandal +(such as marked our own railway development) was ever breathed against +that of Mexico. The subsidies give no tangible claim to the lines--and +as far as I know have never been advanced as a claim. The only hold +of Mexico over those properties is the shadowy title conveyed by the +voting right of a block of stock given voluntarily by the bondholders +in return for guarantees which have been thrown to the winds for these +eight years. + +In the period since the government has had control of the lines, +the physical property has deteriorated to a point where only the +magnificently solid work done by the American builders to-day holds +them together. Operated by the Mexicans, with former firemen as +general superintendents and minor native clerks as high officials, the +properties went their way of slow destruction in the days of Carranza. +Since that time, the turnover of railway officials has eliminated many +of the employees who were trained under the American executives of the +Diaz and Madero time, and to-day the roads are in the hands of men who +learned all they know of the railway business from those who in their +turn had gleaned their little knowledge from their American chiefs--now +gone from Mexico eight years. The result is a ruin comparable to +nothing, probably, but the ruin of railway properties in Russia to-day. + +Of the more than 800 locomotives owned in 1914, only 333 (by the +notoriously inaccurate Mexican government figures) are said to be +running. The rest lie at the bottoms of cañons or are rusting in +banks of hundreds in shop yards, as I have this year seen and counted +over 100 in the one yard of Monterey. The freight cars have decreased +from 18,000 to 7,000, and usable passenger cars are virtually unknown +off the main lines to-day--all were wantonly destroyed in the early +revolution or stolen and converted into dwelling-places for “deserving +revolutionaries.” Three-quarters of all the bridges on the 8,000 miles +of line are damaged, dozens of them beyond repair, thanks to the +diabolical perfection of the methods of destruction used by various +Mexican patriots. The tie replacements are seven years behind; nearly +20,000,000 are needed, worth over $17,000,000. Other items in the +$80,000,000 replacement bill are $30,000,000 for cars, $12,000,000 for +locomotives and $4,000,000 for rails. + +This loss has been the result of two forms of destruction--the +depredations of the fighting factions and the cumulative destruction +of neglect and failure in upkeep. Instances multiply. During one month +(March, 1914) seventy trains were blown up while running at 30 to 40 +miles an hour; the patriots used to connect up their dynamite with +electric batteries and then sight along two sticks from their safe +retreat in the bushes and so set off the charge under whatever section +of the train caught their fancy. At one time in Monterey in 1915, +revolutionary troops burned 800 loaded freight cars; their skeletons +line the Monterey sidings for all the world to see, to-day. One of the +long bridges on the road to Eagle Pass, on the American border, was +wrecked by running a train of loaded coke cars with two locomotives on +each end out on the bridge, firing the train and blowing up the bridge +when the burning coke had heated the steel. A similar trick on the +Tampico line was to take out a rail, then set fire to a train of oil +cars and run it full speed on the bridge, where it was derailed and the +same process was followed as with the coke train. + +The rotting of the ties on the road has left most of the branch lines +all but impassable, save to the Mexican enginemen who know each bump +and are quite willing to “take another chance.” The wrecked bridges, +jacked up on timbers, have uncomfortable and terrifying “dips.” The +list can be multiplied indefinitely. Yet perhaps the most expressive +sight to be seen in Mexico to-day is those banks of rusting engines, +100 in Monterey, 100 at Aguascalientes, others at San Luis Potosi, +Mexico City and Guadalajara. These engines were only slightly damaged +when they were side-tracked, but through the failure of the government +to furnish repair materials, they have been gradually stripped of parts +to repair other engines, the brasses have been carried off and sold for +junk and the whole field of ruin left like a desert waste. + +There is in the Mexican railway law a provision for compensation +in case the railways are taken over “for military purposes.” It +is estimated that under this law the damages collectable are only +$10,000,000 a year--less by $2,000,000 than the default in the fixed +charges alone. The estimated $80,000,000 of physical damage (a +mere estimate until an actual valuation can be made) is presumably +collectable. The bill of the railroads is, however, as follows: +Physical losses, $80,000,000; defaulted interest to June, 1921, +$75,000,000; total, $155,000,000. It is believed that about one-third +of the bonds are held by Americans, so that their loss is over +$50,000,000. In addition, there has been an individual loss in the +disposal of the bonds by small holders, at sacrifices as great as 80 +per cent. It is even said that the Carranza government had hopes of +being able to buy up the railway bond issue when its administrative +policies had reduced the quotations to less than 30 per cent of +par. Only the lack of money prevented this coup for real government +ownership, it is said. + +In the above, I have treated only with the National Railways of Mexico. +Outside of this system the only important lines in Mexico are the +Mexican Railway (British owned) which has now been returned to the +stockholders but without compensation for damages and the Southern +Pacific in Mexico (American owned). The former suffered severe physical +destructions, but the latter’s bill for damages, while heavy, sinks +into relative insignificance. + +In the confines of a general study, space can not be given to the +sidelights on the Mexican railway situation--a situation almost +Teutonic in its colossal blunders, splendidly American in the elements +which have gone to save it from utter wreck. The long years of patient +railway building, the hundreds of miles of rock-ballasted lines across +unproductive wastes, all done under American management, gave Mexico +a system which has held together despite the wreckage of bandits +and the ravages of time and neglect. The traffic of the nation moves +to-day, not in the wheezy trains which the Mexicans maintain, but +overwhelmingly in a system of privately owned locomotives and cars +operated by the American mining and trading companies at staggering +expense. Their 100 locomotives, in perfect repair (kept so in their own +shops) and their nearly 3,000 freight cars probably represent half of +the railway equipment running on the National Railways to-day, and they +probably carry far more than half the freight. They pay full freight +rates in addition to furnishing the trains, and although much of this +equipment has been taken over by the government as this is written, it +is no exaggeration to say that but for these American companies and +their magnificent efforts to save what is to be saved of their Mexican +properties Mexico would to-day be stagnant,--a land of chaos comparable +only to the period of fifty years ago, before Diaz ruled. + +The great oil business of Mexico owes its existence primarily to +American enterprise. Of the $300,000,000 of cash invested in the oil +fields, $200,000,000 is American. To-day, even after the colossal +production during the war, only a small portion of this investment has +been recovered, for only two purely Mexican companies, the Mexican +Petroleum (American) and the Eagle (British) are paying dividends. The +oil business in all lands is so speculative that its returns are quoted +not as “dividends” or “interest,” but as “recovery,” for until the +great investment in drilling, tanks, pipe lines, refineries and ships +is got back, there is no surety that the venture itself will prove +profitable. For this reason the losses of the oil companies through +the Mexican revolutions can be only an estimate. From sources which I +have been able to reach, I place the actual physical losses at about +$5,000,000 for the American companies. This seems like a very small +item, but it does not count the failures of most of the 300 companies +which have put money into Mexican oil or the vast sums paid in taxes +or lost through oppression. Nor does it take into consideration the +potential losses if Mexico enforces her “nationalization” plan. These +last would be legitimately included here, for as I say, they jeopardize +the “recovery” of the investment still remaining unpaid for, and +Mexican oil stock quotations have suffered as a result. Mexico still +threatens to enforce the provisions of the new constitution which +make oil the property of the nation and its exploitation a matter of +concession, like gold and silver. The oil companies are fighting this +plan, for they entered Mexico and invested millions in oil lands and +leases from individuals (no land was ever given them) under a mining +law which left coal and oil the property of the owner of the land, +unlike gold and all other minerals. + +The actual bill of our oil companies includes, as the chief single +item, a $2,000,000 loss due to the Battle of Ebano, fought over +American property in the spring of 1915. Oil, tanks, pipe lines and +refinery buildings were destroyed, a single cannon ball igniting a tank +containing 850,000 barrels of oil, all of which was burned. The item +of direct thievery (largely by federal troops) is only about $300,000, +but petty destruction, murderous assaults, the killing of a score of +valuable employees and the tribute to bandits and federal “generals” +pile the total up. Tribute has been levied, first by the federal +Carrancistas, and from January, 1915, to March, 1920, by Manuel Pelaez, +the former rebel leader, to a total of about $2,000,000, Pelaez’s +figure being a regular $30,000 a month up to his joining the successful +Obregon revolution in 1920 and so becoming a “federal.” + +The ravaging of the oil wells is full of picturesque and terrible +incident, like the railways. The most striking and costly was the +outrage perpetuated by General Candido Aguilar, son-in-law of Carranza. +On December 13, 1913, Aguilar demanded, from the Eagle Oil Company +(British) tribute to the sum of $10,000. This was not forthcoming +so Aguilar proceeded to carry out his threat of “shutting in” the +great “El Portrero” well, one of the most famous in Mexican oil +history, which had been a steady producer, for two and a half years, +of 30,000 barrels per day. He succeeded in capping it, and before the +casing was finally blown out, the oil had broken through the ground +in dozens of places, including the bed of a neighboring river. The +whole countryside was in imminent danger of a terrible holocaust if +the oil on the river flowed away and ignited, as it surely would, but +by superhuman efforts this danger was averted. But all other attempts +to save the oil and repair the damage were almost fruitless, and for +months the seepage went on, until at last the well was reduced to +salt water and $20,000,000 worth of oil had been lost. This loss is +technically British, although it is probable that the bill for damages +will fall upon the United States, for it was undoubtedly through the +instrumentality of our State Department and its emphasis of the Monroe +Doctrine that Great Britain was restrained from taking action. + +Another item to be noted is the great Carranza tax system which +continued in full force into the era of Obregon and costs the oil +companies some $4,000,000 per month. Part of this may be recognized in +time as legitimate, but it violates the letter of the franchises of +most of the companies. To this bill of claims will also be added the +losses incident to carrying out the orders of our Department of State +for all Americans to withdraw from Mexico on two occasions. Each time +about one month’s production was lost. + +I have noted above the far-reaching possibilities of destruction to oil +properties entailed in the “nationalization” plans. While these are +in abeyance pending “investigation and legislation” the oil companies +have other drains on their resources, such as government levies for +dredging the river at Tampico (while the companies’ own dredges do the +work), the requirement of special licenses to drill each well, and the +virtual curtailment of all development work outside the Tampico-Tuxpam +district. All add to the total loot of the revolutionists, and continue +the threat against foreign business development throughout all Mexico. + +About $200,000,000 of American money has gone into mining in Mexico. +Practically all of it has been legitimate business investment, in +low grade or old abandoned bonanza properties, in mills and in +smelters--the speculative period of bonanza mining such as we have +had in our own West was passed in Mexico a century before American +money began to flow across the Rio Grande. Our American investment +could therefore by no means be regarded as a speculative venture, and +the margin of return was relatively small--so small in fact that +Mexicans did not and would not now consider such mining as profitable +investment. We are, therefore, justified in taking a serious and +calculating view of the damage done to American mining properties under +revolutionary rule. + +From sources available, I would estimate the damage done American +mining properties in Mexico at $15,000,000--this is very conservative. +There has, however, been little of the wanton destruction of mines such +as the Germans practiced in Northern France. One instance, however, +stands out, and this was to a coal mining property in northern Mexico, +the Agujita, less than 100 miles south of Eagle Pass, Texas. In May, +1913, General Jesus Carranza, brother of the president, demanded +$50,000 from the manager of this property, owned by American and other +foreign capital. The money was not on the ground and there was no +telegraphic communication with Mexico City, so it could not be paid. +The property was then wrecked by Carranza soldiers, several hundred +coke ovens blown up, the mines fired and flooded, buildings burned, +etc.,--damage estimated at $1,000,000. + +Some other incidents of this sort are recorded, but the largest +physical damage is indirect, due to the driving off of workers and +the murder of the American engineers, so that great mining properties +were abandoned temporarily with the result that the water came in +and tremendous values in timbering and stoping have been destroyed. +In some instances the damage caused by water has mounted up to vast +sums; one great mine, the Tiro General, an American property, will +for instance require $300,000 before it can be operated again. Other +properties abandoned from time to time during the years when railway +traffic was interrupted, have similar bills for repairs, and hundreds +of other mines, great and small, have been kept closed through the most +profitable period mining has ever known (that during the Great War), +with vast losses, although the ore is of course still in the ground and +will some day be taken out. + +The decrees and laws put into effect by the Mexican government in its +effort to raise money have had a serious effect on mining. There have +been new export taxes on metals, for instance, 5 per cent on lead, +copper and zinc, where before nothing was assessed, and in some cases, +as in that of copper, definite sums per pound have been assessed, +with the result that the falling copper prices caused the closing of +great properties like that of Cananea (American) and El Boleo (largely +French). Silver and gold were taxed 10 per cent as against 2¹⁄₂ per +cent in the old days; during the war the export of gold was prohibited +and half of the value of the silver exported had to be returned +to Mexico in gold. Taxes on mining claims also have been increased +tremendously, so that in 1916 a group of forty-five American companies +estimated for the American-Mexican commission sitting in Atlantic City +that where in 1912 they paid $96,000 in taxes on a group of claims the +new laws would have collected $569,000 and where in 1912 the export +taxes were $1,726,000, the export taxes on the same quantity of metal +(if it had been taken out, which it was not) would have been $7,000,000. + +During the war, only high metal prices kept any mining business going +in Mexico. After the armistice, hundreds of mines and all but a few +smelters were closed down, and only the high price of silver, as long +as it continued, allowed those that were left to keep running. Even +during the era of high prices it was impossible for the mines which +were operating to do the development work which alone makes possible +the continued operation of mines under modern conditions. + +Due to taxation, heavy freight costs, scarcity of materials and of +labor, bandit raids and uncertain supplies, the science of mining in +Mexico thus slipped back thirty years. This, in a phrase, sums up the +reason for the losses and the conditions which make it impossible +for mines to operate to-day where in times of ordered, intelligent +government, they were running and supporting hundreds of thousands of +Mexicans in comfort and peace. + +Figures presenting the case of the land and cattle companies are +almost impossible to obtain, for these interests have never organized +as the oil and mining men have, and the only possible sources of such +information have not been able to collect figures enough to cover the +situation. Roughly, however, it is estimated that $50,000,000 of actual +American money has been invested in land in Mexico, and although the +titles to the properties still remain (always subject to the proposed +confiscation of foreign property), the loss in capital invested, of +live stock and crops, can probably be placed at over $10,000,000. The +land companies and individual American holders of lands have, however, +been the greatest sufferers, perhaps, of all the interests, for the +actual worth of the land they occupied was infinitesimal compared with +the value which their very presence and industry created for it. + +The Mormon colonies of northern Chihuahua, near Casas Grandes, were +amongst the most prosperous, in a comparatively large way, of all the +agricultural sections of Mexico. Here the “desert blossomed as the +rose” and the American colonists, industrious and prosperous, were +becoming valuable contributors to the Mexican national wealth. All this +has been swept away, houses burned, cattle run off, men, women and +even the children murdered and maltreated, and the whole enterprise all +but destroyed. The case is paralleled all over the country. + +Millions of dollars have been invested by Americans in tropical +plantations, and some at least of the properties were of great +potential value. The story of the wrecking, raiding, pillaging and +murdering on these properties would cover pages and the sums actually +lost and the values destroyed by the interruption of development run up +into great totals. + +At the other end of the country, in Sonora, the records show the +systematic ruin of the Yaqui Delta Land and Water Co., which, beginning +under President Madero, had invested $3,000,000 in land, surveys and +experiment stations and was turning a great property worthless for +anything but grazing, into a paradise of irrigated farms. Beginning +with Carranza and continuing steadily since this company’s property +has been despoiled, and by means of confiscatory legislation, new +interpretations of franchises and overwhelming taxation has been +reduced to ruin and even the government franchise itself finally +annulled. The Mexicans have no plans and no money to do such vast +development themselves, so the destruction of this property, pushing +it back to the mere value of the grazing land, was utterly wanton and +deprives Mexico of a great agricultural development of the type which +she sorely needs. + +In industrial, public service, banks and other classes of investment +American money has been put into Mexico to a total of about +$50,000,000. Most of the industrial and public service corporations +are owned by foreigners in Mexico, the only exceptions being a few +manufacturing plants and undeveloped tramway and city water plants. +The majority of this capital is, however, British, French and German, +American money having gone into the other interests described. Much of +this industrial property has been destroyed, and the public service +corporations have been taken over by the government on various pretexts +and without payment, for the money they have earned has gone into the +Mexican national war chest. There remains, however, the possibility of +damage claims, which in these cases can be easily established. + +Of the American corporations engaged in industries a typical case is +that of the Continental Rubber Company, which has invested $5,000,000 +in the guayule rubber business in north central Mexico. In 1910 the +guayule exports of Mexico were 28,000,000 pounds, worth in the market +approximately $20,000,000, and of this the Continental exported the +largest share. To-day the guayule exports are practically nothing on +the part of the companies, while the guayule shrubs on their lands are +being cut and shipped by roving bands of bandits and peons. The vast +Hacienda de Cedros, covering 2,000,000 acres, was bought by the company +nearly fifteen years ago, when its value was around $1,000,000. At the +height of the guayule business its worth was many times this sum, but +to-day, even with the chances of a future recognition of the title of +the American company, it could not be sold for its original cost. Like +all foreign properties in Mexico which have been successful, the value +of this hacienda was in the industry of the Americans who owned and +managed it--a value which cannot be estimated or set down in figures in +a damage claim. + +The Mexican Banks of Issue, the backbone of the credit system of +Mexico, were owned only in small part by American interests. Their +destruction and the wiping out of the entire Mexican financial system +which was built up by Diaz, must not be forgotten in trying to get a +picture of the destruction wrought by the Mexican revolutionary bandits +and their governments. The paper money systems which scourged the +country from 1913 to 1916 cost foreigners millions of dollars which +can never be shown in figures, owing to the fluctuations of the paper +pesos. The upsetting of credit, which those who study the situation +soon find was due largely to Carranza decrees (whether justified by +circumstances or not) has set Mexico back nearly fifty years and has +depressed values of property and investment beyond any calculation but +the most careful studies by experts in finance as well as industry. + +It is such phases of the Mexican credit system of to-day which +constitute the real damage claims against Mexico--claims which +can hardly be estimated. I place the figure at $1,000,000,000, +and yet its potentialities are far more than that. At the present +moment the greatest actual loss--even though it can be partially +repaired if the future develops sane government in Mexico--is in the +virtual destruction of the market for property in Mexico. The new +constitution and the decrees and laws under it virtually prohibit +foreigners from owning anything in a vast restricted zone along the +border and seacoast, a zone including the richest foreign holdings +in Mexico. They prohibit foreigners from owning real estate anywhere +unless they agree never to appeal to their home governments in case +of trouble. The effect of this is to eliminate the only possible +market for valuable property. The Mexicans, and particularly the +Mexicans who are in control to-day, will not, need not, can not buy +such properties--foreigners and the opportunities which were open to +foreigners in Mexico before the revolution actually created the market +value of such property, because they and they alone were the possible +purchasers. + +Even well-developed small farming tracts cannot be sold to small +Mexican farmers--such small farmers hardly exist as a class and where +they do exist, their experience and their financial capacity do not +lead them to consider the purchase of improved farms. And above all is +the promise and the performance, in some cases, of the much-heralded +land distribution of the revolutionary governments. Where men can get +something for nothing, or on their own worthless credit, they do not +buy in the open market. + +Aside from this destruction of the values of foreign property holdings +in Mexico by making transfer virtually impossible, there is, once more, +that omnipresent menace of confiscation which makes men seek privileges +instead of their as yet uncertain legal rights, for the protection +of what they have. No longer do men buy to develop--they take, as in +the oil fields, only what is sure to return large profits in a very +brief time, for they know that even if they have privilege, and think +they know how to keep on having privilege for themselves, they cannot +transfer their capacity for getting privilege when they seek to sell +their property. There are no longer relative values of property, in +Mexico--property is worth only what can be got out of it, and got +quickly. + +This all makes up an uninspiring picture. But we must look on such +pictures, must weigh and judge them ere we can see the way through and +beyond them. That there is such a way must not be forgotten. It lies +beyond the realm of mere political reform, for to-day, as all through +the revolutionary history of Mexico the curse of the country is _the +application of political remedies to economic ills_--that phrase should +be burned into the brain of all who seek knowledge of the real Mexico. + +That the relief is to come from the womb of revolution has been +the hope of all who have watched the struggles in Mexico without +understanding them. The failure of their hopes has been continuous. +Madero, Huerta, Carranza, de la Huerta, Obregon,--to each in turn +have such watchers transferred their allegiance and their faith. Each +has failed, in so far as each has applied only the political remedy. +The result has been the utter debasement of Mexican credit, the utter +outraging of Mexican and foreign faith in Mexico herself. To-day, as +I have said, Mexicans do not believe in Mexico, and each new failure +of the political remedy sends them further away from her altars. What, +then, is the answer? + +The answer is but the following of the inexorable logic of life--and +of business. We shall find it, not in the application of new politics, +of new (or of old) constitutions and laws and decrees, not in the +ravings of dreamers or of petty states-men. We shall find it, and shall +know it when we find it, in a solution of the practical problems of +Mexican commerce, labor and business by the practical men of affairs +of Mexico and of the world. Our part shall be a very great part, for +the business men of the United States, above all others, must show the +way. Mexico must in the end bow to practical ideas of practical men, +and in bowing to that yoke she will see her future unfold. Of the ways +of finding the road and of turning Mexico upon it, we shall deal later. +Only here, at the end of this dismal chapter of failure to solve the +economic problems by political nostrums, I wish to indicate that there +is, and will be, a way of hope and of salvation--from within Mexico +herself. + + + + + CHAPTER VI + + MEXICO AND HER “BOLSHEVISM” + + +Ten years ago Mexico was one of the great, progressive nations of the +world; to-day she is just “another Latin American Republic.” Then she +showed literally the achievement and the promise of Japan; to-day she +is as backward and as hopeless as Turkey. Ten years ago her diplomats +were honored in the councils of kings, her credit ranked with that of +the best of Europe, her cities were miniatures of Paris, her mines +operated with the perfection of those in England, her railways and +budding industries bore comparison with those of the United States, +her people lived in arcadian peace, wakening slowly and surely, if +sometimes painfully, to a civilization which was meeting their needs. +To-day, Mexico is a little worse than Turkey, a little better than +Hayti, her diplomats are as inconsequential as those of Thibet, her +credit is as low as that of Austria, her cities and ports are mud +puddles and pest holes, her mines are back to the rat-hole workings +of the colonial Spaniards and Indians, her railroads are rattling +skeletons, her industries virtually non-existent. Life is again +arcadian, with all those discomforts of Arcadia which the poets of old +and the propagandists of to-day neglect, so carefully, to mention. + +The world has learned, in these past years, to take colossal +destructions calmly, so that few of us wonder and none of us really +questions the fact or the why of Mexico’s sudden and astounding +degeneration. And yet that failure is in miniature the threat and +the promise of the failure of our civilization, in epitome the boast +of bolshevism and the nightmare of capitalism. Mexico is like the +Chamber of Horrors at the old Eden Musee or Mme. Tussaud’s, a row of +illuminated pictures which tell in ghastly realism what is sure to +happen to careless people if they play too recklessly with the world +which is given them to use. + +This seems indeed a cycle of bolshevism, but it is a cycle in which +radicalism, like capitalism, is a sorry victim. As a picture the events +in Mexico approximate the drama in Russia, carried to the logical +conclusions which such a drama would reach on any national stage where +personal aggrandizement is a mightier lodestone than public devotion. +The historical facts of the past decade in Mexico are unrelated to the +facts and background of Russia, yet in Mexico there have been heard the +same shibboleths, the same promises, the same cries of the downtrodden. +There have been seen the same red flags, the same uprisings and +assassinations, and the same “redistribution” of property as in Russia. +And more than all has unrolled the drama of the rising of obscure +chieftains and politicians to colossal and wicked power. But in Mexico +the cycle has gone far beyond Russia, perhaps because here there has, +indeed, been no touch of even such idealism as there may be in Moscow. + +In Mexico the crimson day of bolshevism has been followed quickly by +the purple twilight of the aftermath of graft and privilege. To-day +there is to be seen there a power of wealth mightier than any which +is conceivable in the now almost forgotten dawn of bolshevism’s red +day in Mexico. Privilege and not the proletariat, capitalism and not +socialism, are the gods of that stricken land,--a land which ten years +ago was mistress of her life and of her destiny, and to-day is a beggar +in the marts of the world, ready to sell her body and her soul for gold. + +I have no desire to force a parallel between the early events in +Mexico and those in Russia. The parallel is there, and could fill the +eye and mind with the aid of a modicum of imagination. But the facts +alone are eloquent, and the primary fact is not whether the revolution +against the czar was day for day and hour for hour a repetition of +the Madero revolution against Diaz, or whether Huerta was an Indian +Denekin, or Carranza a weak Lenin or Obregon the realization of what +Trotzky might be to-morrow or next year. The first fact and the last +is that in one great section of Mexico we have seen and in the whole +of Mexico we are to-day watching the rolling on of an ugly spiral from +plutocracy to revolution, from revolution to socialism, from socialism +to bolshevism and then from bolshevism to demagogy, to a later and +darker dictatorship, with a more miserable proletariat, and on into the +vast sweep of an age of privilege which holds and wields power greater +than government, greater and more direct than capital or labor has ever +wielded. For privilege stands alone in the midst of the smoking ruins +of what was once the Mexican nation. + +He braves much in this day who dares define or limit bolshevism, but +in Mexico its manifestations have been carried to a point where they +have limited and defined themselves. First, Mexican bolshevism was and +is the application of political remedies to economic ills; second, it +is the raising up of the proletariat by promises and agitation to the +overturning of established government and the setting up, not of the +promised millennium, but of new dictatorships and new oppressions. Both +sought, and claim, the improvement of the workers, but both have failed +and faded to shadowy appearance and raucous boast. + +In Mexico to-day there are spots where peace and progress reign--but +they are literally those spots where “capitalism,” entrenched behind +a wall of gold and foreign protection, has been able to give its +workers the value of the profits which they gain. The rest of Mexico +is worse off, politically and economically, than in the days of Diaz, +and increasingly the only hope of the country seems, by some means, +to achieve the extension of sane business to the replacement of the +economic ruin of native demagogues masquerading behind the fair words +of socialism. + +The essence of the beneficent effects of this foreign business has been +the education of the Mexicans whom it touches toward broader horizons +of living and personal efficiency. For actually the history of Mexico’s +downfall is a history of the failure of her education, of the failure +of the past governments of Mexico to utilize the forces which were at +their hand for the uplift and the development of the unhappy masses of +the people. That failure of the past has become a colossal catastrophe +in the days of present and past revolution. + +For their day and time, Spain and the Roman Catholic church did much +for Mexico. We do not know what the Church might have done if it had +had different, more educational ideals, but we do know that, save for +the work of the Protestant missions in the past thirty years, hardly +any other force but Rome has done anything for social improvement +in Mexico. We do not know what Anglo-Saxon educational and economic +leadership would have done in the place of that of the Spaniards and +mixed-bloods--such comparisons are necessarily academic. But we do know +that under the Spanish viceroys and under Diaz more was done toward +improving the material welfare and toward building the foundations of +material and moral prosperity for the unfortunate peons than has been +done or even sincerely attempted in the ten years of revolutionary rule +since the fall of Diaz. + +Mexico has been, and indeed is, what we sometimes call in our brusque +Americanism, a “white man’s country.” It is essentially one of the +spots in this world where the burden of uplift is the white man’s +burden. For 300 years white Spaniards sought to lift it, and in that +long effort, with all its failures, they placed Mexico, even with her +six millions of unlettered, superstitious Indians, in the category of +the white lands. The duty of the white man, imperialist or socialist as +he may be, has ever been two-fold, and its duality has been its power; +we have lifted the material plane of our wards and we have upraised +those wards themselves to a higher and yet higher mental and spiritual +plane. + +It is this dual duty that the revolutionists of Mexico have shirked +and have scouted. The economic rain of the country is to-day almost +complete, and its spiritual uplift has been halted as by a wall of +flame. From those material ruins, Mexico might conceivably rise in a +spiritual rebirth, but the fact has been otherwise, for the material +ruin has been accomplished by the prostitution of all the ideals, +all the sacred faiths of men, concentrated by self-seeking bandit +governments to the aggrandizement and the enrichment of a few sodden +favorites. + +I would, if I could, paint a different picture, but the half lights of +such a panorama can be added only after the dull background has been +set in. And that background is dark indeed. The panorama of misery +begins when one crosses the northern border to-day. There the scattered +but once almost happy villages of other times have been replaced by +ruined, roofless railway stations lined with starving vendors of food +who fight with the bony dogs for the refuse of the very food they +sell. All the long trip to Mexico City is marked by the same voiceless +suffering, and the capital itself has a dismal dinginess that cries of +hopeless misery, in appalling contrast to the gallant days of the Diaz +“materialism.” + +The unhappy toll of war and revolution, one says? Yes, in part, for +such “war” as Mexico has known always takes that toll and always, too, +from the weaklings, putting starvation and sickness and filth and +dismay where once were comfort and health and some cleanliness and +happiness. + +But, again the question, was it not worth the price, will it not be +worth the price, in the victories won for human freedom? And here the +answer is unequivocably “No.” + +Many hoped, with the fine faith of their own sincerity, that the +upheaval which followed Diaz was the dawning of a new era. But in +that hope even those who knew Mexico forgot the Mexicans and their +history. Political independence from Spain had been won, freedom from +the domination of religious bigotry had been won, before Diaz came. The +struggle of his day was one of uplift, carried on with faulty tools, +perhaps, but slowly reaching toward the light. Living was improving, +slowly; religion was improving, slowly; education was advancing, +slowly. Then came a period of crystallization; the Diaz oligarchy +grew old. Many sincere men, inside and outside Mexico, thought that +the advance could and should move more rapidly. Diaz repressed those +hastening reformers, and the spiritual force which finally broke forth +into the Madero revolution of 1910-11 was undoubtedly the result of +that repression of progressive thought. + +Like all the revolutions of Mexico’s stormy history, this one began +with a beautiful stating of ideals and of the unrealized needs of +the common man; but as with all those other revolutions, the power +passed quickly to the hands of men whose sole “ideal” was personal +aggrandizement, personal wealth, and ruin to all whose needs might +incommode these exalted “leaders.” + +The so-called “social revolution” of Mexico borrowed the battle cries +of European socialism, but in the land in which it worked it stirred up +only a tempest in a teapot, with the miserable masses of the country +serving as tinder and fuel beneath the vessel. The teapot is the +diminutive organized labor world of Mexico, and that is boiling more +violently, perhaps, than elsewhere. But to-day the “advanced” ideas of +Mexico serve, in the name of socialism, only to put sweeping power into +the hands of unscrupulous men, men who know and care nothing of the +responsibilities of power, and are using it only to the destruction of +the very bases of Mexican society. + +Thus, while there seems to be a light dawning in the labor world of +Mexico, I am not sure that the light does not come from the burning +of something which Mexico cannot afford to lose. In that organized +labor world there are fewer than 50,000 workers out of a population +of 15,000,000, while there are more than 3,000,000 peons, heads of +families, who work, when there is work, in the fields, or as common +laborers. It is upon the continued, unbroken suffering of these +3,000,000 that the 50,000 profit to-day--the peons have but changed +masters once again and in the name of freedom, now, serve a vaster +company. The Mexican leaders, drawing their power in turn from the +coherent, organized industrial workers, are to-day destroying the +civilization of Diaz, and with it the civilization of American business +men, American teachers and American missionaries, which was and is the +hope of the downtrodden majority. The “modern” laws which labor has +promulgated might, we may conceive, fit the advanced industrial life of +Germany or the United States, but they are utterly suicidal to Mexico. +The new Constitution of 1917 has written into its fabric an idealistic +set of labor laws, beautiful in terminology but under present +conditions of industry and psychology and government in Mexico, about +as impractical for the development of industry and the true welfare of +labor as they are efficient as a means of graft and extortion against +labor as well as against employers. These laws are worked out for the +sole benefit of the industrial workers of Mexico, that total of less +than 50,000 as against the 3,000,000 farm and day laborers. They are +thus far more important as a propaganda document with the foreign +radicals who caused the inclusion of those administrative laws in the +new national constitution than they are helpful to Mexico’s own social +advancement. + +The eight-hour day provided in the constitution, the welfare projects +such as the stern proviso that nursing mothers shall have two half-hour +periods per day in which to care for their children, the constitutional +support of the right to strike even in public utilities, and the +virtual provision against the employment of strikebreakers, or the +closing of a shop in a lock-out, are typical of the privileges for +labor--they cover everything which the most radical would make the laws +of every land. In Mexico, and under the peculiar conditions of Mexican +psychology and inter-class relationships, they become little more than +tools of the demagogues. The rulers do as they choose in any case, +as when, not long ago, a railway strike was successful to the last +detail of the demands made in the name of “the social revolution” and +two months later a similar strike for similar ends was opposed by the +general use of strikebreakers. The labor courts, theoretically a great +advance, are used almost without exception as a palladium of radical +propaganda--and as a toll-gate on the road of privilege. + +Such are the reforms of the new era. They provide six or eight hour +days, for men who cannot read and whose children are not taught to read +or to think. They provide minimum wages, to be determined by factory +committees, with the most ignorant workmen in the world on a par with +employers and industrial engineers. They provide against discharge for +any cause except proven drunkenness, in a land where, to say the least, +drunkenness is relative. + +Their own people have begun, a little, to wonder at the wisdom of these +sweeping changes, and one, Ing. Carlos Arroyo, not long ago wrote in +the official but very radical “Bulletin of Industry, Commerce and +Labor” that there were four main difficulties which would have to be +corrected before factory efficiency could be arranged in Mexico on a +coöperative basis: first, scientific method would have to replace the +empirical system now in use; second, there would have to be special +training for apprentices; third, there would have to be study of +employees to have them properly placed; fourth, the responsibility +for the tasks assigned would have to be “equally” divided (not given +entirely to the workers) between the management and the workers, +“because the former continues to be charged with the responsibility for +the competence of the latter.” + +And as to that competence, this same bulletin regularly publishes the +records of accidents. There one will find that in 1918, for instance, +there were, in 278 industrial establishments having 292,364 employees, +6,424 accidents, in which 184 were killed, and 42 maimed and 6,198 +wounded. And, most illuminating of all, 5,165 of the accidents were +admittedly due to the “carelessness of workmen,” only 195 were the +fault of the management and 1,064 were due to unavoidable causes. + +As to the value of the achieved reforms, I have but this to tell: In +all the cities, in the centers of industry like the Tampico oil fields +and the busy port of Vera Cruz (busier to-day than it has ever been +because all Mexico must live on imported goods) I found a sullen hatred +of the foreigner, an ugly self-assertion that bodes but ill for those +missionaries of religion and of business to whom we look for so much of +the future regeneration of the country. I saw none of the contented, +happy calm of prosperous laborers, but only the unrest of the great +cities of other lands, ugly with resentment, fertile field for +revolution but not for progress. And yet those very resentful workers, +convinced of an unappreciated importance which they knew but by rote, +are all that there is of the “fruits” of the “social revolution” in +Mexico. + +No, Mexico has not changed, even amongst her petted laboring classes, +and I fear that the old rule of our ancient civilization will have to +persist a little longer, and the long, dim road be trod again through +failure and reform, and failure again and yet again. I fear that we +shall still have to lift by reaching down and, by training the dull +forces of those dull minds, teach them to help themselves and to climb +by themselves. + +Out on the plantations the workers are going the rounds which they have +covered since Mexico began, and in the fairs I saw the only evidence of +happiness which smile on one in the length and breadth of the country. +The market places and the fairs of Mexico, sunny, crowded, colorful, +rich because the Indians in the booths are close to Nature and Nature’s +bounty! That simple happiness has been the source of all Mexico’s +joy--and of all her misfortune. That simplicity has made her people +the dupes of predatory chieftains, and hideous priests of pre-Spanish +times, of Spaniard and priest through the long centuries of the +viceroys, of master and of some priests, too, through the years since +the Independence. Yet in those periods those who have duped the Indians +have, most of them, protected the Indians in an easy, medieval way, and +slowly there has grown a civilization, and in that civilization have +been nurtured the seeds of better things. + +The time was coming for those seeds to bear fruit, when, hastening the +ripening, came the revolutions of 1910 and after. It was like the child +who pulled up the stalks to see how the seeds were growing--they were +growing much faster than appeared on the surface, but they did not grow +after they were pulled up. + +Looking back to the Diaz day we can find, for instance, the slow, +constructive work toward the creation of arable land for small farms. +It was being hampered somewhat by grasping office-holders, but it was +advancing, a great national plan of irrigation to make possible the +use of small tracts in a country where rain conditions have forever +made small farming all but impossible. Then the revolution and the +resounding cry for “land.” The alleged land hunger of the Mexican +Indians and peons has been at once the rallying cry for each succeeding +revolution and the one appeal of all of them for foreign sympathy. + +But whatever authorities may conceive as to the facts of the existence +of this land hunger or of the forms which it takes--a desire for +little farms, for prehistoric communal ownership, or for property only +because it is wealth and can be converted into cash--it is also true +that the schemes of the revolutionists for land distribution have +been impossible except by the confiscation of rich properties and the +destruction of vested rights. Obviously, no land which is not tillable +is satisfactory for distribution, and the tillable land of Mexico +is, as I have pointed out, actually only about 25,000,000 acres, or +one-twentieth of the area of the country. Land distribution must long +remain largely a beautiful theory, good only for raising up the natives +by direct appeal to their bitter poverty or to their human greed, +and for the raising up of foreign sympathy by the flaunting of the +misfortunes of the soil under more appealing names. + +In Mexico to-day all these dreams of land distribution have gone +the way of other “reforms” for the benefit of the peons. Nothing, +virtually, has been done. Some great properties have been confiscated, +or “paid for” in unguaranteed bonds of bankrupt state governments, but +most of such properties are to-day in the hands of former revolutionary +“generals.” Some few have been distributed to Indians, but even +these tracts are taken with but scant enthusiasm. One great “land +distribution” in Yucatan called forth a crowd of 6,000 to the festival +(all Mexico goes to any _fiesta_) but only thirty Indians took up any +of the hundreds of small tracts offered. + +The essential facts of the Mexican situation are patent to all who +go to Mexico to-day, and they are inescapable to those who have a +background of knowledge of Mexico by which to judge of what they see. +And yet it is true that in the councils of Carranza, in the entourages +of de la Huerta and of Obregon there have been men representing forces +which we in our time have felt could not be used to evil purpose. +These were men who had been stirred by the fine frenzy of the first +revolution, and whose ideas, caught as mere phrases by the leaders of +revolts, were handed back to their originators again, as the “ideals” +of the revolution. Strange indeed it is, and yet not only newcomers, +but foreigners of long residence and sincere and devoted Mexicans as +well, fell victims to that subtle flattery. In business, in education, +in the churches, there were such men, their very hopes too great to +protect them from the petty deceits of those who climbed to power upon +them. + +I think I can understand why travelers in Mexico, sincere students +as well as moistily entertained excursions of American “Chambers of +Commerce” can be deceived as to conditions there. I have been inclined +to be impatient with those who let themselves be led this way and +that, and flattered by the apparent sincerity of self-deluding Mexican +officials, but Mexico is, after all, an eternal enigma. It is an enigma +because its colossal depths of ignorance and the smallness of its +deceits are literally incomprehensible to simpler and less subtle minds. + +It is that enigma which I have sought through all my writing on Mexico +to resolve. On my last trip through the country, I saw just the eternal +Mexico, the Mexico of ignorance and misery, whose only change was that +it was a little sadder, a little more resentful of those whom it once +regarded as its helpers and its friends, a little more pompous in +parading its borrowed intellectual plumage. + +A most perfect example of this ability of the Mexican of the “modern” +type to absorb one’s ideas and deceive one by the redishing of those +ideas, happened to me on my last trip to Mexico City. In the course +of the preparation of an article on a great business for a popular +magazine, I met a Mexican _licenciado_ (a title of vast elegance, +meaning much more than its dictionary equivalent of “lawyer”) who was +extremely anxious to be quoted as an expert on the subject which I was +studying. He evidently thought that my quoting him would help him to a +government post to which he aspired, so he expounded his ideas at great +length. When he was finished, I answered his arguments in kind, and +with considerable interest in his response to my counter-play. He was +pleasantly combative, and we parted in thorough friendship. + +It was only a few hours later that I had an urgent call from this same +gentleman, who had, he told me, been going into new material on the +subject, and wished to express his views, stated in the morning, more +definitely to me. Whereupon he returned me, recooked and eloquently +served, my own friendly contentions of the previous interview. It was a +bit thick for me, but it is worth the telling that an American business +man of long experience in Mexico who had introduced this gentleman to +me remarked when the subject came up again, a day or two later: + +“By the way, Licenciado Blank is getting much broader. He has figured +out a pretty decent attitude on this problem ...” and he redished me my +own views again! + +This is Mexico to-day. On the top a group of men who have absorbed in +just this way the phrases of the intelligent radicals of the world +but who still remain, as always, sycophants without background of +education, or even genuine radical convictions. Below them the vast +misery of the unthinking serfs of the country, duller, certainly sadder +and even less well nourished than in the days of the viceroys and of +Diaz. + +We are all responsible for the Mexico which is before us. We Americans +of every type in that old Mexico were too willing to let the misery +of Mexico be what it was, were too willing to take our helpers and +our support from the middle classes which were emerging so slowly. +We made a fetish of that middle class, built our hope of Mexico upon +it, called it the crowning achievement of the age of Diaz, and from +it came the beginnings of that group of Mexican leaders of which we +all had dreamed. We saw Diaz clear--all of us, I think--and knew +that his day could not be forever. But we had faith in that middle +class, forgetting, as it was easy to forget, the instability of that +foundation of Indian poverty and misery. We were going to transmute +those shifting sands by making more striking the examples of its +brothers--artisans and clerks and students and teachers. We trusted +so blindly, then, in the leaven of example--we knew so little of the +sodden flour which made our loaves. + +And then came the day of revolution, Madero the deliverer. There were +few of us who regretted the passing of Diaz, save sentimentally, +that it should have to be in just that way--we had hoped he would +die gloriously, beloved by the people for whom he had given so much. +And then the disappointment and the horror of that wild cabal of +graft and loot under Madero, when the dreamers, the repressed brains +of a generation, stood waiting, wringing their hands in helpless +impotence--those who could, truly, have done so much! It was pitiful, +as was the aftermath of Huerta, the reaction, the impossible reaction +with its ugly tinge of a coming uprush of Indian barbarism. + +Then Carranza, riding upon the winged horse of Madero--it seems that +not all of us understood, quite, for we heard the fair words, as +we have heard them echoing through empty halls and across dead and +tortured bodies these five years since. Many sincere men were caught +by those fair, echoing words, and many followed the phantom to the end. +And many continue to this day. + +I have no need to talk of the recent past, nor of the present. The +story is written in the starving babies of the Mexican towns, in the +dismal railway stations where wretched food can be bought (if one +dares) from the very mouths of hungry, filthy vendors. Misery and grief +and pain stalk in Mexico to-day. Somewhere those who have used these +wretched bodies, as infinite in number, as minute in importance, as the +skeletons of a coral reef, for climbing to wealth and power--somewhere +these must make answer. + +In another chapter I shall tell something of the story of Yucatan, +where the ideas of radical socialism were accepted and then used to +destroy even itself. It is a story of horror and of wreckage, the +clearest picture of Mexican conditions at their ultimate which has +passed in the gory panorama of the recent years. + +What has happened in Yucatan is in essence what has been going on +all over Mexico. In the larger field of the whole country, the +revolutionists have been more coherent, and at the same time in their +utterances somewhat more considerate of the prejudices of the world at +large. Yucatan, isolated from the rest of Mexico, and free from the +prying eyes of most of the world as well, has gone on with the round +of despotism and oppression, rape and murder in the name of socialism, +but on the mainland, the “rights of labor” have been more elaborately +defended (in words) and the legal systems of confiscation and +anti-foreignism have been more logically developed, under the standard +of progressive socialism! + +The years have written records of Mexican political and social +revolution which are identical with those of the present in all save +their battlecries. The first outbreak against Spain in 1810 and the +dozens of revolutions which followed it were a _reductio ad absurdum_ +of the political ideals of Thomas Paine and the American and French +revolutionaries. The Constitution of 1857, under which Diaz ruled, +was little more than a copy of the Constitution of the United States, +and few of its provisions were really adapted to Mexico’s peculiar +conditions. So it is not strange, perhaps, that the Constitution of +1917 is as far from being Mexican and far more false an effort to solve +the nation’s problems than was its predecessor, for it was dictated by +foreign radicals and merely adapted by the Mexican politicians who knew +best what would arouse enthusiasm in the Mexican crowd. + +Despite its beauties of theory and its direct appeal to the serious +radical thought of the world, its most useful function is becoming +obvious even to the most credulous, for it gives the governing groups +that control of Mexican life by which it is possible for them to +sell the privilege of doing business, because the ancient rights of +business are utterly done away with. The ills of Mexico are essentially +economic, and the new constitution and its revolutions, even more than +their predecessors, have sought to apply only the political remedy, a +remedy which has so far served only to destroy the efficiency of the +economic machinery of the country and place it upon the auction-block +of graft. + +To-day all over Mexico, labor is paid higher wages than it ever +received, but it is paying more for its food and shelter than it +ever spent before. The misery of Mexico is just as obvious and as +unescapable as ever to him who sees truly. Save for those sections +where foreign business still survives the Mexican lives as he has +always lived, on the verge of pauperism. And upon the summit of the +heap, lounging in easy magnificence, is the mixed-blood agitator, +the general, the governor, the cabinet official who have battened on +Mexico’s misery before this day and will doubtless do so long after +this day is passed. + +The raising of the Indian masses of Mexico by promises and by +high-sounding battlecries is a game as old as Mexican history; it is +played with unvarying success year after year and generation after +generation. The more extravagant the promises, the more complete the +enthusiasm of the “proletariat,” both for the political movement of the +moment, and for the one which follows it immediately upon the discovery +by the unfortunate “people” that the previous promises are not going to +be kept. + +But in to-day’s orgy of revolution, Mexico has gone further toward +destruction than she has ever gone before. Values throughout native +Mexico are almost non-existent, and the wheels of Mexican civilization +like the wheels of the wheezy locomotives of her railways, creak and +groan on their rounds. The nation’s economic life is tied together +by strings, and what remains is only what has been salvaged from her +junk-heaps, and like the lawn-mower borrowed from a neighbor, is kept +running only to serve the purposes of the borrower. + +The seventy years of warfare before Diaz left intact the civilization +of the Spaniards for Diaz to revive, but the ten years from Diaz to +Obregon have torn that civilization to shreds. Nearly all that Diaz +built has disappeared, and to-day the business of Mexico is swapping +jack-knives and selling food and shelter at the highest prices the +traffic will bear. + +No man who would face truth in Mexico can ignore these potent facts. +And the reason is not revolution, nor even mere radicalism, but the +cynical application of political control to economic needs for the +aggrandizement of individual leaders whose power is in the market for +all who will buy the privileges which they have to offer. + +It is in this condition that the importance and the menace of +radical Mexican government are found. What it has seemed well to +call bolshevism in Mexico has its greatest power in its mere threat +against capital and business. That threat, the mere presence of the +anti-capitalistic constitution and laws, has probably far greater power +than their actual application would have. Once the blow of confiscation +fell, the answer from the world of business and civilized government +would be quick and sure--Mexico cannot be ignored as Russia can be, for +Mexico lies in the center of the trade-routes of the globe, and we in +the United States would feel the menace of her anarchy too strongly to +remain passive. + +But the static power, the threat of laws which are never +enforced--there is the menace and there the great influence which +creates the graft and cynicism of Mexican officials. So long as +those laws remain, business, if it would survive in Mexico, must +buy immunity. And it does buy it, for business is ever timid, and +no single business organization and seldom a group of business +organizations, will ever go to the stake for a principle. Its duty +to its stockholders and to its employees makes it buy its way, not +always by direct graft, but in submission to vast taxes, to unwarranted +extortions, to the riding of official annoyances--rather than accept +the shut-down and fight with its own great power, its inertia of +movement or of the silence which ruins empires. + +In recent months the great business groups in Mexico have opposed a +certain amount of strength to the growing power of the auction-block +of Mexican graft and privilege. The oil companies have from time to +time offered a solid front to the encroachments of this marketing of +the privilege of doing business in contraversion of the temporary +laws of Mexico. They have held back, apparently, the crushing fall of +actual enforcement of the confiscatory provisions of the Constitution +of 1917, and they have, here and there, stopped the marketing of +privilege--for brief periods. But looking at the whole picture, it +seems as if the Mexican officials of the present era are in no greater +hurry to enforce the confiscation than are the foreigners to have it +enforced. The static power of those provisions, waiting to fall, is +far more profitable to Mexican pockets than would be the sudden and +final crash of their genuine application. Their enforcement would be +of little value to the seller of privilege, for then he would have to +invent another method of extortion. No, privilege will long remain +upon the market counters of Mexico. It will remain there, in fact, +until some means is found, within or without Mexico, for destroying the +system which is so profitable. That need of change is the crisis of the +business world of Mexico, the crisis of all who would do business with +Mexico in the present or in the future. + +What, then, can save Mexico in this crisis? The panacea of the Obregon +idea was certainly not a solution. Here indeed was a probably genuine +desire to solve the problem in a final and glorious way. But the tools +were but the tools of the old days of Carranza and the rest. That was +a political remedy for an economic condition, and its promise was a +sordid thing, an unworthy thing for Mexico or for the United States to +expect. For the promise of Obregon was at first for reaction, a belief +that Obregon was comfortably wealthy already or that his ambition was +for power alone. Therefore he was to be the great conservative, who +would save Mexico by slipping back to the days of Diaz. But reaction +must always fail in the end. In this case it passed quickly, for this +was a “reaction” which was part and parcel of the “radicalism” of +Carranza, its power but a manifestation in another form of the same +personalism, the same sale of privilege, which made Carranza impossible +and in the end, brought him to his ruin. + +The later developments of the Obregon idea were marked by an obvious +anxiety to reach a permanent solution of the immediate and pressing +difficulties of Mexico, and most of all to secure recognition by the +United States and financial aid from American bankers, as the _sine +qua non_ of such a solution. The efforts put forth were powerful, but +the driving force back of them was primarily personal ambition and the +realization that only such a solution could save the happy hunting +grounds of revolutionary leaders from some sort of foreign intendancy. +And above and beyond and behind all, were the factors of government +whose origins and whose immediate past seem indeed to be as firmly +stamped upon their natures as the spots upon the leopard or his skin +upon the Ethiopian. + +The completed cycle of the bolshevist experiment and the arrival back +at the sale of privilege links up with the failure of Obregon to offer +anything but, first, a promise of reversion to reactionary czarism and, +second, that unconcealed offering of privileges and promises of power +to all who could or who might aid in the campaign for recognition and +for foreign loans. The condition seems to me to sound a call as of +Elijah for a new understanding of the Mexican problem. Carrancism might +have been but an isolated interlude, might have been a mere question +of observation and interpretation, if the end had not come and if +business in Mexico were not continuing to pay for its sorry privileges +in the same sorry way. Obregon might perhaps have been the hope for +peace and happiness in Mexico if we had not had Carranza and de la +Huerta and if their followers, with their cynical mouthings of all the +most sacred faiths of man, were not to-day still the rulers of Mexico, +still the sellers of privilege in the name of human progress. + +We must, I believe, cast away the too long nurtured idea that the +battle in Mexico is between the progressive thought of the day and +the reactionary conservatism of great interests. I have sought here +to show why this is so. A revolution which can evolve the idea of the +socialization of great industry and can, in the very conception of that +idea, turn it to the looting of that industry for private graft and +gain, as in Yucatan; a revolution which can produce the uncontrolled +radicalism of Carranza and evolve through the cynical play-acting +of de la Huerta into the promise of reactionism in Obregon with all +the unholy forces which supported Carranza rallying to uphold his +successors--such a revolution will not, unredeemed, carry Mexico into +her next era of progress and peace. Capital and socialism must alike +beware. Neither should, in honesty with itself, accept a cause in +Mexico until the issue is joined clear. + +In the past ten years we have seen in turn the appeal of political +Mexico, to-day to the bolshevist, to-morrow to the Christian +missionary, to-day to the thinking radical of the universities, +to-morrow to the deep-dyed conservative of the counting room. Confusion +has piled upon confusion until we have each seen in Mexico what we +hoped or what we feared. + +We can only begin to see the truth, and in the truth the solution of +the complicated Mexican problem, when we clear our minds of these +old ideas that he who is against the revolutionary government in +Mexico is a hopeless reactionary, and that he who is for it is a +raving bolshevist. For the Mexican revolution is part of the “world +revolution” only as the shibboleths of that vast upheaval have been +turned to the aggrandizement of Mexican leaders who know neither what +the phrases mean nor where they lead. + +If this is grasped, and if we will look at Mexico as a problem for us +all, then the beginning of the road away from foreign intervention and +the peril to our peace and Mexico’s will begin to open. Intervention +can be avoided, even though it may be grievously close to-day. But it +cannot be avoided until we see clearly that the issue of intervention, +like the whole issue of the Mexican revolution, is not one of +capitalistic interests against the unhappy Mexican peon, but a struggle +of all the constructive thinkers and workers of the world--be they +radical, socialistic, religious, philosophical, laborite, capitalistic, +industrial or social, be they American, English, French, Russian or +Mexican--against forces of greed and ignorance which turn every ideal +of honest men to the prostitution of their country and the exploitation +of their fellows within and without its borders. + + + + + CHAPTER VII + + THE RAPE OF YUCATAN + + +From the golden wheat fields of Kansas to the barren sands of +Yucatan, from the loaf of bread on your table to the loot of Mexican +revolutions--these seem mighty leaps of imagination or of fiction. Yet +the link is closer than imagination could ever forge, the analogy a +stranger tale than the yarns of Captain Kidd. + +The modern industry of wheat farming depends, by one of the romantic +balances of world commerce, upon the supply of binder twine for the +mechanical harvester, a supply which comes alone, to-day, from the +cultivation of a humble cactus plant in far-off Yucatan. The great +Mexican industry of raising this henequen or sisal hemp was prostituted +by Mexican revolutionists to the manipulation of the binder twine +market so that in four years more than a hundred million dollars in +artificially inflated prices were dragged from American farmers. Thus +it was that through the helpless years of the Great War, all who ate +the bread of the wheat, from you and me in America to the starving +children of Belgium, paid bitter tribute to the greed of Mexican +agitators. + +The story of Yucatan is no mere tale of the by-play of revolution, +the “fortunes of war” or the “necessary accompaniments of a great +social upheaval.” It is the history of the deliberate looting of a +commonwealth and of an indispensable international industry. In the +name of socialism, shouting the battle-cries of the age-long struggle +for human freedom, Mexican revolutionary leaders turned the richest +agricultural state of Mexico into a desert waste, prostituted the only +creative industry in the whole country to the looting of the world’s +farmlands and the taxing of every loaf of bread consumed in the world. +The vast tribute which thus poured into the coffers of revolutionary +government was utterly lost to public vision almost before it had +left the market-places, and not one cent of it was ever turned to the +easing of the sorry human burden of the Mexican peon or devoted to the +education and upbuilding of the Mexican people. + +The story of Yucatan is the story of as gruesome a rape of Mother +Earth as man has known. Beginning with the familiar picture of the +downtrodden peon of the Diaz time, it runs the gamut through the +marching armies of conquerors, through a cycle of high-sounding +socialism to bloody oppressions, and on to a newer despotism and +finally to utter economic collapse. In the end it flattens down into +the present, an era of capitalistic struggle in which the state, by +the laws of economics which its despots perverted so vigorously, is +being ground between the millstones of opposing forces of the very +business which was once the source of all its wealth and all its +progress. + +Upon the wheat crop of the world depends the life of the world, and +upon the mechanical harvester depends, literally, the life of the +modern wheat industry. In its turn, the operation of the harvester +is dependent upon the millions of miles of binder twine which alone +make possible the handling of the wheat on its way from the standing +fields to the thresher which converts it to golden grain. Since Cyrus +McCormick first offered his “reaper” to the American farmer, more than +fifty years ago, invention has sought far and wide for freedom from the +need of twine for the binding of the sheaves, but neither “header” nor +mechanical flail has been able to achieve it; to-day the wheat farmer +must have twine, and that by the hundreds and millions of pounds, to +harvest his crop. + +Thus, because the sisal hemp or henequen of Yucatan is the only fiber +which can be produced in sufficient quantities at a low price to +meet the farmer’s need for binder twine, the wheat for the world’s +food supply depends vitally on the product of this one distant state +of Mexico. Without its humble aid, the American farmer might, +conceivably, hark back to the binding of wheat sheaves by hand--it +is certain that we could anticipate the scrapping of billions of +dollars’ worth of mechanical harvesters in the substitution of some +other method than theirs. The only other fiber that will serve for the +making of binder twine is true Manila hemp, whose total crop would not +fill a tenth of the needs of the world’s annual harvest, and whose +finer quality and greater cost have caused it to be devoted almost +exclusively to the making of high-class cordage. Cotton and jute and +silk and all other known or promised vegetable or animal fibers from +which binder twine might conceivably be made have proven useless for +the purpose. One of them is too stout, one too soft, one too short of +fiber, one not brittle enough, another too brittle. Sisal, the Yucatan +henequen, is to-day the only hemp which meets all demands of the +world’s annual wheat harvest, a demand which has reached the colossal +total of 400,000,000 pounds a year. + +Upon this need has been built the one great creative industry of +Mexico, the one business, agricultural or manufacturing, which in +Mexico produces wealth through human energy. Its source is the +long-leaved henequen plant, to whose necessarily slow growth for +fiber the sandy, desert soil of the Yucatan coastland is peculiarly +adapted. The henequen is a species of the great agave, that strange, +cactus-like “Century plant,” which is found in one form or another +in almost all desert countries. As the maguey, it grows in the great +Central Mexican plateau, furnishing the heavy drink called _pulque_, +and giving up a hand-extracted fiber which has been woven into the +raiment of the Indians of the Valley of Mexico for centuries. Still +other varieties, in the warmer sections of Mexico, furnish food for +cattle and, distilled, the fiery _mescal_ or _tequila_ which is an even +more terrible curse of Mexico than the much-berated _pulque_. + +It is the henequen, however, which is the most commercially useful of +all the agaves, for its narrow leaves, three to four feet long, are +peculiarly adapted to the mechanical extraction of their fiber (which +most of the agaves are not). The coarse, rasping, yellow strands have +the thickness and the strength of horsehair, so that they survive the +vigorous de-pulping process of the great gin-like machines. After +drying, they furnish a stout fiber which, when woven into thick cord, +ties the wheat sheaves in the harvester, and breaks easily as each +sheaf is thrown back into the thresher in the gorgeous pageant of the +harvest. + +This henequen, the sisal hemp of commerce, was first exported in 1864, +and by 1880 was one of the well-known but minor fibers in the American +market. In 1898, when the Spanish-American war cut off the exports of +Manila hemp, henequen sprang into immediate and great importance, its +price rose from 2¹⁄₂ cents to 10 cents a pound in New York, and an +immediate increase in the industry and in the economic importance of +the state of Yucatan took place. There was a lively boom in henequen +lands, and incidentally an improvement in social and political +conditions in Yucatan, followed by something of a slump with a few mild +panics around 1907. + +But henequen fiber had been definitely established in the market and +selling as it did at an average price of 5¹⁄₄ cents a pound, became +the great staple for the manufacture of binder twine. This new and +virtually inexhaustible supply of cheap fiber for twine-making played +its part in the broadening use of the mechanical harvester, until by +1915 Yucatan henequen binder twine was being shipped to every wheat +producing area in the world, from the Siberian steppes to the pampas of +the Argentine. + +In 1914 the exports from Mexico were more than a million bales or +approximately 400,000,000 pounds, which was a doubling of production in +fourteen years. The current price of about 6 cents a pound had enabled +the Yucatan growers to build up immense fortunes and made it possible +for the manufacturers of the thousands of tons of binder twine to +furnish it to the American farmer at less than 10 cents a pound. + +The chief manufacturers of binder twine and, therefore, the chief +buyers of Yucatan henequen, are the International Harvester Company, +which makes about half the binder twine used in the world, the +Plymouth Cordage Company, which makes about a quarter of the entire +supply, and various state penitentiaries in the wheat belt of the +United States. All of these manufacturers work on close margins for +the Harvester Company’s business is selling harvester machines and it +seems interested materially in keeping the price of such accessories +as twine as low as possible. The effect of this, combined with Yankee +shrewdness, has been a continuous effort to keep the price of Yucatan +henequen down to rock bottom, and to this end its buyers have been +cheerful arbiters of the price of the sisal in the Mexican market. + +They were never, however, quite the grasping, grinding capitalistic +despots they were described as being by the Yucatecans, for those of +us who can remember back into the philosophic days before 1914 will +recollect that it was not customary for even American capital to kill +the geese that laid the golden eggs. The Yucatan hacendados were +encouraged to demand, and get, comfortable prices for their product, +and incidentally to plant large new acreages of the henequen plants. + +It was this large planting, which went on from 1900 to 1914, which +caused the first glimmering of the idea of “direct action” on the part +of the hacendados, the growers of the sisal. It takes seven years for +henequen plants to come into bearing, and the prospect of immensely +increased production and probably lowered prices inspired the first +idea of a pool which would maintain the old price levels. In 1912 a +scheme for regulating the price of henequen was first presented to his +fellows by a Yucatan hacendado. His idea was not so much to create +an artificial shortage by storing the hemp, as to form some sort of +organization which would have first chance to buy the henequen crop +and thus make the hacendados participants in the profits made by the +jobbers or middlemen. + +The organization which resulted, in 1914, was called the “_Comisión +Reguladora del Mercado de Henequén_” (Commission for Regulating +the Henequen Market), or, for short, the “Reguladora.” It was not, +however, a great success, for the Reguladora was only an organization +buying in competition with the old established agents, and the +growers still pursued their own immediate interests in seeking their +markets. Coöperation has never been one of the outstanding virtues +of the Mexicans, and in the selling of their crops the Yucatecan +hacendados have never shown any sign of a break away from the national +individualism. The hacendados have always done their business in +Merida, the capital and business center of Yucatan. They pass from one +sunlit office to another, wailing dismally over the terrible prices +the comfortably ensconced buyers offered them and their unfortunate +fellows, but seeking and ready at a momentary hint to drive a bargain +which would cut their neighbors’ throats on the possible chance of a +temporary personal profit. The gentlemanly agreement of the Reguladora +was not, under these circumstances, a controlling factor in the +henequen market. + +This was the situation when, in March, 1915, General Salvador Alvarado, +a doughty retainer of President Carranza, “captured” the state of +Yucatan with an army of 8,000 men which he had brought from Vera +Cruz. Although Mexico has been in revolution since 1911, Yucatan had, +till this time, taken little part, accepting new governors with mild +surprise but no opposition as one administration succeeded another +in Mexico City. Yucatan is a great peninsula far to the east of the +Mexican mainland, unconnected by railways, and thirty-six hours’ +journey by fast steamer across the Gulf of Mexico from Vera Cruz. The +Yucatecans have always considered themselves as a people somewhat +apart from other Mexicans, and during many of the revolutions previous +to Diaz, the peninsula remained aloof and politically independent, +re-entering the Mexican confederation only toward the close of the +pre-Diaz era. + +General Alvarado is a product of northern Mexico. He belongs with +the true Carrancista group in Mexican politics, has been a candidate +for president of Mexico and has made many trips to the United States +as a financier, most recently as an envoy of the de la Huerta +government in search of a rehabilitating loan. All this, however, has +come since his spectacular experience in Yucatan. In that state he +gained the experience, and political record, which made him aspire +to the presidency of Mexico, and earned his diploma as revolutionary +financier. There, also, he probably first acquired those radical ideas +which enabled him to assert, as he did in the Mexican Chamber of +Deputies in November of 1920: + +“I am a bolshevist, I have always been a bolshevist, and I shall always +be a bolshevist.” + +General Alvarado’s first government work was as a custom-house +employee, but he joined the Carranza movement early and early rose to +the rank of general through the manifestation of a thoroughly forceful +personality and a ruthless preoccupation with his own advancement. + +Yucatan, in its isolation, in its great wealth, and its easy-going +manners, presented General Alvarado with the opportunity of his career. +Here were ungathered riches for revolutionary spoils, here was noble +opportunity for the uplift of the “submerged 85 per cent,” here was +waiting easy military glory of conquest with no one to oppose. In going +to Yucatan, General Alvarado was, moreover, encumbered by none of the +political and business experience which delays the prompt execution +of inspired ideas. Nor was he inhibited by any preconception of the +needs of the commonwealth or its chief industry, for this was his first +visit to his future principality. All he knew or heard was that Yucatan +was rich and that its proletariat was “oppressed,” largely by wicked +foreigners of shocking and predatory manners. + +When he arrived in Yucatan, General Alvarado noted with interest +the beauty of that gem of Mexican state capitals, Merida, with its +sun-clear streets and its beautiful parks and public buildings. He +saw the luxurious equipages and homes and visited the great haciendas +of henequen. In the meantime, he looked over the documents in the +governor’s office and the stock of gold in the state treasury. +He scowled his disapproval, as was the Carrancista habit, at the +foreigners engaged in the henequen business. Then his attention was +called to the charter of the Reguladora, the harmless agreement of the +hacendados to keep the price of the fiber as high as they could and +still not soil their hands with trade. + +This charter had courteously made the governor of the state ex-officio +head of the Reguladora. Promptly, and without more authority, General +Alvarado took charge of the organization. His first act was to force +upon the unhappy hacendados, through the authority of their own +instrument, a corporation which took their own business utterly out of +their own hands and forced them to the acceptance of official dictation +without dissent or question. + +To the end of organizing his Reguladora in line with modern thought and +to thorough efficiency for his own ends, he invited in from Mexico City +the one set of brains in the Carranza administration, those of Luis +Cabrera, and called in the motley company of self-styled “socialists” +who had been drawn to Yucatan by the lurid tales of revolutionary +propagandists who had predicted the inevitable uprising of the +oppressed proletariat when opportunity should be given them. + +This cabinet laid out the Reguladora plan, and two American bankers of +New Orleans, Saul Wechsler and Lynn H. Dinkins, organized a syndicate +which agreed to finance the cornering of the henequen market up to +$10,000,000. There was no socialism in this phase of the plan, for the +bankers were to receive a commission of $4 per bale on all henequen +marketed, plus the current banking rate of interest for all moneys +needed, the loans to be fully secured by mortgages against hemp in +storage or in transit. + +So far all was well, but here Alvarado met his first difficulty. The +henequen growers were not socialistically inclined, nor were they +as trusting of his good faith, or so well secured as the American +bankers, nor had they so much to gain or so little to lose as the +“socialist” advisers of the governor. Many of them refused to be bound +by the new rules of the Reguladora, which included, amongst others, a +provision that no hemp should be sold to any agent or interest save the +Reguladora. + +But Alvarado’s government called on the hacendados to subscribe to +his rules for the Reguladora, and to those who refused it threatened +(and gave evidence of the fullness of its intentions to carry out its +threats) to fire the fields and throw the offending hacendados and +their families into the flames. It organized the Red Guard of Yucatan +(called the “Leagues of Resistance”), and spread terrorism throughout +the peninsula. It drove out the tiny group of foreigners who for +twenty-five years had been engaged in “exploiting” the unfortunate +Yucatan proletariat by keeping the capitalistic hacendados from getting +too much money out of American farmers. Along with them went hundreds +of the hacendados and their families, and also priests and nuns, while +the simple Indians who could not take steamers for foreign ports +emigrated quietly back into the forests of interior Yucatan. + +For Alvarado’s henchmen closed the churches, burned their priceless +historical records, and outraged nuns and priests. They turned the +church buildings into “labor temples” and barracks and storehouses +from which later was sold, over the counter, the liquor which had +been confiscated in enforcement of “prohibition” in Yucatan. They +turned the schools of towns and plantations into centers of propaganda +and espionage under imported “teachers” who knew none of the Indian +language, and many of whom could not write their own names. They +confiscated great haciendas under the elaborately “socialistic” +agrarian law, and for those upon whom the iron hand did not fall +directly, established a reign of terror in the raids of the “Leagues of +Resistance,” whose crimes, from night-riding and burglary to rape and +murder, the Legislature declared to be “political offenses” in the name +of “socialism,” and thus outside the jurisdiction of the common courts. + +His henchmen, foreigners, Mexicans and Yucatecans, raised up the +previously contented “industrial workers,” railway men, porters +and longshoremen (numbering in all less than 9,000 out of a state +population of 300,000), forming them into unions whose increasing wages +were overlapped more rapidly than they were raised by the rising costs +of the handling of the imported commodities upon which they, like +every one else, must live in desert Yucatan. Their wages, and the cost +of living, multiplied eight times in the four years, while the wages +of the farm workers little more than doubled, and a grievously added +burden was placed upon the hacendados who from time immemorial have +taken up the loss in increased food prices so that their farm workers +may live. + +By such means, and with such control, General Alvarado acquired the +domination of the industrial life of Yucatan and of henequen production +upon which he built up his market corner. In the selling of the product +so controlled, he raised the price of raw henequen from 7 cents a +pound in New York to more than 19 cents a pound in the same market. +So firm was his grip on production and on distribution that he could, +and did, withhold stock which was sorely needed in the harvest fields, +bringing about, in 1916 (through this means and through the soaring +prices which had to be asked for the binder twine which was sold), +an investigation by a committee of the United States Senate. This +committee, after months of investigation, completely exonerated the +American manufacturers from the charge of profiteering, and perhaps +for the first time in the history of that august body, placed itself on +record as asserting that a foreign government had acted the rôle of an +iniquitous trust in creating an artificial shortage and artificially +inflated prices for a product vital to the business of America’s farms. + +In the four years that the Reguladora corner lasted, more than +$200,000,000 in advanced prices were taken from American buyers, an +average advance of more than 200 per cent. Thus, granting a legitimate +doubling of the price of the fiber in keeping with the doubling of the +costs of other commodities in this period (1915-1919), the accepted +figure of $112,000,000 of direct loot through the Alvarado henequen +corner may be taken as literally true. And this was loot that never +reached either the cruel hacendados who owned the farms or the workers +who furnished the labor for the creation of the product. All this and +more went into the bottomless pit of Mexican revolutionary graft. + +This henequen corner was, it must be remembered, created in the name +of socialism and the salvation of the downtrodden peon. Along with it +went a mass of other activities, wherein the funds derived from the +sale of henequen at the advancing prices were turned to schemes of +ostensible government ownership, socialization and coöperation. Before +even the hacendados were given the 4 cents a pound guaranteed them +as first payment against the great profits to come from the “corner,” +the Reguladora funds were invested in the purchase of the state +railways, at prices to this day unknown. These funds also financed the +organization of the _Compañia de Fomento del Sur-Est_ (Development +Company of the South-East) and bought nine old Mexican coasting +steamers at a cost of $4,000,000 so that the socialists of Yucatan +might not be dependent on capitalistic steamship lines. The Reguladora +also financed the drilling of oil wells, and built a flock of tanks +to contain the oil--which never came out of the ground. It also built +a railway, confiscating therefor, “for the common good,” one-tenth of +all the rails and equipment of the private plantation railways on the +henequen farms; in a few months it sold this railway to a favorite for +$150,000, a tenth of its cash cost, payable in ten years. + +The _Cia. de Fomento del Sur-Est_ entered upon the business of +relieving the oppressed proletariat from the wicked prices for the +necessities of life fixed by capitalistic grocerymen. It bought its own +supplies in the United States, transported them in its own steamers, +and sold them--for more than the current retail rates! The proletariat +did not benefit from any of these schemes, but the government henchmen +who bought in the United States, and those who sold in Yucatan, waxed +fat and comfortable, although remaining firm and loyal socialists to +the end. + +All these things were done in the name of socialism, and in that name, +also, the power of Reguladora gold was felt even in the heart of the +United States, in a heart made sensitive to such machinations by the +nervous strain of the war which was already at our throats. Not a +little of the money derived from the sale of henequen at prices four +and five times normal was used in the conducting of a campaign of +propaganda. Mexican and foreign “socialists” were kept in the United +States lecturing and writing and publishing magazines and books. These +activities were radical and, in part at least, I. W. W., in general +character but they were devoted also to spreading the fame of the +Alvarado brand of socialization of industry in Yucatan and to the +dissemination of anti-American ideas under the guise of socialism. + +It was glory and it was madness to strike thus at the heart of the +“Colossus of the North” as the anti-foreign Mexican orators like to +call the United States, and at the very same time at the “Colossus of +Mammon,” as the wilder socialists referred to us in Yucatan. Carranza +had tried the former form of baiting, but the combination of the two +was an orgy of glory reserved for the satellites of Alvarado. Never +was anything quite so daring and quite so magnificent ever done by a +Mexican revolutionist before, and not even Carranza dared do more. + +So glory and madness traveled together, but meanwhile, out in the +henequen fields and in the Indian villages, Yucatan toiled on. The +simple natives could not quite appreciate the “socialists” and +literally fled in terror before some of their manifestations, so that +in that day, and in this as well, they tell you with eager friendship +to “beware of these terrible socialists.” To them, “socialist” is a +name associated with things that are, to their simple minds, quite +unsocial. + +Alvarado, in his “conquest” of Yucatan, had frankly spread terror +throughout the peninsula. Opposed, on his triumphal march to Merida, by +a small “home guard” of upper and middle class youths, he had captured +and shot scores of them in cold blood, as “traitors,” and pursued his +way. He had, as I have noted, closed and sacked the churches, remarking +that “As the revolution advances, God recedes.” Then, on one of the +main boulevards of Merida, he had allowed the dead bodies of two who +had offended him to swing from sunrise to sunset from a limb of an oak +tree, so that thereafter the simple words, “Remember the oak tree,” +were sufficient to bring the stoutest-hearted conservative to terms. + +But for all that, General Alvarado protested unfailing friendship for +the peons and the Indians, grieved somewhat by their distrust of him, +but pronouncing his devotion to their welfare in no measured terms. In +his carrying out of his “socialistic” policies, he did not, however, +consult their wishes or even their possibilities of development. His +one panacea for the ills of the Indians was “land,” and land he and +his imported advisers were determined to give them, no matter whether +they wanted it or not. Never did the ideals of socialism, beautiful in +themselves, have an uglier distortion. + +“Land distribution” is, as I have said, the crux of the protestations +of all Mexican revolutionists. Upon the alleged land hunger of the +Indians the revolutionists have based most of their appeals for +foreign sympathy. The actual facts of the labor situation, in Mexico +and especially in Yucatan, are therefore worth brief description in +this connection. The so-called “peonage system” of Mexico goes back +historically to pre-Spanish times. It is based on the psychological +difficulty of obtaining continuous labor. Continuous labor being vital +to such an industry as henequen growing, there flourished in Yucatan, +previous to 1914, a system of indebtedness which was practically +slavery. Laborers on the plantations were allowed to get into debt in +order that they might be held on the plantations on the pretext of +working out the advances which were made from time to time by the +hacendados. These debts averaged about 200 pesos ($100) a man, and it +is undoubtedly true that the system was the origin of wicked abuses, +a plantation store credit system being devised to keep the peons +always in debt, and workers being sold by the head for their debts. +Confinement in barbed wire enclosures was common in some sections, and +altogether the picture of the Yucatan situation especially was a very +unlovely one. + +But the system of debt advances was really effectively abolished under +Madero, two full years before Carranza and Alvarado entered upon the +scene, and it is worth noting that the hacendados, many of whom had +fortunes tied up in peon debts, found themselves far happier to be free +from the system than were the peons. It is indeed questionable whether +the peonage system, as such (and where it was not abused), was entirely +distasteful to the Indians who were its victims. Lacking any ability to +save, the abolition of the system of debt advances wrenched from their +grasp the only possible form of enjoying the fruits of their labor +outside their usual hand-to-mouth existence. Under the old systems they +were able to have some of the good things of life by getting an advance +in money, which they spent gayly, careless of the future, and then +proceeded to work out the debt in the months or years which followed. +Basically, the system had its redeeming features, when considered from +the viewpoint of Indian psychology, even though the abuses were such +that its abolition was inevitable. + +Linked up with the peonage system was the land distribution question, +far too complicated for its origins to be gone into here.[6] In +Yucatan, the most heavily populated section is not the most fertile. +Henequen is not grown in the forests back from the sandy seacoast where +prehistoric civilization left the great ruins of a rich and glorious +empire, but on the seacoast itself. This virtual desert, extending in +some places twenty-five miles back from the coast, is the land which is +adapted to the growing of henequen, for a slow maturing of the plant is +vital to the creation of those long, strong fibers which constitute the +valuable portion of the leaves. + +This so-called desert land is sometimes capable, when first cleared of +brush, of one or even two croppings of corn. Then it must lie fallow +for many years before another food crop can be raised. The native +Indian, therefore, has little or no use for a small plot, or indeed +for the ownership of any plot of ground, unless he can crop it once or +twice and then sell it to a henequen planter, while the Indian seeks +other corn-lands elsewhere. If the government hampers him in moving +about, he prefers not to try to live as an independent farmer, but to +work on a plantation where he can get regular pay for cutting henequen +leaves, and also can cultivate a little corn-plot lent him by the +hacendado and renewed each year. + +Now the Indian, despite the fortunes which have been made by the +hacendados in the henequen business, has no interest at all in +becoming a henequen grower. He knows from experience that the value +of the leaves he himself produces are little more than what he would +be paid on an hacienda for cutting the hacendado’s own leaves, and +he knows that he has not the capital or the initiative to go into +hemp production himself. The result was that some years ago, when the +communal land was first distributed to the Indians, it was cropped once +or twice and then sold to the nearest hacendado to become henequen +plots. + +Sometimes indeed, the communal land was so worthless for corn that the +hacendados were allowed to take it over without payment or protest and +to plant it to henequen. This loss, from the Indian viewpoint, was +far from an unmixed evil, for the natives of the commune profited in +the gaining of an opportunity for assured livelihood close by their +homes--difficult enough except on the henequen farms, in the desert +sections of Yucatan. + +Henequen production is far more of an industry than it is a farming +project. Primarily, it requires from the planting of the shoots until +the first leaves are ready for cutting, eight years of continual and +expensive care, for the fields must be kept clear of brush and weeds, +the plants tended and those which die replaced with regularity. After +eight years of continuous outlay, the leaves are cut, brought into a +great industrial plant where machinery and many workers are required to +remove the pulp, to dry the hemp fiber on racks under the sun, to pack +it into 400-pound bales in hydraulic presses, and to ship it to the +distant American market. The agricultural end of the henequen business +is but a small item in its process, and no individual farmer, even if +he has moderate capital, can prosper on it. + +The land distribution planned by Alvarado was to be made from the +great henequen haciendas, and some of the oratory defending the +confiscation of those haciendas pointed out the fact that this very +land had been stolen from the Indian communes in years gone by and was +now being returned to the original Indian owners. That was interesting +to the pitying audiences of the Alvarado propagandists in the United +States, but it was of not the slightest interest to the Indians of +Yucatan. They had once owned that land, and had or had not cropped it +in corn once or twice. They knew quite well it was hardly worth the +trouble and the expense in taxes it would be for them to own it again, +especially as they saw the hacendados being skillfully put out of +business and knew that with their disappearance went the only market in +which Indians could sell the land after they got it, or the henequen +leaves if they raised them. + +Thus it came about that despite the apparent incongruity of the fact, +the Indians of Yucatan paid almost no attention to Alvarado’s land +distribution plans, listening to the alluring official announcements +with stolid indifference. They attended the festivals which accompanied +the distribution, but they took up no land grants. + +There were indeed, many Indians who actually took flight into the +interior of the state as a result of the efforts to force land upon +them. The Mexican Indian, of whatever tribe, in reality desires deeply +but one thing--to be left alone to pursue his half-savage life in +his own way, an aboriginal ambition which should not be difficult to +understand by those who know anything of the North American Indian +of the United States. Socialism, like the responsibilities of land +ownership, is beyond his ken and he literally ran away from the offers +of either in Yucatan. + +Some Indians, of course, remained, along with a great number of the +mixed-blood “slaves” who had been imported from the Mexican mainland +into the state during the boom period of the henequen business. These +were thoroughly “unionized” in the Mexican sense. That is, they were +forced to pay their poor little three pesos for a big red card which +proclaimed their membership in some union or other, were promised all +that the human heart could desire--and were allowed to subsist as long +as possible upon the promises. The unions were used to the double +end of ruining the capitalistic landlords and reducing the output of +henequen so that the price would go higher. + +On the plantations where these “unionized” workmen remained, the old +task system, by which each man cut from 2,500 to 3,000 leaves a day, +was abandoned for a regular “eight-hour day” in which the workmen did +as little as they cared to do, and worked, not under instructions, but +wherever they chose to work. As a result the cutting of leaves was +reduced fully one-half, and the plants near the roads were overcut +while those deep in the fields were allowed to blossom and go to seed. +Both processes killed the henequen, which has to be cut regularly and +skillfully in order to prolong its life of usefulness. For miles the +great pole-like blossoms marked the henequen fields like a forest, and +thousands of productive acres went to ruin. Thus Nature’s inevitable +process of flowering and decay marked, itself, man’s crass flinging +back of her riches into the dust from which those riches had come in +the long slow years of his care of her. + +Meanwhile, other forces had been at work, some building the pyramid +of mad ideas and madder methods, others undermining the pyramid’s +foundations upon the rocks of the conservative past or disintegrating +its mortar of imitation socialistic idealism. Of these forces, the +greatest was the financial cycle of paper money, “short” drafts and +towering mortgages against increasing stocks of unsold henequen. + +By 1915, when Alvarado arrived in Yucatan, the system of paper money +which Carranza used to finance his revolution had already engulfed +Mexico. Carranza had recently issued his famous dictum that if +Gresham’s law (one of the fundamental laws of economics, which holds +that bad money, in any quantity, inevitably drives out good money) was +interfering with the circulation of the Carranza paper, Gresham’s law +should forthwith be repealed by executive decree. Billions of Carranza +paper had been printed, and it was already the circulating medium in +Yucatan; gold and bank bills were in hiding. Alvarado decided that the +time was ripe for a currency of his own, and issued, before he had been +long in the state, the Reguladora paper money, ostensibly guaranteed by +hemp in storage in Yucatan and in the United States. By decree, this +money had to be received at the old value of the silver peso, two for +one American dollar. + +It was a beautiful idea, except for economic law. The bayonets of +Alvarado’s soldiers helped keep up values for a while, but slowly the +theory that power can achieve anything the “proletariat” wants was +blasted by fact. Alvarado had promised to redeem his Reguladora paper +in gold or in New York exchange, but he did not bother to back up his +promises by a limitation of the currency to the amount he could redeem, +so that at one time he had $34,000,000 in paper in circulation, against +henequen stores of half the value, stores which he could not liquidate. +The currency’s value dropped, cent by cent, then by groups of cents, +and finally it was almost waste paper, like that of Carranza. There was +not enough henequen in New York, nor enough gold in Yucatan, to redeem +the paper, and the political nostrum for the economic ill of bad paper +currency failed. + +The failure was colossal enough, in any case, without the financial +complication of the currency. Alvarado had closed the ports to all +hemp from the interior that was not consigned to the Reguladora. That +beneficent monopoly allowed no shipments by rail, and before he got +through Alvarado had to close the roads with soldiers, so that no +carts could reach the port. Meanwhile, he had been boosting the price, +deliberately and virtually by decree, until, as I have said, it +reached more than 19 cents, as against less than 7 cents a pound which +had been its price before the Reguladora took charge of the market. + +This raising of the price cut off a large portion of the market,--and +that had not been anticipated. Virtually all consumption of henequen +except for binder twine ceased. At 19 cents Manila hemp could +compete--and it is far better hemp. At 19 cents jute cord can compete, +and jute cord is soft and pleasant to handle, and where previously +henequen cord had been used for big bundles of newspapers and magazines +and mail, jute was substituted--and now the men who handle the bundles +of newspapers and magazines and mail refuse to go back to the rasping +henequen cord which cuts their hands so uncomfortably. + +The consumption of henequen was actually reduced to half by this +deliberate destruction of its market. In spite of the new low prices +to-day, this condition in the general fiber market combines with the +cutting off of the Russian and some of the other European demand to +reduce the world consumption of the Yucatan fiber to about 70 per cent +of what it was prior to 1914. All this loss the Reguladora had to take +up, in addition to the stores which it laid aside to push up the price. +Economic law was at work, and all the contentious statements that the +price was going up only in proportion to the rising costs the world +over was answered by the fact that henequen was driven out of the +general fiber market by other hemps which had increased in price, to +be sure, but had never approached the geometrical progression which +henequen assumed under the lordly sway of Alvarado’s corner. + +When all is said and done, however, it was Mother Nature and Gresham’s +law which finally broke the corner. Corners in the products of Nature +have a way of piling up unexpected responsibilities and finally loosing +unexpected forces which swamp the unwary juggler. So it was in Yucatan. +With about a year’s supply of fiber in storage in the United States and +Mexico, more than half of it mortgaged to American bankers, and with +about $10,000,000 in Reguladora currency in circulation with nothing +but photographs of gold stores to guarantee it, Alvarado’s henequen +corner went the way of all the corners of history. That was in the +spring of 1920 when, after a year of price fluctuation, Nature and the +eternal laws of economics began gently wafting the prices downward +until they reached the lowest level in fifteen years. Then it was +that the banking syndicate, which had loaned money against henequen +shipments, foreclosed on 250,000 bales in storage in New York, marking +the final chapter in the story of Alvarado’s Reguladora experiment. + +When the smash came, there was an Association of Henequen Growers which +had been begging in Yucatan and in the Supreme Court of Mexico for a +chance to take back their business. As the financial difficulties and +the financial needs of Alvarado’s henchmen increased, the Reguladora +had all but given up paying any money to the haciendas where the +henequen was produced. The mule that lived on sawdust up to the day he +died is a fable of ancient times, but even under such loudly acclaimed +“socialism” as that of Yucatan something has to be paid for a product +which is produced and exported. The growers had all but reached the +end of their resources, and Alvarado offered them only paper money, +which he would or could not change into gold drafts. So just before the +crash, to satisfy the clamor, Alvarado took his way to Mexico City and +royally presented the Reguladora to the Association of the Producers of +Henequen. + +The hacendados had hardly had time to look over the ruins when those +financial interests which had loaned money on hemp that was to sell +around 20 cents a pound foreclosed on those 250,000 bales in New York +and New Orleans, placing thereon a value of 5 cents a pound. Alvarado +was safe in Mexico City preparing to visit New York in an effort to +get a loan of a few hundred millions for the government of Carranza. +The hacendados held the sack, and watching the sack was a group of +financiers, including the Equitable Trust Company of New York, the +Royal Bank of Canada and the Interstate Trust Company of New Orleans, +the latter the Dinkins concern through which most of the loans on the +henequen had been placed. + +Down in Yucatan the hacendados had their farms back, the Indians +were returning at night to look things over and see whether the +“socialists” had retired far enough for them to return in safety to +their comfortable “slavery”--but nobody had any money. When Alvarado +left, the hacendados had inherited the Reguladora offices, and had +opened its money vaults. These vaults, photographs of whose gold stocks +had been circulated by Alvarado to sustain his paper currency, were +quite empty. The haciendas were in terrible condition, and there was no +way of getting funds with which to rebuild and replant them. The only +hope was for capital from outside--Alvarado’s “socialism” had passed on +its way. Of the possible sources of rescue, the chief was in the group +of unhappy banks in New York, New Orleans and Montreal, which were +already in the henequen business with their 250,000 bales of foreclosed +stock. The second hope was the International Harvester Company, which +needs henequen in its business. The hacendados chose the banks, and +the Equitable Trust Company, the Royal Bank of Canada, the Interstate +Trust Co., and the Comisión Reguladora (which still existed in name if +not in spirit) formed a company, and taking the four initials, called +themselves the Eric Corporation. + +There was much rejoicing in Yucatan, for the Eric was going to lend +a few more paltry American and Canadian millions and reëstablish the +great state industry. The Reguladora (now consisting of the hacendados) +turned in some 300,000 more bales of hemp that were stored at Progreso, +the Yucatan port, as their part of the capital stock of the Eric, and +the hacendados went back to work. + +Now one of the peculiar things about “economic ruin” is that it +seldom ruins a business--individuals are the only victims. Yucatan +was devastated, many thousands of acres put on the non-productive +list. There was no money to pay labor or to finance the crops, but the +henequen business went on. To all intents and purposes about all that +had happened was the elimination of most of the surplus planting which +there would have been if all had gone along properly and there had been +no Alvarado to corner and destroy the market. Henequen kept on growing +on the haciendas and, despite increased costs of handling, it continued +to move to market. + +Don Avelino Montes, a Spaniard who had been the chief buyer of the +International Harvester Company, returned from his exile in Cuba and +resumed buying. Don Arturo Pierce, the honorary British vice-consul who +did the buying for the Plymouth Cordage Company, abandoned consuling +and returned to the henequen trade. The price of Yucatan hemp kept +slumping, but to the surprise of the Eric people, the demand was +supplied with new hemp, and the Eric’s stocks of old hemp diminished +but slightly. The money to rehabilitate the Yucatan haciendas was not +forthcoming. The old hemp stock had to be sold first, and the wretched +hacendados refused to coöperate and let the Eric unload. + +Henequen deteriorates, and also it requires insurance, as the many +fires in Progreso and New Orleans at the time testified. The cost +of holding the half million bales of henequen of the Eric is about +$2,500,000 a year, and the price at which it was bought in, plus +insurance, represents a cost of about 8 cents a pound. The price of +hemp had been stabilized at that very figure by Señores Montes and +Pierce, with some outside assistance from New York brokers, but the +sales were made in Yucatan, of new hemp. So the Eric, in righteous +anger, cut the price from 8 cents to 7, and then to 6. The price of +new hemp also fell, and the hacendados, partners in the Eric, wailed +at the evil which was being done them. However, they continued to sell +the new crop at the new price, to the Harvester and the Plymouth +and Henry Peabody & Co., and Hanson and Orth, while the gradually +deteriorating stocks of the Eric went begging. The price was finally +cut to 5 cents, by the Eric. Yucatan has met this price, too, with new +hemp, and because it is still possible to make money out of henequen +with the price at 4 cents in New York, it seems likely that Yucatan +will continue to grow henequen, and to sell it. Meanwhile, however, +the business doctors of the Obregon administration in Mexico City at +one time succumbed to the pressure of the unhappy hacendados and even +agreed to try the “Reguladora” experiment all over again, with the +central government buying 60 per cent of the henequen crop at 6 cents +a pound, and again “controlling” the market, a step in the spiral of +destruction which had but a brief life and little significance. For +the story of Yucatan is written and the state and its great industry +are to-day being ground between the wheels of the “capitalism” which +the beautiful theories of Yucatan’s “socialistic” autocrats sought to +destroy. + +This is the outcome of Yucatan’s experiments in Alvarado’s brand of +so-called socialism. The price of the fiber is back to less than it +was before the inflation began, the production has been cut from +1,000,000 bales in 1914 to less than 700,000 in 1919, a decline of 30 +per cent, while, taking the potential production from the plantings +up to 1914, the present production is about half of what it would have +been if Alvarado had never come to Yucatan. The haciendas are back +in the hands of their original owners, the market is in the hands +of foreign capital, and foreign capital is fighting over the spoils +with what seems to the Yucatecans utter and cruel disregard of the +amenities of gentlemen. The $112,000,000 squeezed from American farmers +and the other untold millions taken from Yucatan by loot, by false +prices in “coöperative stores,” by freight rates on the graft-owned +railways, and all the other means used by Alvarado’s retainers, have +gone to the enrichment of his group and to the upkeeping of the +Carranza government. No noticeable part of it has remained in Yucatan, +and save for increased wages all around (and the world has surely +learned that this is not prosperity) no possible profit has remained. +The spiral cycle is complete, and none has gained, not even the +predatory capitalists, who are unhappily cutting each other’s throats +in an effort to solve the problems into which they were swept by the +machinations of Alvarado and his henchmen. + +To-day Yucatan is not free from the domination of the “socialists,” but +that domination is political, marked by those outrages which have come +to be merely a part of politics in Mexico. Elections are held from time +to time, elections wherein two parties of socialists alone confronted +each other. The battle is bitter, as battles are when brothers are the +contestants. There is still killing and loot, and women and children +suffer death and worse in the solution of such glowing political +questions as whether, we might say, the flag of Yucatan should be all +red or merely red with a black bar across it--its problems are daily +forgotten, for the real issue is only to find out who should have the +next hand at the graft. Socialistic, to be sure, because all Mexican +manifestations to-day are masquerading under the name of socialism, +but quite as little in tune with true socialistic ideals as a battle +between two factions in Tammany Hall over the control of New York +politics would be socialism. + + +FOOTNOTES: + +[6] Both peonage and the Mexican systems of land distribution are +discussed at some length in _The People of Mexico_. + + + + + CHAPTER VIII + + THE ROMANCE OF MEXICAN OIL + + +When you cross the Mexican border at Laredo, oil enters your +consciousness--and your clothes. It is everywhere, the thick, odorous +_chapapote_ which furnishes the fuel for Mexico’s locomotives, the +energy for every Mexican industry which has no water power, the +pavements for her streets, and, I am still convinced, the heavy +lubricant with which the sandal-clad brakeman of our train eased an +incidental hot-box. In Tampico, whence comes all the oil of Mexico, the +heavy, black “crude” is even more ubiquitous. It “tars” your shoes when +you walk abroad; it decorates your clothes when you ride in anybody’s +motor car or motor boat; it oozes between your toes and sticks in your +hair when you bathe at the beach. + +But the physical presence of oil is as a whiff from the dead well at +Dos Bocas compared to its spiritual domination in all Mexican affairs. +Oil is the greatest--I had almost said the only--wealth of Mexico +to-day, its possession the issue of one of the mighty diplomatic +battles of recent times, while the taxes and graft of it have fed the +wellsprings of ten years of devastating revolutions. + +Far and away and by many fold, oil is the largest single item of +export of Mexico, and the varied needs of the oil industry and of the +beneficiaries of that industry dominate the imports as well. To Tampico +go shiploads of steel, machinery and supplies, and trainloads of soap +and shoes; the factors which build civilization go chiefly and all but +alone, in Mexico, to the oil fields. + +Oil dominates the political life of the country not because oil +companies or oil millionaires seek to control the Mexican government +but because the vast unbelievable wealth which is pouring into the +coffers of that government in taxes and in tribute makes revolution a +game the stakes of which eclipse any sum or any potentiality of wealth +or power which has ever been known in Mexico. + +Oil is the inspiration for the “nationalization” policies which, +forged by foreign radicals and given edge by Mexican cupidity, the +Carrancistas wrote into their Constitution of 1917. This policy of +nationalization, the decrees, the laws, the taxation and the graft +which have come in its train, have brought into the field of diplomatic +controversy the whole problem of the right of a government to enforce +radical, socialistic or, if you will, bolshevik policies against +foreign interests which may have entered a country and developed it +under older, more conservative ideals and systems of government. + +For the oil industry of Mexico is overwhelmingly a foreign enterprise. +American and British and Dutch are the flags which should fly from the +oil derricks, for neither Mexico nor Mexicans have had a hand worth +the naming in the opening of the nation’s richest treasure-house. The +search for oil in Mexico has taken on the nature of a race, a battle, +between British and American oil interests, a battle not without its +tremendous significance in the world oil situation. But behind this +struggle, which is still and, we may hope, will remain a friendly one, +loom controversies which are vaster than Mexico or England or America, +problems on whose solution the very future of our civilization depends. + +For the real battle in Mexico is not between the two great Anglo-Saxon +powers, but between the powers of light and the powers of darkness. In +Mexico’s oil fields to-day is being settled the question of whether +enterprise shall have the right to bring the riches of the earth +to the aid of humanity, of whether industrial power belongs to the +backward people who by accident find that power in their inept hands, +or to those who can develop and raise it up to the service of mankind. +Upon the issue in Mexico depends not only the usefulness of all the +petroleum resources of that country, but the future development of +oil in Colombia, Venezuela, all South America, all Asia, all Africa. +And the future of oil development in those lands is the future of the +world’s oil supply, for there, alone, remain stores sufficient to meet +the multiplying needs of the world. + +The solution of this question is vastly complicated. Within the +oil situation itself are many problems such as those just noted. +Bearing upon it is the tangle of cross-purposes, indirections and +varying psychologies. That solution is made all but impossible by the +conditions of Mexico to-day, by the flabby weakness of the rulers of +the Mexican people, by their blindness and selfishness. It has been +jammed, time and again, by the failure of the oil companies and their +representatives to assert their rights with a skill equal to that of +the Mexicans in casting up mountains of controversy out of mole hills +of technicality. + +But the story of Mexican oil is not all ugly calling of names, not all +mere hopeless tangle. The history of its discovery and development is +rich with color. The romance of an oil field, like the romance of a +gold camp, is always a thrilling tale. But the story of Tampico has +this other element, for it is indeed the great romance of our race, +the tale of the white man round the world, the building of gigantic +enterprises, the harnessing of unknown forces, neglected for centuries +by apathetic natives, unlocked by the vision and the enterprise of the +Anglo-Saxon. + +Oil began with Tampico, but the story of Tampico antedates oil. It +goes back to the late 80’s, when one of the great railway builders of +America’s youth left Kansas for Mexico. A. A. Robinson, who surveyed +and built the Santa Fe Railroad from the Kansas prairies to the Pacific +Ocean, who swung the track of the Denver and Rio Grande Railroad above +the rapids of the Royal Gorge, was also one of the great builders of +modern Mexico. Leaving the Santa Fe in 1889, he became president of +the Mexican Central and built almost the whole of this first standard +gauge line in the country, its branches and tributaries toward the +rich granary of Mexico about Guadalajara in the west, to the mines of +Pachuca in the mountains and to Tampico on the Gulf of Mexico. + +Tampico, a wretched, fever-ridden village beside a beautiful river, +was no port in those days. The railroad which brought Mr. Robinson to +Tampico brought also the engineers who built the great jetties which +cleared the bar and opened Tampico to the world, carried the ores of +Pachuca to their markets and began the conscious development of what is +now the busiest seaport of Mexico. The railroad company built and paid +for the jetties, and under Mr. Robinson a short-line to Mexico City +was surveyed and construction was begun, to be halted, in 1908, by the +government merger of the lines. + +All this seems to lead far away from oil, but it was in 1900, two years +before the jetties were completed, that Mr. Robinson invited Edward L. +Doheny and his partner, the late Charles A. Canfield, to Tampico to +develop oil wells. Doheny, who had made himself famous and unpopular by +discovering petroleum in the middle of Los Angeles, came to examine the +seepages of which Robinson had told him in the hope that he might find +an oil to help the Mexican Central solve its fuel problems, for the +coal of Mexico is scarce and poor, and all the fuel for the railways +had to be imported. + +Mr. Robinson agreed to buy the oil for fuel if Mr. Doheny developed +it, and it was this encouragement, this faith of two great believers +in Mexico, which brought about the discovery and the later development +of Mexican oil. The board of directors for the Mexican Central later +repudiated the Robinson contract, but the development of the Mexican +oil fields had been begun, and it has never stopped from that day to +this. + +It was in 1905 that I first visited Tampico. I was the guest of Mr. +Robinson, and as we looked out, one day, over the marshes along the +river which runs past Tampico to the sea, six miles away, he told me of +his dreams for his port, of the day when not only the Tampico side of +the river, but the barren jungle on the other bank would be lined with +wharves and great steamers, greater than any of the coasters and tramps +that to the number of half a dozen a month were then carrying coal and +ore and, amusingly enough as we look back on it now, crude oil from +Pennsylvania for use in Tampico’s one industrial establishment, the +Waters-Pierce Refinery. + +I visited Tampico twice again, the last time in 1908. And then this +year! It was as if the dream of the builder of the port had come true +since the setting of yesterday’s sun. To-day the river is lined, from +its mouth all the six miles to Tampico and above, with wharves and +warehouses and hundreds of great tanks of oil, and throughout all this +length are ships, tankers and cargo boats, while on the hills above are +refineries and modern towns, and at night the lights are like those +of great cities. The dream, indeed, of a builder of civilization, of +civilized Mexico, has apparently come true. + +A. A. Robinson is gone, laid away with his honors and his vision +these four years. But still there is that other American, who twenty +years ago rode off into the jungles of the coastal plain, saw with +his own eyes the thick, slimy puddles of asphalt at Ebano, and there +drilled his first wells. Years later, after his railway contracts were +abrogated, seeking lighter, better oils, Mr. Doheny went, with the +frontiersman’s unquenchable optimism, nearly a hundred miles farther +into the jungle till he heard the unforgettable baby murmur and saw +the unforgettable bubbling spring of viscous black oil of the great +seepages of Cerro Azul, and there located what was to become the +greatest oil well in the history of the world, the Cerro Azul No. 4. + +Oil is the most fascinating of all the treasures of earth. No geologist +has ever approached the solution of either its source or the contours +or formations within which it lies. An oil spring such as that +wonderful bubbling pool at Cerro Azul may mean the presence of a great +reservoir of oil directly beneath or it may mean that the oil has come +a dozen or fifty or a hundred miles along a crack in the mother-rock. +Experience, faith, intuition, these determine the location of a well. +It was these factors that Doheny brought with him to Mexico, for the +fields which he finally drilled and proved had been rejected by many +geologists before he came and after. + +At Ebano, a way-station on the Mexican Central a few miles inland +from Tampico this pioneer of the Mexican oil fields found his oil and +developed it, and his success brought hundreds of other prospectors to +Ebano in 1900-1902. But Ebano oil is heavy with asphalt, and it was +dangerous to handle in the crude burners of the time because its fumes +ignite at low temperatures. Thus, although it is rich in lubricating +oils, it was not the petroleum which the world wanted in that day. With +his contract with the Mexican Central abrogated, virtually without a +market excepting for asphalt paving in Mexican cities, Doheny turned +southward in search of lighter oils. + +His trips into the swamps and forests of the _huasteca_ or coastal +plain led him to the great seepages at Cerro Azul, sixty miles below +Ebano. It also took him to Juan Casiano where he located his first +wells and in 1908 opened the first of the great producing pools of the +Tuxpam district. Drilling and exploration went hand in hand and not +only Doheny but the British interests of Sir Weetman Pearson (now Lord +Cowdray) and other American companies began to make this field famous. + +Since that time the story of the Tampico oil fields has been the +story of the Americans and other foreigners who followed them. No +Mexican name and no Mexican interest are connected with the vast +development which has come. Yet so vast is the busy zone of production, +so tremendous and so varied the forces and elements working there, +that one feels something false in this appearance of preponderance +of individuals and of foreigners in the epochal industry of Mexico. +When, however, one glimpses the long diplomatic struggle, the legal +tangle, the endless problems which make the Mexican oil question so +complicated, one finds that in every phase there are always only +these foreigners on the one side and the predatory, scheming Mexican +revolutionary leaders on the other. Never is there a Mexican on the +production side, never a foreigner on the side of the elements which +retard production. + +It was Mr. Robinson who opened up Mexican oil, and it was Doheny and +other early foreigners who first dared drill, and the foreigners alone +who in the years past have dared to put millions into pipe lines, +storage tanks and wonderful fleets of oil-carrying ships. Only they +dared or would dare to go into the sleepy villages of the Vera Cruz +plains and pay fifty cents a day to peons who had lived for generations +on less than a quarter as much. Only the foreigners dared give their +labor a decent wage, dared teach their men to be worth more and more +until to-day they pay the commonest peon the equivalent of two American +dollars a day. Only these foreigners dared believe in Mexico, dared +insist on the good faith of all her faithless governments, dared to go +on with their work when all else in Mexico stagnates and cringes before +the continuing revolutions. + +And on the other hand are the Mexicans who govern the land, making it +their chief business to bait and loudly curse these same foreigners. +The name of the foreign oil men is anathema in Mexico to-day, and the +busiest game of any Mexican official is the oratorical denouncing of +the sponsors of the industry. But, we cannot forget, these Mexicans +have not and do not turn a finger to the replacing of great foreign +activity by any constructive form of Mexican enterprise. + +At basis the difficulties of the oil companies and the Mexican +governments are psychological--and an understanding of those +psychological bases is the rarest flower in the intellectual nosegay +of most of those who discuss either Mexico or oil. First of all is +the companies’ belligerent insistence on the principles of vested +rights as the first and only basis for the oil discussion--naturally +distasteful to those whose single idea is to upset those rights. +Another psychological element is that the foreigners’ very respect for +law and the continuity of government and their insistence that Mexico +live up to their own ideals is in the first place quite beyond the +conception of the Mexicans in power to-day and in the second place such +an attitude is inevitably maddening to the weaker brother whom it seeks +to benefit. Because the foreigners believe in Mexico, the Mexicans will +not believe in the foreigners. + +Another disturbing factor is the very success of the oil companies and +of the foreigners whom they employ. I have told, above, something of +the picture of the Tampico that was and of the Tampico that is. It +has changed in yet other ways, and most of all in the makeup of her +population. + +In 1908 there were perhaps two score Americans and English in the +town, and the chief industry of the place was--tarpon fishing! To-day +there are 8,000 Americans and a thousand British and Dutch, and the +swaggering, free-money, noisy, busy atmosphere of the frontier, of +the oil fields, of the white man on his bully-ragging, destructive, +inconsequential “education” of the dark brother round the world, +permeates the place. Its influence is not academic, but somehow one +feels that Tampico is a monument to the genius and faith of the +Americans who made it great. The restless power is there, the restless +making over of the world that it may be a better place for the white +youth of the future to stamp about in, for the dark brothers to build +their new homes in. + +Yet strangely enough, if you will, it is to my mind largely because +of this same energy, the achievement which this spirit indicates and +predicates, that the difficulties of the foreign oil companies in +Mexico have been the sort they are. Their persecution has sprung from +the realization of the Mexicans that these Americans, these English, +these Dutch, are doing in Mexico and for Mexico what Mexicans can +not, dare not, do. The Mexicans from generals to peons, are frantic, +baffled, rabid, at the wretched Gringoes who dare to pour their +millions out to drill wells, to build pipe lines and terminals and +ships, to take and to convert this black and liquid gold from the soil +of Mexico. + +Of the hundreds of wells drilled in the Tampico-Tuxpam fields, some +of them the veriest “wildcats” on the flimsiest of chances, hundreds +of them as sure as opening a bank vault, only a half dozen, and none +a “wildcat,” have been drilled by Mexicans as individuals or in +corporations, and not a single ship, not a single storage tank, not +a mile of pipe line, is Mexican. Were the Mexican government to take +over the administration of the oil fields to-day, drilling would cease +utterly, to-morrow development would stop and when, a year hence, +it became vital to open more wells, the event would be marked by +government ceremonies and stifling graft. + +Every one who knows Mexico knows that this is the truth. The Mexicans +themselves know it, and from the Tampico policeman who howls in +outraged anger when an American motorist refuses to be disturbed by +official anathemas, up to the presidential secretaries who devise +complicated and childish schemes to force the oil companies into +recognizing the dignity of Mexican sovereignty, the whole attitude +toward the oil business has been fraught with effort to maintain that +hazy halo of the weakling, delicate “sensitiveness,” national pride, +_amour propre_. + +When I left New York to study Mexican problems for the present writing, +I was convinced that the full facts of the case, on both sides, were to +be found in the United States; Washington was indeed the battle ground +of lawyers and diplomats. Not until I reached Tampico, however, not +until I went out to the oil fields, did I realize that the real problem +is not the question of diplomatic controversy or commercial adjustment. +There, on the long roads, where but one _peon_ of all the thousands +whom we passed, took off his hat to the white _patrones_, as every +one would have done twelve years ago, I found the touchstone. I knew +then why reason will not prevail, why justice is non-existent, why no +white man has yet been able to feel firm ground beneath his feet in the +discussion of the oil problems. These problems have had their rights +and wrongs, as we shall see, but I think that the great difficulty we +at home have had in believing that our own people could be right has +been our inability to conceive how, being right, the Mexicans could be +so hostile to them. + +This, I think, is the point of departure in our misunderstanding of the +Mexican situation, especially as it applies to oil. Mexican jealousy +and Mexican realization of the weakness of the national psychology +in great enterprise have set Mexico frantic with the success, the +triumph, the apparent imperturbability of the great foreign oil +companies. This alone has made their hostility to the American +drillers, linemen and engineers who night and day, month after month +through the years of the war, kept the lines open, the oil flowing. +Unarmed, and slaughtered by the score from ambush, grim, unkempt, +often happily drunk in town, these frontiersmen added their bit to +the fire, to be sure. But note this--it was not the white man’s rough +assertion of superiority or the companies’ “tactless insistence,” but +the Mexican’s conception of his own inferiority, personal, commercial, +political, which lit the flame and kept it burning. + +The world has entered upon a new industrial era, the age of petroleum. +The commercial struggle is to-day not the war for markets, but the race +for oil lands. And of all the petroleum fields known to exist, those in +Mexico are the greatest in actual production, the greatest in potential +extent, and the most favorably situated for distribution--all vivified +by the greatest individual oil wells in the records of the world. + +The story of the development of that oil field is linked with the +history of Mexico, inexorably, inevitably a part of it, influencing it, +all but dominating it. + +The first oil well in Mexico was brought in in 1900; production +began on a commercial scale in 1903; about 1904 a British company +secured its first “concession” for oil drilling; in 1905 the status of +petroleum as belonging to the owner of the surface land was definitely +settled, and development began on a large scale; in 1912 the Madero +government established, over the mild protests of the producing +companies, the principle of special taxation on the oil business; in +1914 President Huerta extracted 200,000 Mexican pesos from an American +oil representative in Mexico City, and the oil company, under advice +of the Department of State, repudiated his draft and paid the money to +Carranza; in 1914 the principle of “shaking down” the oil companies +was originated by Candido Aguilar (later son-in-law of Carranza), who +made a mild $10,000 collection; in 1915 Manuel Pelaez made his first +call for tribute, some $1,500, under the exchange conditions of the +day, which the companies paid with the advice of the American State +Department and the American Ambassador, a precedent which later netted +Pelaez a regular $30,000 a month; in 1915 Carranza began to devote the +brains of his finance minister, Luis Cabrera, to devising oil taxes, +with the result that to-day the foreign oil companies pay a total of +nearly $4,000,000 a month, derived from export taxes on the product, +stamp taxes on their business, occupation taxes on their offices, +harbor taxes on their ships, customs duties on their supplies, +etc.; in 1916 Carranza issued the decree requiring foreigners who +did business in Mexico to renounce their rights of recourse to their +home government; in 1917 came the new Mexican constitution declaring +all petroleum in the subsoil the property of the nation; in 1919 the +drilling of new wells was stopped unless the companies agreed to accept +this principle of nationalization; in 1919 the second of the big oil +pools went to salt water and the need of new drilling to keep up the +supply of oil (and the Mexican taxes) became imperative; in January, +1920, temporary drilling permits were issued by Carranza; in May, 1920, +Carranza was overthrown and murdered in the revolution of Obregon, said +to have been financed by certain oil interests; in 1921 Obregon doubled +the oil taxes, bringing about a shutdown, temporary but salutary; in +1921 drilling is going on, however, and the shipment of oil continues. + +While drilling is going on in small sections in spite of obstacles, +the full development of the petroleum fields of Mexico waits on the +final decision of the confiscatory provisions of Carranza, whose dead +hand still guides the policies of his successors along the road of +anti-foreignism. In 1921, then, the oil companies are still uncertain +of their status, still the objects of astonishing taxation, still +subject to government annoyance and graft, still buying, in taxes and +annoyances, the “privilege” of working their properties. + +The plants of the foreign companies are probably the greatest +installation in any single oil field in the world. The investment in +pipe lines, pumping stations, storage tanks, refineries, terminals and +ships represents close on $750,000,000; the length of the 161 pipe +lines (practically all of them eight or ten inches in diameter) totals +nearly 1,000 miles, while nearly 1,500 steel tanks, with a capacity of +60,000,000 barrels, furnish enough storage to fill a thousand ships. +Through the pipe lines can pass, under high pressure, 750,000 barrels +a day, although the average production for 1920 was about half of this +amount. + +In the Mexican fields in April, 1920, the latest date for which figures +are available, there were 304 wells in production, 148 located and 123 +drilling. The total of commercially unproductive wells to that date +was 464, including only 35 which showed oil in too small quantities. +Three-fifths of all the wells drilled in Mexico have been dry holes, +and to-day of 1,113 wells drilled and projected, only 75 which have +actually flowed oil have run out of production. These last, however, +include some of the greatest in the history of the petroleum industry. + +The vast investment and plant in the Tampico-Tuxpam fields produced +in 1920 over 140,000,000 barrels of oil, one-fourth of all that +was produced in the entire world, equaling some 40 per cent of the +production of all the fields in the United States. The 1920 production +was nearly five times that of 1913, when less than 26,000,000 barrels +were extracted from the Mexican wells, and when Mexico’s total oil +output was only one-ninth that of the United States and contributed +less than one-twelfth to the production of the world. The growth has +been steady and by tremendous strides, for when the pressure of war was +on, the men who were taking out Mexican oil built up a production which +between 1916 and 1917 brought an increase of 40 per cent and began a +development that despite superhuman difficulties gained such momentum +that between 1919 and 1920 the increase was 60 per cent. + +On your map you will easily find, on the eastern shore of Mexico, the +city of Tampico, located in the center of the palm of the hand with +which Mexico grasps the great Gulf. A little to the south you will +find, with difficulty, the town of Tuxpam, midway between Tampico and +Vera Cruz. From Tampico directly south to a few miles west of Tuxpam +runs the “line” along which lies virtually all the oil yet developed +in commercial quantities in Mexico. The “line” is thirty-five miles +long; the great producing territory never extended over twenty miles; +momentarily the section which is giving the oil of the Tuxpam district +is along ten miles in the middle of the “line”--and the territory is +hardly a half mile broad at its greatest width. This section produced +in the past ten years 500,000,000 barrels of oil. In 1920 it produced +about 140,000,000 barrels, close to one-quarter of all the oil taken +from all the wells in the world. + +Now trace the “line” north to Texas and Oklahoma--it is an extension +of the great mid-continent field of the United States. Now go south, +through the old Furbero field, swing a little in toward the Gulf, +and south of Vera Cruz, on the Isthmus of Tehuantepec, you will find +Minatitlan, the site of early drillings, and of the refinery of the +Mexican Eagle Oil Company. Still south, on the “line,” and you will +find, if your map is large enough, the village of Macuspana, in the +state of Tabasco. Here oil of a grade so fine that the natives burn +the crude seepage in their lamps has been oozing through the soil for +centuries, and here, long ago, the British drilled many test holes. The +“line” runs true, skirting the Gulf of Mexico. + +Still more. There are oil seepages on the West Coast, an extension, +perhaps, of our California fields. Other indications have been found, +even far inland, and indeed on the Gulf side, the “line” does not by +any means cover the seepages, even of the coastal plain. All this +section, off into the interior toward the states of Puebla and +Hidalgo, has been leased for oil. But production sticks to the “line.” + +The Tuxpam field, the heart of the “line,” will ultimately go to salt +water. Of this there is no question. Every pool of oil that has been +drained--now three in number--has given its 100,000,000 barrels, and +the steaming, brackish water, still under terrific pressure, has wiped +out the property, often between sunset and sunrise--a few hours between +50,000 barrels a day and nothing. Dos Bocas at the northernmost end +of the “line,” came in on July 4, 1906, hailed as the greatest well +of history, blew out her casing, caught fire and burned for months, +a torch of gas and flame 850 feet high, till (if it was oil and not +gas she burned) she had easily spent her 100,000,000 barrels. Another +great British well, Portrero del Llano No. 4, flowed eight years, +giving nearly her 100,000,000 to industry, and went to salt water over +night. The Casiano field, of the Doheny interests, paid a similar toll. +Cerro Azul No. 4 of the same company came in at a full rate of 162,000 +barrels a day. She has never been allowed to flow full, for the whole +field is owned by the company, and the pool is considered safe from +drainage. Further south, the Doheny companies have, in 1921, opened +another vast field, the Chapapote Nuñez--but that, still, is “on the +line.” + +During the past year the Naranjos field has been showing salt water; +the Chinampa, with a hundred wells located on a relatively few acres, +is being drained at top speed, and salt water has been cutting closer +in at its edges. To-day the Zacamixtle camp, the last of the “line,” +which was drilled like mad by scores of crews putting down wells that +cost in Mexico $100,000 each, has been narrowed to a strip of an oil +river only a few hundred yards wide. + +With Chinampa and Zacamixtle gone, only the Cerro Azul, the sixty +square miles of the Chapapote field, and the adjacent Toteco pool will +remain on the “line” with no reserves save to the south, in a territory +recently proved by the “Toteco” and “Chapapote” districts, or to the +north, in the Tampico or Panuco field proper. This last is a heavy oil +section, and here, too, the largest portion of the territory is owned +by the Doheny companies. + +Why, with this dwindling field, this steady reduction in reserves, +has there not been more development in Mexico? You know the basic +answer--revolution. But through revolution and graft and theft and +murder the American operators in the oil fields, working for British +and American companies, have kept on the job. Revolution is not the +only answer. + +Carranza, when he became president of Mexico, cast envious eyes toward +the oil fields, and sought to make them his own, for loot and for +graft, and not for conservation, be it noted here. He “nationalized” +petroleum, by his new constitution, and tried to force the companies +to give up their properties. They did not surrender, in fact or in +principle, and for five years have fought for their rights, and for +what they believe is the hope of oil development in all the backward +lands of the globe. + +In 1919 Carranza stopped the drilling of new wells, in an effort to +force the companies to submit to his decrees, and not until Tepetate +and Juan Casiano went to salt water and the tax returns of nearly +$30,000,000 a year (at that time) were direly threatened, did he give +temporary permits for drilling. He might fight for the nationalization +of the oil, but he was routed by the danger to the vast sum upon +which he ran his government and upon which his generals and favorites +fattened and grew rich. + +Thus in the oil fields drilling has been resumed. But off the “line” +there is virtually no drilling, none of the “wild-catting” which is the +life of the oil industry. Until the new government, if it ever does of +its own free will, loosens the death-grip of Carranza, the oil industry +will remain paralyzed and confined to its narrow, shrinking bed between +Tampico and Tuxpam. + +But why does Mexico go on? Why does she see so little of the way before +her? The situation is complicated by many factors, two of which stand +out in relief. These are the support given the Carranza ideas first by +the British companies and second by some new American companies. The +British needs in Mexico have from time to time been identical with the +American, and then the two have worked together, but the British occupy +a peculiar position, going back to the Madero revolution of 1910-11. At +that time the Mexican Eagle company (which is a Mexican corporation) +was caught with a number of the old Diaz “reactionaries” as its company +officials, and it was also the holder of the hated Diaz “concessions.” +As a result it had to walk the chalk line very carefully under both +Madero and Carranza, a condition which has always made its position +weaker than the American. The large local business of the Eagle +Company, in refined gasoline and oils, as well as in fuel oil, has also +complicated the matter. It was due to these and similar factors that +the Eagle Company placed itself under the “protection” of the Carranza +decrees when they were first issued, although with protests, both +legal and diplomatic. With a single American exception, the English +interests were the only ones which gave any comfort to those early +Carranza plans. Upon their support the former president built many of +his subsequent activities, including the ruling on drilling permits. +He gave these permits to the Eagle Company without conditions, at the +very time withholding them from the “unfriendly” Americans under a +demand for a written waiver of all protest against future petroleum +legislation. + +The second form of support which the Mexican governments obtained is +more recent, and more complicated. Under the Carranza decrees oil lands +were open to “denouncement” (or filing of claims) and the taking out +of a “denouncement” even to protect one’s own property was taken as an +unqualified recognition of the right of Mexico in confiscating the oil +rights of that property. The American and British companies united in +an agreement not to denounce their own lands and not to buy or lease +denouncements upon any other lands. + +In 1919, some new American interests, which had had other experience +in oil, entered the Mexican field. They spent some $500,000 in looking +up titles to the properties and leases held by the old companies. They +found many defects, for the inheritance laws, the poor records and the +negligible value of the properties as farm lands make questionable +titles the commonplace of the oil game in Mexico. Where there was an +apparently defective title, these interests acquired the outstanding +lien, and so laid claim to some of the finest producing lots. + +So far the plan was a not unexpected move toward getting a hand in +the oil game, a chance to sit in with big stakes alongside the big +companies. The new elements, however, next “denounced” their new claims +before the Carranza government, thus placing themselves quite outside +the old-crowd oil camp. This “denouncing” of their properties brought +them many favors from Carranza officials, but it made negotiation with +the old companies difficult. + +The Mexican oil problem, in its simplest, is three-fold. It has to +do, first, with the nationalization of the petroleum in the subsoil, +which threatens to wipe out vested property; second, with the question +of taxation, which may at any time, and indeed actually threatens to +become confiscatory; third, with the problem of concessions which are +to-day the most obvious form of political graft and to-morrow may +precipitate a Mexican war over petroleum rights. + +First, the nationalization of petroleum. The Constitution of 1917, +adopted by Carranza, and continued by de la Huerta and Obregon, +definitely declares petroleum the property of the nation. In the grants +of land made by the Spanish crown (the basis of all land titles in +Mexico to-day), gold, silver and other metals were especially reserved +as the property of the king, and in colonial times and since have been +worked only by special permission or grant under “denouncement,” quite +independently of the owner of the land. Neither coal nor oil was known +to commerce in Spanish times, but in 1884, when the mining laws were +revised, the Mexican government as inheritor of the rights of the Crown +of Spain and retaining, as it did and does, the royal control over gold +and silver, specifically stated that coal and oil belonged to the owner +of the surface. This was confirmed later in the mining laws of 1892. +In 1905, after oil was discovered and certain concessions for drilling +had been issued to Sir Weetman Pearson (now Lord Cowdray), head of the +Mexican Eagle Oil Company, an effort was made to have oil declared +the property of the nation, like gold and silver, and thus subject +to concession and denouncement. This was opposed by the American +interests, which held no concessions. The issue was decided virtually +unanimously by the Academy of Jurisprudence, and in the mining laws of +1909 the title to oil was definitely and unequivocably vested in the +title to the surface soil. + +Until 1917, the vast development of Mexican oil fields went on apace, +based on the old property rights and apparently safe from molestation. +Carranza switched the matter completely around by the simple expedient +of adding oil to the list of minerals which are national property and +placing the new ruling in that famous Article 27 which contains most of +the anti-foreign provisions of the new constitution. + +The Mexican defenses of this action are two. The primary thesis is +that the subsoil has always belonged to the government, whether king +or republic, and that it was beyond the power of ministers or courts +or legislatures to alienate those rights. In other words, Mexico is +only “taking back her own.” The opposition to this is on the basis +of vested rights, on the long periods during which the owners of the +lands had actually enjoyed possession of the subsoil, paying taxes +on full valuations, and on the virtual obligation of contract of all +Mexican governments to support developments under the laws of their +predecessors. + +The other contention, more general and yet with a stronger appeal to +modern radicals, was that such nationalization was in line with the +trend of the times, a trend later manifested in the Russian revolution. +Candido Aguilar, then Carranza’s foreign minister, gave voice to this +phase in his note of August 12, 1918, to the British Foreign Office, +where he stated that “the modern conception of property is that it is a +social function bound closely to the prosperity of the State.” + +Both these contentions might in fact be worthy of consideration if +the government of Mexico were of a character to be trusted, if it were +indeed genuinely devoted to any sincere ideals of social reform, if it +were truly interested in the conservation of the nation’s resources for +the benefit of the people. But the Mexican governments have been none +of these things, truly believe none of these things. The radicalism +of Mexico, the socialism of Mexico, are means to an end, not ends in +themselves, means to power and position, for loot and for the pelf +which goes into private pockets and not even into national coffers. + +Certainly if government could be depended on, the idea of paying +fixed royalties to a national treasury is financially preferable to +dickering with individuals, and obviously more businesslike. But since +oil has been known, the great organizations which handle the product +have been accustomed to dealing with private owners; it is a game they +know, a business they understand. In Mexico there is the other factor +which one can never lose sight of, and that is that government control +means graft, favoritism, chicanery, the meddling of foreigners and big +business in the very heart of the councils of government. And those +things, until now avoided, must never come into being. + +In the final analysis, the proposed nationalization of petroleum has +never been a conservation measure, the only excuse (to radical or to +conservative) for its promulgation. The Mexican governments, from +Carranza to Obregon, accepted “denouncements” upon petroleum lands +already developed, granted vast concessions for drilling, on a royalty +arrangement with the government, in so-called navigable streams +and other “federal zones,” and in every way in their power carried +on a _redistribution_ of petroleum titles. This single fact of the +government acceptance of such denouncements and concessions indicates +that the intention is not to conserve, but to get a new deal with +somebody besides the Gringoes and the Indians who own the oil lands +sitting around the table. + +The whole interpretation of the oil features of Article 27 seems at +variance with the ideas of genuine radicals as completely as it is at +variance with the ideas of dyed-in-the-wool conservatives who still +dare talk of “vested rights.” The effect of the enforcement of the +nationalization plan would be first to change royalty payments from +the land owners to the government and second to move the dealings for +oil leases from the open field and the negotiations of plain buying +and selling to the conferences of government officials where honor is +to-day a more commercial commodity than land, and where the proportions +of lease money to graft would be as one to ten. It would indeed, bring +on the era of concessions and favoritism with a vengeance, and the +dismal pictures of the foreigners’ corruption and exploitation of +Mexico would become a bitter reality. + +At present, the chief hope of avoidance of such a condition lies in +Article 14 of the same Constitution of 1917, which declares that none +of the provisions of that instrument shall be construed as being +retroactive. The interpretation of non-retroactivity has been the +subject of much discussion. At one time Carranza’s foreign minister +told the oil companies that it should be understood to mean that the +government would not collect for the oil already extracted. At other +times it has been held that the expropriation of petroleum rights would +not affect the properties where wells were opened prior to May 1st, +1917; then not to land acquired for drilling purposes before that date. +It was this detail which was taken up by the Mexican Supreme Court in +August, 1921. But after years of fighting single incidents, and working +along the theory that American companies could demand only their own +rights, the issue has actually broadened to the whole question of +property rights of Mexicans as well as foreigners. There are millions +of acres of potential petroleum land in Mexico, not one per cent of +which is owned or leased by foreigners, and all this would be wiped +out, along with foreign properties, if the oil were declared definitely +confiscated to the nation, or even if merely the “oil” lands were +exempted. + +Were non-retroactivity interpreted to nationalize only the oil and +coal in federal lands to which no title had ever been given to private +individuals, the vested rights of land owners would be protected +whether petroleum had been discovered on the property or not. Such +an idea of nationalization would approximate the control of oil in +national lands in the United States under the new leasing laws. It is +this interpretation which the oil companies and the Mexican land owners +are seeking, and which has not been touched by the Mexican Supreme +Court decisions noted above. + +The second issue in the oil controversy is taxation. Until the +1921 temporary increase, export duties on oil were collected at a +theoretical rate of 15 per cent of its value. This valuation is +supposedly on the basis of sales of oil in Mexico. There are hundreds +of such sales, but their prices are not taken, and arbitrary estimates +ostensibly based on the prices for which oil is sold abroad, less +another arbitrary allowance for transportation, are the criteria. The +results of this system have been confusing to the exporters, to say the +least. Some of the lower grades of oil, for instance, were actually +paying, not 15 per cent of their value, but 40 or 50 per cent. The +valuations fluctuate also according to government caprice and the need +of tax money; the result is another difficulty in making close prices +to consumers, which in the end all must feel in the price of gasoline. +A peculiar tax difficulty of the oil companies was over an exact +doubling of the valuations and thus of the taxes, made by the Carranza +government a few days before it fell--an increased tax which the de +la Huerta and Obregon governments have sought to collect. Still more +recent is the virtual doubling of oil taxes which shut in many of the +wells during July, 1921. + +The direct oil taxes are now about $2,000,000 a month, so that the +doubling is an item of no small moment. At present no immediate +solution of the tax difficulties is in sight, and the companies have +been split by favoritism into two camps. One is largely British, +which finds it profitable to accept the decrees. The other is largely +American and finds the enforcement of the new regulations oppressive. +Some plans for relief have been discussed. One of the proposed oil +bills based on Article 27 interprets it not as nationalizing petroleum, +but as nationalizing the right of taxation, taking all tax privileges +from the states and vesting them in the federal power. The idea would +be to provide a single direct tax on petroleum extracted from the soil +instead of upon that exported. Apparently this tends toward a solution +of the tax question. But here again enters the difficulty of dealing +with Mexicans, for such a direct tax would be without recourse, until +its provisions became confiscatory, while at present the companies have +at least a chance of defense in protests against arbitrary valuations. + +The outstanding fact in the tax situation, as in the nationalization +question, is the bad faith of Mexican government. The much discussed +reforms are non-existent, and government in Mexico is for the benefit, +not of the governed, but of those who rule, and taxes fill not the +treasury but the pockets of officials, and appropriations are not for +schools and civic welfare, but for the army and “public works,” where +graft is so colossal that it passes the conception of citizens of +simpler lands. + +The third element of the Mexican oil problem has to do with +concessions. This is a phase of nationalization, but to-day it has +taken on an importance which recently obscured other issues. The +government had issued a number of what are called “federal zone +concessions,” giving to individuals and companies the right to explore +and extract oil from the rivers, lakes, etc. The federal zones are +narrow strips along the seashore and navigable rivers on which an +easement has been reserved for the public use. The American oil +companies contend that this mere easement cannot be converted into +absolute ownership, which is the effect when the government grants to +third parties the right to drill wells there and thus to tap the pools +of oil which the companies have discovered and developed and on which +they are paying rentals to land owners. + +There were a few oil concessions under Diaz, practically all to English +companies. One of the great shibboleths of the Madero revolution was +the wiping out of the system of concessions, so no more were given +until toward the end of the Carranza régime. Beginning then, becoming +almost an orgy in the brief rule of de la Huerta, and continuing +into the days of Obregon, concessions have become common, some +going indirectly to a few American companies, many to the British +corporations and more to Mexican favorites of the ruling group. The +concessions issued cover practically every river and semi-arid gully +(regarded as a “navigable stream” for the purposes of the concession) +in the whole Tampico-Tuxpam field, a stretching of the “federal zone” +idea in order to make possible the penetration of the producing fields +by concessionaires. + +Other concessions are of different sort. Under de la Huerta one was +issued giving the right to explore rivers, lakes and government lands +over the entire republic, with preferential drilling rights up to a +production of 400,000,000 barrels per year, the chief consideration +being a return to the Mexican government of 40 per cent of the gross +value of the oil found. Another, to a company, also American, gives +rights to explore Lower California and other West Coast states, with +the privilege of denouncing not only government lands, but private +properties as well--the return to the government in this case is 10 per +cent of the gross. + +The concession feature of the oil question, like the others which I +have described, has its rights and its wrongs, but the fact of giving +concessions, and in such blanket form, to take oil from the lands of +private property holders, is in itself proof of but one thing--the +intention of the Mexican government, not to conserve its resources +of oil for the benefit of its people and the generations yet unborn, +but to get out of the oil business as much as possible as quickly as +possible--and solely for itself and its favorites. + +The final phase of the oil problem in particular and of the entire +Mexican question in general is anti-foreignism. Article 27 of the +new constitution contains a number of anti-foreign provisions other +than petroleum nationalization. One is that only Mexican citizens may +develop oil (and other properties) in the republic. Another section of +the Constitution, as I have mentioned, gives this provision force by +requiring that foreigners who sought to work such properties should +appear before a government department and waive all rights of appeal +to their home government for protection. This and other anti-foreign +provisions are summed up in the so-called “Carranza Doctrine,” one of +the interesting developments of his picturesque reign. This has been +stated as follows: + + “No individual should aspire to a better situation than that of the + citizens of the country to which he goes; legislation should be + general and abstain from distinctions on account of nationality. + Neither the power of nations nor their diplomacy should serve for + the protection of particular interests or to exert pressure upon the + governments of weak peoples with the end of obtaining modifications of + laws which are disagreeable to the subjects of a powerful country.” + +The world outside largely persists in taking Mexican professions at +their face value, and in solemnly accepting the beautiful Mexican laws +and the beautiful Mexican arguments as literally true. On this point +I have quoted elsewhere the words of a great Mexican publicist, who +has written: “The carpet baggers of Mexico have traditions rooted as +far back as colonial times. They combine the shrewd and subtle wit +of the Indian with the grandiose words of modern civilization, with +which they have gained the sympathy of uninformed outsiders.” Our own +State Department has answered the “Carranza Doctrine” in no uncertain +terms and once wrote that “the Department is of the opinion that ... +an attempt is being made to coerce American companies ... to admit in +advance ... the correctness of the contention of the Mexican government +in the matter of ownership of oil deposits, against which the American +government has made solemn protest as threatening confiscation of +rights legally acquired by American citizens.” + +In fact, there is no reason to doubt that virtually all of the oil +decrees of Carranza, all the rulings of his ministers, all the +regulations which have been enforced with such insistence on petty +details have been, first, appeals to sentimentalism abroad and, second, +childish expedients to force recognition by the foreigners of some +sort--any sort--of superiority in the Mexicans. In the last, so well +set forth in the State Department message quoted just above, lies the +basic cause of the failure of the companies to reach an agreement with +the Mexican government. Every willingness to discuss a point, every +slackening of their demands, has been accepted, not as an approach to +a solution, but as a weak concession to Mexican “national pride” and +personal dignity. + +There are two remaining reasons why the oil question remains unsettled. +They are extremely practical,--loot and incompetence. Of the former, +George Agnew Chamberlain, the novelist, recently American Consul +General in Mexico City, has written in his book, “Is Mexico Worth +Saving?” that: + + “Today it is taken as a matter of course that ninety per cent of all + Mexican officials in positions of trust are openly corrupt and will + inevitably continue so until controlled by some greater power than + any single faction of their peers.... The graft of Mexico is outright + loot; its effect is to open simultaneously all the arteries of the + body politic and to pour the entire life blood of the nation into the + gullets of the group in power.” + +The oil companies are the ripest prey for loot in all Mexico. Their +individual employees pay graft of certain kinds--of that I have no +doubt, although there is vigorous and official denial. The companies +themselves, however, pay a tribute, through the channels of astonishing +taxation and contributions to public works, which is no less than the +buying of the privilege of doing business. Another phase appears in the +gossip which is general that one of the English companies materially +aided the Obregon revolution--certainly every moneyed interest in +Mexico had ample opportunity to do so. The American companies were, +after Obregon’s occupation of Mexico City, “shaken down” for about +$1,000,000 which was credited against taxes--and the taxes afterwards +proportionately increased! + +As a whole, the companies have resisted the temptation to ease their +way along the broader paths of high government by the voluntary use of +money--they have generally confined their expenses to the ample totals +of taxes and assessments. It is for this reason that one of the most +serious phases of the Mexican congressional discussion of petroleum +legislation is that practically every member of the Mexican congress +expects “his,” and when it is not forthcoming, will see to it that +nothing favorable to the foreign companies finds its way to the statute +books. + +Lastly, incompetence. Perhaps the most appalling factor of the whole +Mexican situation is the utter and profound ignorance of the men in +control of the national affairs, men to whom the culture, the very +procedure, of modern civilization are as a closed book. I believe that +the oil problem is made serious chiefly because the Mexicans who might +otherwise be willing to solve it are so uneducated, so limited in +viewpoint and understanding, that they cannot conceive of the vast sums +of money which must be invested in pipe lines, storage tanks, pumping +stations, wharves and ships and refineries before the oil taken from +their country’s soil becomes the fabulous treasure of which they hear +so much. They seem utterly incapable of grasping the fundamentals of +their national problems; the pity of the condition almost obscures the +significance of the fact. It has not been easy for me to explain the +oil problem in its simplest phases to Americans, yet in this chapter +you who have read it have learned more than the floor leaders of the +Mexican congress will ever know. + +It is through this forest of ignorance, this slime of graft, that the +foreign oil companies are making their way. They have committed many +mistakes in their handling of the situation, selfish mistakes, mistakes +of ignorance, but the struggle has been against forces whose depravity +has been literally unbelievable. Personally, I am no fire-eater, but I +have seen much of Mexico and I have seen something of the psychology +of depravity, and I believe that the last lingering hope of Mexican +adaptability to world conditions lies in Mexican recognition of the +need of grasping truth rather than theory, of facing facts with manly +faith in Mexico and in Mexican ability to solve her problems as other +nations solve theirs, by honesty and patriotism and not by graft and +personalism. This attitude the oil companies have nurtured, and in this +their policy has been a policy of weakness. Seeking here an outlet +for the day, there a hope for the morrow, they have put a premium on +Mexican dishonesty, given a prize for Mexican argumentative skill. I +know some of the problems the companies have faced, I know the need for +oil during the war, I have written here something of the magnificence +of their achievement, but for all that, I hold that they have had much +to do with the vacillation, the inefficiency, the watery, grafting +policy of the Mexican governments from Carranza to Obregon. They have +had a large part in making such a policy successful by not refusing +unjust demands firmly and directly, by not challenging Carranza to +close the oil fields, by not taking a mighty loss to save the endless +leak of graft and taxes and cynical legislation which is their heritage +to-day. Even yet their policy is one of conciliation to Obregon, the +newest president; still they are offering compromise, still giving the +subtle Mexican mind to understand that perhaps they might agree to +Article 27, perhaps they might accept a little higher taxation, perhaps +they would like a few concessions, perhaps they might be counted on to +get the hopefully predicted Mexican loan. + +All this is the last phase of the complicated problem. We have said, +in days gone by, that this is the problem of the oil companies, that +theirs is the gain and theirs should be the cost. But if I have +succeeded here I have conveyed an idea of the breadth of the oil +problem. It is no longer a question of whether the American State +Department is making the proper moves to support honest and industrious +American investors and workers abroad. It is no longer the academic +problem of whether the oil companies are handling their business in an +intelligent and efficient manner. The problem is ours, yours and mine, +of you in Kansas, of me in New York, of our cousins in England and +China. It is the problem of the chap who runs a Ford and of the man who +is cutting our freight bills by renting us a truck, of the steamship +company which is carrying our goods, of the captain of the battleship +which keeps us safe from near and distant enemies. + +The problem is not merely whether the white peoples of the world are +to have the right to develop the riches of the backward nations for +the benefit of the world, but of _how_ they are to do it. So far, +even in forward-looking lands, it has been impossible to eliminate +private ownership and colossal private fortunes from the wheel of +oil production; in Mexico, to-day, it would be disaster beyond +understanding to turn the right of concession and oil privileges over +to corrupt and inept government. The battle of the oil companies in +Mexico is to save, first themselves from such a fate, and second to +save all the unopened oil resources in the world from the strangling +hold of such governments and such peoples everywhere. The oil industry +can no longer carry the burden of such conditions, for the prices of +your gasoline and your ship’s fuel oil are reflections not of a world +scarcity, but of the uncertainty, the colossal artificial difficulties +of oil production in the backward lands. + +Commerce has fashioned the world into one brotherhood, and the Great +War, for all its appearances, has welded us all into a mightier machine +of civilization than history has ever known. Oil is the fuel of that +machine, and oil must come to its engine, though all the power of +politicians and bandits combine to keep it in the soil. The backward +countries are swept into the forefront of commercial importance when +oil begins to flow from their soil. The process is going on all over +the world. In Mexico it is at its zenith. The oil must come, and from +Mexico before all others, for Mexico lies in the heart of the world, +her shores touched by more waters in proportion to her area than any +other continental nation. And her stores of oil are the greatest man +has yet found or dreamed of. + +To-day the world’s need of oil threatens the life of Mexico. It +is eating out her body by revolutions, by bandit governments, by +colossal graft which feeds on the ever growing river of gold from +the oil fields. The world’s need for Mexico’s oil threatens her with +intervention, not because of capitalistic machinations, but because of +the crass and wicked injustices which the wealth has tempted her to +wreak upon her foreign residents, because wealth has undermined her +government and given her over to demagogues. + + + + + CHAPTER IX + + THE GOLDEN GEESE + + +In all these devious ways Mexico has tried to kill the goose which lays +her golden eggs. Not the least onerous of her efforts in this direction +has been the seeking she has always done to make the United States +government and American business men take the responsibility for this +precious goose of commerce. And sad to tell--to the Mexican mind at +least--we have not always awakened quite promptly enough to our sudden +new responsibilities, and the goose has more than once dropped near to +dying in our arms. + +That golden goose was the product of the nature of Mexico and of the +régime of Porfirio Diaz. Long before Mexico became independent, long +before the social problems which assail her now had been allowed to +gain impetus, Nature had given up vast riches from the Mexican soil. +Spain garnered them in, and gave Mexico such care as she knew how to +give, and the golden era of the three centuries of Colonial life rolled +out. Then came the first revolution, and the destruction of such wealth +as Spain had left, until Diaz organized what remained and with it began +his thirty years of peace. + +In those thirty years. Mexico was changed from a land whose wealth +poured out in bonanzas returning only caprice for industry and wealth +for caprice, into one where industry, solidly invested capital, +and wise foresight gained the golden fruit. In other words, the +goose became domesticated, and produced golden eggs when she was +appropriately fed with golden capital and golden brains. + +It was literally the wealth imported and created by those years +of peace and domestication which made possible the outbreak of +revolutionary activity in 1910 and drove Diaz from Mexico in 1911. +Prosperity was too much for poor Mexico. + +The revolution, indeed, came at a moment of Mexico’s saturation +with prosperity. And it has continued by the continuation of that +prosperity, which has furnished and still furnishes the fuel of +banditry and revolution. It was not until after Diaz fell that the +great wealth of Mexican oil became patent. And not until Carranza began +imposing his taxes on the oil industry do we find the upsurgence of the +ideas of socialism, bolshevism and nationalization which have been the +battlecries of all the governments which have followed him. Oil, as we +have seen, has furnished the sinews of war, and continues to furnish +them, despite all that can be done to turn the tide. + +In the days of the revolutions previous to Diaz the rewards of +success were governorships, sometimes presidencies, and always some +brief spell of peace. But to-day the reward is too vast, the graft +quite too colossal, to slow down the round of struggle. Wealth pours +into the national capital in amounts which would be quite hopeless of +comprehension to the revolutionists of the older day. More tax money +reaches Mexico City to-day from oil alone than Diaz had from every +source at his command--while, save for the oil fields, Mexico is to-day +a desert waste. + +It is no wonder, then, that the nation can and does buy herself honors +and praise in the world outside, that she considers it criminal that +she cannot buy recognition, cannot force aid and trade and gold to flow +to her. Is she not wealthy and can she not buy pages of advertising and +the services of hundreds of propagandists of every type known to the +trade? Gold is here and more gold she expects to bring to her through +other channels than her own genuine advancement. She is back again in +the days of the bonanza mines, when wealth went to caprice and labor +and industry meant nothing. + +And so she is killing the golden goose, just as she killed it long ago +under the Spaniards, by forcing it to lay and lay and lay, till at the +height of its productivity it is trembling to its death. Destructive +legislation, the bitter threat of its confiscation, the continuing +theft of vast sums in exchange for the privilege of struggling against +these laws and threats--these are striking down the golden bird. To-day +that goose is dying, and all Mexico seeks is to bring in, somehow, +another goose to feed her hungry office-holders. She is willing that +it shall be a relatively tame domestic goose, if only it will lay the +golden eggs of foreign investment, trade, commerce--she would gladly go +back to the relatively mild, but sure, wealth of the time of Diaz. + +And what does she offer to induce that timid, wabbling goose across +the national fence? I can see behind her promises of privilege nothing +more substantial than outraged rights, and beside them, the panting, +half-dead corpses of two golden geese of bonanza days--the almost dead +mining industry, the sadly ill oil industry. For Mexico has limited +mining by confiscatory taxation and by revolutionary outrages which +left the mines in such a state that to-day the cost of operation is too +great for them to continue under present prices. And she has set about +the starvation of the oil industry, as we have seen, by limiting it to +the narrow field of the Tampico-Tuxpam district, when the opportunities +for oil development throughout the whole of Mexico are probably +unequaled in any similar area in the world! + +It is with such pictures as these that she would tempt trade and +commerce and investment to Mexico. No, the “centennial expositions,” +the trade excursions, the special trips for special friends of the +government, even the official telegrams of thanks to American officials +who breathe a misplaced idealism with regard to Mexico--none of these, +nor all of them, can quite make a screen before the unhappy corpses of +the once lively golden geese of Mexican prosperity. + +Let us resume, briefly, the list of the events which have marked the +process of the years in the Mexican revolutions which began with the +uprising of Madero--and which have been the means of killing foreign +enterprise and native faith in Mexico’s succeeding governments. The +list is long, but it cannot be forgotten. + +The revolution in 1917-1918 virtually wiped out religion in Mexico, +profaned, sacked and burned churches, killed and outraged priests, +violated nuns and girls in the convents, and drove into exile thousands +of priests. The Constitution of 1917 virtually abolished religion, +and yet the Protestant churches have been allowed to continue their +work (with the result that many Protestant missionaries of Mexico were +active Carranza and Obregon propagandists in this country). While most +of the exiled Catholic clergy have now been allowed to return, they +still work under conditions which make religion a virtual monopoly of +the state, and practically eliminate religious freedom in Mexico. + +Ten years of revolution have all but wiped out education in Mexico: +first, by destroying the Catholic schools, which were almost the only +educational system in the country outside the great cities, and, +second, by so curtailing the appropriations for public school expenses +as to make educational organization impossible. + +The revolutionary hordes, when Mexico City was taken in 1915 by General +(now President) Obregon, sacked the city almost as thoroughly as +Attila sacked Rome, the public being invited by proclamation to join +in the looting. Beautiful houses were made barracks for the soldiers; +automobiles and horses, including those of foreign diplomats, were +taken; stores and homes were broken open and robbed, and trainloads of +rich furniture, including carloads of pianos, were shipped out, much of +the loot coming to the United States to be sold. While the population, +rich and poor, starved, no food was allowed to enter the city, and +trainloads of beans and corn, the staples of Mexican food, were shipped +out. + +The revolution virtually suspended the political rights of the Mexican +people. Under Carranza’s decrees, which to this day form the chief +basis of government in Mexico, no one may hold office who ever served +under Diaz or Huerta, or who was not known to be a Carranzista +before the Huerta uprising--save by special permission, granted only +on personal appeal to the president himself. The revolutionists +continuously refused to allow any Mexicans but those of known +sympathies with themselves to participate in elections, so that only a +fraction of the eligible voters have ever taken part in any election. + +The revolution exiled from Mexico, on one pretext or another, virtually +all the higher type of Mexicans, the men who throughout all Mexican +history have been the stable and stabilizing element in the government, +leaving Mexico in the hands of demagogues of the worst type, from +the highest offices to the lowest. There has been talk of political +amnesty, but none has yet been forthcoming, and the few Mexican exiles +who return do so under personal assurance of their personal safety. + +Mexico is to-day taxing her people, both natives and foreign +corporations, to an extent and with a recklessness unknown even in +war-ridden Europe. Taxes on imports and exports have been doubled and +sextupled. The stamp tax has been quadrupled and broadened to cover +almost every possible human activity; direct taxation on every form of +industry and export taxes on the country’s products have become the +normal, where, before, these forms of taxation were distinctly avoided +in order to encourage enterprise. Mexico is still spending more on +her army, mostly in graft, than Diaz spent on his whole government, +including interest on foreign indebtedness (which the revolution has +never paid). + +The present taxation system has been coupled with favoritism and graft +to an extent that punishes with ruin any enterprise (save those fed +from the natural resources of the soil, such as oil) which is engaged +in a business where profiteering is not possible. + +Carranza, as we have seen, financed his revolution by issuing +2,000,000,000 pesos of paper money, forced into circulation at the +points of bayonets. None of this has ever been honestly redeemed. +The paper money orgy covered three years, and absolutely wiped out +all semblance of credit and all use of paper in business. In its +course, the revolution took from the banks in “loans” approximately +$28,000,000, completing the ruin of the banking system, as I have +described above. + +Carranza took over the railways of the republic in 1914, and since that +date the revolutionary group has operated them for the profit of the +government and themselves. They have increased passenger, freight and +express rates to figures many times the normal, forcing the properties +to yield the national treasury $1,500,000 a month, meanwhile paying +nothing of rental to their owners, whose fixed charges are being +defaulted at the rate of $1,000,000 a month--a total theft of nearly +$400,000,000, growing at the rate of $1,000,000 a month. + +The revolutionaries gained the support of the sincere Mexican +progressives and of American students on the ground of a defense of +the Mexican Constitution of 1857, but after they came to power they +promulgated the Constitution of 1917, a new instrument, although the +old Constitution was amply provided with means for its amendment. +The new document is the most radical written Constitution in effect +in the world to-day, but its provisions have been used so far only +for the aggrandizement and enrichment of those who can abuse its +privileges. The provisions for the confiscation and distribution of all +pieces of land of large area have been used only to take properties +of foreigners and Mexicans of the old régime to hand them over to +revolutionary leaders. The provisions against the operating of mines, +etc., by foreign companies have so far been used only to transfer +such properties to friendly Mexicans and Germans. The provisions +“nationalizing” oil deposits have been used only to exact towering +taxes and millions of dollars of loot from the foreign companies and +to drive the properties more and more into the hands of the British, +Dutch and Germans, and away from the Americans. + +The revolution has allowed and abetted the looting and ravaging of +Mexico by every method known to brigandage. Hundreds of thousands +of cattle have been killed for their hides; thousands of acres of +standing crops have been wantonly ruined; seed grains have been stolen +or destroyed; the vast sugar industry, left stagnant by Zapata’s +depredations has, since the government regained possession, been wiped +out by the shipping away for “junk” of the machinery of the sugar +mills; graft has been levied against relief trains sent by the American +Red Cross to feed starving Mexicans and the contents of such trains +even stolen and sold for personal profit of generals. + +Carranza encouraged and abetted a military oligarchy which supported +brigandage as a means for its own profit. Campaigns against the +bandits and rebels were not pressed, arms and ammunition were sold by +the federals to the bandits and rebels, in order that the military +might continue to have work to do. The officers, acting as their own +paymasters, padded the army rolls to many times their actual size, +and the balance between the expenses and pay of the actual army and +the phantom army was pocketed by the officers. The Obregon process, +a variation of the Carranza plan, paid millions of pesos in cash +and land to ex-bandits and revolutionaries, setting up Villa on a +rich hacienda, and paying out the resources of the nation to buy the +appearance of a peace. + +Revolutionary favorites, as we have seen, were given the rich state of +Yucatan for loot. They foisted upon that community (the only spot in +Mexico where any wealth has ever been created through manufacturing +and industry as opposed to the sacking of the riches of the soil), a +so-called “socialistic” régime. A “modern state” was set up, and the +experiment of taking from the rich for the benefit of the poor was +set in full swing. By means of a great national monopoly of the hemp +industry, prices were so inflated that in the course of five years the +American farmer paid, in artificially-increased prices for twine for +his wheat-binding machinery, $112,000,000 to the Mexican revolution. +The state-controlled hemp trust has been forced to relinquish its +control, and the costly experiment seems passed. Here is the first +collapse of the Mexican fetish of socialistic demagogy, but it seems +safe to believe that it will not be the last. + +So stands the record, incomplete, shorn of detail, but each item taken +from the history of shame which has been written in Mexico in the years +just passed. Hidden behind a curtain of fair words and lofty idealism, +the shame has been committed, but behind that same curtain to-day +disintegration is hurrying on, coming as it came to Yucatan in the +grist of inevitable retribution. That we may understand the end, it +behooves us not to close our eyes to the beginnings. + +The killing of the golden geese of recent years in Mexico carries a +responsibility from which the United States cannot be entirely free. +The eight years of the Wilson régime, when American foreign policy, +as enunciated by Secretary of State Bryan, held that Americans who +ventured abroad did so at their own risk and had no right to ask the +protection of their government, was a mighty factor in the despoliation +which followed in Mexico. Carranza, seeking the excuse for the policies +to which the great wealth of the oil fields tempted him, found in this, +our official attitude, his opportunity for baiting the Americans and +with them most other foreigners in Mexico. His virtual espousal of the +German cause in the Great War gave him still further opportunities, and +the result has been written in the outrages which he committed against +the Americans. This is a list only less appalling than the list of the +outrages which were perpetrated against Mexico and the Mexicans in the +name of the revolution. Here, briefly, is the record. Although many of +its outrages were committed only during the Carranza régime, it must be +remembered that that régime is the direct ancestor of those which have +followed it, for the personalities seem the same, the shift in their +places being the only change. + +The revolution has killed over 3,000 foreigners, most of them in cold +blood, probably not one per cent in fair and open battle. + +The revolution has murdered over 600 Americans since 1910, and the +revolutionaries have violated scores of American women. + +The revolution has ruined over $1,000,000,000 worth of American +property in Mexico through wanton destruction, cynical recklessness and +savage bravado. + +The revolution has driven from their homes in Mexico more than 30,000 +Americans, men, women and children, who, in carrying to Mexico the high +standards of American living, American business and American ethics, +were pioneers of our trade and influence, and potential civilizers of +Mexico. + +The revolution has, as we know full well, promulgated that Constitution +of 1917 which has been the bane of American, even more than it has of +Mexican, business. + +The Mexican revolution, by its baiting of the American government +through nearly a decade, has nurtured in Mexico and sought to spread +throughout Latin-America a hatred and fear of Americans and hostility +to the Monroe Doctrine. This is threatening not only our own prestige +on this continent, but the peace of the established governments of our +Latin-American sisters, through the fomenting of hostility and unrest +within their frontiers. + +More than all, the revolution has made of Mexico a refuge for the +enemies of the United States, first by allowing to be set up in its +capital the central organization of the German spy and sabotage system +in the Western world, and since the war by welcoming and aiding the +bolshevists and radicals who are working openly for the overthrow of +American institutions in this country and the destruction of American +industry and trade in Mexico. + +This is a bitter record, but without it, as I have had to say of many +things in this book, the picture cannot come clear to our eyes. We +cannot, in justice to our own understanding, forget that since the +death of Madero, and even before, the Mexican revolution has been +but one movement. The rulers who have succeeded each other have all +been of the same group, and those in power in 1921 are those who +were scrambling for place within the same ruling group in 1913. “The +revolution,” as one of them has said, “is the revolution.” And so it +is in more senses than one. We but deceive ourselves if in our very +genuine desire to give each new Mexican president a chance, we close +our eyes to the obvious facts of his political heritage and the human +tools he must use. + +Only one word more, and the tale of the golden geese is done. The +protection which the American government has failed to give its traders +and investors who have gone abroad has had an effect which those +traders and investors must obviate before they step forth, at least +into Mexico, again. Through the years of the Great War, our government, +along with those of the Allies, put into effect in neutral countries, +a “Black List” which was designed to keep German, Austrian and Turkish +firms and their sympathizers from dealing and trading with the neutrals +or with the peoples of the allied countries. + +Mexico was of course our chief field for activity, and there our Black +List had its severest test. In those months of struggle, we committed +many faults; we shut off friendly firms from trade with this country; +we encouraged, by many stupidities, the activities of smugglers and +“cloaks” who bought for the Germans in Texas jobbing towns; we created +for ourselves a phalanx of enemies of American trade who will not soon +forget. Worse than this, even, when the war was over the tremendous +machinery of the enforcement of the provisions of the Enemy Trading +Act, with its literally priceless information regarding the business +of Mexico, the capital and trade of the Germans, the Mexicans, and the +Americans in the whole country--all this was thrown away. Literally it +was cast into the waste-basket, and the information which if followed +up and kept even partially up to date would to-day be the richest mine +of information for American importers and exporters was scrapped like +worn-out machinery. I do not know how many millions of dollars were +spent in gathering this data for the War Trade Board, but I do know the +nature of that data. It is gone, and the advantage which might have +come from it is lost forever. + +But the unfriendliness which was engendered by our mistakes, which was +only slowly being wiped out by the correction of those mistakes when +peace came--that unfriendliness remains. That is our only heritage of +our Mexican activity in the war; it couples up with our own mistakes of +ignorance or of carelessness during the same period. + +From 1915 to 1919, literally all the foreign trade of Mexico passed +through the United States. Imports and exports, the goods from and for +England and Japan and China and Africa no less than our own domestic +trade with Mexico went through the border ports by rail. Of necessity, +the advantages of ship traffic were lost, and our manufacturers and +our buyers of Mexico’s raw materials had the greatest opportunity of +all time to capture the vast bulk of the Mexican trade. The tremendous +apparent increases in our Mexican trade during the war years were only +the record of the world’s commerce passing through our border towns. +But to-day we have retained only a little of the gains recorded then, +and we shall lose still more of what we have kept. And why? Because we +have never truly sought Mexican trade and do not seek it to-day. + +Ah, yes. We want to trade with Mexico, but, I repeat, we have never +sought Mexican trade. We have wanted to sell Mexico our surplus, +to have her take our extra runs and use the goods we have made in +quantities for other countries. But we have never sought to meet the +exigencies of the Mexican market. We have never done (as a nation, I +mean, of course) what England and Germany have done; we do not follow +specifications literally and send cloth, for instance, with exactly +the number of threads per inch which the Mexican must have to get his +best customs classification. We do not rearrange our patterns to meet +a special demand of the Mexican market, carefully described to us by +our customers. It is the old story of American trade everywhere in +the world--our manufacturers have heard it in a dozen ways, and they +are justly tired of the sound of it. My only point is that during the +period of the war, when Mexican trade had of necessity to come to us +in great volume, we did not link the Mexican buyer to us, either by +meeting his demands or by helping him to understand our difficulties. + +So it was that when the golden goose of Mexican business was +surreptitiously put into our arms when we were busy with a lively war +in Europe, we did not take the care of it that its parents might have +expected of us. + +The result is that to-day we have little hold on the trade of Mexico, +despite the astonishing figures of our preponderance in it. For what we +ship to Mexico is largely food and what we take from Mexico is largely +oil--an exchange which is more significant than columns of figures in +showing the economic condition of the land we trade with. Again we +swing back to the one great, significant fact, the need of an activity +which transcends mere barter, which has little to do with whether we +are deceived by Mexican conditions or whether we are willing to risk +them now for the sake of the great possible gains of the future. This +is the issue of our duty to learn how we can serve in the solution of +the problem--and to devote something of our energy to that solution. + + + + + CHAPTER X + + THE HIGHWAY TO SOLUTION + + +The solution of the problems of Mexico’s commerce and business seems to +rest in hands alien to Mexico. The destructions of the past ten years +are bringing her steadily nearer to annihilation, and Mexico herself +seems helpless to save herself. These make the appearance, and it is +vivid indeed. But it may still be only an appearance, if the forces +which are acting and must act can be brought to see that they can and +must work in Mexico herself. + +The cycle of destructions insists upon showing itself as the round from +the materialism of Diaz on to the destructions of an era of profaned +utopian idealism and now to an era of materialism again. But this +time it is an era of materialism which differs from the Diaz time, +and is more potent, at the moment, for good and for ill. For to-day, +in the high places of government, controlling through their greed the +very minions of government, is an animating power which is not the +idealism nor the self-sacrifice of devoted rulers, but the worship of +wealth alone. That power is mighty for destruction, but at the very +moment that it functions thus, another form of wealth, “capitalism” +if you will, is working slowly for the saving of such of Mexico as is +being saved. For “capitalism,” in foreign guise, in such enterprises +as even the mad radicals of the day point to as the signs of their +“progress”--here capitalism is giving Mexico her only surcease from the +destructions of her rulers. + +Wealth is the one power which men recognize in Mexico. It is to-day +above government, for it dominates government and destroys government +by the very temptation which it holds out to successful revolution. It +rules to-day in Yucatan, even as it ruins the individuals of Yucatan. +Yet, too, it rules in the oil fields, for it makes the vast production +of oil possible, because it alone has the power and the foresight to +develop oil’s potentialities. And there, in the oil fields, it is being +turned, ever so slightly, to the beginnings of its ultimate destiny, +which must be, I believe, the saving of Mexico. + +Strange tales I have told of the oil fields, and yet it is a far +stranger tale which I have now to tell. For I would point out the vast +opportunity which awaits that wealth of oil for the saving of Mexico. +In the light of that possibility, the mighty stream of oil which in a +thousand ships pours from Mexico into the industries of the globe, is a +helpless Niagara, childishly unconscious of its own power. + +The constitutions and laws and decrees of the Mexican revolutionaries +still hold the wealth of oil in their grip. There has been, in the +summer months of 1921, a mild effort to break that grip, to stay the +hand of strangulation which is at the throat of the oil industry, but +this is still self-defense. There is a yet more persistent force than +mere taxation or even than mere confiscation at work in the oil fields +of Mexico. This force savors of elements mightier than mere industry; +it seems to be taking the form of a sinister elaboration of the vital +principles of bolshevism--the bolshevism which rules in Russia and is a +battle cry in Mexico. + +Among these principles of bolshevism, enunciated by Lenin himself a +year ago, was the setting of the capitalistic powers at each other’s +throats, such powers as Japan and America, that they might destroy one +another. + +In Mexico we see that threat from Russia developed with the +thoroughness of a too-eager pupil. In Yucatan the cycle has brought +two vast financial interests to battle--the millions of the Equitable +and the Royal Bank of Canada, against the International Harvester with +other unlimited resources. In mightier and more daring terms, and even +more deliberately, in Tampico and in the false issues of concessions, +Mexico and the governments, radical, bolshevist indeed, of the +revolutionary era, have been setting not merely groups of financiers +but the interests of nations at each other’s throats. The issues of +concessions on the one side and open oil fields on the other seem to +have been planned and fomented and distributed with a deliberation +which is not Mexican to bring the United States and England to +grips--in Mexico. So the spoken threat of Lenin finds elaborate action +in distant Mexico. + +Oil has been the victim, the tool, then, of those who would destroy +our civilization? We do not know. But this we do know--that to save +itself, to save great nations from war, to save the world’s oil for +the uses of civilization, oil must come to its own rescue. It may be +saved temporarily in other ways than by itself, but itself it must +save sooner or later. If sooner, the power will be for good; if later, +it will be for destruction, even as the powers in Yucatan are being +expended for destruction. The comparison is inadequate, perhaps unfair, +but the vision is crystal clear. It shows the last great power of the +world--wealth--diverted from its proper channels to battle within +itself. The dragon’s teeth of capitalism have raised up armies and the +stone cast by bolshevism has thrown them at each other’s throats. + +And this cannot be, and must not be. Our civilization rocks. Were it +to pass on to the millennium, the rocking would be worth the price. +But we see, not the millennium, but, as in Yucatan, the coming of new +destructions, with capital, and labor, in rôles of ignominy. + +For to-day oil, and the capitalism it represents, as yet does little +good for Mexico. It pours its wealth--nearly $50,000,000 a year--into +the coffers of government and there, like the golden apple, it creates +discord and wars and bloodshed. It feeds and fattens the group in power +and makes it worth the while for other groups as fast as their petty +agitations will allow, to rise up and overthrow their predecessors, +to the end of getting their share of the loot, and a new distribution +of favors. The gold which pours into the national treasury inspires, +as we have seen, all manner of radical legislation and constitutional +provisions and oppressions to make the capitalism which develops the +oil disgorge more and more of oil’s wealth, and bow more deeply beneath +the yoke of political personalism. + +Thus is the gold which flows from the oil wells dynamically active--as +a poison and a weapon against those who create it. The oil companies of +themselves take no part in Mexican politics. This, I admit, is almost +unbelievable, but I am convinced that except where government--our +government or that of England--has directed them, the oil companies +have not used their power politically. The United States and England +have both taken hands in Mexican politics, and particularly was +Washington active in arbitrating the destinies of Mexico in the eight +years just closed. But that does not concern us just now. The liquid +gold from the oil fields has never used its power alone. + +It has not yet used its power for its great possible good, either. +Not even for so much good as the International Harvester and the Eric +corporation have used theirs in Yucatan to the discomfiture of Alvarado +and the chastening of the henequen industry. Never, for the sake of a +principle alone, has an oily hand been lifted to say “thus far and no +farther.” Never has an oil official done more than cry aloud over the +pressure of the thumb-screws--cries which do no more than extract more +wealth to fatten the generals who, with added strength, only gave the +screw another turn. + +For seven years the oil companies paid the rebel general, Manuel +Pelaez, a comfortable tribute. In that time they also paid Carranza all +he asked in “taxes.” They were helpless, and the war was the excuse, +not for strength on their part, but for submission to unwarranted +and unjust oppression, oppression which had no object save personal +aggrandizement and enrichment. + +Here is the one power in Mexico which is potent, accepting the rule of +corrupt government, passing on its power of gold to those who use it +for nothing but their own ends, and for the destruction of all that +our civilization holds dear. + +They buy privilege in Mexico, the privilege to do the business which +they must do, while the sinister powers to whom they pay tribute cut +them from the development of new fields upon which their ultimate +future and Mexico’s immediate future depend. The whole power of Mexican +revolution and of the groups which control the revolution lies in that +one principle which I have reiterated: they give no rights, they sell +no rights; only privilege is on the auction-block. Those who buy it +to-day and those who contemplate the buying of it as a way to enter +a promising foreign trade and investment field are the upholders of +the shameful exploitation under which Mexico herself bows. And of +these, the greater sinner, to my mind, is he who plans to enter Mexico +now. After all, we must in fairness admit that the old companies have +the potent excuse of their vast holdings and of their duty to their +stockholders. + +The plan which I hold as the solution of the economic and political +chaos of Mexico would comprise a shifting of the center of control +from politics to economics, where the motive force, at least, has +ever rested. I would no longer tolerate the application of political +remedies for economic ills, but would go so far as to suggest an +economic remedy for both economic and political afflictions. +Apparently this is what our government plans, and what Mexico’s +government will not bring herself to accept. + +Years of observation of the Mexican problem has led to the conviction +that the international difficulties of Mexico are between the Mexican +politicians and the American government--their interests decidedly +conflict. But there is no division of interest between Mexican business +men and American business men; the former are just as disturbed over +the confiscatory policies of the Constitution of 1917 as are the +latter. So recently as April 7, 1921, a petition was sent to President +Obregon by a group of landowners in the Mexican state of Jalisco, +protesting against the enforcement of the rulings of the “National +Agrarian Commission” which confiscated their properties in the name of +the “social revolution” under the same Article 27 which attacks foreign +property rights. Its words are worth recording as an indication that it +is not alone the American business man who feels the pinch of the rule +of privilege in Mexico. + + “Such commissions,” the petition reads, “are nothing more than + partisan centers where laws, reason and justice are mocked. + + “This atrocious work will be judged by public opinion as soon as the + deep and serious damage which has been done is known, and history will + in time establish the responsibility. Suffice it to say that in every + case it has been a work of destruction and never of construction.... + + “The local agrarian commission is inventing fantastic plans of + taxation, confiscating large and small properties, and sugar, _mezcal_ + and orange plantations, which have cost their legitimate owners years + of toil and the investment of considerable capital. The federal + tribunals, deaf to all appeals, follow an invariable line of conduct + in every case against the landowners. Should the landowner invoke + in his behalf the same doctrines which have been applied to the + benefit of others, he finds out that these same doctrines are never + interpreted in his favor. The authorities only favor those they wish + to favor and to accomplish this end they do not hesitate to override + justice and reason.” + +It is to this Mexican business man, still a stable factor in Mexico, +that we must look for the change in government attitude toward business +which is indispensable to the solution of the social, economic and +political chaos of Mexico to-day. In numbers these Mexican business +men are few; in grasp of world affairs they lag behind men in similar +positions in this country. Nevertheless, their interests, those of the +American companies now operating in Mexico and those of the Americans +and other foreigners who hope to share in Mexican trade, are and will +be one. It is in the way of supporting such Mexicans in their efforts +to influence the government of their own country that I speak of an +economic remedy for all the afflictions of Mexico. I would, if I +could, put them in control, would bring back to their aid the brains +and the energy of the exiles who belong, in one way or another, to +their class of producers. + +It is to such an end that the foreign business man who hopes, in the +immediate or in the distant future, to share in Mexican trade should +turn his hand. He should demand, in the councils of his government, in +the congress of the country, in the powerful conventions of chambers of +commerce, that Washington insist definitely on a return to civilized +and economic rule in Mexico. This Washington seems to seek but they +and they alone have the power to compel the decision by the powers of +this world that the day of privilege in Mexico must be put aside, and +the era of equal rights shall dawn. In the hands of American business +interests the tool of pressure is very powerful. This is a moment, not +to rush in to get easy markets on the “ground floor,” but to demand +conditions which will give the opportunities and the profits to those +who can best use them--the truly Golden Rule of business the world +around. + +When that day comes, all will profit. Until that day comes, none can +have aught but risk and chance, the chance of the gambler. For who +can say how the wheel of politics will turn? And only he who knows +Mexico and the Mexicans of old can assume that he can buy his way +to privilege with the next pirate crew. The solution is in the hands +of American business men because it is in the hands of the Mexican +business men whom they can support and aid. And in the group of such +Mexican business men we must include not only the true Mexicans, but +the foreign companies which have worked long in Mexico and so have made +themselves a true part of Mexico, vitally concerned in her progress and +prosperity. + +Those foreign companies of Mexico are the business world of Mexico. And +they know Mexico and her needs better, in many ways, than Mexico knows +herself. They know, as every one who is honest with himself knows, that +the hope of Mexico is in truly devoted, native government. Yet we still +see them pass the power which could to-morrow restore Mexico to the +family of nations over to those who use it for their own ends and for +the utter destruction of all Mexico that is outside the influence of +the oil fields and of their civilization. + +The great companies are Mexican, in essence. They have rights as +Americans and as Englishmen, to be sure, but their greater right is in +Mexico. And they have the right to use their power as they will. They +seek to be good and to be honest and just, but the ends of justice +are defeated by their very honesty. I do not advocate activity in +politics, nor even the tangible aid of oil companies to revolutionists +of any stamp. I hold only that if the oil companies would give over +their profits (as they did temporarily in the summer of 1921) long +enough to shut off the stream of gold from corrupt government, if they +would thus render revolution and loot unprofitable, the solution of +the problem of Mexico would soon come, in a return to an age of honest +work and honest government, free from the temptation of vast unearned +wealth. We need not ask how or by whom the change shall be made, +whether by a sincere Mexican government ready to cast out its evil +elements, or by a government yet to be born. That is not our concern, +for our concern is to search for our part and having found that part, +to play it well. + +Is not this a solution of the Mexican problem? Should we not say to the +foreign companies: + +“You are in Mexico, you are of Mexico. You represent all that is +stable in Mexico. You know those Mexicans who can solve the country’s +problems, and make Mexico again a land where white men can keep the +altar fires burning bright, where honest Mexicans, and foreigners if +they will, may help to make it all that it should and must be.” + +Revolutionary radicalism has run its course in Mexico, and we are back +again at a rule of capitalism, a rule which capitalism, for right or +wrong, cannot longer avoid. The eyes of the world are on the moneyed +powers of the world. It is childish to try to deceive radicals or +conservatives with saying anything else. To-day, in Yucatan, capitalism +(because circumstances have forced it to do so) is exacting the toll of +penalty from the henequen industry and its native spokesmen. To-day in +Tampico, capitalism hesitates to move on, and waits for the ruin which +will tumble about it, forcing it, in its turn, to grind Mexico beneath +its heel. Somehow, dimly, seems to emerge the lesson which Mexico has +for us and for the world. Capitalism must in the end save the world +from the ruin of revolution. To-day in Mexico it can move quickly and +freely. To-morrow it may be clutched in the very destruction which is +upon it, and be forced, itself, to the destruction not alone of the +enemies of our civilization, but of the fabric of progress of that +civilization. The story of Yucatan is written. Is the story of Tampico +and all Mexico to follow the same plot, and is the world to go blindly +on, believing that in compromise it shall gain strength? + +Truly the crimson feast is preparing for the vultures, and vultures +will our eagles of business become if they wait longer on their distant +heights for revolution to finish its bloody orgy. To-day there is +yet time. In Mexico there is yet time. Why wait for the chaos, from +which there seems but one emergence, the emergence to intervention +and blood and long foreign rule? The one stable force, the wealth +of Mexico, must choose a nobler course than that waiting, than that +cynical hoping. It can choose and it must choose. Old worlds are indeed +passed away and the paths of new stars are to-day being plotted. In +the courses of those new stars power will be used without apology, +as the revolutionary radicalism which our old civilization created +moves without apology. Our duty is to the future, not to the dead past +of compromise and convention and self-righteousness. Is capitalism +honest and sincere and bound up with the welfare of the human race? Or +is it indeed the vulture which waits to feast only upon dead bodies +amid ruins? To-day in Mexico it waits vulture-like. Its sincerity and +its true righteousness are to be determined not by slavish waiting +for the ruin which will force it to use its power, as it is using it +in Yucatan, but by its moving, to-day, to the solving of the great +problems of a great nation as it alone can solve them. Capitalism and +not revolution, the corporations and people of Mexico, and not foreign +pressure, must in the end give answer before the last Tribunal. + + + + + Transcriber’s Notes + +Page 18: “southermost point” changed to “southernmost point” + +Page 114: “outrage perpetated” changed to “outrage perpetuated” + +Page 142: “or for propety” changed to “or for property” + +Page 200: “Sante Fe Railroad” changed to “Santa Fe Railroad” + +Page 236: “pyschology of depravity” changed to “psychology of depravity” + + + +*** END OF THE PROJECT GUTENBERG EBOOK 75469 *** diff --git a/75469-h/75469-h.htm b/75469-h/75469-h.htm new file mode 100644 index 0000000..c56b7a6 --- /dev/null +++ b/75469-h/75469-h.htm @@ -0,0 +1,6551 @@ +<!DOCTYPE html> +<html lang="en"> +<head> + <meta charset="UTF-8"> + <title> + Trading with Mexico | Project Gutenberg + </title> + <link rel="icon" href="images/cover.jpg" type="image/x-cover"> + <style> + +body { + margin-left: 10%; + margin-right: 10%; +} + + h1,h2,h3,h4,h5,h6 { + text-align: center; /* all headings centered */ + clear: both; +} + +p { + margin-top: .51em; + text-align: justify; + margin-bottom: .49em; + text-indent: 1em; +} + +.p2 {margin-top: 2em;} +.p4 {margin-top: 4em;} + +hr { + width: 33%; + margin-top: 2em; + margin-bottom: 2em; + margin-left: 33.5%; + margin-right: 33.5%; + clear: both; +} + +hr.chap {width: 65%; margin-left: 17.5%; margin-right: 17.5%;} +hr.r5 {width: 5%; margin-top: 1em; margin-bottom: 1em; margin-left: 47.5%; margin-right: 47.5%;} +@media print { hr.chap {display: none; visibility: hidden;} } + +div.chapter {page-break-before: always;} +h2.nobreak {page-break-before: avoid;} + +table { + margin-left: auto; + margin-right: auto; +} +table.autotable { border-collapse: collapse; width: 60%;} +table.autotable td, +table.autotable th { padding: 4px; } +.x-ebookmaker table {width: 95%;} + +.tdr {text-align: right; vertical-align: top;} +.bt {border-top: 2px solid;} + +.pagenum { /* uncomment the next line for invisible page numbers */ + /* visibility: hidden; */ + position: absolute; + left: 92%; + font-size: smaller; + text-align: right; + font-style: normal; + font-weight: normal; + font-variant: normal; + text-indent: 0; +} + +.blockquot { + margin-left: 5%; + margin-right: 5%; +} + +.center {text-align: center; text-indent: 0em;} + +.right {text-align: right; text-indent: 0em;} + +.smcap {font-variant: small-caps;} + +/* Images */ + +img { + max-width: 100%; + height: auto; +} +.w10 {width: 10%;} +.x-ebookmaker .w10 {width: 13%;} + +.figcenter { + margin: auto; + text-align: center; + page-break-inside: avoid; + max-width: 100%; +} + +/* Footnotes */ +.footnotes {border: 1px dashed; margin-top: 1em;} + +.footnote {margin-left: 10%; margin-right: 10%; font-size: 0.9em;} + +.footnote .label {position: absolute; right: 84%; text-align: right;} + +.fnanchor { + vertical-align: super; + font-size: .8em; + text-decoration: + none; +} + + +/* Transcriber's notes */ +.transnote {background-color: #E6E6FA; + color: black; + font-size:smaller; + padding:0.5em; + margin-bottom:5em; + font-family:sans-serif, serif; } + +.xbig {font-size: 2em;} +.big {font-size: 1.3em;} +.small {font-size: 0.8em;} + +abbr[title] { + text-decoration: none; +} +.illowp82 {width: 82%;} + +</style> +</head> +<body> +<div style='text-align:center'>*** START OF THE PROJECT GUTENBERG EBOOK 75469 ***</div> + +<h1>TRADING WITH MEXICO</h1> + +<p class="center p2"> +BY<br><span class="big"> +WALLACE THOMPSON</span> +<br><span class="small"> +AUTHOR OF “THE PEOPLE OF MEXICO”</span> +</p> +<figure class="figcenter illowp82" id="001" style="max-width: 62.5em;"> + <img class="w10 p2" src="images/001.jpg" alt=""> +</figure> + +<p class="center p4"> +NEW YORK<br> +DODD, MEAD AND COMPANY<br> +1921<br> +</p> +<hr class="chap x-ebookmaker-drop"> + + +<div class="chapter"> +<p class="center"> +<span class="smcap">Copyright 1921</span><br> +<span class="smcap">By</span> DODD, MEAD AND COMPANY, <span class="smcap">Inc.</span><br> +</p> +</div> +<p class="center p4"> +PRINTED IN THE U. S. A. BY<br> +The Quinn & Boden Company</p> +<hr class="r5"> +<p class="center"> +BOOK MANUFACTURERS<br> +RAHWAY NEW JERSEY<br> +</p> + +<hr class="chap x-ebookmaker-drop"> + + +<div class="chapter"> + +<p class="center"> +TO<br><span class="big"> +ALBERT BACON FALL</span> +</p> + +<p class="center"> +A Statesman Whose Insight and Whose<br> +Knowledge of Mexico Have Long<br> +Sustained the Faith of Those<br> +Who Love Her Best.<br> +</p></div> +<hr class="chap x-ebookmaker-drop"> + +<div class="chapter"> +<p><span class="pagenum" id="Page_vii">[Pg vii]</span></p> + +<h2 class="nobreak" id="PREFACE">PREFACE</h2> +</div> + + +<p>The book whose pages follow is the result of a conviction, firm-rooted +in observation and experience, that the American business man prefers +to judge for himself. He wishes the facts, and beyond all the +fundamental facts, and when he has them his judgment is sure, quick and +final. It is to men who think in this way that this book is addressed. +It is the story, told as concisely as the facts permit, of conditions +as they truly exist in the great land which, like a cornucopia, +stretches to the south of us. It is written for the business man of the +United States, definitely, with such limitations as exist for such a +book—its value to the European may be the greater because it does not +seek to straddle the national issue.</p> + +<p>I have written other books on Mexico. One has seen the light of +publication before this volume was written.<a id="FNanchor_1" href="#Footnote_1" class="fnanchor">[1]</a> I have sought, in +these other volumes, one upon the people of Mexico and one upon the +psychology which governs their actions in social and in business life, +to lay a solid ground for the understanding of the country and its +people. In the book which is offered here I give, freely, openly, +without apology, the facts of a commercial<span class="pagenum" id="Page_viii">[Pg viii]</span> situation which to me is +the most astounding condition in the business world to-day. I picture, +with the simplicity of truth, a country of vast natural mineral +resources, but virtually no agricultural wealth, a country with almost +no consuming population, a country of radical governments which have +sought, frankly, to destroy capital and the machinery of Mexico’s own +wealth. I have told but little of the famous resources of Mexico—those +are described elaborately in many works. I have told little of the +labor of Mexico, for this is yet to be harnessed. I have described none +of the great industrial needs of Mexico, because those are obvious to +all who run.</p> + +<p>I have sought, rather, to set down those phases of Mexican life to-day +which are the background of Mexican business. I have dared—what no +man with less faith in the American business man would dare to do—to +set forth honestly the truth about Mexicans of to-day, the secrets of +Mexican government, the facts of Mexican “bolshevism,” the horrors of +Mexico’s degeneration under the rule of her predatory <i>caciques</i>. +These to me are the fundamentals of Mexican trade, just as they are the +fundamentals of Mexican politics and of the life of the Mexican people +to-day. I have sought to set them forth in their relation to the grave +issues of world trade, to set them in their relationship with the ways +of men in business and<span class="pagenum" id="Page_ix">[Pg ix]</span> with the ways of business in its relationship +to human life.</p> + +<p>I am a friend of Mexico. Few who have written of her life have been +more deeply interested in her welfare. I should like to lay here the +foundations for a solution of the Mexican business problem by setting +forth the unhappy picture, ignoring no detail, seeking no self-deceit, +as is too often the practice of those who write on Mexico. I believe +that more will be gained, more business of a solid sort won, by those +who realize and recognize the truth of conditions in Mexico, than by +those who deliberately close their eyes to those conditions.</p> + +<p>Let us have the truth, then! Let us face the Mexican trade problem +as it is, with its vast potentialities balanced, as they actually +are, by the sinister elements of ignorance, bitter poverty and racial +conservatism. Let us see the problem while we see the golden goal. For +this problem is no mere issue of beating the British or the Germans to +a thriving market. It is an issue of bringing into being the purchasing +power of a populous nation, which is bowed down to-day by the horrors +of revolution, of unthinking radicalism, of national degeneracy. He +who shall solve that problem will win the trade of Mexico when she +has trade. That is all which is to be known, and the only issue to be +faced.</p> + +<p><span class="pagenum" id="Page_x">[Pg x]</span></p> + +<p>This book is not a radical document. It does not seek to explain the +problems of to-day in terms of to-morrow. The author finds in the +radical movements of the present the leaven of the future—little else. +He sees in the upheavals of our day a searching for some essential +truth which will be a clarifying factor in this time of chaos and +distrust. He does not see in them the final solution of any of the +difficulties which hatched them out into a too ready world.</p> + +<p>Nor is this book reactionary. The author believes that the day of +Diaz is long past in Mexico, that the day of the dreamer of utopian +visions—Madero—is past in Mexico. He seeks in the present and in +the future the sane, firm grasp of actualities which to the watcher +on the tower is the only hope of true progress. He sees in the orgies +of Carranza and his immediate successors not the upsurgence of mighty +ideals, but of personal ambitions and crass disregard of the bases of +all human progress. He seeks, in the whirling chaos of the present, a +firm footing. He seeks to give the direction of such understanding as +he may have to those who think with him. He believes that if he gives +such a direction to them, it will enable them to go forward to the +winning of some of the vast profits which await them in the Mexican +market.</p> + +<p>One word more I would add. There rules to-day<span class="pagenum" id="Page_xi">[Pg xi]</span> in Washington +a government one of whose mighty maxims is the protection and +encouragement of those Americans who to-day go forth, as their fathers +went forth before them, to carve their way in the wilderness. The +Washington government knows, as we all know, that the only wilderness +left to us is the open field of the vast undeveloped lands to the +South. I believe that Washington plans definitely to support the +American pioneer to the fullest in his new conquest of the New World. +That his weapons of conquest are dollars and brains and energy matter +not, and that he battles in lands over which the flag shall never fly +matters less. The fact that he is an American, that he is honest, that +he is patriotic and sincere—these matter much in Washington.</p> + +<p>This book, then, goes upon its way, its record clear and envisioned +in deep frankness and in deep faith in the American business man and +in the American government of to-day. I offer it to those who must go +forth, to those who must perforce place the funds at the disposal of +those who go, and to those who, in the councils of our government, are +quietly, without ostentation or political apology, placing firm hands +to the backs of those who dare and who give.</p> + +<p class="right"> +<span class="smcap">Wallace Thompson.</span><br> +</p> +<p> +<span class="smcap">New York</span>,<br> +<span style="margin-left: 1.5em;">August 5, 1921.</span><br> +</p> + +<p><span class="pagenum" id="Page_xii">[Pg xii]</span></p> + + +<div class="footnotes"><h3>FOOTNOTES:</h3> + +<div class="footnote"> + +<p><a id="Footnote_1" href="#FNanchor_1" class="label">[1]</a> <i>The People of Mexico.</i> Harper & Bros., New York, +1921. The companion book, <i>The Mexican Mind</i>, is in preparation +for publication as this present volume goes to press.</p> + +</div> +</div> +<hr class="chap x-ebookmaker-drop"> + +<div class="chapter"> +<p><span class="pagenum" id="Page_xiii">[Pg xiii]</span></p> + +<h2 class="nobreak" id="CONTENTS">CONTENTS</h2> +</div> + + +<table class="autotable"> +<tr><th class="tdr"> +CHAPTER</th><th></th><th class="tdr">PAGE</th></tr> +<tr><td class="tdr"> +<a href="#CHAPTER_I">I</a></td><td> <span class="smcap">Trading With Mexico</span></td> +<td class="tdr"> <a href="#Page_1">1</a></td></tr> +<tr><td class="tdr"> +<a href="#CHAPTER_II">II</a></td><td> <span class="smcap">Nature and the Mexican Market</span> </td> +<td class="tdr"><a href="#Page_16">16</a></td></tr> +<tr><td class="tdr"> +<a href="#CHAPTER_III">III</a></td><td> <span class="smcap">The People Who Buy</span> </td> +<td class="tdr"><a href="#Page_48">48</a></td></tr> +<tr><td class="tdr"> +<a href="#CHAPTER_IV">IV</a></td><td> <span class="smcap">The Credit of Mexico and of the +Mexicans</span> </td> +<td class="tdr"><a href="#Page_69">69</a></td></tr> +<tr><td class="tdr"> +<a href="#CHAPTER_V">V</a></td><td> <span class="smcap">Our Bill Against Revolutionary +Mexico</span> </td> +<td class="tdr"><a href="#Page_96">96</a></td></tr> +<tr><td class="tdr"> +<a href="#CHAPTER_VI">VI</a></td><td> <span class="smcap">Mexico and Her “Bolshevism”</span> </td> +<td class="tdr"><a href="#Page_128">128</a></td></tr> +<tr><td class="tdr"> +<a href="#CHAPTER_VII">VII</a></td><td> <span class="smcap">The Rape of Yucatan</span> </td> +<td class="tdr"><a href="#Page_159">159</a></td></tr> +<tr><td class="tdr"> +<a href="#CHAPTER_VIII">VIII</a></td><td> <span class="smcap">The Romance of Mexican Oil</span> </td> +<td class="tdr"><a href="#Page_196">196</a></td></tr> +<tr><td class="tdr"> +<a href="#CHAPTER_IX">IX</a></td><td> <span class="smcap">The Golden Geese</span> </td> +<td class="tdr"><a href="#Page_240">240</a></td></tr> +<tr><td class="tdr"> +<a href="#CHAPTER_X">X</a></td><td> <span class="smcap">The Highway to Solution</span> </td> +<td class="tdr"> <a href="#Page_258">258</a></td></tr> +</table> +<p><span class="pagenum" id="Page_1">[Pg 1]</span></p> + + +<hr class="chap x-ebookmaker-drop"> + +<div class="chapter"> +<p class="center xbig">TRADING WITH MEXICO</p> +</div> + + +<hr class="chap x-ebookmaker-drop"> + +<div class="chapter"> +<h2 class="nobreak" id="CHAPTER_I">CHAPTER I<br><span class="small">TRADING WITH MEXICO</span></h2></div> + + +<p>Three fundamentals determine and will determine American participation +in Mexican trade. Excursions, however wet, will not change those +fundamentals. Enthusiasm, however sincere, will not affect them. Above +all, promises should not be taken into consideration in our cool +judgment of them. American business men have never been noted for +sentimentalism in their own country; they should not be sentimental in +other countries. Let us take up the situation and look at it with the +sane judgment we would apply to the question of selling, say, a new +type of water meter in New York City.</p> + +<p>The three fundamentals of the Mexican trade question are not unique. +They are, first, the Market; second, the Credit, and third, the +Government and Laws under which trade must be carried on. Truly not +original, and the astonishing thing<span class="pagenum" id="Page_2">[Pg 2]</span> about American business men who +consider Mexico is that they apparently lose sight of them, and most of +all lose sight of the emphasis which must be given to each.</p> + +<p>First, the Mexican market. Three phases again: the people, the +industries and the need. There are 15,000,000 people in Mexico. +Of these, 6,000,000 are Indians, and Indians that are comparable, +literally, to our own reservation Indians in the United States, in +the things they buy and the things they make. There are 8,000,000 +mixed-bloods, a cross of Indian and Spanish, but of these 8,000,000 +fully 6,000,000 are almost as Indian as their full-blood cousins. In +other words, 12,000,000 out of 15,000,000 take and need nothing from +the outside world excepting food, at those times, like the present, +when they do not produce enough for their own needs. More than that, +the money or goods which would pay for imported food for the 12,000,000 +are created by the remaining 3,000,000—in other words, the actual +market in Mexico is not 15,000,000 people but 3,000,000. The rest wear +no shoes—only native tanned sandals. They wear no civilized clothes, +only white cotton woven at home. They wear only home-made hats, the raw +material the fiber of palm trees which grow wild. They have no need for +culture, for houses, for travel. Remember, then, a buying population of +3,000,000.</p> + +<p><span class="pagenum" id="Page_3">[Pg 3]</span></p> + +<p>The industries are limited almost exclusively to the extraction of +the riches of the soil by mining and through deep oil wells. In all +Mexico, with its vast sweep of territory, virtually nothing is produced +for export excepting those riches which come from Mother Earth, and +those overwhelmingly under the enterprising management of the foreign +companies and individuals who alone have ever sought to develop them. +Only one industry in Mexico puts human hands and human brains to the +wheel of progress and creates wealth—that is the industry of growing +sisal hemp in Yucatan. Sisal hemp is indispensable for the making of +binder twine for the world’s wheat crop, and is the basis of what was +once a great national and international industry. Yet to-day even +that commodity has been cut in production almost to the point of +destruction, by the machinations of Mexican government and graft, and +Yucatan is not to-day the great purchasing center that it once was. +Moreover, Yucatan is far from the Mexican mainland, a principality, a +country of its own, and its riches have never been a true part of the +resources of Mexico, for it buys and sells direct with the outside +world.</p> + +<p>Gold is the common medium of circulation in Mexico to-day. There is +not a peso of Mexican paper currency in use. All is gold, or foreign +bills, with low-grade silver and copper as subsidiary<span class="pagenum" id="Page_4">[Pg 4]</span> coins. The use +of gold is reassuring to the business man. It looks like prosperity +and it does assure a firm rate of exchange. But the gold in Mexico +does not mean these things. Its great significance is the absence of +credit. Gold circulates because no man trusts the government, and +every piece of gold that passes through your hands in Mexico tells you +that Mexico is far from being on a stable financial basis, either as a +government or as a business community. Gold is of value, really, only +because it makes credit possible. When you must ship boxes of gold +into distant states at an appalling rate of insurance against bandits +and highwaymen, it is not prosperity, but rather the lack of it. When +gold is in circulation, and there are no bills, the available money +of the country is limited, literally, to the total of the gold and to +not one cent more. When there is paper in circulation it means that +the gold supply has been increased many fold because the credit of the +government has been added to the gold to supplement the supply of money +to be used in trade.</p> + +<p>In Mexico there is not only no paper money, but there is practically no +commercial paper. The drafts of great foreign companies travel about +the land for weeks and months before they are cashed and when they +finally reach the bank on which they are drawn, the backs are covered +with endorsements,<span class="pagenum" id="Page_5">[Pg 5]</span> and on some an extra sheet of paper has been pasted +to carry more signatures. And that is not good business, and should not +be reassuring to the prospective trader.</p> + +<p>In Mexico to-day no one trusts the government, and as a result no one +trusts his neighbor. The business men of Mexico who are demanding +long-term credits abroad will not trust their oldest customers, and +cannot themselves get credit in their own country. Recently, when +the Mexican government wanted credit on a large supply of railway +equipment, it was told that if one young American, engaged in running +private trains at heavy cost over the Mexican railway systems, would +guarantee the bills, the Mexican government could have what it +needed. Otherwise, cash with order. The Mexican government is trying +to get railway equipment, and is making promising announcements. +But it is getting very little, and for what it is getting it pays +almost entirely in cash, or, strangely enough in this age, barters +commodities or prepaid freight tickets for it! These are facts, and +extremely significant facts. The railway equipment men want to know +how the government is going to pay—and that is what all Americans who +contemplate trade with Mexico should want to know.</p> + +<p>But the need of Mexico, the power we have to help her rehabilitate +herself! Ah, that is a strong<span class="pagenum" id="Page_6">[Pg 6]</span> bid, even with what we have called the +unsentimental American business man. He wants to give her a lift now, +when she needs it, and then he will not be forgotten when the big +splitting up of profits comes. Perhaps this is true. Let us look at +it. For some years now we have been following the very laudable and +beautiful system of going more than half way with Mexico. We are still +urged to follow this excellent method. The only trouble is that the +“more than half way” is getting longer and longer, and Mexico is asking +more and more and giving less and less. The kindly souls who have +sought to get into Mexico with their surplus stocks are not gaining +anything, except curses and distrust. So far, save for the promises +which have always been forthcoming, there is nothing coming out of +Mexico to help the trade we are hearing about.</p> + +<p>Most of the talk about Mexican trade for American manufacturers was +born, moreover, of our own need to get rid of accumulated goods. +Beginning late in 1919, there was considerable inflow of these cheap +goods into Mexico on good terms. Those who were fortunate enough to +unload talked of it, and the gossip went about that Mexico was a +fine place to sell off extra stocks. But after a year, the unloading +system began to glut the Mexican market, and to-day, when the same +manufacturers want to sell again, they find that Mexico<span class="pagenum" id="Page_7">[Pg 7]</span> will +take—only goods at sacrifice prices. They went half way and more, did +our manufacturers, and Mexico did not “come back.” Instead she sat +tight where we came to her, and insisted on our coming a little further +with concessions to her needs and wants. The result is that to-day +there is nothing like the demand for American goods that there was when +we first did the unloading which we thought would whet the Mexican +appetite. Mexico is like the customer of a “fire sale” store—she will +buy only the most obvious bargains. It is cash trade for a section of +a town where there used to be credit, and where there is no credit +to-day. But the customer is again demanding credit—and cash-trade +bargains at the same time.</p> + +<p>This question of credit is of necessity complicated. But perhaps the +answer as far as the American business man is concerned is contained +in the fact that while the Mexican merchant demands credit he himself +does not give credit—no country was ever on so thorough a cash basis +as Mexico is to-day. The merchant who is asking for credit is carrying +on his business from hand to mouth; he has no accounts on his books to +guarantee the goods for which he is promising to pay. He asks credit +on his character standing and on the possibilities of his market—he +offers literally nothing else. Personally, many Mexicans<span class="pagenum" id="Page_8">[Pg 8]</span> and many +foreigners in Mexico are reliable and honest men, but no sane business +man would take in the United States risks similar to those demanded +by his prospective customers in Mexico. And the possibilities of +the market—those are as yet thin air and enthusiastic hope, which +gain strength only from our national need to get a foreign outlet to +keep our plants going. Let the American manufacturer weigh these two +considerations with the additional realization that there is no reserve +credit in the background.</p> + +<p>Reserve credit, such as bills payable, sound real estate values and +prospects of peace and good business years ahead, are comparable to +the unseen sources of energy in the human body, on which that body +lives and thrives during lean periods. Mexico’s lean period has now +lasted for eleven long years, and in that period the country has been +living literally on its reserves alone. Again and again one hears the +expression, “Mexico is living on her fat,” and the continued marvel +is that she has lived so long and survived such lengthened calamities +through so many ghastly years of destruction. As this is written, there +has been some appearance of regeneration, a noisily announced period +of “reconstruction.” But as yet this is only an appearance. Actually +while the wheels of business and life are running more smoothly for the +moment, this is obviously a surface<span class="pagenum" id="Page_9">[Pg 9]</span> condition—deep down under the +surface of Mexican life the wasted tissue remains. Mexico is not yet +filling the interstices of her flesh with that reserve strength which +is business credit and business promise.</p> + +<p>But why not help in the rebuilding, and thus take a risk which will +probably bring great gain in the years of progress to come?</p> + +<p>The answer to this question must be based on a thorough understanding +of the third of our three great issues—Mexican Government and Law as +applied to business. The Mexican revolutions which began in 1910 had +for their announced object, “Mexico for the Mexicans.” The idea was to +bring the foreigner under control of Mexican law and government. This +was eminently just—if it were true, as assumed, that under the Diaz +régime the foreigners had been above the Mexican law. The facts were +largely otherwise, however, despite some glaring abuses. In the working +out of the idea of “Mexico for the Mexicans,” the revised as well as +the entirely new legislation and procedure went far beyond the normal +reaction against the alleged irregularities of the Diaz time.</p> + +<p>In the new “Constitution of 1917,” which is literally the most radical +written constitution of any country in the world to-day, the chief, if +not the only object was to make difficult the operation of foreigners +in any line of business in the country.<span class="pagenum" id="Page_10">[Pg 10]</span> The laws against their holding +land are drastic and final in their import; no foreigner may own +property within sixty miles of the border or within thirty miles of the +sea; foreigners may not control a Mexican corporation formed for the +purpose of holding such land unless they waive their citizenship rights +with respect to such companies; great estates are prohibited, so that +true agricultural industry is made virtually impossible; foreign plans +for irrigation projects—the one hope of the Mexican farmer—are nipped +and killed; most serious of all, such lands are virtually confiscated +through nationalization projects which have already been applied to +many great properties, some of them of foreigners, and have been kept +from affecting others only by active diplomatic protest.</p> + +<p>But, the casual observer of things Mexican asks, how is it that +business still continues? How is it that the oil companies to whom, +we are told, these nationalization laws especially apply, how is it +that the oil companies are still doing business, are still drilling +wells and taking out oil? Does this not mean that these laws are merely +provisions against a revival of the abuses of the old days? These are +the questions that occur, as the Mexicans planned them to occur, to the +outside observer.</p> + +<p>The Mexicans assure us that this is truly the case, but the effect of +the laws is very different.<span class="pagenum" id="Page_11">[Pg 11]</span> Their effect is to place all business, +Mexican and American, foreign oil wells and native merchants alike, +in the status of receiving the <i>privilege</i> of doing business, +in place of the <i>right</i> of doing business. In effect they make +every foreigner in Mexico, from the missionaries who conduct services +contrary to the law of the land which prohibits foreigners from +officiating as priests before their own altars to the oil men who dig +wells under permits wheedled out of a grasping government department, +law-breakers or receivers of special and “pernicious” privilege. To-day +no business man can defend his rights before the courts of Mexico, +for all rights, even the common rights of corporate business, are +in some way or another contradictory to the laws of the land. They +receive privilege, and privilege in great and generous measure—if they +are friendly to the ruling group or their satellites. They receive +privilege by the grace of government, not rights by the power of +government. Government theoretically exists for the protection of the +weak, but government in Mexico exists actually for the exploitation +of the strong by officials and for the suppression of the weak if the +strong want and can pay for such suppression.</p> + +<p>Strangely enough, the strong in Mexico are not altogether contented +with this condition. Somehow business, with its awakening consciousness +to its helplessness, is finding the situation irksome.<span class="pagenum" id="Page_12">[Pg 12]</span> The greatest +single industry in Mexico to-day is oil, and oil pays about $50,000,000 +a year in various taxes to the Mexican government—and for what? Almost +all of it for the privilege of doing business, and the result is that +oil is at the mercy, to-day, of government caprice and the caprice of +Mexican officials. The laws of the present era of Mexico are enacted +literally for the purpose of having a “club” of control over all forms +of business activity, laws to be enforced when it is convenient, or to +be “forgotten” when that is desirable. The oil companies spend time +and vast effort to keep their protests to the Washington and Mexican +governments in good order—so that the price of their privileges may be +kept low. The legitimate portion of their taxes is only about forty per +cent of the total sum they pay, but it is probably literally true that +they would pay all they now pay and more if they could dispense with +the rule of privilege and trade it for decent human rights to do decent +business in a decently governed country.</p> + +<p>In this, these companies are fighting the fight of the individual +business man as well as the fight of their own stockholders. It may all +be selfish, and doubtless is, but by a strange turn of affairs, the +laws of Mexico have worked out to the creation of salable privilege +instead of defensible rights, and this has thrown all business into +the<span class="pagenum" id="Page_13">[Pg 13]</span> same group. The business problem of Mexico is literally the +achievement of this exchange of privileges for rights. And until that +exchange is effected, he is but a gambler who goes into Mexico to seek +or to offer honest business, for even though he should gain much sure +profit in the beginning, those profits will be more than wiped out +later unless the legitimate business of Mexico is given the legitimate +rights of business.</p> + +<p>And how is this exchange of privileges for rights to be effected? This +is the problem that confronts American business and American government +to-day. The issue is joined clean and is simple indeed. The provisions +of the Mexican Constitution of 1917 and the laws which give it effect +remain on the Mexican statute books to-day because they are profitable +to the group in control of the government. They mean, literally, graft +and power, for where privilege is necessary for the carrying out of +business, there is a price on privilege, but where rights are provided +for business, the price and the prize are upon industry and activity.</p> + +<p>To the members of the American Chambers of Commerce on tour in Mexico, +to the American manufacturers who are invited to ship goods to Mexico +to-day, offers of privilege are made, privilege without graft or +price, now. But the price is there, and is clearly worked out in the +subtle Mexican mind. These American business men,<span class="pagenum" id="Page_14">[Pg 14]</span> pleased with their +reception, are to become boosters of the Mexican government, demanding +its recognition and scouting the great financial interests who are +their traditional enemies at home. That is price enough to the Mexican +mind. But when recognition is gained, and when those same individuals +seek to do business in Mexico under “normal” conditions, the laws +which ensconce privilege and give it into the hands of petty and high +officials for dispensation, will reap their toll.</p> + +<p>One way only remains—the removal of privilege, the establishment +of rights. Insistence on these issues alone will almost solve the +Mexican problems politically and commercially. But the Mexicans are +wise indeed when they seek to divide the counsels of this country, to +place the small American business man and manufacturer in a position of +antagonism to the issues that are set clear in Washington, the issues +of political privilege versus political rights, the issues of the +business privileges which those individual Americans seek to gain for +themselves versus the business rights that will include them and all +their fellows.</p> + +<p>The call is again for clear foresight and not for sentimentalism, for +a social conception of business and not for a selfish, individualistic +hope of getting in ahead of the next fellow. The Americans who have +been longest in Mexico are begging to-day for rights in exchange for +privilege. They<span class="pagenum" id="Page_15">[Pg 15]</span> know, as those who look upon Mexico from outside or as +newcomers do not know, that until Mexico mends her ways with business, +business can never rescue Mexico from the slough of her present +unhappiness. They know that no business in any nation can long prosper +without the prosperity and the good sense of the government of that +nation. They are not pirates, and they know that piracy, in government +or in business, leads but to the destruction of both. What they know we +may have for the listening. If we do not take it, we, too, must learn, +as they learned, in the costly school of experience.</p> +<hr class="chap x-ebookmaker-drop"> + +<div class="chapter"> +<p><span class="pagenum" id="Page_16">[Pg 16]</span></p> + +<h2 class="nobreak" id="CHAPTER_II">CHAPTER II<br><span class="small">NATURE AND THE MEXICAN MARKET<a id="FNanchor_2" href="#Footnote_2" class="fnanchor">[2]</a></span></h2></div> + + +<p>Every land upon this globe owes to nature that predetermination of its +products and its needs which are the vital factors of its commerce and +its industries. Even the nature of its races, which has so much to do +with the standards of living which affect the quality and volume of +business, is determined to a certain extent by climate and geography. +It is therefore a fundamental need of all who have a deep interest in +Mexican business to grasp something of the location, the formation, and +the climate of that country. For few nations in the world have a more +wonderful location, and few have a more disastrous climate.</p> + +<p>The vast cornucopia-like triangle of land which comprises the territory +of Mexico lies south of nearly three-quarters of the southern boundary +of the United States. Its western tip touches Southern California at +the Pacific and its most easterly point is 500 miles south of the +Pensacola, at the western end of Florida. For 1,833 miles<span class="pagenum" id="Page_17">[Pg 17]</span> Mexico’s +northern border is contiguous to the United States, 693 miles eastward +along arbitrarily marked lines from the Pacific Ocean to El Paso, +Texas, and the remainder southeastward along the sinuous course of the +Rio Grande to the Gulf of Mexico. Its jagged southern border is hardly +400 miles long, touching Guatemala and British Honduras (Belize).</p> + +<p>This cornucopia, grasping the Gulf of Mexico on the east like a great +hand, swings southeastward from the Pacific contact with the United +States until the most westerly point of the Guatemalan border is 500 +miles <i>east</i> of Mexico’s easternmost contact with the United +States on the north.</p> + +<p>Set apart, as Mexico is by her boundaries, she seems in form much like +a great peninsula, but she has, herself, two important peninsulas as +part of her territorial extent and configuration. One is the Peninsula +of Yucatan, which forms the eastern end of the cornucopia, the thumb +of the curving hand which grasps the Gulf of Mexico, an area of about +50,000 square miles. The other is the long, narrow peninsula of Lower +California, with 58,343 square miles, extending directly south of the +American state of California and connected with the Mexican mainland by +only a narrow strip.</p> + +<p>That mainland comprises, with the two peninsulas, 765,762 square +miles, and the 1,561 square miles of coastal islands under Mexican +sovereignty<span class="pagenum" id="Page_18">[Pg 18]</span> bring the total area of the country up to 767,323 square +miles. The greatest width of the mainland is 750 miles, and the +greatest length is 1,942 miles, from the northwestern tip of Lower +California, where it joins the United States, to the southernmost point +in the jagged Guatemalan border in the Mexican state of Chiapas. The +narrowest point in Mexico is 120 miles, at the Isthmus of Tehuantepec, +once discussed as the possible site of an interoceanic canal, and in +the time of Diaz the route of a great transshipping railway between the +Pacific and the Gulf of Mexico. The Atlantic (Gulf of Mexico) coastline +of Mexico is 1,727 miles long, that of the Pacific (including the long +border of Lower California) 4,574 miles.</p> + +<p>Lying between 32° 30′ and 14° 30′ North Latitude and 86° 30′ to 117° +Longitude west from Greenwich, the triangular form of the Mexican +territory places it about equally in the temperate and torrid zones. +This is a primary factor in Mexican climate, but far more significant +is the contour of the country itself.</p> + +<p>This is largely mountainous, for if we include the high but fertile +table-lands, nearly two-thirds of the country is covered with mountain +ranges. The Rocky Mountains of the United States, the great backbone +of the Western Hemisphere, cross the Mexican border into Sonora, in +a low, narrow range. Almost immediately south of the international<span class="pagenum" id="Page_19">[Pg 19]</span> +line they begin spreading eastward. A long, slowly rising valley a +hundred miles wide continues southward from El Paso, narrowing rapidly, +while to the eastward of this valley rises an apparently new range of +mountains, obviously a part of the great Rocky Mountain range, but +unconnected with it in the United States and south, indeed, of the +broad flat plains of Texas. This is the <i>Sierra Madre Oriental</i>, +or Eastern Mother Range, the continuation of the Rockies in Sonora and +Durango being called the <i>Sierra Madre Occidental</i>, or Western +Mother Range. Further south, these two join together, and spread to +virtually the whole width of Mexico, excepting for the Gulf coastal +plain, some 300 miles wide, to the east. All of Central Mexico is +mountainous, flattened only by vast plateaus which, according to the +accepted geological theory, were created by alluvial deposits and lava +dust from the mountains which rise still above them. At the Isthmus +of Tehuantepec, the Sierra Madre flattens out till, save for the +relatively easy grades which climb from the Gulf and from the Pacific +to the summit of the low divide (less than 300 feet above sea level) +the mountains might be all but gone. The narrow plane of the Isthmus +passed, the mountains rise again until the center of the state of +Chiapas is once more a vast plateau accented with towering peaks, a +formation which<span class="pagenum" id="Page_20">[Pg 20]</span> continues southward through Central America, lowers +again at Panama, but joins directly, at last, with the South American +Andes.</p> + +<p>In this sweep of mountainous territory are hundreds of deep cañons or +<i>barrancas</i>, great fertile plateaus, and many wonderful mountains. +Of these last those about the Valley of Anahuac, the site of Mexico +City and for ages the center of Mexican government and population, are +the most famous. Here are Popocatepetl (17,520 feet) and Ixtaccihuatl +(16,960 feet) the snow-peaked volcanoes, and to the eastward the still +more beautiful cone of Orizaba (18,250 feet). Virtually at the same +latitude, but far to the west, is Colima, (12,991 feet), a still active +volcano. Toluca (14,950 feet), close to the Valley of Mexico, Malinche +(14,636 feet) in the state Tlaxcala, the Cofre de Perote (13,400 feet) +in the state of Vera Cruz, and Tancitaro (12,664 feet) are those of +greatest height. Only the already great altitude of the plateaus +of Mexico from which most of the striking mountains spring keeps +hundreds of others from filling the eye of the traveler. The scenery +which results from the mountainous formations of Mexico is literally +unsurpassed, for Popocatepetl and Ixtaccihuatl can give the climber all +the thrills of the Alps, and the crater lakes to be found in one or two +sections of Mexico rival in splendor the more famous resorts in Europe.</p> + +<p><span class="pagenum" id="Page_21">[Pg 21]</span></p> + +<p>The deep and wide <i>barrancas</i> which mark the mountainous formation +all through Mexico are magnificent to contemplate, but the day’s +journey down and up the sides of such a geological spectacle as the +Barranca of Beltran brings home to even the unscientific observer +the terrific handicaps which these vast cuts put upon the industrial +development of the country. Much of the conquering of these handicaps +was achieved under the broad railway policy of President Diaz, and +the work done still remains, but many years must now pass before the +final conquest is achieved. Such a work as the building of the Colima +branch of the Mexican Central, completing the only direct line for the +first time from the Capital to the Pacific, will hardly be repeated +when revolution threatens, for here, in less than 100 miles, twenty +great bridges had to be built, most of them crossing <i>barrancas</i> +and cuts of mere geological formation, with virtually no streams +filling them even in the rainy season. The Southern Pacific line from +the northern border in Sonora lacks but sixty miles of linking up +with the Guadalajara branch of the National Railways, but thirty of +those sixty miles are through a mountainous territory cut with deep +<i>barrancas</i> which will cost close to a million dollars a mile to +build.</p> + +<p>Such <i>barrancas</i> and valleys do not, of themselves, indicate +either great natural water power<span class="pagenum" id="Page_22">[Pg 22]</span> or navigable streams. There are +wonderful water power possibilities in Mexico, to be sure, which come +from two factors, the sheer drops which give ideal power sites with +tremendous heads of water, and the heavy torrential rainy season. +But the streams themselves do not carry sufficient water the year +round to justify any plant, and tremendous reservoir development is +vital to any power plant design. Such reservoirs have been built in +various parts of Mexico, but at appalling expense, such as only great +financial interests can swing—only foreign capital or the government +has been able to handle them. There is an added and unexpected element +of difficulty—the porousness of much of the soil of Mexico. The +mountains, indeed, are of igneous rocks, but underneath the valleys is +often soft limestone, and more often still, under those places where +a great impounding of water might be made with a relatively low and +inexpensive dam, is the soft, porous alluvial and volcanic-ash land +with which the valleys have been filled up.</p> + +<p>This porous soil and limestone are factors bearing on the absence of +navigable streams. Even in the lowlands the streams run underground in +Mexico, and while they can be tapped by shallow wells, they deprive +Mexico almost entirely of the advantages of river transportation. Even +the<span class="pagenum" id="Page_23">[Pg 23]</span> Rio Grande, on the northern border, is useless for navigation most +of the year. The Panuco, at whose mouth is located the great oil center +of Tampico, is navigable only a short distance above that port. The +broad, rich coastal plain along the Gulf of Mexico is watered by tiny +streams, all of which, excepting the partially navigable Papaloapam, +are useless for steamers and even for launches most of the year. Not +until we reach the Isthmus of Tehuantepec do we find a river worth +considering for transportation. The Coatzacoalcos, at whose mouth +on the Gulf of Mexico is Puerto Mexico (the eastern terminus of the +Tehuantepec National Railway), furnishes a highway which made possible +the relatively great development of American tropical plantations +during the years of peace under Diaz. Its mouth was then the port of +loading for great ships, but only by continual dredging was it kept +open, and to-day the port is abandoned except for light-draft coasting +ships. Further south, emptying into the Gulf at Frontera, is the +magnificent system of which the Grijalva and the Usumacinta are the +chief streams. Here indeed have plied and in the future will ply great +river steamers, for upon the banks of the Usumacinta, at least, are +rich oil fields and the fairest farming land in all tropical Mexico. +Both the Grijalva and the Usumacinta are magnificent<span class="pagenum" id="Page_24">[Pg 24]</span> streams, and +the latter is comparable, in its majestic volume, to the Mississippi +itself. Only the bar at Frontera keeps them from being navigable to +ocean steamers. For a brief period under President Madero this bar +was dredged so that fruit boats could enter and go to the docks of +banana farms, encouraging a promising industry which was killed by +heavy taxation and government neglect of the dredging, under the +revolutionary presidents of recent years. But this one system of rivers +offers virtually all there is of navigation in Mexico.</p> + +<p>Yucatan, the peninsula which separates the Caribbean sea from the Gulf +of Mexico, is virtually without rivers, the water from the abundant +rainfall of its interior finding its way to underground streams in the +porous underlying coral limestone.</p> + +<p>On the west coast there are a few rivers. The most important is +the Lerma, which waters a large territory on the Pacific side of +the continental divide, and allows some local transportation. The +Balsas, in the states of Oaxaca and Guerrero, reaches far inland, but +rapids and shallows make its use for navigation expensive and all but +impossible. In Sonora is the Yaqui river, navigable for small boats and +of some value for transportation. The Fuerte is also in this class.</p> + +<p>Another phase of the geography of Mexico which affects transportation +is the complete absence<span class="pagenum" id="Page_25">[Pg 25]</span> of good natural harbors well located. +The chief port of Mexico, Vera Cruz, has a harbor which was built +artificially around a partially protected bay. Tampico is a port solely +because of the jetties which narrow the mouth of the Panuco and, with +the help of dredges, keep the channel clear. Puerto Mexico has a +similar problem, but the smaller river makes dredging absolutely vital. +Frontera is solely a dredging proposition, as the Usumacinta and the +Grijalva, emptying together into the Gulf, have formed a vast delta in +the lowlands which can probably never be narrowed to take advantage of +the great volume of water which they pour out. Yucatan has literally +no semblance of a harbor, and its great crops of sisal hemp are loaded +from lighters at appalling expense.</p> + +<p>On the Pacific coast, Acapulco has one of the ideal harbors of the +world, completely landlocked, and open for medium-draft ships. But it +is relatively small, and moreover as yet almost inaccessible to any +railway survey, although it was used by the galleons from Manila as a +port for trans-shipment of the treasures of the Orient across Mexico +to the galleons from Cadiz which came to Vera Cruz. Salina Cruz, the +Pacific terminus of the Tehuantepec National Railway, was built from +an open roadstead with two lines of jetties and seawalls, a work which +inattention has now all<span class="pagenum" id="Page_26">[Pg 26]</span> but ruined. Manzanillo, the terminus of the +only direct railway line from Mexico City to the Pacific, was also +built with seawalls and opened by dredges. Mazatlan, further up the +coast, and the chief port of the Southern Pacific Railway of Mexico, +is an open roadstead. Guaymas, the port of the state of Sonora, is +accessible only to light-draft ships.</p> + +<p>These are all great natural handicaps, and have affected the life of +Mexico probably more than it will be possible to estimate. The mighty +and costly work of the Diaz régime in building harbors is a monument +to that “materialistic” era which will last through many years and has +already played a tremendous part in furnishing the sinews of revolution +to succeeding governments, for without that work Mexico would be far +from capable of sustaining herself in the period of her agony to-day.</p> + +<p>But beyond all these factors of mountains and rivers and sea looms +a yet greater problem, and still more far-reaching—the problem of +climate. As noted, Mexico lies in about equal parts in the temperate +and torrid zones. But the geological zones are far more important, +for climate is affected not alone by latitude but by altitude as +well. These geological zones are three, the hot country or <i>tierra +caliente</i>, the temperate country or <i>tierra templada</i> and the +(relatively) cold country or<span class="pagenum" id="Page_27">[Pg 27]</span> <i>tierra fria</i>. The hot country is +the lowland section along the coasts from sea level to 3,000 feet +altitude, where the mean annual temperature varies from 76° to 88° +Fahrenheit. The Mexican terminology includes not only the lowlands +of the torrid zone, but the whole coastal plain up to the northern +border. The <i>tierra templada</i> lies along the mountain slopes +and in the lower plateaus, between 3,000 and 6,500 feet altitude, +where the temperature is between 65° and 76°. This zone takes in the +higher northern sections which are within the temperate zone proper. +The <i>tierra fria</i> takes in the high plateaus and the mountains, +between 6,500 and 12,500 feet, the yearly average temperatures +varying from 30° to 60°, although the important sections record 50° +or more. The three geological zones each include about equal portions +of the country, but half of the inhabitants live in the cold zone, +and only a quarter each in the temperate and hot sections. The mean +temperatures of the cold zone are approximately those recognized as +the most favorable for physical exertion, but in the hot country the +body struggles against a handicap of almost 20° F. more than the 65° +at which it normally functions best. More significant still are the +temperatures of all the zones in their relation to mental activity. +The human mind is at its best under the stimulus of a mean temperature +of about 40° F., but even at Mexico<span class="pagenum" id="Page_28">[Pg 28]</span> City, 7,600 feet above sea level, +the mean temperature of winter is as high as 53°. In the temperate and +hot countries the handicaps under which the brain functions run to 20° +and up to 45° above the 40° at which the human mind works at highest +efficiency. No stimulating winters, no clarifying cool spells, even, in +the midst of the endlessly beautiful summers of Mexico!</p> + +<p>Only the cold zone has any advantages in temperature, and these +advantages are equally important with the fertility of the soil in +accounting for the predominance of population there. Yet even where +the temperature is favorable to at least physical work, there is the +debilitating sameness of the tropics, the assurance that there will +always be more difference between day and night than between the +seasons. There, on the heights, too, the nervous drain of altitude +and of lack of moisture in the air takes the place—with no advantage +to the human machine—of the humidity and heat of the hot country. At +every turn in Mexico climate takes toll of human energy, even if we +ignore the undoubtedly debilitating effect of tropical and sub-tropical +light upon the white men and upon their mixed-blood descendants as well.</p> + +<p>All these climatic factors, then, have continuous influence on the +health of all the Mexican people as well as upon Mexican business. The +hot, humid<span class="pagenum" id="Page_29">[Pg 29]</span> weather of the hot country makes those who live there low +in resistance of disease, while the nervous strain of the altitudes and +dryness of air in the better portions achieves a not dissimilar result +in lowering resistance. It is axiomatic that the Mexicans as a people +are seldom well and, as has been recorded in detail elsewhere,<a id="FNanchor_3" href="#Footnote_3" class="fnanchor">[3]</a> +this ill-health has been and is to-day one of the determinants of the +relatively low state of progress of the country. No people who are +continually sick and upon whose energies their climate is a continuous +drain can work well or achieve greatly.</p> + +<p>The relation of this thoroughly recognized factor of ill-health to +Mexican trade and commerce must not be overlooked. It is at the root +of much of the apathy which keeps the Mexican people at their low ebb +of business enterprise. It determines with peculiar insistence their +predilection for the easy road, the “<i>mañana</i> habit,” even for +the dominance of outworn traditional methods in agriculture and in +business. It has a great deal to do with the ease with which foreigners +develop a land which has for centuries lain virtually fallow. But it +places vast difficulties in the way of that development, for it keeps +the labor problem continually in the foreground and vitiates much of +the great advantage which the relative cheapness of that labor seems to +offer. It has and will<span class="pagenum" id="Page_30">[Pg 30]</span> continue to have a powerful effect on trade, +for it keeps even the enterprising among Mexican business men at a low +standard of efficiency and makes it almost imperative that foreigners, +for the present, do most of the jobbing and export and much of the +retail trade and export buying of the country. This element is too +likely to be lost sight of, because it is not a condition common to +other lands. But it explains much that seems at first inexplicable in +the difficulties of the American exporter and importer in getting the +adequate representation in Mexico which he must have.</p> + +<p>Another vitally important effect of Mexican geography is the +uncertainty and untoward distribution of rainfall. This has forced +upon the Mexicans their diet of corn and with it their use of fiery +condiments which are probable causes of the digestive disorders which +ravage all classes. Moreover, the rainfall conditions have been vitally +important in the determination of the entire agricultural tendency of +the country.</p> + +<p>The seasons in Mexico are marked, not by winter cold and summer heat so +much as by seasons of rain and drought. The winter is the dry season, +roughly between October and May, and the summer is the salubrious rainy +season, from June to September. The distribution of rain throughout +the year and the failure of the rains in the important growing seasons +in some of the otherwise<span class="pagenum" id="Page_31">[Pg 31]</span> fertile sections is due primarily to the +geography of the country. Professor Ellsworth Huntington, of Yale, the +great American climatologist, finds that Mexico’s summer rains are due +to the vertical rays of the sun which cause the rapid rising of the +heated air, with sudden expansion and condensation, first over the +low-lying hot country and later on the rising uplands of the <i>tierra +templada</i>, where the function of the mountains in bringing about +condensation is amply proven by the well-watered eastern slopes and the +dry western sides of the ranges.</p> + +<p>This mountain contour and the peculiar shape of the Mexican mainland +(very wide at the north in proportion to the south) create another +important climatological effect—the broad stretches of desert in the +northern sections. The so-called continental type of climate which +forms the American deserts further north combines with the mountain +contour and the distance from the eastern seashore (driving the +rain-clouds southward) to make immense sections of Mexico desert, +capable of supporting, at best, only wandering herds. These deserts +lie between the broad arms of the great “Y” of the Mexican mountain +ranges, and combined with the mountainsides themselves render nearly +three-fourths of the area of Mexico unfit for cultivation, even if +irrigation were general.</p> + +<p><span class="pagenum" id="Page_32">[Pg 32]</span></p> + +<p>The result is that of the 500,000,000 acres of land in Mexico, not +more than 25,000,000 acres are arable. Great sections are useless, so +that in the state of Chihuahua, 90,000 square miles in extent, only +about 125,000 acres, or less than two-tenths of one per cent can be +cultivated—and most of that arable portion is irrigated.</p> + +<p>The most fertile sections of Mexico are rich indeed, and in the plateau +valleys, where alluvial deposits and lava dust have been poured in +together to form the soil, great crops can be raised—when there is +rain. Only in a relatively limited section, however, is rain sure to +come at the times needed by the crops. Often when it does come, it is +in torrential downpours which are likely to wash cultivated fields +away in a single night. It is this condition which makes the so-called +<i>tierra templada</i>, on the slopes of the mountains, in many ways +the least desirable of all the farming land of Mexico.</p> + +<p>Uncertainty of rainfall is, then, one of the outstanding results of the +Mexican climate as influenced by Mexican geography. This uncertainty +works forever upon the mind of the Mexican farmer, making him a +hopeless fatalist, making it less than worth his while to attempt +scientific cultivation. If there is rain, his crops are good anyway, +and if there is not rain, the cost of labor and fertilizer and good +seed are lost. The Mexican<span class="pagenum" id="Page_33">[Pg 33]</span> farmer is the worst of gamblers, and his +fondest hope is that his average crop over a period of years will be +twenty-five per cent of normal!</p> + +<p>Famine has ravaged Mexico periodically for thousands of years. It is +most interesting, in looking at the present stage (when the largest +items of import are foodstuffs), to realize that it has probably been +only the much-abused hacienda system which has saved Mexico from severe +ravages of recent famine. The hacienda system, which is the operation +of huge estates under an elaborate overseership, approaches as nearly +as the living conditions of the country permit to a businesslike +administration of the farming of the land. It was the stable factor in +Mexican food production in the time of the Spaniards and in the later +era of Diaz.</p> + +<p>The small farmer of Mexico has worked, since the beginning of Indian +history, without a thought of supplying the market and thus feeding +the industrial workers of the towns. He has lived from hand to mouth, +and only when he chances to have a surplus does he transport it or +sell it on the ground for the needs of the city market. So true is +this that in the period of mining and industrial expansion under Diaz, +the draining of the labor from the haciendas to the mines and to the +few factories had an immediate effect on the food production, and the +imports of foreign corn and wheat<span class="pagenum" id="Page_34">[Pg 34]</span> grew almost in exact proportion +to the diversion of this labor to industry. The small farmers, the +Indians and peons, who had places of their own or worked in the village +commons, did not go to the mines, but continued their relatively easy +existence on their own little <i>fincas</i>. They learned only slowly +the possibilities of the increased market for their product, and only +to an infinitesimal degree did they rise to meet that market.</p> + +<p>To-day, with the shutting down of hundreds of the haciendas, and the +return of the country to its primeval agriculture, the situation has +become extremely serious, and the food importations have grown out of +all proportion to the industrial growth of the country; in fact, almost +in inverse ratio to the industrial depression of the country.</p> + +<p>This presents a serious problem, but it also presents a promise of +new opportunity when peace comes to Mexico. For then there must come +a revival of large-scale farming, the growth of a new farming system, +and with it a tremendously increased market for modern farm implements. +There has been much talk, on the part of the revolutionary governments, +of the needs of the new small farmers for agricultural machinery, +but this is almost entirely talk, for the new small farmers are only +falling back to the way of their ancestors, and are not in any sense +taking the place of the ruined haciendas in food production for the<span class="pagenum" id="Page_35">[Pg 35]</span> +cities and industrial sections. That development will probably come in +the form of an entirely new system of agriculture, in which foreign +machinery and of necessity foreign capital must have a vital part.</p> + +<p>One of the inevitable developments of Mexican agriculture must be +in the direction of irrigation. There is literally not enough good +accessible land which will produce without irrigation to feed the +country or, what is more important, to make an increase of population +possible. This land must be created by irrigation, and irrigation, +owing to the geographical formation of the country, must of necessity +be carried out by great capital. Many of the village communes have +irrigation systems, of a crude sort. Water is brought from distant +streams, where it flows after the rainy season, and in some places +it is brought up from the underground streams by means of crude +water-wheels operated by man-power. But the total area watered by such +irrigation is relatively insignificant, and as dams can be built in +Mexico only at large cost, the true development of Mexican irrigation +waits on peace, on foreign capital and government investment and +encouragement.</p> + +<p>Something of this sort had been begun before the present era of +revolutions. In the closing years of the Diaz régime (before 1911) +many franchises were granted to large private companies<span class="pagenum" id="Page_36">[Pg 36]</span> which planned +irrigation projects, and the sum of 90,000,000 pesos was ordered +expended on government irrigation over a period of years. A few of +the private companies had put their plans into execution, and many +others, on the way to accomplishment, were nipped and destroyed by the +subsequent revolutions. For the past ten years, nothing has been done +toward solving the problems of irrigating the fertile but unwatered +lands of Mexico, and it seems hardly likely that anything will be +done under the threats of confiscation which now hang over all great +enterprise there.</p> + +<p>Rainfall conditions have had much to do with the overemphasis on the +land problem and indeed with the failure of succeeding governments +to solve that problem. As in all arid countries, water rights were +originally more important to the natives than were land rights. In +hundreds of the Indian communes which still persist, the communal +rights of the Indians are distributed, not on the basis of land +assigned, but of the water allowed; each Indian receives a proportion +of the water brought by the communal irrigation ditches, and may +take three or four times the amount of land which his water will +irrigate—for crop rotation, forage, etc. This inevitable emphasis +on water has perhaps had its part in directing the attention of the +Indians in their demands for land distribution, toward the cultivated +haciendas<span class="pagenum" id="Page_37">[Pg 37]</span> where water is available. But it also gives promise for +a future which will make possible the rehabilitation of the country +through great irrigation projects creating thousands of rich small +tracts available for distribution to industrious natives—and foreign +small farmers as well. In the government franchises given under Diaz to +private irrigation projects, provision was made that about one-third +of the land brought into cultivation should be turned over to the +government for distribution to small native farmers.</p> + +<p>Aside from the indirect effect of these rainfall conditions, they +have determined, with imperative insistence, the type of agriculture +which is followed in Mexico, and so have affected her trade in foods +and raw materials. They have made corn (maize) the staple food of the +country, as wheat is the staple of the lands where there is winter +snow and regular rainfall throughout the year. They have allowed the +development of only the tropical products like coffee, sugar and rubber +in the rich districts of Vera Cruz and Oaxaca which were partially +opened by foreign stock companies under Diaz. They have, more than +all, enthroned, as the only important agricultural export of Mexico, +the sisal hemp of Yucatan. This desert product, which requires slow +growth for the maturing of the long stout fibers which make rope and +binder twine, is the greatest export of Mexico<span class="pagenum" id="Page_38">[Pg 38]</span> which is the product +of Nature’s bounty and human enterprise. Coffee and some rubber and +tobacco and a little sugar were raised for export in happier days, but +only sisal hemp, the product of the desert <i>henequen</i> plant, has +become a wealth-producer in any great quantity. Mexico has long been +an importer of foodstuffs, for, as I have noted, before the days of +modern commerce, famine came with terrible regularity. Under Diaz, food +was imported in increasing quantities, and since his fall, Mexico has +been utterly dependent on the outside world for a large portion of the +nutriment of her people.</p> + +<p>It is impossible now to predict when and how Mexico will become an +agricultural country in fact as well as in potentialities. Irrigation +must come, for only when it does will agriculture and the prosperity +of agriculture fill the land. In one section where irrigation has +been carried out on a large scale—the Laguna district near Torreon, +Coah.—cotton is grown in quantity. This product feeds into the native +industry of cotton weaving which flourishes near Orizaba and in other +sections where local, direct water-power is available.</p> + +<p>It seems inevitable that the increase in irrigated lands will add +to the acreage of cotton and also to the number and importance of +agricultural products of the class of raw materials. The country +which irrigation will water in Mexico is of<span class="pagenum" id="Page_39">[Pg 39]</span> vast extent, and is +safely comparable, even at its worst, with what the lands of Utah +and California and the Imperial Valley were before water was brought +to them. Again, however, we wait on peace and on the great works of +modern scientific irrigation. And, however enthusiastic we may be as +tradesmen, our capital will not be rushing to seek Mexican investments +of this sort until civilized government again rules, with a promise of +relative permanency.</p> + +<p>The desert character of the country in the north was responsible for +the establishment of a great cattle-raising industry, for the land was +cheap and the ranges were vast. This has to-day been virtually wiped +out, and Mexico imports meat from the United States—all the result of +revolution, so that when peace comes the cattle industry will surely +be revived. But always the cattle of northern Mexico have been of the +range, still unfit for profitable slaughter, and sections suitable for +their fattening have been badly needed. There was, in other days, much +shipment of range cattle into the United States, and to the better +watered southern sections of Mexico. But although peace will bring a +revival of the ranges, Mexico cannot look forward to becoming a great +meat-producing country until the irrigation problem is solved.</p> + +<p>There are rich, well-watered sections of Mexico—this must not be +overlooked—but these have<span class="pagenum" id="Page_40">[Pg 40]</span> resulted in a crowding of population on +the plateaus and through the rich valleys such as that of the Lerma +river in Jalisco state, and have contributed but little toward the +broad development of the country. In fact, one of the characteristics +of Mexico’s population distribution has been the tendency to gather +into groups, so that a great city like the capital or like Guadalajara +or Puebla will have a dozen cities and villages of considerable size +close about it—and then stretches of sparsely populated country for +leagues until another group is found. This is essentially climatic—and +geographical.</p> + +<p>The mountain contour of the country and this same grouping of the +important centers of population have been the chief influences in the +location of the railways. Owing to the absence of navigable streams, +the mere possibility of Mexico’s industrial and of even her true +national development had to wait upon the coming of the railways. The +first line was that completed in 1872 by English capital between Vera +Cruz, the chief port of the Gulf of Mexico, and the City of Mexico, +some 400 miles inland and a mile and a half above the level of the +port. This “Mexican Railway” touches the groups of cities along the +old Spanish highway, and gave them an industrial primacy which was +unchallenged until the very last years of the Diaz peace.</p> + +<p><span class="pagenum" id="Page_41">[Pg 41]</span></p> + +<p>After the building of this first line railway construction turned to +follow the great natural avenues laid out by the mountain valleys. +There were, as we have seen, two main valleys, that between the Eastern +and Western Mother ranges, and that to the east of the Eastern chain. +Looking at a map of Mexico, the most casual observer is struck by +the fact mentioned more than once by Mexican revolutionists, that +both these valleys lead directly to the heart of the United States. +The railroads which were built there might indeed be taken to have +been built to drain Mexico’s resources into the United States. But it +was only because these roadbeds had been laid out by Nature herself +that the lines came to be built there, with the inevitable result of +increasing immeasurably the importance of the United States to Mexican +development. One early Mexican president (Sebastian Lerdo de Tejada, +1872-76), in fact, refused to allow these obvious roads to be built, +explaining, in a much-quoted phrase: “Between the weak and the strong, +let the desert remain.”</p> + +<p>The roads were both built by American companies under President Diaz, +the Mexican National on the east, the Mexican Central on the west. +They had a mighty part to play in the modernizing of Mexico, and in +her development through the trade in the minerals and in the<span class="pagenum" id="Page_42">[Pg 42]</span> building +of such industries as followed them. Throughout their history to the +present, they have been of far greater importance to Mexico than to her +allegedly covetous northern neighbor.</p> + +<p>After these lines were built, others came, to follow the mountain +valleys. One went from Mexico City westward to Guadalajara, tapping the +rich Valley of the Lerma, the granary of Mexico. Narrow gauge lines +twisted through the rich states of Mexico and Michoacan, lines which +when modernized and extended in some future time will open agricultural +and mining territory comparable to anything yet known to commerce +and Mexican industry. Another line found its way to Oaxaca, deep in +the mountains to the east and south of Mexico City. Others followed +the seacoast to the Isthmus of Tehuantepec, and crossed that narrow, +shallow neck of land to the Pacific.</p> + +<p>Along the western slope of the Sierra Madre other lines were built +through Sonora, and then the Southern Pacific of Mexico, an American +company, pushed these roads still further southward, opening new +territory, not to the commerce of Central Mexico, but to that of the +United States. And last of all, the line to Guadalajara left its easy +grades and smooth roadbed to leap the <i>barrancas</i> and climb down +the mountains to achieve the contact with the Pacific at Manzanillo. +A mighty hand, indeed, has nature had in the locating<span class="pagenum" id="Page_43">[Pg 43]</span> of Mexico’s +railway lines, and with their connection to the United States and our +trade.</p> + +<p>The mountainous character of the Mexican territory has upturned vast +mineral resources, whose effect on the development of the country +has been greater perhaps than any other single fact. These minerals +gave the wealth of the Aztecs which tempted the Spaniards to take +and to develop the country so thoroughly. They were drained for the +three centuries that Spain ruled, and their exploitation shaped all +the policy of the colonial régime. They were the greatest of the +attractions to foreign capital at the beginning of the Diaz rule, +and they paid most of the revenue of taxes upon which the material +civilization of the Mexico of that day was built. It seems safe +to promise that when there is lengthened peace again in Mexico, +mining will take its place with the greatest industries of the +country—although oil may still retain its present primacy when it, +too, can spread out and develop itself.</p> + +<p>Mining camps and groups of mining camps dot the country, and whole +distinct territories are devoted to the mining, here of silver, +there of gold, there of copper, lead, etc. Indeed, the geography of +Mexico has had a tremendous effect in the creation there of a country +primarily rich in minerals as she is poor in agriculture. Oil is to-day +the greatest single wealth of Mexico, but the other<span class="pagenum" id="Page_44">[Pg 44]</span> minerals have had +and will again have their important bearing on her development.</p> + +<p>The mineral wealth (oil as well as metals) has as I have noted been +the chief attraction which has brought foreign capital to Mexico. +The Spaniards and to a lesser extent the Indians before them, mined +the mountains of Mexico, but it remained to foreign enterprise in +the time of Diaz to open up the great bonanza sections to scientific +development. In the train of this development, came more foreign +capital of every sort, for agriculture, for industry, for oil, and for +public service investment. This foreign capital, developing Mexico’s +latent wealth, opened her to the world, and brought forth her great +promise of the future, even though it also gave to the revolutionists +who overthrew Diaz a handy battle cry of anti-foreignism.</p> + +<p>It seems unlikely that without the geographical and geological +conditions which offered the wealth of minerals to the development +of capital, Mexico would or could have entered upon the modern stage +of her development. In that was the hope of the past and in it, +too, is the hope of the future regeneration of Mexico. The tempting +possibilities of such development are the only bait which will bring +back to Mexico the stream of foreign capital to which alone she can +look for her prompt salvation, when peace comes at last.</p> + +<p><span class="pagenum" id="Page_45">[Pg 45]</span></p> + +<p>The geography and climate have had their hand, too, in the industrial +situation in Mexico. Mining, in the time of Diaz, drained the available +labor away from the farms and away from the small factories which then +existed. The oil fields have more recently taken a large proportion of +the available workers. The supply of labor in Mexico is astonishingly +small—the development of the latent labor supplies in the Indian +communes waits on peace and education. Temperamentally (and in this we +find the hand of climate) the Mexican is not a good factory worker. +The raw products which the land produces, sisal hemp, cotton, rubber, +etc., all demand for their profitable manufacture large and intricate +plants, such as Mexico has not built and for whose operation she has +never trained her people. Therefore, save for the cotton factories +(which produce only the coarser staples) there is to-day in Mexico +almost no industrial development. The lists of industries of which +such a manufacturing town as Monterey boasts, include, for instance, +candle and match factories employing thirty or forty people, brass bed +“factories,” where the products of American foundries are put together, +soda water factories—the industries which no city in any other land +would find worth mentioning. Mexican industry, indeed, waits surely +upon the development of the crops of raw materials, upon the education +of her<span class="pagenum" id="Page_46">[Pg 46]</span> laboring classes, and upon the solution of the problems of +irrigation and water power.</p> + +<p>Geography and climate have been cruel to Mexico,—of this we need +not seek to deceive ourselves. But throughout the list of unhappy +conditions which has been set down here there runs a promise of +advancement and of better things—when peace comes and when foreign +enterprise shall again be welcomed. All of the advance which Mexico has +made in her long fight against an unkind Nature has been made with the +help of foreign energy. First was Spain, and the 300 years in which she +built up the colony to a semblance of a modern state, creating great +cities and peace and prosperity. Then, after fifty years of destructive +revolution, Diaz, and his wise invitation to and use of foreign +enterprises and foreign money. Only in these two periods has Mexico +been prosperous.</p> + +<p>The greatest advance was under Diaz, when in thirty years Mexico +rose from the ashes of her revolutions and flew toward the heights +of commercial advancement. In that time her railways were almost +all of them built, all the water power which she now has developed, +the one great and productive irrigation section—the Laguna cotton +district—reclaimed from the desert, the sisal hemp industry created, +the factories, such as they are, built and set in operation. Virtually +all of these<span class="pagenum" id="Page_47">[Pg 47]</span> advances were made with foreign capital and under the +control of foreign engineers and managers. Success rewarded the faith +and the efforts of all who devoted themselves to these developments and +it was their conquering of the great natural handicaps of Mexico which +made possible the glowing tales of her “treasure-house.” When such +times as those come again, and only when they come, will the battle +against Nature be resumed, and in its resumption, the signs of man’s +great conquest reappear.</p> + + +<div class="footnotes"><h3>FOOTNOTES:</h3> + +<div class="footnote"> + +<p><a id="Footnote_2" href="#FNanchor_2" class="label">[2]</a> This chapter is based upon the author’s article on Mexican +Geography contributed to the important <i>Mexican Year Book for +1920-21</i>, published in Los Angeles, Calif., concurrently with this +volume.</p> + +</div> + +<div class="footnote"> + +<p><a id="Footnote_3" href="#FNanchor_3" class="label">[3]</a> <i>The People of Mexico</i>, Book I, Chap. V.</p> + +</div> +</div> +<hr class="chap x-ebookmaker-drop"> + +<div class="chapter"> +<p><span class="pagenum" id="Page_48">[Pg 48]</span></p> + +<h2 class="nobreak" id="CHAPTER_III">CHAPTER III<br><span class="small">THE PEOPLE WHO BUY</span></h2></div> + + +<p>A bamboo hut with a clumsy thatch of grass, a hovel of sundried +bricks, made, as the Israelites made them, of straw and clay, a shack +of unfinished lumber or rotting railway ties topped with a roof of +laminated sheet-iron—these are the symbols of the social level of +Mexico. Within them all a dirt floor, a box filled with earth for a +brazier, two or three earthenware pots, a <i>metate</i> over which the +woman bends at her endless task of grinding meal for the family cakes +of unleavened corn, a few rush mats for beds and a tawdry shrine with a +dim light before it—the inert millions of Mexico live to-day as they +have lived for a thousand years.</p> + +<p>Their minds untutored, their thoughts and desires confined literally +to the animal plane, their religious instincts almost entirely +superstition, their government the support of rulers upon the vast +misery of the lowly, Mexico finds her parallels only in China and in +Turkey. And Mexico is at our own back door, the cynosure of our most +hopeful tradesmen!</p> + +<p><span class="pagenum" id="Page_49">[Pg 49]</span></p> + +<p>Up until ten years ago, there was an aristocracy in Mexico counting in +its make-up many able men, groups of able men, devoted as far as their +lights allowed them, to a paternalistic care of the Indians and peons, +and to the development of Mexico as a great, modern state. Under Diaz +there was also a slow building of a material civilization, looking, in +the future, to the filling of the peon stomach and the lifting of the +peon mind through education to the light of the white man’s world, to +a place in the white man’s commerce. It has been the common usage, in +this past decade since Diaz fell, to excoriate that aristocracy, to +blame it for all the evils of the country, to point with bitter scorn +at its wealth, at its material monuments of churches and palaces and +mines and railways. And yet, although these ten years of revolutions +have been devoted most effectively to the elimination of the Mexican +upper classes and of their materialism and its monuments, the condition +of the lower classes has not been alleviated by one tiny burden, nor +has it been lifted by one hair’s breadth.</p> + +<p>The Mexicans of to-day are worse off than they were in the days of +Diaz; they are worse off than in that wild revolutionary period before +Diaz; I am not so sure that they are not in worse condition than they +were under the Spaniards, for they seem literally to be sliding back to +an era of barbarism<span class="pagenum" id="Page_50">[Pg 50]</span> like only to that misery which was theirs before +the Spaniards came.</p> + +<p>We lose sight of the essential fact of Mexico, commercially as well as +socially, if we lose sight for one moment of the lowest of the Mexican +people. They present to us our first and greatest problem, whether +we are traders, missionaries, or those who seek to develop Mexico’s +resources or to sell her our goods.</p> + +<p>It is they who must buy our merchandise or aid our work or operate our +factories, mines and oil wells. They were, and are, a vast potential +market, a great, slow-moving force for us to re-shape by education into +an advanced people, civilized, progressive, using the products of the +world and pouring their own products back into the stream of commerce. +They offer us an immense, a wonderful well of labor, perhaps a greater +contributant to the nation’s future wealth than anything else in all +Mexico. Because of these potentialities and because of our inability to +understand why such possibilities do not find their development, it is +vital that we look, clear-eyed and sympathetically, on the one great +and overwhelming factor in that hopeless inertia—the ignorance of the +mass of the Mexicans.</p> + +<p>Mexico is a land of innumerable children. A land where there are twice +as many children under ten years old as there are in the United States +(in<span class="pagenum" id="Page_51">[Pg 51]</span> proportion to population). And a land where not one child in six +has even the chance to go to school, because there are no schools for +them.</p> + +<p>The depth of Mexico’s ignorance, in childhood and in adulthood, in life +and in business, literally passes comprehension. The active, curious +minds of the Indian youngsters grow quickly into sodden stupidity; the +keen and vivid intelligences of the children of the middle and upper +classes expend their growing forces in sensuality and plunge themselves +and their country into debilitating excesses—because there is no +training to give them a life above the animals.</p> + +<p>I have seen, in the seats of government in Mexico, men who know less +of world history than a boy in an American high school; I have talked +with “experts” of government departments who knew less of their special +subjects than did I, a layman. I have seen in the presidential chair +men who believed, literally, that the shrunken, sick Mexico of to-day +was one of the great, advanced countries of the world—because they had +no conception of the development of world civilization.</p> + +<p>I have seen, in Mexican homes, the slow murder of Mexican babies, +because neither I nor any one else could change the round of tradition, +unrelieved by training of any sort, which takes an annual toll of child +life in Mexico that is perhaps not surpassed even by the toll of the +famine in China.</p> + +<p><span class="pagenum" id="Page_52">[Pg 52]</span></p> + +<p>The chain of tradition links Mexico together, and links her, too, to a +past which goes back into the furthest reaches of prehistoric legend.</p> + +<p>The ways of modern agriculture are those of the early Aztecs, and +modern tools, even, are introduced with the greatest difficulty. The +round of life is a brief cycle of dull days, unlivened by any thought +or knowledge beyond the confines of a village or a township or a few +blocks of a city. The schools, such as they are, are patterned after +models long abandoned everywhere else in the world, and are stifled +by a traditional belief that war and revolution and the erection of +imposing buildings are more important to the progress of the country +than the education of its youth.</p> + +<p>All this has driven Mexico on through the years handicapped with a load +of illiteracy that can well be recognized as the most potent factor in +the degeneration that marks her every manifestation to-day.</p> + +<p>Only figures can tell, even in part, the depths of that ignorance. Back +in 1895, the Mexican government reports (which one must always remember +speak as favorably as they dare) showed that only 2,000,000 out of +a population of 12,500,000 could read and write! This means that 82 +per cent of all the people of Mexico were without these rudiments of +learning. By 1900 this percentage had been reduced to 80 and in 1910 +the<span class="pagenum" id="Page_53">[Pg 53]</span> Diaz government claimed that it had been reduced to 78, in other +words that of the 15,000,000 population of that year, a little over +3,000,000 could read and write, while nearly 12,000,000 remained in +the depths of their ignorance. In 1919, the Carranza government issued +a report claiming but a slight advance over these figures in the nine +years since the fall of Diaz.</p> + +<p>It is literally true that not a tenth of all the people in Mexico have +what we would call a common school education, and three out of four +cannot read a street sign or scrawl their own names. Indeed, one great +British mining company reported that of its 595 Mexican employees, +including scores of what we would call skilled workmen, only six, or +about one per cent could sign a receipt for the money they were paid.</p> + +<p>To those of us who look on through foreign eyes, this condition +explains much of Mexico’s dilemma, and the point is further clarified +when we know that the greatest claim ever made for Mexican education +showed but 12,000 schools, with 850,000 pupils enrolled—while the +population of children of school age was more than 4,000,000! No single +issue is greater or more pressing than education. Yet education waits, +as everything in Mexico waits, on peace and better times, on food +and on health. And these wait—and more than all, from our selfish +interest, business and commerce wait—on<span class="pagenum" id="Page_54">[Pg 54]</span> education! Around and around +the problem swings, and each issue is dependent upon another, and that, +then, upon the first.</p> + +<p>Of all the complicated, interwoven factors of Mexican life and of +the tendencies, this very day, of Mexican business and trade none, +however, offers so true an understanding as race. The basis of Mexico’s +ignorance and the basis of her steel-bound traditions is Indianism. +For Mexico’s 15,000,000 people include 6,000,000 pure-blooded Indians, +of some fifty tribal strains, literal aborigines in their life and in +their thoughts. There are, as I have noted, 8,000,000 mixed-bloods, +three-quarters of whom are virtually Indians in their way of life and +in their outlook upon the world. And there are only 1,000,000 of white +strain, mostly Spanish, a group which is to-day without voice in the +affairs of the country. Two-thirds of Mexico is Indian, and most of the +other third a mixture of Indian and white, a mass with the dark Indian +sea below it and virtually no light coming to it from above.</p> + +<p>To-day there sifts into the Mexican ruling classes—these same +mixed-bloods—hardly a ray of culture, hardly a gleam of a truly +broader outlook, to lift them and their people out of the dull cavern +of their circumscribed life, or to lead them to the better things of +modern civilization and commerce. We talk of the heathen of China, of<span class="pagenum" id="Page_55">[Pg 55]</span> +the darkness of ignorance and superstition in Africa, but in Mexico +the churches and the foreign industrial concerns seem to me to face a +greater need than in any other country in the world.</p> + +<p>For Mexico is at our door, and the cultural traditions of Mexico are +those of our own world, the white. For 300 years she was a subject +state of Spain, and for all the mistakes of the Spaniards and the Roman +Catholic Church, the foundation-stones they laid are as the foundation +stones of our own life.</p> + +<p>The Indian mass was the great problem of Spain; it was the great +problem of Diaz; it is the great problem of all those who would lead +her to the ways of the world of to-day. For the past ten years it has +been forgotten, lost in the struggles of individual men for personal +power. But always those individuals have been swallowed up, without +their realizing it, in the mire of Indianism, for Indianism, the +very epitome of ignorance, lies there always beneath the Mexico that +the world sees, waiting to engulf its own masters and to destroy all +social and business progress. The Spaniards and Diaz built above these +shifting sands, ever conscious of them, providing against them always. +Diaz fell because after he built his foundations he did not reach +down into the Indian mass to up-raise them. He fell in his old age, +forgetting, as old men forget, the dangers which have been with<span class="pagenum" id="Page_56">[Pg 56]</span> them +through all their life. But before he fell he had laid the foundations, +building upon those of the Spaniards and erecting new ones of his +own, among them foundations of foreign business, of foreign missions, +of foreign schools, business and missions and schools which by their +own enterprise and perhaps as much by the examples which they set for +Mexican business, Catholic churches and native school teachers, were +beginning the great uplift of that vast, inert Indian mass.</p> + +<p>The brief rule of Madero (1911-1913) was the link between Diaz and the +upheaval of radicalism and Indianism which was to begin with Carranza, +in 1914. Then commenced the process of casting away, bit by bit, all +the slow-built civilization, all the shallow foundations of commercial +prosperity, of Diaz. With Carranza began the upsurgence of the Indian, +the terrific push upward of the long-hidden forces of destruction which +had been held in check, not only for the thirty years of the Diaz +peace, but for all the four centuries since the Spaniards had first +come to Mexico.</p> + +<p>Primarily, this destruction was marked by the wiping out of the fabric +of the promising Mexican educational system—for Diaz had made sound +beginnings toward raising the Indians out of the depths of their +ignorance. His rule was building a foundation for business and for +progress by creating an intelligence which would demand and<span class="pagenum" id="Page_57">[Pg 57]</span> would +develop the better things which white civilization had to offer.</p> + +<p>Under Carranza the ideal was not of slow uplift by education and the +creation of a substantial economic existence which would make life and +peace worth striving for. Carranza and those who followed him under the +banner of the revolution have thought little of solid progress. Their +ideal has been revolution—the political remedy for the economic ills +of the land.</p> + +<p>So, despite all the sweeping promises of Carranza and his immediate +successors, education and the progress of business, of trade and +of development have gone into the discard. With the pressure of +the needs of the revolutionary “generals” for greater and greater +appropriations for their armies (and for the graft which ate up most +of such appropriations), with the ever-widening circle of vampires who +fattened on government patronage in every other conceivable way, the +money available for education as well as for industrial advancement +shrank steadily. Where under Diaz the total annual budget of the +government was $50,000,000 a year, with a total appropriation for +schools, federal and state, probably less than $4,000,000, Carranza +had nearer $100,000,000 and spent less than $2,000,000 a year on +education. For Carranza, when the demands of his “generals” for their +“share” increased, shut off the federal<span class="pagenum" id="Page_58">[Pg 58]</span> support of the schools of the +City of Mexico and its neighboring villages, and also the sums which +in other days had gone to help the poorly provided state governments. +He threw the school systems on the hands of absolutely bankrupt cities +and towns, with the result that in the City of Mexico alone some 120 +schools, half the former number, were closed, and 25,000 children, +despite crowding into other buildings, were deprived of education. All +this is history. And statistics do not show that there has been any +recovery since that day.</p> + +<p>The Obregon government, on paper, re-established the federal department +of education with a cabinet officer at its head, which was abolished +by Carranza as an economy measure. There was some more of the endless +Mexican discussion of systems of education, but so far as can be +found, no increase in appropriations or in plans for better support +of the public schools. All those wait, perhaps, as I have said, on +the improvement of business conditions, as the final solution of the +business problem waits, I believe, upon them.</p> + +<p>But they all wait on something else, which I have mentioned above, +and that is the improved physical condition of the Mexican people. +Comfort, food and health are as important to mental and moral +development as the training of the mind by education. The misery of +Mexico is so profound,<span class="pagenum" id="Page_59">[Pg 59]</span> her crashing inertia so deep-rooted and so +self-perpetuating, that it sometimes seems that she can never be cured +from within herself. Some outside force must break the circle and this +I believe is the great opportunity of the American missions, working in +conjunction with the great civilizing energies of American business.</p> + +<p>Already something has been done, by great American business concerns, +and by American trade unions along the northern border and even within +Mexico itself, to improve living conditions. But the terrific chasm of +the Mexican mass remains utterly unplumbed, and the childhood of Mexico +and the manhood and womanhood of Mexico wait, hungry because their food +does not feed them; in discomfort because their long traditions do not +let them even desire comfort; in sickness because of utter ignorance of +the foundations of human health.</p> + +<p>Of this last a word must be written here. I have compiled, +elsewhere,<a id="FNanchor_4" href="#Footnote_4" class="fnanchor">[4]</a> the astonishing figures bearing upon this question, and +have found, in the mass of Mexican official statistics, that the death +rate of Mexican babies under one year is nearly twice that of the +United States; between birth and ten years, three times that of this +country, and that clear through the whole range of Mexican life,<span class="pagenum" id="Page_60">[Pg 60]</span> from +two to four times as many Mexicans die in each thousand as die in the +United States at the same ages. The average life of every Mexican born +is but 15 years, while in the United States it is about 35 years, and +half of the Mexicans born this year will be dead before they are 7 +years old, while in the United States half of all the babies born will +live to be 42 years old.</p> + +<p>High death rate means sickness. Experts estimate that for each death in +the United States there are 300 days of severe illness and 6,000 days +of indisposition or slight illness, spread over the average 35 years of +American life. But in Mexico the average age of death is 15 years, so +that the days of sickness must be crowded into less than half the space +of time they cover in the United States.</p> + +<p>In Mexico, almost no care, as we conceive it, is given to the sick. +The government reports show that only one-quarter of all the deaths +reported in the country are listed as “classified by the doctor”—in +other words, there is no medical attendance at all in three-quarters +of all the fatal illnesses in Mexico. It is well known to those who +know that unhappy land that in the case of illness, the priest and the +doctor are sent for at the same time, the priest to administer extreme +unction, the doctor to do what he can with a dying patient.</p> + +<p>This factor of ill-health in Mexico is one of the<span class="pagenum" id="Page_61">[Pg 61]</span> most terrible of +all the pictures of her misery, perhaps the most potent element in +the national ineptitude. No one who is continually ill can be greatly +interested in progress, mental, or moral, or industrial, for illness +is the greatest force working against the material advancement of the +people and of the country. And upon material advancement, upon the +increase of income and the increase of needs physical and cultural (as +the money comes to procure them) we must build the solidity of the +Mexican people that are to be, as well as the trade which we seek to +gain from them.</p> + +<p>Out of this picture of darkness, then, comes opportunity and with +opportunity the dawning of a new day in Mexico. Because ill health is +so great a factor as it is, there is something that we can attack and +can conquer. Because education is at the low ebb that it is, there is +something which we can do that is direct and tangible, when the means +are put into our hands.</p> + +<p>There is hope in Mexico, and that hope is tied up with the opportunity +for foreign help, which is actually, and even more potentially, the +most disinterested and direct force working on conditions in Mexico +to-day. The land is so torn by personal politics, so nearly ruined +by the exactions of unthinking government, so much the football of +well-deserved calumny, that this single ray of clean, clear light can +be recognized by all as one of the<span class="pagenum" id="Page_62">[Pg 62]</span> great hopes in the horizon to-day. +That hope must be made to dawn, and it is well for us to consider how +that dawn may be assured, and how the day which must follow may be +firmly grounded on economic permanence, on social stability and on +the comfort, health, education and industrial progress of the Mexican +people.</p> + +<p>This is the field wherein I believe that the coöperation of the +American companies established in Mexico and the American missions +operating there will bring about a solution of the ultimate Mexican +problem. For the companies, ready and anxious as they appear to be to +serve, would, through the missions, find a means wherein their money +and the great force of their prestige would have efficient direction. +The foreign oil, mining and railway corporations will not hesitate, +I believe, to place their resources and their opportunities at the +disposal of workers whom they are convinced can truly improve the +morale and thus the productive capacity of the workers upon whom their +business depends. Heretofore there has been mutual misunderstanding. +The companies have not always found the mission workers as efficient as +they would like, and the missionaries have been quite ready to suspect +the companies of representing “predatory capital” with the ambition, +not merely of making their business profitable, but of putting down the +“devoted” leaders of the people<span class="pagenum" id="Page_63">[Pg 63]</span> or of forcing American intervention at +once.</p> + +<p>I have faith in both the companies and the missionaries, and I believe +that in the new political crisis which Mexico is bringing upon herself +as this is written (and which she may have tumbling about her ears +before it is printed) these two must reach out, and will reach out, to +clasp hands and go on together.</p> + +<p>Both have done wonderful things for Mexican education, the missions +through the conscious development in Mexico of the ideal of education +for service, and to the end of raising and training leaders for the +Mexican masses, and the companies through isolated examples of truly +constructive welfare and educational work.</p> + +<p>Probably the most outstanding example of the educational achievements +of American corporations was that of the trade schools which were +organized and operated by the National Railroad between 1890 and +1912, under the direction of E. N. Brown, president of the National +Railways—one of the “pernicious foreigners” who were exiled under +Carranza’s “nationalization” of the railway properties in 1914. These +railway schools trained between 15,000 and 18,000 Mexican mechanics +and engineers, taking boys of 14 and 15, paying them first 62 cents a +day and gradually increasing that until, after four years’ training, +they were receiving three and a half pesos a day. They<span class="pagenum" id="Page_64">[Pg 64]</span> were then +ready to take positions as skilled workers in the railway shops or on +the locomotives or, if they chose, in other industries. The railway +placed no limitation on them, holding that the company benefited in the +increase of the efficiency of the Mexican worker wherever he might be.</p> + +<p>The whole scheme of this work, including the paying of apprentices +while learning, was the broadest kind of educational service, taken +up, to be sure, because the railway company needed mechanics and +trainmen, but with an effect on Mexico and on the creation of the +so-called Mexican “middle class” (the buying and building as well as +the elevating element in any population) which is still felt through +the chaos of revolutionary destruction.</p> + +<p>To-day the greatest industry of Mexico is the production and refining +of petroleum, and foreign companies, of course, control it. Much +genuinely helpful welfare work is being done by them, including not +only schools for children but training schools for workers as well. In +addition the very conscious plan of increasing wages until unskilled +labor now receives a minimum of $2 a day is having a remarkable effect +upon the standard of living and upon the buying capacity (as well as +upon the efficiency) of the Mexicans of the Tampico oil section. There +is much undigested prosperity, and agitators are creating trouble as +far as they<span class="pagenum" id="Page_65">[Pg 65]</span> can for the foreigners, but on the whole the effect on the +material well-being of the peon has been advantageous. It is inevitable +that a continuation of this attitude should bring forth a vastly +increased civilization at least in this one section of Mexico.</p> + +<p>Education has been pushed forward by the companies, and in the model +villages such as the town of Terminal (across the river from Tampico +on the property of the Doheny companies) really excellent schools are +maintained with Mexican teachers under American supervision.</p> + +<p>Conditions in the oil country outside the private company towns are, +however, deplorable, presenting a contrast which is not without its +mighty lesson for us all. The graft and incompetence of the present +ruling classes of Mexico have regarded the prosperous oil towns only as +the most luxurious of posts for influential favorites. The educational +conditions of Tampico, where in a city of more than 100,000 people +there are only twenty government primary schools with an attendance of +4,500 pupils, beggars description. Yet the foreign companies have been +called on regularly to support the Tampico schools, just as they are +called on to pay for pavements, sanitation, etc. And this money has +gone, hardly a single dollar into the work for which it was collected, +but countless thousands into the bottomless pit of revolutionary graft.</p> + +<p><span class="pagenum" id="Page_66">[Pg 66]</span></p> + +<p>But for all the unfortunate conditions of the moment, the possibilities +of the foreign corporations aiding in the uplift of the Mexican +mass throughout the country is one of the encouraging phases of the +Mexican trade and business problem. It links up definitely with the +solution (on which we shall touch, in later chapters) of the parts of +the question which deal with other elements than the human equation. +The beginning which has been made in Tampico, chiefly by the great +American companies, carries with it an import far greater than the +mere contrast between their trim little company villages and schools +and the ugly squalor of the Mexican towns. Somehow, out of the dark +present, American business has learned how closely it is linked with +the welfare of the human element in its scheme. They have learned how +the simple man, how his happiness and prosperity, are wrapped up with +the prosperity and success of every enterprise which remotely touches +him.</p> + +<p>Until these recent years, and through these American corporations, +there has never been scientific welfare work in Mexico, there has +never been considerate treatment of the workers, little study of +their weaknesses and their needs. If we contemplate that, in its bare +truth, we can begin to understand something of the importance of even +the relatively little work which has been done of late. Perhaps the +greatest potentiality of the<span class="pagenum" id="Page_67">[Pg 67]</span> future of the human side of the Mexican +market lies in the broad extension of that genuinely American attitude +toward the masses of the country.</p> + +<p>I have advocated the union of the forces of American missionaries and +American corporations in Mexico. I believe that this will bring great +good and will eventually, as it has done in this country, bring a +higher efficiency of labor and a larger market for the things which +this country can export to Mexico. The desertion of the masses by the +revolutionary government and the exile of the natural aristocracy, have +brought the human problem of the country home with tremendous force to +the foreigners. It lies to-day almost solely in their hands, and seems +likely to wait long for a rescue or aid from any other source whatever.</p> + +<p>For the missionaries, education and improved economic conditions +amongst the workers is indispensable—they are the tools and the signs +of their great plan of regeneration. For business, the encouragement +of religion and education which the mission schools give promises that +improvement in the laboring population and in the buying capacity of +that population which is demanded by the advancement of their business. +Somehow that buying population which I have set at 3,000,000 must be +increased. Somehow the efficiency of the laboring group (which numbers +little more than the<span class="pagenum" id="Page_68">[Pg 68]</span> buying public) must be increased. Only one way +is open—to make the masses better men, happier men, more cultured +men. The ignorance of Mexico, the inefficiency which results from that +ignorance, the low standard of living which keeps the people from those +“wants” which make luxuries into necessities and so improve trade by +widening the eddies of demand—all these affect us all in Mexico.</p> + +<p>Trade follows education. It follows the missionaries of business and +of religion. It thrives alone on the prosperity of peoples. To-day +these factors of trade in Mexico are only depressants—in the future +they must and surely will be changed slowly into booming creators of +trade. But so long as the chief item of import is food and so long as +the productive capacity of the Mexicans is only half developed, so long +will the market in Mexico swing at its lowest ebb.</p> + + +<div class="footnotes"><h3>FOOTNOTES:</h3> + +<div class="footnote"> + +<p><a id="Footnote_4" href="#FNanchor_4" class="label">[4]</a> <i>The People of Mexico.</i> Mexican health is treated +directly in the chapter on “Vitality,” pp. 86-109, and indirectly in +the chapter on “Climate,” pp. 131-151.</p> + +</div> +</div> +<hr class="chap x-ebookmaker-drop"> + +<div class="chapter"> +<p><span class="pagenum" id="Page_69">[Pg 69]</span></p> + +<h2 class="nobreak" id="CHAPTER_IV">CHAPTER IV<br><span class="small">THE CREDIT OF MEXICO AND OF THE MEXICANS</span></h2></div> + + +<p>The Mexican government to-day is bankrupt, and Mexican business +is bankrupt. The most sanguine propagandists of the revolutionary +governments can offer nothing better than promises to offset the +obvious facts of Mexican finance. The government to-day owes nearly +a billion dollars—including unpaid interest on her debts for eleven +years. Commercial credit has reflected the ghastly vision of government +bankruptcy, because the ingrained principle of Mexican politics has +been the subservience of economic progress to political exigencies.</p> + +<p>The history of Mexican revolutionary government has been marked by the +steady suction of business into the maelstrom of political horror. This +began in the earliest years of the rule of Carranza (1914-1920). For +five years Carranza carried on a deliberate campaign to destroy the +banks, as the representatives of the capitalists. He succeeded, despite +all the magnificent resiliency of business. He swamped the country with +paper currency; he withdrew the metallic reserves of the banks until +their bank notes reached almost<span class="pagenum" id="Page_70">[Pg 70]</span> the degradation of his own issues. He +made Mexico into a land of thieves, and gave their thievery the cloak +of government sanction—as of one thief underwriting the ventures of +another.</p> + +<p>When her banks were gone, Mexico had nothing left but her mines and +her oil, for Mexico creates virtually no wealth. She manufactures +nothing and exports nothing save the ultimately exhaustible resources +of her soil. Mining flourished during the war, with allied governments +supporting the lead and silver markets, and oil has flowed on and +continues to flow, giving Mexico herself only the curse of incalculable +unearned wealth for the personal loot of her government officials.</p> + +<p>Credit was Mexico’s great asset under Diaz—he spent years in +establishing it and upon it he built the nation. To-day in Mexico there +is no credit. There is gold in circulation and the sight of gold is +encouraging to the business man. But the gold in Mexico circulates +because there is no credit; no man trusts another and none trusts the +promises of the government. Mexico cannot to-day issue paper money, and +her heavily alloyed silver coin is on a par with her gold only because +an artificial scarcity is maintained in order to increase the value of +silver as the change needed in business.</p> + +<p>Mexico is one of the great potential markets of the world. The American +manufacturer can justly<span class="pagenum" id="Page_71">[Pg 71]</span> look to it for an outlet for his wares. But +a market is useless until the buyer can pay for his goods. Mexico is +not yet a place to dispose of what we make until she can pay for what +she takes. The credit situation is the crux of Mexico, and the crux of +the credit situation is the political chauvinism which, eight years +ago, set out deliberately to destroy that credit, because credit was +capitalism and capitalism was unfriendly to the self-appointed leaders +of the proletariat and, more important still, was said to be the enemy +of that world radical movement to which the Mexican revolutionary +leaders look so smugly to save them from interference in their orgy of +loot and glory.</p> + +<p>When Diaz left the presidency in 1911, there were $35,000,000 in the +national treasury, and Mexico’s credit was such that she could float +at par a national bond issue drawing 4¹⁄₂ per cent. To-day the unpaid +interest on her public obligations exceeds $150,000,000 and she cannot +at any price borrow a cent on any security less than the indorsement of +the government of the United States of America.</p> + +<p>This is the way the situation is expressed in cold figures. But Mexico +is a land of infinite resource, both natural and diplomatic, and +nations in worse condition than this have been taken in hand by great +bankers and placed upon their financial feet. Any Mexican official can +explain<span class="pagenum" id="Page_72">[Pg 72]</span> Mexico’s condition convincingly—the long years of revolution, +the paralyzation of industry through destruction and through the prices +and want brought to all the world by the Great War. It is therefore of +no really deep significance, they say, that Mexico owes millions of +dollars, and that she is to-day suing for favor in the world’s money +markets. But there is a deep and fundamental cause which is back of +her financial bankruptcy, back even of its merely economic causes in +wrecked mines and abandoned factories, in ranches stripped of millions +of head of cattle which bandits have killed for their hides.</p> + +<p>The real bankruptcy of Mexico goes deep down into the minds of +men, Mexicans and foreigners, government officials and rabid +interventionists alike. The bankruptcy of Mexico is a sickness born +of broken faith, a moral bankruptcy that is ugly with human greed and +hopeless with nervous fear.</p> + +<p>The trouble with Mexico to-day is that Mexicans as well as foreigners +have ceased to believe in Mexico.</p> + +<p>At the time of my several recent visits to Mexico, I did not go as a +stranger to the country. I had watched her develop during six years +prior to 1910, under the peace and prosperity of the Diaz régime. +Understanding something of the native psychology and much of that +of the foreigners,<span class="pagenum" id="Page_73">[Pg 73]</span> I was prepared to find that a good deal of the +seriousness of the situation was due to panicky fear and distrust one +of another. What I was not prepared for was a condition where every +incident, every situation, every tight-strung nerve of potential +strength or weakness led down pell-mell paths to a deep ravine of +utterly blasted faith not only in present conditions in Mexico, but in +the possibility of the country’s ever crawling back to her old serenity +and strength in any measurable time.</p> + +<p>Mexico, as most Americans do not realize, considers herself to have +been at peace for the past five years, for the bandits were in the +hills and most “revolutionary” outbreaks were being successfully +nipped. Yet in the important city of Monterey, typical of the interior +of Mexico, the damage done “in the revolution” remains untouched. On +the main plaza the stones that are left of the beautiful old Casino, +burned by Carranza’s soldiers six years ago, have barely been moved +from the roadway. Smoke-stained shells of buildings rise here and +there, and in the suburbs bullet-ridden windows still remain in fine +private houses and factories. The once paved streets are full of +unexpected bumps, the roads leading to the smelters and out into the +country are cut deep with ruts and puddles and railway crossings are +all but impassable, even to skipping Fords. The<span class="pagenum" id="Page_74">[Pg 74]</span> street cars limp and +bump and leak, and the very civic improvements seem installed with a +fatalistic certainty that they will soon be destroyed.</p> + +<p>There is industry and there is business in Monterey, each of a kind. +In the old days there were two great smelters, foreign owned, a steel +plant and a brewery, besides three railway shops and miscellaneous +other factories. Most of the miscellaneous factories closed long ago, +but the smelters and the steel plant kept going in good order—as long +as war prices sustained them. Now, one of the smelters has closed, for +London has ceased holding up the lead market, and the other (owned by +the American Smelting and Refining Company) continues only because it +uses the ore from its own mines. During the war the steel plant was +handled by the United States War Trade Board, the great organization +which harnessed our own industries to war needs, and 80 per cent of its +product was, by agreement, sold in the United States and in Cuba—at +war prices. When the war ended, the Monterey steel plant was forced to +curtail, and to-day the great blast furnace is cold and only a Mexican +government order for a few thousand tons of steel rails keeps the +rolling mill moving.</p> + +<p>The railway shops are content with the most perfunctory of repairs, +and are more remarkable for the appalling array of rusted and rotted +engines<span class="pagenum" id="Page_75">[Pg 75]</span> (I have counted 150 engines out of commission in the Monterey +yards) and for the wrecks of burned freight cars which fill their +sidings than for any activity which inspires their machinery.</p> + +<p>The few factories which operate are sustained, in their turn, by the +high prices which even the staples of existence command in Mexico. +Three small cotton goods factories, reopened five years ago, get +prices only a few cents below those paid for imported goods, to whose +cost in this country is added a heavy import duty. The brewery keeps +running, although it pays the government a tax of 100 per cent on its +product—estimated to be $1,000 in American gold per day.</p> + +<p>Retail trade goes on, throughout Mexico, but the sales are greatly +curtailed and the prices are out of reach of the masses, being twice to +five times those of the last normal period, 1912. Stocks are hopelessly +depleted, for no merchant will keep a large supply of goods on hand, +for fear not alone of the long-promised drop in the world market, but +of what will happen in Mexico to-day or to-morrow or next week.</p> + +<p>Moreover, all business is on an absolutely cash basis, and for “hard” +money—gold and silver—alone, whether the trade be wholesale or +retail. In Mexico to-day credit is practically unknown, either amongst +Mexicans or between Mexican houses and those with whom they deal +abroad.<span class="pagenum" id="Page_76">[Pg 76]</span> There is a stringency of currency, due to the destruction (for +various reasons soon to be noted) of all forms of paper money. Mexico +is spending literally her economic life blood, gold and silver, and her +great resources are wasting and rotting because there is no money with +which to develop them or to move them.</p> + +<p>Those are simple conditions, patent to any observer who stays longer +than the few hours or a day allowed the busy junketer on his trip +through “prosperous Mexico.” Back of these conditions, however, are +facts which are as incontrovertible and menacing. The closing of +the smelters has back of it the conditions of mining, in a country +which for centuries has depended on its mines for its existence as an +economic entity. Even through the war, with war prices for metals, the +mines which were producing were only those with high grade ores, which +could bear the risks of banditry, the cost of ponderous freight rates, +or could maintain their private railway trains to transport ore which +the run-down government rolling stock could not handle. Moreover, even +war time prices did not make possible the proper development of the +properties, and when the bottom dropped out of the lead and copper +markets, many of the richest mines closed, because they had not been +able or had not dared do enough normal development to keep ahead of the +work on the rich veins.</p> + +<p><span class="pagenum" id="Page_77">[Pg 77]</span></p> + +<p>Back of the hand-to-mouth operation of factories and wholesale and +retail stores is the situation with regard to currency and banking. +Money in Mexico is worth, at legal interest, 1 per cent per month (12 +per cent per year) but if you have money, and will take a chance, you +can get 5 per cent a month and even more on as good security as the +country affords. So few are the men who believe enough in Mexico to +take the chance that there is not enough capital even to satisfy the +needs of speculators. And can legitimate business expand or even carry +its normal load when the money it ought to borrow, the money it has +already invested, is worth so much as that? The only form of business +which thrives in Mexico is speculation, and I think I am safe in saying +that virtually every sign of business activity which any visitor to +Mexico sees to-day is speculative at its source or dependent upon +speculation.</p> + +<p>This speculation finds its chief manifestation in the marketing of +food—the distribution of the necessities of life is in Mexico, as +elsewhere, the source of sure profit. But in Mexico, so great is +the fear of men of what may happen, that the profits of speculation +transcend anything known to our busiest food profiteers. The farmers +will not take the chances (which include the uncertainties of costly +graft) incident to getting freight cars or pack animals as well as the +fear of bandits.<span class="pagenum" id="Page_78">[Pg 78]</span> This allows the speculators, in quick turnovers, to +make as much as 200 per cent on a car of corn in a fortnight, and this +condition has lasted for nearly eight years.</p> + +<p>Another phase of speculative activity is in the importation of foreign +goods. The Mexican customs laws are complicated with elaborate +classifications, and at best it is something of a speculation +for a merchant to import goods in the days of sudden changes in +classifications and boosts of tariffs without notice. In addition, +however, many favored henchmen of government officials have been given +concessions to import all goods free, privileges which it is said they +sell to any one who will take the risk for a fixed charge of one-half +of the customs fee that would otherwise have been collected. Now and +then these favored persons take a flyer of their own and one of them +once sent in a carload of shoes, most of which were dumped in Monterey. +Having paid no duty, the shoes were sold at prices which demoralized +the local market, for the normal duty on a pair of shoes averages $1.50.</p> + +<p>Other things “happen.” For instance, a favored group gets a trainload +of goods—say foodstuffs—at an entry port. Then the government +suddenly announces that, effective at once, the high duties on these +foodstuffs are to be removed. The goods of those “in the know” go +across duty<span class="pagenum" id="Page_79">[Pg 79]</span> free, and if other merchants telegraph orders to take +advantage of the open port, as like as not they find, when the goods +reach the border, that the high duties have been put back as suddenly +as they were removed.</p> + +<p>Such things as these happened with great frequency in the days of +Carranza. Perhaps they are not happening now, for Mexico is on her good +behavior. But all this has occurred frequently enough to have shaken +the faith of simple men. The fear of what may happen to-morrow—things +of this sort or something else—stifles business, for business is a +timid spirit, and does not recover its confidence quickly.</p> + +<p>I hold no brief against the present governments of Mexico. They have +been and still are revolutionary governments. They have a natural faith +in their own vital importance to Mexico, and consider that whatever it +may have cost the country to get such government is money well spent. +But for her own sake and for the sake of those of us who are sincerely +interested in knowing what troubles Mexico, it seems that we should +realize by this frank analysis the lack of faith which I describe.</p> + +<p>The situation which I have just outlined is economic, but back of the +economic and basically more important is the financial situation. The +cause of the economic bankruptcy is to be found<span class="pagenum" id="Page_80">[Pg 80]</span> in the new conception +of the financial organization of Mexico which the Carranza officials +have pronounced, and upon which Mexico has been acting for the past +seven years.</p> + +<p>Let us look for a moment at the financial side of the foreign +investments in Mexico, for recent activities on the part of the +government seem to admit that Mexico recognizes that an important +factor in the present national bankruptcy is the loss of foreign +capital. This damming up of the flow of foreign investments has been +the result of two distinct situations. First is the outrages, the +wanton destruction of foreign property and foreign lives by bandits and +revolutionaries. The other is the enactment and partial enforcement of +drastic anti-foreign laws.</p> + +<p>One of the strongest pillars of the material prosperity of the Diaz +time was foreign investments. The bonanza mines had to become paying +low-grade business propositions in order to preserve mining as a +national asset. The barren agricultural lands had to be irrigated, +with water that fell in mountains hundreds of miles away. More than +that, Mexico had to begin to build an industrial machine of railroads +and factories which would create new national wealth—the economists +of even a generation ago realized that no land, however rich, could +prosper from her natural<span class="pagenum" id="Page_81">[Pg 81]</span> resources alone. These were the axiomatic +bases of the economic need of foreign money.</p> + +<p>The financial need for foreign capital was yet more pressing. At +the beginning of the Diaz rule, the trade balance against Mexico +was apparently insurmountable, and although year by year it was cut +down through the economic development of the country, each year the +trade balance has to be evened up. This was the function of foreign +investments, and this was the financial reason for its continued +encouragement under Diaz. To the last year of his reign, this inflow +of foreign money kept coming evenly, in tens and twenties of millions +annually. As it came in, balancing the outgo of interest on the +national debt and on private loans, it became itself a producer of +Mexican wealth, so that in time it would have eliminated the necessity +of further forced-draft encouragement for outside investment.</p> + +<p>That time had not come in 1911, however, when Diaz left Mexico. But the +net result of the stoppage of foreign investment in the revolutionary +period which followed is to be found to-day in that unpaid interest of +nearly $200,000,000 on government securities alone.</p> + +<p>This is no apology for the mistakes of the Diaz régime. The great men +of that day built a vast commercial enterprise, the Business of Being +the<span class="pagenum" id="Page_82">[Pg 82]</span> Republic of Mexico, but like many commercial enterprises of the +period before the Great War, it had left out the human equation. It was +this failure which wrecked the Diaz government in the end, and made +such purely paternalistic régimes virtually impossible in Mexico again.</p> + +<p>To-day the rulers of Mexico, awake at last to the need for the foreign +money which their revolutionary predecessors shut out so stubbornly +under the “Mexico for the Mexicans” policy and the socialistic +constitution, have been carrying on an active campaign of publicity and +official conciliation. The junkets of Chambers of Commerce from all +over the United States are part of the big plan. Yet in the hearts of +the people, of this country and of Europe, who hold the purse strings, +be they bankers or enthusiastic investors of little capital, there +lingers and will linger many doubts. It seems likely to be a long day +before the foreign investor finds any new faith in Mexico.</p> + +<p>But what of Mexico herself? Where lie the financial roots of her lost +faith in Mexico’s own future? After the economic conditions noted +above, they lie in the Mexican currency situation.</p> + +<p>To-day Mexico has no currency but gold, silver, nickel and copper +coins. There are no bank bills, there is no bankable paper, there are +no promissory notes, no checks, no credit. Seven years ago there was no +metallic currency whatever, only<span class="pagenum" id="Page_83">[Pg 83]</span> banknotes, depreciated till a peso +(normally worth fifty cents) would hardly pay carfare. During that +time the banking business was all but wiped out, and bankable paper +disappeared.</p> + +<p>Yet back of that period, in turn, was the time of Diaz, when paper +money was as good as gold, and the ordinary processes of exchange +went on as in any civilized country. Diaz had found, when he came to +power, a condition similar to that which exists to-day, with only +metallic currency in circulation. He brought in a new financial régime, +establishing sound banks, which under government control issued paper +money. In 1910, the circulating medium of the country was $150,000,000, +of which $65,000,000 was banknotes, accepted on an absolute parity +with the $85,000,000 of gold and silver. This money was, as noted, +supplemented by active bankable paper circulating freely in business. +To-day, by contrast, the government admits that there is less than +$50,000,000 (I personally think it is very much less) of gold and +silver money in the country—to transact the business (on a cash basis) +of nearly 15,000,000 people!</p> + +<p>The loss of $100,000,000 of the circulating medium of the country (to +make no estimate of the loss and inconvenience due to the destruction +of credit) is the work of the revolutions of the past eleven years.</p> + +<p><span class="pagenum" id="Page_84">[Pg 84]</span></p> + +<p>It was Carranza who started the paper money orgy. In the course +of three years he issued probably 2,000,000,000 pesos of paper +currency—the exact records, if kept, have never been made public. +Through this means he destroyed the confidence of the public in paper +money, and ultimately, when he came to full power, wiped out of +existence the whole system of Banks of Issue established by Diaz.</p> + +<p>The first of the Carranza paper money was issued in Chihuahua, and was +accepted at its face value. Diaz had taught the people, down to the +humblest peon, to accept paper money, and the bayonets of the Carranza +troops convinced any who doubted the quality of the new issue. It was a +good scheme for financing a revolution—till Villa drove Carranza out +of Chihuahua and declared Carranza money worthless and its possession +a political crime. Now Villa money was issued, and was forced upon the +people at the points of new bayonets, and as the various chieftains +chased each other over the country the money of the towns fluctuated +with the identity of the conqueror. Metallic currency disappeared +completely and the value of paper money fell by jolts to a few centavos +on the peso.</p> + +<p>These were the days when men who were paid in American money lived like +kings. House rent was fifty cents a month; light, gas and water cost<span class="pagenum" id="Page_85">[Pg 85]</span> +a dime. You could travel hundreds of miles in a Pullman for a dollar, +and settle all your old debts for two per cent of the original figure. +Food prices went up, of course, and the natives, mostly paid in the +depreciated paper, suffered terribly. Starvation followed in waves, and +the mortality in the cities was appalling.</p> + +<p>The value of paper money fluctuated over night, and after closing hours +each day, there was a scampering of merchants to sell the currency +taken in during the day. They bought New York drafts, worn American +bills, diamonds, carriages and real estate, at prices whose rise could +not possibly keep up with the fall in the value of paper money.</p> + +<p>Early in the excitement Carranza had begun to repudiate his various +issues of currency. The reason given was a real one—that they were +being counterfeited everywhere, a process simple enough, for the +original issues were themselves crudely printed on ordinary paper. At +first the Carrancistas had attempted to keep up with the avalanche of +counterfeits by requiring that all paper money on hand in banks, stores +and private tills be submitted regularly for inspection. Not even the +government “experts” could tell the bad from the good, however, and +they ended by declaring all of the money submitted by their political +friends to be all right, and confiscating, as<span class="pagenum" id="Page_86">[Pg 86]</span> counterfeit, a large +and fixed percentage of that owned by men of doubtful “loyalty.” +The process did not tend to increase the public confidence in the +administration.</p> + +<p>The final issues of Carranza revolutionary paper money came from +Vera Cruz in 1915. This money alone was recognized as a part of the +Carranza government obligation, and $8,000,000 was set aside in the +Carranza financial plans for its redemption. This last paper money, +issued after Carranza was recognized by the United States, consisted +of engraved notes, known as “infalsificables” or “uncounterfeitables.” +These were issued at 10 centavos on the peso, and the government was +pledged to “redeem” them. This is being done, but not by anything +so simple as paying honest money for them (which would put them, +perhaps, into general circulation). Instead, all who pay direct taxes +are required to return a surtax of the face value of their taxes in +these “infalsificables.” A friend of Carranza wrote that “this was a +beautifully simple and ingenious scheme.” It is that still, for those +favored ones who control the remaining supply of the notes and sell +them at advanced prices to the taxpayers who have to have them—mostly +the big foreign mining and oil companies.</p> + +<p>The story of the paper money days in Mexico, and the fact that of the +billions issued but $8,000,000<span class="pagenum" id="Page_87">[Pg 87]</span> is recognized as a just debt, may +stir the indignation, and it certainly clarifies our understanding of +Mexico’s lost faith in her rulers. But in point of actual fact, the +destruction of the banking and credit system of the country, which was +a corollary of the paper money orgy, was far more terrible and cast an +even more lasting blight on the standing of the government.</p> + +<p>Early in his revolutionary career Carranza was at odds with the +banks. He considered it an unfriendly act, one “taking advantage of +the unlettered,” for the banks to use their knowledge of financial +conditions to profit from the fluctuations of his paper currency. +He also found the banks “reactionary” in their refusal to use their +standing to assist him in making his money popular, and he charged +openly that the banks had “combined to discredit the government.” On +his entry into Mexico City he endeavored to coerce banking officials +personally, and jail was sometimes the boarding place of bank managers +and bank presidents, when they refused to unlock the vaults to +government “inspection.”</p> + +<p>The wrecking of the banking system extended over more than a year. +Huerta, who preceded Carranza in the presidency, took the first forced +loans of $5,000,000 from the banks, allowing them to issue new paper +currency to cover this coin taken out. Carranza, on gaining control of +Mexico<span class="pagenum" id="Page_88">[Pg 88]</span> City, found the forced loan idea convenient, for he was in sore +financial straits. As one chronicler has it, “Money had to be found.... +The money in the banks was the only money available, and it was taken +as the only way out of a very difficult situation.”<a id="FNanchor_5" href="#Footnote_5" class="fnanchor">[5]</a> In its statement +of debts, however, the Carranza government recognized these forced +loans to a total of $20,000,000, none of which has been paid in six +years.</p> + +<p>The Carranza “loans” from the banks inevitably shook their credit and +with it the credit of every business man and business organization, +and inevitably the credit of the Mexican government itself. Banknotes +dropped in value and although they never reached the low mark touched +by government paper, their fall to 75, to 50 and finally 30 per cent of +their face value reduced in like manner the value of all bank deposits, +and finally brought banking transactions to a stand-still. The process +of final destruction of the banks began with the edict of September 26, +1915, abolishing out of hand the Huerta concession which had allowed +some of the banks to issue additional paper currency to cover the +Huerta “loans.” The banks were required to bring their reserves up to +the old basis in forty-five days, and despite the blow to their credit, +this was accomplished. On November 10, however, another Carranza edict<span class="pagenum" id="Page_89">[Pg 89]</span> +reduced the recognized bank reserves by requiring that silver coins be +estimated at their bullion, instead of their face value. This storm was +weathered, in its turn, and nothing further was done for nearly a year, +although during that time the breach between Carranza and the banks was +continually widening.</p> + +<p>An edict of September 15, 1916, required that the banks should have +in their vaults within sixty days enough gold and silver to redeem at +par every banknote which they had in circulation, currency which had +been issued under concessions allowing a banknote circulation twice +the total of the bank reserves in metal and bankable paper. The decree +also prohibited the banks from doing business with the public until +the conditions set down were fulfilled. In other words, liquidation +of notes and deposits was stopped, and the life blood of banking, the +active turning over of funds in the course of business, was cut off. +Finally, on December 14, 1916, the <i>coup de grace</i> was given, +and the banks were officially closed to all business excepting the +collection of bills receivable in the depreciated currency of the banks +themselves.</p> + +<p>Thus by a series of cumulative blows the whole Mexican national banking +system which had been built up under Diaz was destroyed utterly. At +the time the final blow was given, banknotes were accepted at about 30 +per cent of their face value, and<span class="pagenum" id="Page_90">[Pg 90]</span> had apparently reached stability. +Bankers assure me that had they been allowed to operate, even under +the conditions then prevailing, they could eventually have pulled +themselves and much of the business of the country out of the hole. It +is also interesting to remember that the franchises of the Banks of +Issue were to expire in 1922, time sufficient, under careful government +leadership, for them to wind up their affairs and furnish a solid +financial basis for the erection of some new form of national currency.</p> + +<p>The Mexican governments, one after the other, have lent what prestige +they had to a proposed and elaborate new banking law, based on a +“Sole Bank of Issue.” From Carranza’s time the men in charge of the +government finances apparently believed that this system could be +established on the wrecks of the ruined Banks of Issue. Up to the +present this has not yet been attempted, for Mexico was and is in no +mood to receive any form of paper currency or government banking, +however it may be guaranteed.</p> + +<p>It was inevitable, after the banks were closed, that the country should +go back to a metallic basis. This was made more difficult, however, by +the government’s decree, recently reiterated in the summer of 1921, +making illegal the circulation of American silver and banknotes. This +plan, although it brought out the Mexican gold and silver<span class="pagenum" id="Page_91">[Pg 91]</span> which had +been hoarded, inevitably cut down the circulating medium of the country +to absolutely inadequate proportions, even though American money could +easily have been obtained to provide enough currency to tide over the +crisis.</p> + +<p>There were many difficulties connected with the establishment of gold +and silver again, but most of them had to do with the scarcity of +these mediums. There was a further complication for which no one was +responsible. This was the phenomenal rise in the price of silver during +the Great War. This early became a crisis, for first the silver pesos +became more valuable as bullion than the fifty cents (American money) +at which they had been fixed in the time of Diaz, and soon even the +subsidiary coins, of a lower silver content, became worth more than +their legal value in gold. The export of silver coins had to be stopped +by government order, and under the guidance of American monetary +experts the recoinage of silver in smaller pieces was begun. To-day +this money is in general circulation, accepted at face value for the +simple and deliberately created reason that it is issued only as the +crying demands of business for change force it out. The new pesos are +about half the bullion value of the old, and the subsidiary coins are +even less valuable in proportion.</p> + +<p>Needless to say, this change in the size of the<span class="pagenum" id="Page_92">[Pg 92]</span> silver coins had an +unfavorable effect on the public mind, already on edge over the various +financial coups of the Carranza government. This was aggravated by a +destructive form of favoritism by which a few men were allowed, under +Carranza, to buy up and export the old silver coins, a form of graft +which amazes and disgusts the observer and also, be it noted, made the +money shortage greater and less easy to endure.</p> + +<p>The ruin of the economic structure of Mexico lies bare for any one +to see, and beneath it is the rotted structure of the old financial +system. The closing of the banks, the destruction of credit, the +shutting off of the relief which might have been given by the use of +American currency, seem at the root of most of the ills which then +beset Mexico, because they are at the root of the lack of faith of the +people and their fear of the caprices of the morrow. For instance, +to-day in Monterey, the great industrial center of northern Mexico, +there are no banks save two private houses where money can be left on +deposit, and a few exchange offices. Where, in 1910, the four Banks +of Issue had more than $10,000,000 out in industrial, mining and +farm loans, there is hardly as much as $250,000 loaned to-day, and +that is by American banks on the border. The safe commercial paper +which circulates in Northern Mexico is checks on American banks. The +drafts of strong mining<span class="pagenum" id="Page_93">[Pg 93]</span> and oil companies form the chief basis of +money transfer, and are shipped from place to place all over Mexico. +Optimists call this a peaceful penetration of American credit into +Mexico, and so it is, but all that can be done from outside of Mexico +is but a drop in the bucket compared with her financial needs. Credit +within and without must be established, and that is a problem which +rests with Mexico alone.</p> + +<p>To understand at all the mountain of distrust which looms before her, +it is necessary to set down, briefly, the condition of the Mexican +foreign debt.</p> + +<p>The external government debt is $173,000,000, and on this interest +has been defaulted for more than eight years, a total of $50,000,000 +remaining unpaid. The internal national debt is $67,000,000 and the +defaulted interest $20,000,000. State and other debts (save railroads), +which have been guaranteed by the government are $33,000,000 and +$10,000,000 in interest.</p> + +<p>The bonds of the National Railways of Mexico, guaranteed by the Mexican +government, total $239,000,000, the interest defaulted being about +$75,000,000.</p> + +<p>With other items, and counting alone the debts guaranteed by the credit +of the government, these obligations total $603,000,000, and the unpaid +interest thereon is over $155,000,000. Unguaranteed state and city bond +issues, the $20,000,000<span class="pagenum" id="Page_94">[Pg 94]</span> recognized as due the banks for “loans,” and +$8,000,000 with which to redeem outstanding fiat currency bring the +total up to a principal of $779,120,915. Nearly eight hundred million +dollars, and defaulted interest to nearly two hundred million!</p> + +<p>From time to time, and government after government, treasury officials +have come to New York to arrange for the refunding of this debt. The +plan is usually for New York bankers to loan Mexico $300,000,000, +refund the whole debt, eliminating some items (notably by a reduction +of the bond issue of the railroads) and take as security the Mexican +government’s pledge of a portion of the customs duties.</p> + +<p>The answer to this proposition has been astonishingly to the point. +No Mexican guarantee of customs receipts has interested the bankers +unless it was backed by the United States government, presumably with +a collection agency of American marines, as in Haiti and Honduras +to-day. The most interesting development in answer to the Mexican +suggestions of refunding was the appointment of one of the most +impressive international banking committees ever created some three +years ago. This was headed by J. Pierpont Morgan and announced that its +purpose was “the protecting of the holders of securities of the Mexican +republic and of the various railway systems of<span class="pagenum" id="Page_95">[Pg 95]</span> Mexico and generally +of such other enterprises as have their field of action in Mexico.” +It would seem that the probity of the Mexican government, both as to +its debts and as to its willingness to repay the losses of foreign +investors was slightly under suspicion in the financial circles of the +world, a suspicion which is shared by no other Latin-American country +save those in actual and admitted bankruptcy.</p> + + +<div class="footnotes"><h3>FOOTNOTES:</h3> + +<div class="footnote"> + +<p><a id="Footnote_5" href="#FNanchor_5" class="label">[5]</a> E. D. Trowbridge. <i>Mexico Today and Tomorrow</i>, p. +198.</p> + +</div> +</div> +<hr class="chap x-ebookmaker-drop"> + +<div class="chapter"> +<p><span class="pagenum" id="Page_96">[Pg 96]</span></p> + +<h2 class="nobreak" id="CHAPTER_V">CHAPTER V<br><span class="small">OUR BILL AGAINST REVOLUTIONARY MEXICO</span></h2></div> + + +<p>The American after-dinner orator roars his boast of “two billions +of American dollars in Mexico” and moans his claim of “a billion of +damage” done to those pioneer American dollars. Whereupon the Mexican +(of whatever political complexion) wails protest that three-quarters +of those American dollars were made out of Mexico herself, and our +State Department, which alone might clarify the matter, perforce keeps +silence. Up to the present time few have attempted to bridge the gulf +between the orator and the Mexican and no one that gulf between the +orator and the State Department. We live in an age of “convictions” and +we choose our figures according to our beliefs.</p> + +<p>Fifteen years ago an American consul in Chihuahua, Marion Letcher, +wrote a report in which he estimated (frankly without figures) that the +total foreign investments in Mexico were $1,641,054,180, distributed as +follows:</p> + +<table class="autotable"> +<tr><td> +American </td><td class="tdr">$1,057,770,000</td></tr> +<tr><td> +British </td><td class="tdr">321,302,800</td></tr> +<tr><td> +French </td><td class="tdr">143,446,000</td></tr> +<tr><td> +Various </td><td class="tdr">118,535,380</td></tr> +<tr class="bt"><td> +Total </td><td class="tdr">$1,641,054,180</td></tr> +</table> +<p><span class="pagenum" id="Page_97">[Pg 97]</span></p> + +<p>These figures have been assailed, especially as regards the +comparatively small sum alloted to the British, but they remain to this +day the only official estimate available. I have, however, been able +to find another compilation, worked out also by Americans, but this by +the research departments of several large banking groups, with full +access to all Mexican government figures and to the stock books of most +of the great American companies. The total, which is for 1914, before +the vast bulk of the investment in oil, is almost identical, but the +distribution is startlingly different:</p> + +<table class="autotable"> +<tr><td>American </td><td class="tdr">$655,000,000</td></tr> +<tr><td>British </td><td class="tdr">670,000,000</td></tr> +<tr><td>French </td><td class="tdr"> 285,000,000</td></tr> +<tr><td>German </td><td class="tdr">75,000,000</td></tr> +<tr><td>Spanish, Dutch, etc. </td><td class="tdr">190,000,000</td></tr> +<tr class="bt"><td>Total </td><td class="tdr">$1,875,000,000</td></tr> +</table> + +<p>These figures claim to include the foreign investment in the National +Debt of Mexico and are said to estimate the actual distribution, +as far as can be worked out, of the holdings of the securities of +all companies operating in Mexico. Consul Letcher’s figures were +conceivably based largely on the nationality of the corporations alone. +On the other hand, Europe contributed more than half the invested +capital of such important groups as<span class="pagenum" id="Page_98">[Pg 98]</span> the National Railways of Mexico, +made up of companies which were all incorporated under American laws.</p> + +<p>When this new compilation of investment distribution first came to +my hands, I was, I may admit, inclined to “split the difference.” As +careful a study of the American investment field as it is possible to +make has, however, convinced me that the new figures are much more +nearly correct than those of Consul Letcher with one exception. I +do not believe that they include all the American investment in the +Mexican government, state and municipal bonds held abroad.</p> + +<p>On the other hand, neither Consul Letcher’s figures nor the other +compilation represent the actual full value of American investments in +Mexico at the fall of Diaz in 1911. It is important that this fact be +remembered because by that date the moneys which had gone into Mexico +for foreign enterprise had increased many fold through the energy +which went with them and pushed them forward to success. I believe +that the original American investment had grown, by 1911, to fully +$2,000,000,000, but in order to be absolutely just from the Mexican +viewpoint we can discuss the damages on the basis of the actual cash +invested—the loss, incidentally, looms even greater. On the other +hand, we must not forget that however the Mexicans may claim that the +increase in values<span class="pagenum" id="Page_99">[Pg 99]</span> represents an “exploitation” of their country’s +resources, the concomitant advance in all values throughout the land +in the era of Diaz was almost entirely the direct result of those same +foreign enterprises.</p> + +<p>From many sources, including of course the two authorities which have +been quoted, I have estimated the American investment of actual cash +capital and have set against it the losses in actual physical damage +and in ruined business, since 1910, as follows:</p> + +<p class="center big"><span class="smcap">American Capital in Mexico</span></p> +<table class="autotable"> +<tr><th></th><th class="tdr">Original Investment</th><th class="tdr">Physical Damage</th><th class="tdr">Actual Losses</th></tr> +<tr><td>Railroads </td><td class="tdr">$150,000,000 </td><td class="tdr">$30,000,000 </td><td class="tdr">$60,000,000</td></tr> +<tr><td> +Oil </td><td class="tdr">200,000,000 </td><td class="tdr">5,000,000 </td><td class="tdr">100,000,000</td></tr> +<tr><td> +Mines </td><td class="tdr">200,000,000 </td><td class="tdr">15,000,000 </td><td class="tdr">100,000,000</td></tr> +<tr><td> +Lands and cattle </td><td class="tdr">50,000,000 </td><td class="tdr">10,000,000 </td><td class="tdr">20,000,000</td></tr> +<tr><td> +Industries and public +service </td><td class="tdr">50,000,000 </td><td class="tdr">10,000,000 </td><td class="tdr">20,000,000</td></tr> +<tr class="bt"><td>Total </td><td class="tdr">$650,000,000 </td><td class="tdr">$70,000,000 </td><td class="tdr">$300,000,000</td></tr> +</table> + +<p>Damage claims aggregating $500,000,000 are said to have been filed with +the American State Department, but no official confirmation of this has +ever been forthcoming. However, the claims which Americans have against +Mexico, whether filed in the State Department or not, must be divided +into two categories, the actual and the potential damage, and perforce +includes also the claims due for loss of life and personal damages.</p> + +<p>The actual harm already done includes: physical damage to property; +unwarranted and illegitimate<span class="pagenum" id="Page_100">[Pg 100]</span> taxes which approach confiscation; +destruction of property values through such taxation and through the +prevalence of banditry; destruction of property values by the driving +out of stable government; destruction of the financial and credit +system of the country through government decrees and repudiations; +losses in legitimate profits which would have been made during the +recent eras of high prices; actual loss in market value of property +through the estrangement of the foreign capital which alone, in Mexico, +presents a reliable buying element; destruction of property values +through the exile of the foreigners who formed the industrious and +capable organization which maintained those values.</p> + +<p>The potential damages are chiefly those which come from the fact that +there hangs over all foreign property in Mexico to-day, and has hung +for five years, a sword of Damocles in the threatened confiscation +of such property under the radical “nationalization” plans of the +revolutionary governments. These, briefly, provide that: foreign +corporations and individuals are incompetent to own property in Mexico +unless they renounce their citizenship and appear only as Mexicans +before the Mexican law; the government may appropriate all large +tracts of land, giving in return unguaranteed state agrarian bonds of +virtually no value; the government may “nationalize” the oil<span class="pagenum" id="Page_101">[Pg 101]</span> in the +ground, making it subject to the denouncement of any one, whether the +property owner or not, when the whole oil-producing organization of +Mexico to-day is founded on the principle of the oil belonging to the +land itself; no foreigners, under any conditions, may own any land +within sixty miles of the frontier or thirty miles of the seacoast.</p> + +<p>Lastly, and in a group by itself, are the damage claims arising from +the killing of nearly 600 American citizens in Mexico since the Madero +revolution began in 1910. The claims for these outrages and for the +maiming and raping of many hundreds more occupy a class by themselves, +and will, we may confidently believe, be the first which will be paid +when Mexico returns to the ways of civilization.</p> + +<p>Just here we can imagine the official Mexican “press department” +preparing to state that “Mexico has always paid her bills, including +all damage claims.” This, however, is not quite literally true. She +has paid foreign damage claims at the muzzles of foreign cannon, to +be sure, and President Diaz, in that long rule which many call “the +anomaly of Mexican history” paid all the bills presented to him. But +the only “convention” which ever sat to adjudicate American damage +claims was hardly the success that would justify any such sweeping +assertion of Mexico’s probity.<span class="pagenum" id="Page_102">[Pg 102]</span> In 1840, after years of turmoil, +and after a show of force, President Jackson called a convention of +Americans and Mexicans together to consider American damage claims. +They sat from 1840 to 1842, allowed $2,000,000 in damage claims, +rejected $1,000,000 and when they adjourned left $3,000,000 still to +be considered. Under an arrangement of twenty installments, Mexico +paid three and defaulted the rest. The cash was paid by the United +States, and the slate was wiped clean after the Mexican war of 1847-48. +Finally, this war, which as schoolboys we were taught to regard as a +sort of “blot on the national escutcheon” was the result of continued +outrages to Americans and continued diplomatic jockeyings with an Uncle +Sam who even then was much the same model of patience which he is +to-day.</p> + +<p>In the public discussion of the damage which has been done to American +properties in Mexico, there has been much emphasis on the potential +harm from the so-called “socialistic” or “bolsheviki” tenets of the new +Mexican constitution. There have been vast, crippling losses, yet it +seems as if most of what we have heard has been the things which will +happen if Mexico is allowed to proceed along her present road. There is +reason enough for this fear and for this emphasis, and one of the great +battles being fought in the world to-day is that which these Americans +are putting up not<span class="pagenum" id="Page_103">[Pg 103]</span> alone for themselves but for the very principles of +property rights. But so far Mexico and particularly the wily gentlemen +who have occupied the Mexican presidential chair have always tried to +get all they could and have often carried the mis-named “American” +bluff to astonishing lengths—but have almost as often retired when +the game turned against them. They have used the potential damage as a +means of extracting an increasing toll of taxes and of loot, and for +little else, as yet.</p> + +<p>In this chapter I am, as already mentioned, intentionally avoiding +taking these “potential damages” into consideration. I feel that we +must have, as a starting point, a comprehensible picture of what has +already actually happened to American investments in Mexico.</p> + +<p>Most of the American money in Mexico went to that country during the +thirty-four years of Diaz rule. This period was marked not by blind +adoration of the foreigner, as the revolutionists now state, but by +a sane and far-seeing realization that foreign capital must come +to Mexico if her national and economic potentialities were to be +developed. Foreigners were encouraged generously by laws recognizing +the privileges of pioneers in protection and in assistance in the form +of exemption from taxes during their development period (the term +was usually for ten years). The<span class="pagenum" id="Page_104">[Pg 104]</span> idea was to allow them to import +machinery without duties and get on their feet as quickly as possible. +Practically none of these companies was given land, for there is no +vacant Mexican government land worth having.</p> + +<p>The first and the greatest American corporations to enter Mexico were +the railroads. These held concessions, made according to law, but +Mexico had profited by the American government’s experience with its +trans-continental lines, and the subsidies and grants were small indeed +compared with those given to our Union Pacific, for instance. It is +worth noting also that there have never been such scandals as our great +railroads reveled in, and that virtually every cent was invested in the +lines themselves. The Mexican railway companies which were consolidated +in 1907 into the National Railways of Mexico were never paying ventures +for the builders, and until the merger few dividends had ever been +paid by any of the lines. For about four years following the merger +conditions improved greatly, but in 1912 troubles began, and by 1913 +all was chaos and destruction.</p> + +<p>From then on to to-day, the story of the railways of Mexico has been +a tragic romance. It can be reduced to figures, necessarily cold in +the telling, but every figure the result of dramatic and crushingly +realistic incident. The National Railways of Mexico, a property worth +over $250,000,000<span class="pagenum" id="Page_105">[Pg 105]</span> as a physical plant alone, was taken over by the +Carranza government on December 4, 1914, and since that time the +bondholders have received no cent of interest and the physical property +has been crushed and battered and all but destroyed. On January 1 of +1921 over $75,000,000 of back interest was unpaid and the defaulted +payments on fixed charges is still piling up at the rate of $1,000,000 +a month, while the Mexican government is collecting from the operating +commission $1,500,000 a month—a sum set by Carranza for the commission +to turn in by any means available, as higher rates, scrimping on +repairs, deterioration in upkeep.</p> + +<p>The confiscation of the railway properties by the Mexican government +under Carranza is one of the most astonishing and illuminating +pages in the whole story of Carranza’s campaign against capital and +the foreigners. But although it began with him, it apparently has +continued into the rule of his successors—for they seem a part of +the revolution of which he was and still is the dominating, sinister +genius. Under the terms of the merger of 1907, the Mexican government +was given the voting power—but not the title to—50 per cent of the +stock of the company, under certain definite conditions laid down by +the bondholders. This 50 per cent interest represented no capital +invested, nor was it a recognition of any<span class="pagenum" id="Page_106">[Pg 106]</span> debt which the railways +might have imagined they owed the government. It was given outright in +consideration of one thing, the guaranteeing by the Mexican government +of a return of 4 per cent interest on the bonds of the merged lines. To +the merger the government contributed nothing of tangible value—save +one short line of railway worth about $5,000. Its permission was +needed, perhaps, for the transfer of the railway concessions to the +merger, but this would probably have been given without question had it +been asked alone. The interests back of the merger believed that the +Mexican government guarantee of the interest on the bonds was worth +the gift of the voting right of half the common stock—and on this +understanding alone it was given.</p> + +<p>The taking over of the physical property by the Mexican government +followed the American occupation of Vera Cruz in 1914, and shortly +afterwards Carranza made his claim official, on the ground of the 50 +per cent voting right! On the basis of this right alone the Mexican +government to-day holds control of the National Railways of Mexico, +a right once given on the solemn guarantee of the interest on the +bonds—which has not been paid for eight years—and with the recognized +provision that the bondholders should name the president of the lines, +and various officials and members of the board—and to-day there is +not<span class="pagenum" id="Page_107">[Pg 107]</span> one official who is not a creature of the government which happens +to be in power in Mexico!</p> + +<p>Upon such a basis rests the title of the Mexican government to the +National Railways. The subsidies paid by the Diaz government in years +gone by for construction were given as the subsidies were given to the +American railways which crossed the prairies to the Pacific coast—to +make such construction possible in recognition of their benefit to the +country. The Mexican subsidies were less than those given to the Union +Pacific by the United States government and not one touch of scandal +(such as marked our own railway development) was ever breathed against +that of Mexico. The subsidies give no tangible claim to the lines—and +as far as I know have never been advanced as a claim. The only hold +of Mexico over those properties is the shadowy title conveyed by the +voting right of a block of stock given voluntarily by the bondholders +in return for guarantees which have been thrown to the winds for these +eight years.</p> + +<p>In the period since the government has had control of the lines, +the physical property has deteriorated to a point where only the +magnificently solid work done by the American builders to-day holds +them together. Operated by the Mexicans, with former firemen as +general superintendents and minor native clerks as high officials, the +properties<span class="pagenum" id="Page_108">[Pg 108]</span> went their way of slow destruction in the days of Carranza. +Since that time, the turnover of railway officials has eliminated many +of the employees who were trained under the American executives of the +Diaz and Madero time, and to-day the roads are in the hands of men who +learned all they know of the railway business from those who in their +turn had gleaned their little knowledge from their American chiefs—now +gone from Mexico eight years. The result is a ruin comparable to +nothing, probably, but the ruin of railway properties in Russia to-day.</p> + +<p>Of the more than 800 locomotives owned in 1914, only 333 (by the +notoriously inaccurate Mexican government figures) are said to be +running. The rest lie at the bottoms of cañons or are rusting in +banks of hundreds in shop yards, as I have this year seen and counted +over 100 in the one yard of Monterey. The freight cars have decreased +from 18,000 to 7,000, and usable passenger cars are virtually unknown +off the main lines to-day—all were wantonly destroyed in the early +revolution or stolen and converted into dwelling-places for “deserving +revolutionaries.” Three-quarters of all the bridges on the 8,000 miles +of line are damaged, dozens of them beyond repair, thanks to the +diabolical perfection of the methods of destruction used by various +Mexican patriots. The tie replacements are seven years behind; nearly +20,000,000<span class="pagenum" id="Page_109">[Pg 109]</span> are needed, worth over $17,000,000. Other items in the +$80,000,000 replacement bill are $30,000,000 for cars, $12,000,000 for +locomotives and $4,000,000 for rails.</p> + +<p>This loss has been the result of two forms of destruction—the +depredations of the fighting factions and the cumulative destruction +of neglect and failure in upkeep. Instances multiply. During one month +(March, 1914) seventy trains were blown up while running at 30 to 40 +miles an hour; the patriots used to connect up their dynamite with +electric batteries and then sight along two sticks from their safe +retreat in the bushes and so set off the charge under whatever section +of the train caught their fancy. At one time in Monterey in 1915, +revolutionary troops burned 800 loaded freight cars; their skeletons +line the Monterey sidings for all the world to see, to-day. One of the +long bridges on the road to Eagle Pass, on the American border, was +wrecked by running a train of loaded coke cars with two locomotives on +each end out on the bridge, firing the train and blowing up the bridge +when the burning coke had heated the steel. A similar trick on the +Tampico line was to take out a rail, then set fire to a train of oil +cars and run it full speed on the bridge, where it was derailed and the +same process was followed as with the coke train.</p> + +<p>The rotting of the ties on the road has left most<span class="pagenum" id="Page_110">[Pg 110]</span> of the branch lines +all but impassable, save to the Mexican enginemen who know each bump +and are quite willing to “take another chance.” The wrecked bridges, +jacked up on timbers, have uncomfortable and terrifying “dips.” The +list can be multiplied indefinitely. Yet perhaps the most expressive +sight to be seen in Mexico to-day is those banks of rusting engines, +100 in Monterey, 100 at Aguascalientes, others at San Luis Potosi, +Mexico City and Guadalajara. These engines were only slightly damaged +when they were side-tracked, but through the failure of the government +to furnish repair materials, they have been gradually stripped of parts +to repair other engines, the brasses have been carried off and sold for +junk and the whole field of ruin left like a desert waste.</p> + +<p>There is in the Mexican railway law a provision for compensation +in case the railways are taken over “for military purposes.” It +is estimated that under this law the damages collectable are only +$10,000,000 a year—less by $2,000,000 than the default in the fixed +charges alone. The estimated $80,000,000 of physical damage (a +mere estimate until an actual valuation can be made) is presumably +collectable. The bill of the railroads is, however, as follows: +Physical losses, $80,000,000; defaulted interest to June, 1921, +$75,000,000; total, $155,000,000. It is believed that about one-third +of the bonds are held by Americans,<span class="pagenum" id="Page_111">[Pg 111]</span> so that their loss is over +$50,000,000. In addition, there has been an individual loss in the +disposal of the bonds by small holders, at sacrifices as great as 80 +per cent. It is even said that the Carranza government had hopes of +being able to buy up the railway bond issue when its administrative +policies had reduced the quotations to less than 30 per cent of +par. Only the lack of money prevented this coup for real government +ownership, it is said.</p> + +<p>In the above, I have treated only with the National Railways of Mexico. +Outside of this system the only important lines in Mexico are the +Mexican Railway (British owned) which has now been returned to the +stockholders but without compensation for damages and the Southern +Pacific in Mexico (American owned). The former suffered severe physical +destructions, but the latter’s bill for damages, while heavy, sinks +into relative insignificance.</p> + +<p>In the confines of a general study, space can not be given to the +sidelights on the Mexican railway situation—a situation almost +Teutonic in its colossal blunders, splendidly American in the elements +which have gone to save it from utter wreck. The long years of patient +railway building, the hundreds of miles of rock-ballasted lines across +unproductive wastes, all done under American management, gave Mexico +a system which has held<span class="pagenum" id="Page_112">[Pg 112]</span> together despite the wreckage of bandits +and the ravages of time and neglect. The traffic of the nation moves +to-day, not in the wheezy trains which the Mexicans maintain, but +overwhelmingly in a system of privately owned locomotives and cars +operated by the American mining and trading companies at staggering +expense. Their 100 locomotives, in perfect repair (kept so in their own +shops) and their nearly 3,000 freight cars probably represent half of +the railway equipment running on the National Railways to-day, and they +probably carry far more than half the freight. They pay full freight +rates in addition to furnishing the trains, and although much of this +equipment has been taken over by the government as this is written, it +is no exaggeration to say that but for these American companies and +their magnificent efforts to save what is to be saved of their Mexican +properties Mexico would to-day be stagnant,—a land of chaos comparable +only to the period of fifty years ago, before Diaz ruled.</p> + +<p>The great oil business of Mexico owes its existence primarily to +American enterprise. Of the $300,000,000 of cash invested in the oil +fields, $200,000,000 is American. To-day, even after the colossal +production during the war, only a small portion of this investment has +been recovered, for only two purely Mexican companies, the Mexican<span class="pagenum" id="Page_113">[Pg 113]</span> +Petroleum (American) and the Eagle (British) are paying dividends. The +oil business in all lands is so speculative that its returns are quoted +not as “dividends” or “interest,” but as “recovery,” for until the +great investment in drilling, tanks, pipe lines, refineries and ships +is got back, there is no surety that the venture itself will prove +profitable. For this reason the losses of the oil companies through +the Mexican revolutions can be only an estimate. From sources which I +have been able to reach, I place the actual physical losses at about +$5,000,000 for the American companies. This seems like a very small +item, but it does not count the failures of most of the 300 companies +which have put money into Mexican oil or the vast sums paid in taxes +or lost through oppression. Nor does it take into consideration the +potential losses if Mexico enforces her “nationalization” plan. These +last would be legitimately included here, for as I say, they jeopardize +the “recovery” of the investment still remaining unpaid for, and +Mexican oil stock quotations have suffered as a result. Mexico still +threatens to enforce the provisions of the new constitution which +make oil the property of the nation and its exploitation a matter of +concession, like gold and silver. The oil companies are fighting this +plan, for they entered Mexico and invested millions in oil lands and +leases from individuals (no land<span class="pagenum" id="Page_114">[Pg 114]</span> was ever given them) under a mining +law which left coal and oil the property of the owner of the land, +unlike gold and all other minerals.</p> + +<p>The actual bill of our oil companies includes, as the chief single +item, a $2,000,000 loss due to the Battle of Ebano, fought over +American property in the spring of 1915. Oil, tanks, pipe lines and +refinery buildings were destroyed, a single cannon ball igniting a tank +containing 850,000 barrels of oil, all of which was burned. The item +of direct thievery (largely by federal troops) is only about $300,000, +but petty destruction, murderous assaults, the killing of a score of +valuable employees and the tribute to bandits and federal “generals” +pile the total up. Tribute has been levied, first by the federal +Carrancistas, and from January, 1915, to March, 1920, by Manuel Pelaez, +the former rebel leader, to a total of about $2,000,000, Pelaez’s +figure being a regular $30,000 a month up to his joining the successful +Obregon revolution in 1920 and so becoming a “federal.”</p> + +<p>The ravaging of the oil wells is full of picturesque and terrible +incident, like the railways. The most striking and costly was the +outrage perpetuated by General Candido Aguilar, son-in-law of Carranza. +On December 13, 1913, Aguilar demanded, from the Eagle Oil Company +(British) tribute to the sum of $10,000. This was not forthcoming +so Aguilar proceeded to carry out his<span class="pagenum" id="Page_115">[Pg 115]</span> threat of “shutting in” the +great “El Portrero” well, one of the most famous in Mexican oil +history, which had been a steady producer, for two and a half years, +of 30,000 barrels per day. He succeeded in capping it, and before the +casing was finally blown out, the oil had broken through the ground +in dozens of places, including the bed of a neighboring river. The +whole countryside was in imminent danger of a terrible holocaust if +the oil on the river flowed away and ignited, as it surely would, but +by superhuman efforts this danger was averted. But all other attempts +to save the oil and repair the damage were almost fruitless, and for +months the seepage went on, until at last the well was reduced to +salt water and $20,000,000 worth of oil had been lost. This loss is +technically British, although it is probable that the bill for damages +will fall upon the United States, for it was undoubtedly through the +instrumentality of our State Department and its emphasis of the Monroe +Doctrine that Great Britain was restrained from taking action.</p> + +<p>Another item to be noted is the great Carranza tax system which +continued in full force into the era of Obregon and costs the oil +companies some $4,000,000 per month. Part of this may be recognized in +time as legitimate, but it violates the letter of the franchises of +most of the companies. To this bill of claims will also be added the +losses<span class="pagenum" id="Page_116">[Pg 116]</span> incident to carrying out the orders of our Department of State +for all Americans to withdraw from Mexico on two occasions. Each time +about one month’s production was lost.</p> + +<p>I have noted above the far-reaching possibilities of destruction to oil +properties entailed in the “nationalization” plans. While these are +in abeyance pending “investigation and legislation” the oil companies +have other drains on their resources, such as government levies for +dredging the river at Tampico (while the companies’ own dredges do the +work), the requirement of special licenses to drill each well, and the +virtual curtailment of all development work outside the Tampico-Tuxpam +district. All add to the total loot of the revolutionists, and continue +the threat against foreign business development throughout all Mexico.</p> + +<p>About $200,000,000 of American money has gone into mining in Mexico. +Practically all of it has been legitimate business investment, in +low grade or old abandoned bonanza properties, in mills and in +smelters—the speculative period of bonanza mining such as we have +had in our own West was passed in Mexico a century before American +money began to flow across the Rio Grande. Our American investment +could therefore by no means be regarded as a speculative venture, and +the margin of return was relatively small—so small<span class="pagenum" id="Page_117">[Pg 117]</span> in fact that +Mexicans did not and would not now consider such mining as profitable +investment. We are, therefore, justified in taking a serious and +calculating view of the damage done to American mining properties under +revolutionary rule.</p> + +<p>From sources available, I would estimate the damage done American +mining properties in Mexico at $15,000,000—this is very conservative. +There has, however, been little of the wanton destruction of mines such +as the Germans practiced in Northern France. One instance, however, +stands out, and this was to a coal mining property in northern Mexico, +the Agujita, less than 100 miles south of Eagle Pass, Texas. In May, +1913, General Jesus Carranza, brother of the president, demanded +$50,000 from the manager of this property, owned by American and other +foreign capital. The money was not on the ground and there was no +telegraphic communication with Mexico City, so it could not be paid. +The property was then wrecked by Carranza soldiers, several hundred +coke ovens blown up, the mines fired and flooded, buildings burned, +etc.,—damage estimated at $1,000,000.</p> + +<p>Some other incidents of this sort are recorded, but the largest +physical damage is indirect, due to the driving off of workers and +the murder of the American engineers, so that great mining properties +were abandoned temporarily with the result<span class="pagenum" id="Page_118">[Pg 118]</span> that the water came in +and tremendous values in timbering and stoping have been destroyed. +In some instances the damage caused by water has mounted up to vast +sums; one great mine, the Tiro General, an American property, will +for instance require $300,000 before it can be operated again. Other +properties abandoned from time to time during the years when railway +traffic was interrupted, have similar bills for repairs, and hundreds +of other mines, great and small, have been kept closed through the most +profitable period mining has ever known (that during the Great War), +with vast losses, although the ore is of course still in the ground and +will some day be taken out.</p> + +<p>The decrees and laws put into effect by the Mexican government in its +effort to raise money have had a serious effect on mining. There have +been new export taxes on metals, for instance, 5 per cent on lead, +copper and zinc, where before nothing was assessed, and in some cases, +as in that of copper, definite sums per pound have been assessed, +with the result that the falling copper prices caused the closing of +great properties like that of Cananea (American) and El Boleo (largely +French). Silver and gold were taxed 10 per cent as against 2¹⁄₂ per +cent in the old days; during the war the export of gold was prohibited +and half of the value of the silver exported had<span class="pagenum" id="Page_119">[Pg 119]</span> to be returned +to Mexico in gold. Taxes on mining claims also have been increased +tremendously, so that in 1916 a group of forty-five American companies +estimated for the American-Mexican commission sitting in Atlantic City +that where in 1912 they paid $96,000 in taxes on a group of claims the +new laws would have collected $569,000 and where in 1912 the export +taxes were $1,726,000, the export taxes on the same quantity of metal +(if it had been taken out, which it was not) would have been $7,000,000.</p> + +<p>During the war, only high metal prices kept any mining business going +in Mexico. After the armistice, hundreds of mines and all but a few +smelters were closed down, and only the high price of silver, as long +as it continued, allowed those that were left to keep running. Even +during the era of high prices it was impossible for the mines which +were operating to do the development work which alone makes possible +the continued operation of mines under modern conditions.</p> + +<p>Due to taxation, heavy freight costs, scarcity of materials and of +labor, bandit raids and uncertain supplies, the science of mining in +Mexico thus slipped back thirty years. This, in a phrase, sums up the +reason for the losses and the conditions which make it impossible +for mines to operate to-day where in times of ordered, intelligent +government, they were running and supporting hundreds<span class="pagenum" id="Page_120">[Pg 120]</span> of thousands of +Mexicans in comfort and peace.</p> + +<p>Figures presenting the case of the land and cattle companies are +almost impossible to obtain, for these interests have never organized +as the oil and mining men have, and the only possible sources of such +information have not been able to collect figures enough to cover the +situation. Roughly, however, it is estimated that $50,000,000 of actual +American money has been invested in land in Mexico, and although the +titles to the properties still remain (always subject to the proposed +confiscation of foreign property), the loss in capital invested, of +live stock and crops, can probably be placed at over $10,000,000. The +land companies and individual American holders of lands have, however, +been the greatest sufferers, perhaps, of all the interests, for the +actual worth of the land they occupied was infinitesimal compared with +the value which their very presence and industry created for it.</p> + +<p>The Mormon colonies of northern Chihuahua, near Casas Grandes, were +amongst the most prosperous, in a comparatively large way, of all the +agricultural sections of Mexico. Here the “desert blossomed as the +rose” and the American colonists, industrious and prosperous, were +becoming valuable contributors to the Mexican national wealth. All this +has been swept away, houses<span class="pagenum" id="Page_121">[Pg 121]</span> burned, cattle run off, men, women and +even the children murdered and maltreated, and the whole enterprise all +but destroyed. The case is paralleled all over the country.</p> + +<p>Millions of dollars have been invested by Americans in tropical +plantations, and some at least of the properties were of great +potential value. The story of the wrecking, raiding, pillaging and +murdering on these properties would cover pages and the sums actually +lost and the values destroyed by the interruption of development run up +into great totals.</p> + +<p>At the other end of the country, in Sonora, the records show the +systematic ruin of the Yaqui Delta Land and Water Co., which, beginning +under President Madero, had invested $3,000,000 in land, surveys and +experiment stations and was turning a great property worthless for +anything but grazing, into a paradise of irrigated farms. Beginning +with Carranza and continuing steadily since this company’s property +has been despoiled, and by means of confiscatory legislation, new +interpretations of franchises and overwhelming taxation has been +reduced to ruin and even the government franchise itself finally +annulled. The Mexicans have no plans and no money to do such vast +development themselves, so the destruction of this property, pushing +it back to the mere value of the<span class="pagenum" id="Page_122">[Pg 122]</span> grazing land, was utterly wanton and +deprives Mexico of a great agricultural development of the type which +she sorely needs.</p> + +<p>In industrial, public service, banks and other classes of investment +American money has been put into Mexico to a total of about +$50,000,000. Most of the industrial and public service corporations +are owned by foreigners in Mexico, the only exceptions being a few +manufacturing plants and undeveloped tramway and city water plants. +The majority of this capital is, however, British, French and German, +American money having gone into the other interests described. Much of +this industrial property has been destroyed, and the public service +corporations have been taken over by the government on various pretexts +and without payment, for the money they have earned has gone into the +Mexican national war chest. There remains, however, the possibility of +damage claims, which in these cases can be easily established.</p> + +<p>Of the American corporations engaged in industries a typical case is +that of the Continental Rubber Company, which has invested $5,000,000 +in the guayule rubber business in north central Mexico. In 1910 the +guayule exports of Mexico were 28,000,000 pounds, worth in the market +approximately $20,000,000, and of this the Continental exported the +largest share. To-day the<span class="pagenum" id="Page_123">[Pg 123]</span> guayule exports are practically nothing on +the part of the companies, while the guayule shrubs on their lands are +being cut and shipped by roving bands of bandits and peons. The vast +Hacienda de Cedros, covering 2,000,000 acres, was bought by the company +nearly fifteen years ago, when its value was around $1,000,000. At the +height of the guayule business its worth was many times this sum, but +to-day, even with the chances of a future recognition of the title of +the American company, it could not be sold for its original cost. Like +all foreign properties in Mexico which have been successful, the value +of this hacienda was in the industry of the Americans who owned and +managed it—a value which cannot be estimated or set down in figures in +a damage claim.</p> + +<p>The Mexican Banks of Issue, the backbone of the credit system of +Mexico, were owned only in small part by American interests. Their +destruction and the wiping out of the entire Mexican financial system +which was built up by Diaz, must not be forgotten in trying to get a +picture of the destruction wrought by the Mexican revolutionary bandits +and their governments. The paper money systems which scourged the +country from 1913 to 1916 cost foreigners millions of dollars which +can never be shown in figures, owing to the fluctuations of the paper +pesos. The upsetting of credit, which those who study the situation +soon find was<span class="pagenum" id="Page_124">[Pg 124]</span> due largely to Carranza decrees (whether justified by +circumstances or not) has set Mexico back nearly fifty years and has +depressed values of property and investment beyond any calculation but +the most careful studies by experts in finance as well as industry.</p> + +<p>It is such phases of the Mexican credit system of to-day which +constitute the real damage claims against Mexico—claims which +can hardly be estimated. I place the figure at $1,000,000,000, +and yet its potentialities are far more than that. At the present +moment the greatest actual loss—even though it can be partially +repaired if the future develops sane government in Mexico—is in the +virtual destruction of the market for property in Mexico. The new +constitution and the decrees and laws under it virtually prohibit +foreigners from owning anything in a vast restricted zone along the +border and seacoast, a zone including the richest foreign holdings +in Mexico. They prohibit foreigners from owning real estate anywhere +unless they agree never to appeal to their home governments in case +of trouble. The effect of this is to eliminate the only possible +market for valuable property. The Mexicans, and particularly the +Mexicans who are in control to-day, will not, need not, can not buy +such properties—foreigners and the opportunities which were open to +foreigners in<span class="pagenum" id="Page_125">[Pg 125]</span> Mexico before the revolution actually created the market +value of such property, because they and they alone were the possible +purchasers.</p> + +<p>Even well-developed small farming tracts cannot be sold to small +Mexican farmers—such small farmers hardly exist as a class and where +they do exist, their experience and their financial capacity do not +lead them to consider the purchase of improved farms. And above all is +the promise and the performance, in some cases, of the much-heralded +land distribution of the revolutionary governments. Where men can get +something for nothing, or on their own worthless credit, they do not +buy in the open market.</p> + +<p>Aside from this destruction of the values of foreign property holdings +in Mexico by making transfer virtually impossible, there is, once more, +that omnipresent menace of confiscation which makes men seek privileges +instead of their as yet uncertain legal rights, for the protection +of what they have. No longer do men buy to develop—they take, as in +the oil fields, only what is sure to return large profits in a very +brief time, for they know that even if they have privilege, and think +they know how to keep on having privilege for themselves, they cannot +transfer their capacity for getting privilege when they seek to sell +their property. There are no longer relative values of<span class="pagenum" id="Page_126">[Pg 126]</span> property, in +Mexico—property is worth only what can be got out of it, and got +quickly.</p> + +<p>This all makes up an uninspiring picture. But we must look on such +pictures, must weigh and judge them ere we can see the way through and +beyond them. That there is such a way must not be forgotten. It lies +beyond the realm of mere political reform, for to-day, as all through +the revolutionary history of Mexico the curse of the country is <i>the +application of political remedies to economic ills</i>—that phrase +should be burned into the brain of all who seek knowledge of the real +Mexico.</p> + +<p>That the relief is to come from the womb of revolution has been +the hope of all who have watched the struggles in Mexico without +understanding them. The failure of their hopes has been continuous. +Madero, Huerta, Carranza, de la Huerta, Obregon,—to each in turn +have such watchers transferred their allegiance and their faith. Each +has failed, in so far as each has applied only the political remedy. +The result has been the utter debasement of Mexican credit, the utter +outraging of Mexican and foreign faith in Mexico herself. To-day, as +I have said, Mexicans do not believe in Mexico, and each new failure +of the political remedy sends them further away from her altars. What, +then, is the answer?</p> + +<p>The answer is but the following of the inexorable<span class="pagenum" id="Page_127">[Pg 127]</span> logic of life—and +of business. We shall find it, not in the application of new politics, +of new (or of old) constitutions and laws and decrees, not in the +ravings of dreamers or of petty states-men. We shall find it, and shall +know it when we find it, in a solution of the practical problems of +Mexican commerce, labor and business by the practical men of affairs +of Mexico and of the world. Our part shall be a very great part, for +the business men of the United States, above all others, must show the +way. Mexico must in the end bow to practical ideas of practical men, +and in bowing to that yoke she will see her future unfold. Of the ways +of finding the road and of turning Mexico upon it, we shall deal later. +Only here, at the end of this dismal chapter of failure to solve the +economic problems by political nostrums, I wish to indicate that there +is, and will be, a way of hope and of salvation—from within Mexico +herself.</p> +<hr class="chap x-ebookmaker-drop"> + +<div class="chapter"> +<p><span class="pagenum" id="Page_128">[Pg 128]</span></p> + +<h2 class="nobreak" id="CHAPTER_VI">CHAPTER VI<br><span class="small">MEXICO AND HER “BOLSHEVISM”</span></h2></div> + + +<p>Ten years ago Mexico was one of the great, progressive nations of the +world; to-day she is just “another Latin American Republic.” Then she +showed literally the achievement and the promise of Japan; to-day she +is as backward and as hopeless as Turkey. Ten years ago her diplomats +were honored in the councils of kings, her credit ranked with that of +the best of Europe, her cities were miniatures of Paris, her mines +operated with the perfection of those in England, her railways and +budding industries bore comparison with those of the United States, +her people lived in arcadian peace, wakening slowly and surely, if +sometimes painfully, to a civilization which was meeting their needs. +To-day, Mexico is a little worse than Turkey, a little better than +Hayti, her diplomats are as inconsequential as those of Thibet, her +credit is as low as that of Austria, her cities and ports are mud +puddles and pest holes, her mines are back to the rat-hole workings +of the colonial Spaniards and Indians, her railroads are rattling +skeletons, her industries virtually non-existent. Life is again +arcadian, with all<span class="pagenum" id="Page_129">[Pg 129]</span> those discomforts of Arcadia which the poets of old +and the propagandists of to-day neglect, so carefully, to mention.</p> + +<p>The world has learned, in these past years, to take colossal +destructions calmly, so that few of us wonder and none of us really +questions the fact or the why of Mexico’s sudden and astounding +degeneration. And yet that failure is in miniature the threat and +the promise of the failure of our civilization, in epitome the boast +of bolshevism and the nightmare of capitalism. Mexico is like the +Chamber of Horrors at the old Eden Musee or Mme. Tussaud’s, a row of +illuminated pictures which tell in ghastly realism what is sure to +happen to careless people if they play too recklessly with the world +which is given them to use.</p> + +<p>This seems indeed a cycle of bolshevism, but it is a cycle in which +radicalism, like capitalism, is a sorry victim. As a picture the events +in Mexico approximate the drama in Russia, carried to the logical +conclusions which such a drama would reach on any national stage where +personal aggrandizement is a mightier lodestone than public devotion. +The historical facts of the past decade in Mexico are unrelated to the +facts and background of Russia, yet in Mexico there have been heard the +same shibboleths, the same promises, the same cries of the downtrodden. +There have been seen the same red flags, the same uprisings<span class="pagenum" id="Page_130">[Pg 130]</span> and +assassinations, and the same “redistribution” of property as in Russia. +And more than all has unrolled the drama of the rising of obscure +chieftains and politicians to colossal and wicked power. But in Mexico +the cycle has gone far beyond Russia, perhaps because here there has, +indeed, been no touch of even such idealism as there may be in Moscow.</p> + +<p>In Mexico the crimson day of bolshevism has been followed quickly by +the purple twilight of the aftermath of graft and privilege. To-day +there is to be seen there a power of wealth mightier than any which +is conceivable in the now almost forgotten dawn of bolshevism’s red +day in Mexico. Privilege and not the proletariat, capitalism and not +socialism, are the gods of that stricken land,—a land which ten years +ago was mistress of her life and of her destiny, and to-day is a beggar +in the marts of the world, ready to sell her body and her soul for gold.</p> + +<p>I have no desire to force a parallel between the early events in +Mexico and those in Russia. The parallel is there, and could fill the +eye and mind with the aid of a modicum of imagination. But the facts +alone are eloquent, and the primary fact is not whether the revolution +against the czar was day for day and hour for hour a repetition of +the Madero revolution against Diaz, or whether Huerta was an Indian +Denekin, or Carranza a<span class="pagenum" id="Page_131">[Pg 131]</span> weak Lenin or Obregon the realization of what +Trotzky might be to-morrow or next year. The first fact and the last +is that in one great section of Mexico we have seen and in the whole +of Mexico we are to-day watching the rolling on of an ugly spiral from +plutocracy to revolution, from revolution to socialism, from socialism +to bolshevism and then from bolshevism to demagogy, to a later and +darker dictatorship, with a more miserable proletariat, and on into the +vast sweep of an age of privilege which holds and wields power greater +than government, greater and more direct than capital or labor has ever +wielded. For privilege stands alone in the midst of the smoking ruins +of what was once the Mexican nation.</p> + +<p>He braves much in this day who dares define or limit bolshevism, but +in Mexico its manifestations have been carried to a point where they +have limited and defined themselves. First, Mexican bolshevism was and +is the application of political remedies to economic ills; second, it +is the raising up of the proletariat by promises and agitation to the +overturning of established government and the setting up, not of the +promised millennium, but of new dictatorships and new oppressions. Both +sought, and claim, the improvement of the workers, but both have failed +and faded to shadowy appearance and raucous boast.</p> + +<p>In Mexico to-day there are spots where peace<span class="pagenum" id="Page_132">[Pg 132]</span> and progress reign—but +they are literally those spots where “capitalism,” entrenched behind +a wall of gold and foreign protection, has been able to give its +workers the value of the profits which they gain. The rest of Mexico +is worse off, politically and economically, than in the days of Diaz, +and increasingly the only hope of the country seems, by some means, +to achieve the extension of sane business to the replacement of the +economic ruin of native demagogues masquerading behind the fair words +of socialism.</p> + +<p>The essence of the beneficent effects of this foreign business has been +the education of the Mexicans whom it touches toward broader horizons +of living and personal efficiency. For actually the history of Mexico’s +downfall is a history of the failure of her education, of the failure +of the past governments of Mexico to utilize the forces which were at +their hand for the uplift and the development of the unhappy masses of +the people. That failure of the past has become a colossal catastrophe +in the days of present and past revolution.</p> + +<p>For their day and time, Spain and the Roman Catholic church did much +for Mexico. We do not know what the Church might have done if it had +had different, more educational ideals, but we do know that, save for +the work of the Protestant missions in the past thirty years, hardly +any other force but Rome has done anything for social improvement<span class="pagenum" id="Page_133">[Pg 133]</span> +in Mexico. We do not know what Anglo-Saxon educational and economic +leadership would have done in the place of that of the Spaniards and +mixed-bloods—such comparisons are necessarily academic. But we do know +that under the Spanish viceroys and under Diaz more was done toward +improving the material welfare and toward building the foundations of +material and moral prosperity for the unfortunate peons than has been +done or even sincerely attempted in the ten years of revolutionary rule +since the fall of Diaz.</p> + +<p>Mexico has been, and indeed is, what we sometimes call in our brusque +Americanism, a “white man’s country.” It is essentially one of the +spots in this world where the burden of uplift is the white man’s +burden. For 300 years white Spaniards sought to lift it, and in that +long effort, with all its failures, they placed Mexico, even with her +six millions of unlettered, superstitious Indians, in the category of +the white lands. The duty of the white man, imperialist or socialist as +he may be, has ever been two-fold, and its duality has been its power; +we have lifted the material plane of our wards and we have upraised +those wards themselves to a higher and yet higher mental and spiritual +plane.</p> + +<p>It is this dual duty that the revolutionists of Mexico have shirked +and have scouted. The economic<span class="pagenum" id="Page_134">[Pg 134]</span> rain of the country is to-day almost +complete, and its spiritual uplift has been halted as by a wall of +flame. From those material ruins, Mexico might conceivably rise in a +spiritual rebirth, but the fact has been otherwise, for the material +ruin has been accomplished by the prostitution of all the ideals, +all the sacred faiths of men, concentrated by self-seeking bandit +governments to the aggrandizement and the enrichment of a few sodden +favorites.</p> + +<p>I would, if I could, paint a different picture, but the half lights of +such a panorama can be added only after the dull background has been +set in. And that background is dark indeed. The panorama of misery +begins when one crosses the northern border to-day. There the scattered +but once almost happy villages of other times have been replaced by +ruined, roofless railway stations lined with starving vendors of food +who fight with the bony dogs for the refuse of the very food they +sell. All the long trip to Mexico City is marked by the same voiceless +suffering, and the capital itself has a dismal dinginess that cries of +hopeless misery, in appalling contrast to the gallant days of the Diaz +“materialism.”</p> + +<p>The unhappy toll of war and revolution, one says? Yes, in part, for +such “war” as Mexico has known always takes that toll and always, too, +from the weaklings, putting starvation and sickness<span class="pagenum" id="Page_135">[Pg 135]</span> and filth and +dismay where once were comfort and health and some cleanliness and +happiness.</p> + +<p>But, again the question, was it not worth the price, will it not be +worth the price, in the victories won for human freedom? And here the +answer is unequivocably “No.”</p> + +<p>Many hoped, with the fine faith of their own sincerity, that the +upheaval which followed Diaz was the dawning of a new era. But in +that hope even those who knew Mexico forgot the Mexicans and their +history. Political independence from Spain had been won, freedom from +the domination of religious bigotry had been won, before Diaz came. The +struggle of his day was one of uplift, carried on with faulty tools, +perhaps, but slowly reaching toward the light. Living was improving, +slowly; religion was improving, slowly; education was advancing, +slowly. Then came a period of crystallization; the Diaz oligarchy +grew old. Many sincere men, inside and outside Mexico, thought that +the advance could and should move more rapidly. Diaz repressed those +hastening reformers, and the spiritual force which finally broke forth +into the Madero revolution of 1910-11 was undoubtedly the result of +that repression of progressive thought.</p> + +<p>Like all the revolutions of Mexico’s stormy history, this one began +with a beautiful stating of ideals and of the unrealized needs of +the common<span class="pagenum" id="Page_136">[Pg 136]</span> man; but as with all those other revolutions, the power +passed quickly to the hands of men whose sole “ideal” was personal +aggrandizement, personal wealth, and ruin to all whose needs might +incommode these exalted “leaders.”</p> + +<p>The so-called “social revolution” of Mexico borrowed the battle cries +of European socialism, but in the land in which it worked it stirred up +only a tempest in a teapot, with the miserable masses of the country +serving as tinder and fuel beneath the vessel. The teapot is the +diminutive organized labor world of Mexico, and that is boiling more +violently, perhaps, than elsewhere. But to-day the “advanced” ideas of +Mexico serve, in the name of socialism, only to put sweeping power into +the hands of unscrupulous men, men who know and care nothing of the +responsibilities of power, and are using it only to the destruction of +the very bases of Mexican society.</p> + +<p>Thus, while there seems to be a light dawning in the labor world of +Mexico, I am not sure that the light does not come from the burning +of something which Mexico cannot afford to lose. In that organized +labor world there are fewer than 50,000 workers out of a population +of 15,000,000, while there are more than 3,000,000 peons, heads of +families, who work, when there is work, in the fields, or as common +laborers. It is upon the continued, unbroken suffering of these +3,000,000 that<span class="pagenum" id="Page_137">[Pg 137]</span> the 50,000 profit to-day—the peons have but changed +masters once again and in the name of freedom, now, serve a vaster +company. The Mexican leaders, drawing their power in turn from the +coherent, organized industrial workers, are to-day destroying the +civilization of Diaz, and with it the civilization of American business +men, American teachers and American missionaries, which was and is the +hope of the downtrodden majority. The “modern” laws which labor has +promulgated might, we may conceive, fit the advanced industrial life of +Germany or the United States, but they are utterly suicidal to Mexico. +The new Constitution of 1917 has written into its fabric an idealistic +set of labor laws, beautiful in terminology but under present +conditions of industry and psychology and government in Mexico, about +as impractical for the development of industry and the true welfare of +labor as they are efficient as a means of graft and extortion against +labor as well as against employers. These laws are worked out for the +sole benefit of the industrial workers of Mexico, that total of less +than 50,000 as against the 3,000,000 farm and day laborers. They are +thus far more important as a propaganda document with the foreign +radicals who caused the inclusion of those administrative laws in the +new national constitution than they are helpful to Mexico’s own social +advancement.</p> + +<p><span class="pagenum" id="Page_138">[Pg 138]</span></p> + +<p>The eight-hour day provided in the constitution, the welfare projects +such as the stern proviso that nursing mothers shall have two half-hour +periods per day in which to care for their children, the constitutional +support of the right to strike even in public utilities, and the +virtual provision against the employment of strikebreakers, or the +closing of a shop in a lock-out, are typical of the privileges for +labor—they cover everything which the most radical would make the laws +of every land. In Mexico, and under the peculiar conditions of Mexican +psychology and inter-class relationships, they become little more than +tools of the demagogues. The rulers do as they choose in any case, +as when, not long ago, a railway strike was successful to the last +detail of the demands made in the name of “the social revolution” and +two months later a similar strike for similar ends was opposed by the +general use of strikebreakers. The labor courts, theoretically a great +advance, are used almost without exception as a palladium of radical +propaganda—and as a toll-gate on the road of privilege.</p> + +<p>Such are the reforms of the new era. They provide six or eight hour +days, for men who cannot read and whose children are not taught to read +or to think. They provide minimum wages, to be determined by factory +committees, with the most ignorant workmen in the world on a par with<span class="pagenum" id="Page_139">[Pg 139]</span> +employers and industrial engineers. They provide against discharge for +any cause except proven drunkenness, in a land where, to say the least, +drunkenness is relative.</p> + +<p>Their own people have begun, a little, to wonder at the wisdom of these +sweeping changes, and one, Ing. Carlos Arroyo, not long ago wrote in +the official but very radical “Bulletin of Industry, Commerce and +Labor” that there were four main difficulties which would have to be +corrected before factory efficiency could be arranged in Mexico on a +coöperative basis: first, scientific method would have to replace the +empirical system now in use; second, there would have to be special +training for apprentices; third, there would have to be study of +employees to have them properly placed; fourth, the responsibility +for the tasks assigned would have to be “equally” divided (not given +entirely to the workers) between the management and the workers, +“because the former continues to be charged with the responsibility for +the competence of the latter.”</p> + +<p>And as to that competence, this same bulletin regularly publishes the +records of accidents. There one will find that in 1918, for instance, +there were, in 278 industrial establishments having 292,364 employees, +6,424 accidents, in which 184 were killed, and 42 maimed and 6,198 +wounded. And, most illuminating of all, 5,165 of the accidents<span class="pagenum" id="Page_140">[Pg 140]</span> were +admittedly due to the “carelessness of workmen,” only 195 were the +fault of the management and 1,064 were due to unavoidable causes.</p> + +<p>As to the value of the achieved reforms, I have but this to tell: In +all the cities, in the centers of industry like the Tampico oil fields +and the busy port of Vera Cruz (busier to-day than it has ever been +because all Mexico must live on imported goods) I found a sullen hatred +of the foreigner, an ugly self-assertion that bodes but ill for those +missionaries of religion and of business to whom we look for so much of +the future regeneration of the country. I saw none of the contented, +happy calm of prosperous laborers, but only the unrest of the great +cities of other lands, ugly with resentment, fertile field for +revolution but not for progress. And yet those very resentful workers, +convinced of an unappreciated importance which they knew but by rote, +are all that there is of the “fruits” of the “social revolution” in +Mexico.</p> + +<p>No, Mexico has not changed, even amongst her petted laboring classes, +and I fear that the old rule of our ancient civilization will have to +persist a little longer, and the long, dim road be trod again through +failure and reform, and failure again and yet again. I fear that we +shall still have to lift by reaching down and, by training the dull +forces of those dull minds, teach them to help themselves and to climb +by themselves.</p> + +<p><span class="pagenum" id="Page_141">[Pg 141]</span></p> + +<p>Out on the plantations the workers are going the rounds which they have +covered since Mexico began, and in the fairs I saw the only evidence of +happiness which smile on one in the length and breadth of the country. +The market places and the fairs of Mexico, sunny, crowded, colorful, +rich because the Indians in the booths are close to Nature and Nature’s +bounty! That simple happiness has been the source of all Mexico’s +joy—and of all her misfortune. That simplicity has made her people +the dupes of predatory chieftains, and hideous priests of pre-Spanish +times, of Spaniard and priest through the long centuries of the +viceroys, of master and of some priests, too, through the years since +the Independence. Yet in those periods those who have duped the Indians +have, most of them, protected the Indians in an easy, medieval way, and +slowly there has grown a civilization, and in that civilization have +been nurtured the seeds of better things.</p> + +<p>The time was coming for those seeds to bear fruit, when, hastening the +ripening, came the revolutions of 1910 and after. It was like the child +who pulled up the stalks to see how the seeds were growing—they were +growing much faster than appeared on the surface, but they did not grow +after they were pulled up.</p> + +<p>Looking back to the Diaz day we can find, for instance, the slow, +constructive work toward the<span class="pagenum" id="Page_142">[Pg 142]</span> creation of arable land for small farms. +It was being hampered somewhat by grasping office-holders, but it was +advancing, a great national plan of irrigation to make possible the +use of small tracts in a country where rain conditions have forever +made small farming all but impossible. Then the revolution and the +resounding cry for “land.” The alleged land hunger of the Mexican +Indians and peons has been at once the rallying cry for each succeeding +revolution and the one appeal of all of them for foreign sympathy.</p> + +<p>But whatever authorities may conceive as to the facts of the existence +of this land hunger or of the forms which it takes—a desire for +little farms, for prehistoric communal ownership, or for property only +because it is wealth and can be converted into cash—it is also true +that the schemes of the revolutionists for land distribution have +been impossible except by the confiscation of rich properties and the +destruction of vested rights. Obviously, no land which is not tillable +is satisfactory for distribution, and the tillable land of Mexico +is, as I have pointed out, actually only about 25,000,000 acres, or +one-twentieth of the area of the country. Land distribution must long +remain largely a beautiful theory, good only for raising up the natives +by direct appeal to their bitter poverty or to their human greed, +and for<span class="pagenum" id="Page_143">[Pg 143]</span> the raising up of foreign sympathy by the flaunting of the +misfortunes of the soil under more appealing names.</p> + +<p>In Mexico to-day all these dreams of land distribution have gone +the way of other “reforms” for the benefit of the peons. Nothing, +virtually, has been done. Some great properties have been confiscated, +or “paid for” in unguaranteed bonds of bankrupt state governments, but +most of such properties are to-day in the hands of former revolutionary +“generals.” Some few have been distributed to Indians, but even +these tracts are taken with but scant enthusiasm. One great “land +distribution” in Yucatan called forth a crowd of 6,000 to the festival +(all Mexico goes to any <i>fiesta</i>) but only thirty Indians took up +any of the hundreds of small tracts offered.</p> + +<p>The essential facts of the Mexican situation are patent to all who +go to Mexico to-day, and they are inescapable to those who have a +background of knowledge of Mexico by which to judge of what they see. +And yet it is true that in the councils of Carranza, in the entourages +of de la Huerta and of Obregon there have been men representing forces +which we in our time have felt could not be used to evil purpose. +These were men who had been stirred by the fine frenzy of the first +revolution, and whose ideas, caught as mere<span class="pagenum" id="Page_144">[Pg 144]</span> phrases by the leaders of +revolts, were handed back to their originators again, as the “ideals” +of the revolution. Strange indeed it is, and yet not only newcomers, +but foreigners of long residence and sincere and devoted Mexicans as +well, fell victims to that subtle flattery. In business, in education, +in the churches, there were such men, their very hopes too great to +protect them from the petty deceits of those who climbed to power upon +them.</p> + +<p>I think I can understand why travelers in Mexico, sincere students +as well as moistily entertained excursions of American “Chambers of +Commerce” can be deceived as to conditions there. I have been inclined +to be impatient with those who let themselves be led this way and +that, and flattered by the apparent sincerity of self-deluding Mexican +officials, but Mexico is, after all, an eternal enigma. It is an enigma +because its colossal depths of ignorance and the smallness of its +deceits are literally incomprehensible to simpler and less subtle minds.</p> + +<p>It is that enigma which I have sought through all my writing on Mexico +to resolve. On my last trip through the country, I saw just the eternal +Mexico, the Mexico of ignorance and misery, whose only change was that +it was a little sadder, a little more resentful of those whom it once +regarded as its helpers and its friends, a little more<span class="pagenum" id="Page_145">[Pg 145]</span> pompous in +parading its borrowed intellectual plumage.</p> + +<p>A most perfect example of this ability of the Mexican of the “modern” +type to absorb one’s ideas and deceive one by the redishing of those +ideas, happened to me on my last trip to Mexico City. In the course +of the preparation of an article on a great business for a popular +magazine, I met a Mexican <i>licenciado</i> (a title of vast elegance, +meaning much more than its dictionary equivalent of “lawyer”) who was +extremely anxious to be quoted as an expert on the subject which I was +studying. He evidently thought that my quoting him would help him to a +government post to which he aspired, so he expounded his ideas at great +length. When he was finished, I answered his arguments in kind, and +with considerable interest in his response to my counter-play. He was +pleasantly combative, and we parted in thorough friendship.</p> + +<p>It was only a few hours later that I had an urgent call from this same +gentleman, who had, he told me, been going into new material on the +subject, and wished to express his views, stated in the morning, more +definitely to me. Whereupon he returned me, recooked and eloquently +served, my own friendly contentions of the previous interview. It was a +bit thick for me, but it is worth the telling that an American business +man of long<span class="pagenum" id="Page_146">[Pg 146]</span> experience in Mexico who had introduced this gentleman to +me remarked when the subject came up again, a day or two later:</p> + +<p>“By the way, Licenciado Blank is getting much broader. He has figured +out a pretty decent attitude on this problem ...” and he redished me my +own views again!</p> + +<p>This is Mexico to-day. On the top a group of men who have absorbed in +just this way the phrases of the intelligent radicals of the world +but who still remain, as always, sycophants without background of +education, or even genuine radical convictions. Below them the vast +misery of the unthinking serfs of the country, duller, certainly sadder +and even less well nourished than in the days of the viceroys and of +Diaz.</p> + +<p>We are all responsible for the Mexico which is before us. We Americans +of every type in that old Mexico were too willing to let the misery +of Mexico be what it was, were too willing to take our helpers and +our support from the middle classes which were emerging so slowly. +We made a fetish of that middle class, built our hope of Mexico upon +it, called it the crowning achievement of the age of Diaz, and from +it came the beginnings of that group of Mexican leaders of which we +all had dreamed. We saw Diaz clear—all of us, I think—and knew +that his day could not be forever. But<span class="pagenum" id="Page_147">[Pg 147]</span> we had faith in that middle +class, forgetting, as it was easy to forget, the instability of that +foundation of Indian poverty and misery. We were going to transmute +those shifting sands by making more striking the examples of its +brothers—artisans and clerks and students and teachers. We trusted +so blindly, then, in the leaven of example—we knew so little of the +sodden flour which made our loaves.</p> + +<p>And then came the day of revolution, Madero the deliverer. There were +few of us who regretted the passing of Diaz, save sentimentally, +that it should have to be in just that way—we had hoped he would +die gloriously, beloved by the people for whom he had given so much. +And then the disappointment and the horror of that wild cabal of +graft and loot under Madero, when the dreamers, the repressed brains +of a generation, stood waiting, wringing their hands in helpless +impotence—those who could, truly, have done so much! It was pitiful, +as was the aftermath of Huerta, the reaction, the impossible reaction +with its ugly tinge of a coming uprush of Indian barbarism.</p> + +<p>Then Carranza, riding upon the winged horse of Madero—it seems that +not all of us understood, quite, for we heard the fair words, as +we have heard them echoing through empty halls and across dead and +tortured bodies these five years<span class="pagenum" id="Page_148">[Pg 148]</span> since. Many sincere men were caught +by those fair, echoing words, and many followed the phantom to the end. +And many continue to this day.</p> + +<p>I have no need to talk of the recent past, nor of the present. The +story is written in the starving babies of the Mexican towns, in the +dismal railway stations where wretched food can be bought (if one +dares) from the very mouths of hungry, filthy vendors. Misery and grief +and pain stalk in Mexico to-day. Somewhere those who have used these +wretched bodies, as infinite in number, as minute in importance, as the +skeletons of a coral reef, for climbing to wealth and power—somewhere +these must make answer.</p> + +<p>In another chapter I shall tell something of the story of Yucatan, +where the ideas of radical socialism were accepted and then used to +destroy even itself. It is a story of horror and of wreckage, the +clearest picture of Mexican conditions at their ultimate which has +passed in the gory panorama of the recent years.</p> + +<p>What has happened in Yucatan is in essence what has been going on +all over Mexico. In the larger field of the whole country, the +revolutionists have been more coherent, and at the same time in their +utterances somewhat more considerate of the prejudices of the world at +large. Yucatan, isolated from the rest of Mexico, and free from the +prying eyes of most of the world as well, has<span class="pagenum" id="Page_149">[Pg 149]</span> gone on with the round +of despotism and oppression, rape and murder in the name of socialism, +but on the mainland, the “rights of labor” have been more elaborately +defended (in words) and the legal systems of confiscation and +anti-foreignism have been more logically developed, under the standard +of progressive socialism!</p> + +<p>The years have written records of Mexican political and social +revolution which are identical with those of the present in all +save their battlecries. The first outbreak against Spain in 1810 +and the dozens of revolutions which followed it were a <i>reductio +ad absurdum</i> of the political ideals of Thomas Paine and the +American and French revolutionaries. The Constitution of 1857, under +which Diaz ruled, was little more than a copy of the Constitution of +the United States, and few of its provisions were really adapted to +Mexico’s peculiar conditions. So it is not strange, perhaps, that the +Constitution of 1917 is as far from being Mexican and far more false +an effort to solve the nation’s problems than was its predecessor, for +it was dictated by foreign radicals and merely adapted by the Mexican +politicians who knew best what would arouse enthusiasm in the Mexican +crowd.</p> + +<p>Despite its beauties of theory and its direct appeal to the serious +radical thought of the world, its most useful function is becoming +obvious even<span class="pagenum" id="Page_150">[Pg 150]</span> to the most credulous, for it gives the governing groups +that control of Mexican life by which it is possible for them to +sell the privilege of doing business, because the ancient rights of +business are utterly done away with. The ills of Mexico are essentially +economic, and the new constitution and its revolutions, even more than +their predecessors, have sought to apply only the political remedy, a +remedy which has so far served only to destroy the efficiency of the +economic machinery of the country and place it upon the auction-block +of graft.</p> + +<p>To-day all over Mexico, labor is paid higher wages than it ever +received, but it is paying more for its food and shelter than it +ever spent before. The misery of Mexico is just as obvious and as +unescapable as ever to him who sees truly. Save for those sections +where foreign business still survives the Mexican lives as he has +always lived, on the verge of pauperism. And upon the summit of the +heap, lounging in easy magnificence, is the mixed-blood agitator, +the general, the governor, the cabinet official who have battened on +Mexico’s misery before this day and will doubtless do so long after +this day is passed.</p> + +<p>The raising of the Indian masses of Mexico by promises and by +high-sounding battlecries is a game as old as Mexican history; it is +played with unvarying success year after year and generation<span class="pagenum" id="Page_151">[Pg 151]</span> after +generation. The more extravagant the promises, the more complete the +enthusiasm of the “proletariat,” both for the political movement of the +moment, and for the one which follows it immediately upon the discovery +by the unfortunate “people” that the previous promises are not going to +be kept.</p> + +<p>But in to-day’s orgy of revolution, Mexico has gone further toward +destruction than she has ever gone before. Values throughout native +Mexico are almost non-existent, and the wheels of Mexican civilization +like the wheels of the wheezy locomotives of her railways, creak and +groan on their rounds. The nation’s economic life is tied together +by strings, and what remains is only what has been salvaged from her +junk-heaps, and like the lawn-mower borrowed from a neighbor, is kept +running only to serve the purposes of the borrower.</p> + +<p>The seventy years of warfare before Diaz left intact the civilization +of the Spaniards for Diaz to revive, but the ten years from Diaz to +Obregon have torn that civilization to shreds. Nearly all that Diaz +built has disappeared, and to-day the business of Mexico is swapping +jack-knives and selling food and shelter at the highest prices the +traffic will bear.</p> + +<p>No man who would face truth in Mexico can ignore these potent facts. +And the reason is not<span class="pagenum" id="Page_152">[Pg 152]</span> revolution, nor even mere radicalism, but the +cynical application of political control to economic needs for the +aggrandizement of individual leaders whose power is in the market for +all who will buy the privileges which they have to offer.</p> + +<p>It is in this condition that the importance and the menace of +radical Mexican government are found. What it has seemed well to +call bolshevism in Mexico has its greatest power in its mere threat +against capital and business. That threat, the mere presence of the +anti-capitalistic constitution and laws, has probably far greater power +than their actual application would have. Once the blow of confiscation +fell, the answer from the world of business and civilized government +would be quick and sure—Mexico cannot be ignored as Russia can be, for +Mexico lies in the center of the trade-routes of the globe, and we in +the United States would feel the menace of her anarchy too strongly to +remain passive.</p> + +<p>But the static power, the threat of laws which are never +enforced—there is the menace and there the great influence which +creates the graft and cynicism of Mexican officials. So long as +those laws remain, business, if it would survive in Mexico, must +buy immunity. And it does buy it, for business is ever timid, and +no single business organization and seldom a group of business +organizations, will ever go to the stake for a principle.<span class="pagenum" id="Page_153">[Pg 153]</span> Its duty +to its stockholders and to its employees makes it buy its way, not +always by direct graft, but in submission to vast taxes, to unwarranted +extortions, to the riding of official annoyances—rather than accept +the shut-down and fight with its own great power, its inertia of +movement or of the silence which ruins empires.</p> + +<p>In recent months the great business groups in Mexico have opposed a +certain amount of strength to the growing power of the auction-block +of Mexican graft and privilege. The oil companies have from time to +time offered a solid front to the encroachments of this marketing of +the privilege of doing business in contraversion of the temporary +laws of Mexico. They have held back, apparently, the crushing fall of +actual enforcement of the confiscatory provisions of the Constitution +of 1917, and they have, here and there, stopped the marketing of +privilege—for brief periods. But looking at the whole picture, it +seems as if the Mexican officials of the present era are in no greater +hurry to enforce the confiscation than are the foreigners to have it +enforced. The static power of those provisions, waiting to fall, is +far more profitable to Mexican pockets than would be the sudden and +final crash of their genuine application. Their enforcement would be +of little value to the seller of privilege, for then he would have to +invent another method of extortion. No, privilege will long remain<span class="pagenum" id="Page_154">[Pg 154]</span> +upon the market counters of Mexico. It will remain there, in fact, +until some means is found, within or without Mexico, for destroying the +system which is so profitable. That need of change is the crisis of the +business world of Mexico, the crisis of all who would do business with +Mexico in the present or in the future.</p> + +<p>What, then, can save Mexico in this crisis? The panacea of the Obregon +idea was certainly not a solution. Here indeed was a probably genuine +desire to solve the problem in a final and glorious way. But the tools +were but the tools of the old days of Carranza and the rest. That was +a political remedy for an economic condition, and its promise was a +sordid thing, an unworthy thing for Mexico or for the United States to +expect. For the promise of Obregon was at first for reaction, a belief +that Obregon was comfortably wealthy already or that his ambition was +for power alone. Therefore he was to be the great conservative, who +would save Mexico by slipping back to the days of Diaz. But reaction +must always fail in the end. In this case it passed quickly, for this +was a “reaction” which was part and parcel of the “radicalism” of +Carranza, its power but a manifestation in another form of the same +personalism, the same sale of privilege, which made Carranza impossible +and in the end, brought him to his ruin.</p> + +<p><span class="pagenum" id="Page_155">[Pg 155]</span></p> + +<p>The later developments of the Obregon idea were marked by an obvious +anxiety to reach a permanent solution of the immediate and pressing +difficulties of Mexico, and most of all to secure recognition by the +United States and financial aid from American bankers, as the <i>sine +qua non</i> of such a solution. The efforts put forth were powerful, +but the driving force back of them was primarily personal ambition and +the realization that only such a solution could save the happy hunting +grounds of revolutionary leaders from some sort of foreign intendancy. +And above and beyond and behind all, were the factors of government +whose origins and whose immediate past seem indeed to be as firmly +stamped upon their natures as the spots upon the leopard or his skin +upon the Ethiopian.</p> + +<p>The completed cycle of the bolshevist experiment and the arrival back +at the sale of privilege links up with the failure of Obregon to offer +anything but, first, a promise of reversion to reactionary czarism and, +second, that unconcealed offering of privileges and promises of power +to all who could or who might aid in the campaign for recognition and +for foreign loans. The condition seems to me to sound a call as of +Elijah for a new understanding of the Mexican problem. Carrancism might +have been but an isolated interlude, might have been a mere question +of observation<span class="pagenum" id="Page_156">[Pg 156]</span> and interpretation, if the end had not come and if +business in Mexico were not continuing to pay for its sorry privileges +in the same sorry way. Obregon might perhaps have been the hope for +peace and happiness in Mexico if we had not had Carranza and de la +Huerta and if their followers, with their cynical mouthings of all the +most sacred faiths of man, were not to-day still the rulers of Mexico, +still the sellers of privilege in the name of human progress.</p> + +<p>We must, I believe, cast away the too long nurtured idea that the +battle in Mexico is between the progressive thought of the day and +the reactionary conservatism of great interests. I have sought here +to show why this is so. A revolution which can evolve the idea of the +socialization of great industry and can, in the very conception of that +idea, turn it to the looting of that industry for private graft and +gain, as in Yucatan; a revolution which can produce the uncontrolled +radicalism of Carranza and evolve through the cynical play-acting +of de la Huerta into the promise of reactionism in Obregon with all +the unholy forces which supported Carranza rallying to uphold his +successors—such a revolution will not, unredeemed, carry Mexico into +her next era of progress and peace. Capital and socialism must alike +beware. Neither should, in honesty with itself, accept a cause in +Mexico until the issue is joined clear.</p> + +<p><span class="pagenum" id="Page_157">[Pg 157]</span></p> + +<p>In the past ten years we have seen in turn the appeal of political +Mexico, to-day to the bolshevist, to-morrow to the Christian +missionary, to-day to the thinking radical of the universities, +to-morrow to the deep-dyed conservative of the counting room. Confusion +has piled upon confusion until we have each seen in Mexico what we +hoped or what we feared.</p> + +<p>We can only begin to see the truth, and in the truth the solution of +the complicated Mexican problem, when we clear our minds of these +old ideas that he who is against the revolutionary government in +Mexico is a hopeless reactionary, and that he who is for it is a +raving bolshevist. For the Mexican revolution is part of the “world +revolution” only as the shibboleths of that vast upheaval have been +turned to the aggrandizement of Mexican leaders who know neither what +the phrases mean nor where they lead.</p> + +<p>If this is grasped, and if we will look at Mexico as a problem for us +all, then the beginning of the road away from foreign intervention and +the peril to our peace and Mexico’s will begin to open. Intervention +can be avoided, even though it may be grievously close to-day. But it +cannot be avoided until we see clearly that the issue of intervention, +like the whole issue of the Mexican revolution, is not one of +capitalistic interests against the unhappy Mexican peon, but a struggle +of all the constructive<span class="pagenum" id="Page_158">[Pg 158]</span> thinkers and workers of the world—be they +radical, socialistic, religious, philosophical, laborite, capitalistic, +industrial or social, be they American, English, French, Russian or +Mexican—against forces of greed and ignorance which turn every ideal +of honest men to the prostitution of their country and the exploitation +of their fellows within and without its borders.</p> +<hr class="chap x-ebookmaker-drop"> + +<div class="chapter"> +<p><span class="pagenum" id="Page_159">[Pg 159]</span></p> + +<h2 class="nobreak" id="CHAPTER_VII">CHAPTER VII<br><span class="small">THE RAPE OF YUCATAN</span></h2></div> + + +<p>From the golden wheat fields of Kansas to the barren sands of +Yucatan, from the loaf of bread on your table to the loot of Mexican +revolutions—these seem mighty leaps of imagination or of fiction. Yet +the link is closer than imagination could ever forge, the analogy a +stranger tale than the yarns of Captain Kidd.</p> + +<p>The modern industry of wheat farming depends, by one of the romantic +balances of world commerce, upon the supply of binder twine for the +mechanical harvester, a supply which comes alone, to-day, from the +cultivation of a humble cactus plant in far-off Yucatan. The great +Mexican industry of raising this henequen or sisal hemp was prostituted +by Mexican revolutionists to the manipulation of the binder twine +market so that in four years more than a hundred million dollars in +artificially inflated prices were dragged from American farmers. Thus +it was that through the helpless years of the Great War, all who ate +the bread of the wheat, from you and me in America to the starving +children of Belgium, paid bitter tribute to the greed of Mexican +agitators.</p> + +<p><span class="pagenum" id="Page_160">[Pg 160]</span></p> + +<p>The story of Yucatan is no mere tale of the by-play of revolution, +the “fortunes of war” or the “necessary accompaniments of a great +social upheaval.” It is the history of the deliberate looting of a +commonwealth and of an indispensable international industry. In the +name of socialism, shouting the battle-cries of the age-long struggle +for human freedom, Mexican revolutionary leaders turned the richest +agricultural state of Mexico into a desert waste, prostituted the only +creative industry in the whole country to the looting of the world’s +farmlands and the taxing of every loaf of bread consumed in the world. +The vast tribute which thus poured into the coffers of revolutionary +government was utterly lost to public vision almost before it had +left the market-places, and not one cent of it was ever turned to the +easing of the sorry human burden of the Mexican peon or devoted to the +education and upbuilding of the Mexican people.</p> + +<p>The story of Yucatan is the story of as gruesome a rape of Mother +Earth as man has known. Beginning with the familiar picture of the +downtrodden peon of the Diaz time, it runs the gamut through the +marching armies of conquerors, through a cycle of high-sounding +socialism to bloody oppressions, and on to a newer despotism and +finally to utter economic collapse. In the end it flattens down into +the present, an era of capitalistic<span class="pagenum" id="Page_161">[Pg 161]</span> struggle in which the state, by +the laws of economics which its despots perverted so vigorously, is +being ground between the millstones of opposing forces of the very +business which was once the source of all its wealth and all its +progress.</p> + +<p>Upon the wheat crop of the world depends the life of the world, and +upon the mechanical harvester depends, literally, the life of the +modern wheat industry. In its turn, the operation of the harvester +is dependent upon the millions of miles of binder twine which alone +make possible the handling of the wheat on its way from the standing +fields to the thresher which converts it to golden grain. Since Cyrus +McCormick first offered his “reaper” to the American farmer, more than +fifty years ago, invention has sought far and wide for freedom from the +need of twine for the binding of the sheaves, but neither “header” nor +mechanical flail has been able to achieve it; to-day the wheat farmer +must have twine, and that by the hundreds and millions of pounds, to +harvest his crop.</p> + +<p>Thus, because the sisal hemp or henequen of Yucatan is the only fiber +which can be produced in sufficient quantities at a low price to +meet the farmer’s need for binder twine, the wheat for the world’s +food supply depends vitally on the product of this one distant state +of Mexico. Without<span class="pagenum" id="Page_162">[Pg 162]</span> its humble aid, the American farmer might, +conceivably, hark back to the binding of wheat sheaves by hand—it +is certain that we could anticipate the scrapping of billions of +dollars’ worth of mechanical harvesters in the substitution of some +other method than theirs. The only other fiber that will serve for the +making of binder twine is true Manila hemp, whose total crop would not +fill a tenth of the needs of the world’s annual harvest, and whose +finer quality and greater cost have caused it to be devoted almost +exclusively to the making of high-class cordage. Cotton and jute and +silk and all other known or promised vegetable or animal fibers from +which binder twine might conceivably be made have proven useless for +the purpose. One of them is too stout, one too soft, one too short of +fiber, one not brittle enough, another too brittle. Sisal, the Yucatan +henequen, is to-day the only hemp which meets all demands of the +world’s annual wheat harvest, a demand which has reached the colossal +total of 400,000,000 pounds a year.</p> + +<p>Upon this need has been built the one great creative industry of +Mexico, the one business, agricultural or manufacturing, which in +Mexico produces wealth through human energy. Its source is the +long-leaved henequen plant, to whose necessarily slow growth for +fiber the sandy, desert soil of the Yucatan coastland is peculiarly +adapted. The<span class="pagenum" id="Page_163">[Pg 163]</span> henequen is a species of the great agave, that strange, +cactus-like “Century plant,” which is found in one form or another +in almost all desert countries. As the maguey, it grows in the +great Central Mexican plateau, furnishing the heavy drink called +<i>pulque</i>, and giving up a hand-extracted fiber which has been +woven into the raiment of the Indians of the Valley of Mexico for +centuries. Still other varieties, in the warmer sections of Mexico, +furnish food for cattle and, distilled, the fiery <i>mescal</i> or +<i>tequila</i> which is an even more terrible curse of Mexico than the +much-berated <i>pulque</i>.</p> + +<p>It is the henequen, however, which is the most commercially useful of +all the agaves, for its narrow leaves, three to four feet long, are +peculiarly adapted to the mechanical extraction of their fiber (which +most of the agaves are not). The coarse, rasping, yellow strands have +the thickness and the strength of horsehair, so that they survive the +vigorous de-pulping process of the great gin-like machines. After +drying, they furnish a stout fiber which, when woven into thick cord, +ties the wheat sheaves in the harvester, and breaks easily as each +sheaf is thrown back into the thresher in the gorgeous pageant of the +harvest.</p> + +<p>This henequen, the sisal hemp of commerce, was first exported in 1864, +and by 1880 was one of the well-known but minor fibers in the American<span class="pagenum" id="Page_164">[Pg 164]</span> +market. In 1898, when the Spanish-American war cut off the exports of +Manila hemp, henequen sprang into immediate and great importance, its +price rose from 2¹⁄₂ cents to 10 cents a pound in New York, and an +immediate increase in the industry and in the economic importance of +the state of Yucatan took place. There was a lively boom in henequen +lands, and incidentally an improvement in social and political +conditions in Yucatan, followed by something of a slump with a few mild +panics around 1907.</p> + +<p>But henequen fiber had been definitely established in the market and +selling as it did at an average price of 5¹⁄₄ cents a pound, became +the great staple for the manufacture of binder twine. This new and +virtually inexhaustible supply of cheap fiber for twine-making played +its part in the broadening use of the mechanical harvester, until by +1915 Yucatan henequen binder twine was being shipped to every wheat +producing area in the world, from the Siberian steppes to the pampas of +the Argentine.</p> + +<p>In 1914 the exports from Mexico were more than a million bales or +approximately 400,000,000 pounds, which was a doubling of production in +fourteen years. The current price of about 6 cents a pound had enabled +the Yucatan growers to build up immense fortunes and made it possible<span class="pagenum" id="Page_165">[Pg 165]</span> +for the manufacturers of the thousands of tons of binder twine to +furnish it to the American farmer at less than 10 cents a pound.</p> + +<p>The chief manufacturers of binder twine and, therefore, the chief +buyers of Yucatan henequen, are the International Harvester Company, +which makes about half the binder twine used in the world, the +Plymouth Cordage Company, which makes about a quarter of the entire +supply, and various state penitentiaries in the wheat belt of the +United States. All of these manufacturers work on close margins for +the Harvester Company’s business is selling harvester machines and it +seems interested materially in keeping the price of such accessories +as twine as low as possible. The effect of this, combined with Yankee +shrewdness, has been a continuous effort to keep the price of Yucatan +henequen down to rock bottom, and to this end its buyers have been +cheerful arbiters of the price of the sisal in the Mexican market.</p> + +<p>They were never, however, quite the grasping, grinding capitalistic +despots they were described as being by the Yucatecans, for those of +us who can remember back into the philosophic days before 1914 will +recollect that it was not customary for even American capital to kill +the geese that laid the golden eggs. The Yucatan hacendados<span class="pagenum" id="Page_166">[Pg 166]</span> were +encouraged to demand, and get, comfortable prices for their product, +and incidentally to plant large new acreages of the henequen plants.</p> + +<p>It was this large planting, which went on from 1900 to 1914, which +caused the first glimmering of the idea of “direct action” on the part +of the hacendados, the growers of the sisal. It takes seven years for +henequen plants to come into bearing, and the prospect of immensely +increased production and probably lowered prices inspired the first +idea of a pool which would maintain the old price levels. In 1912 a +scheme for regulating the price of henequen was first presented to his +fellows by a Yucatan hacendado. His idea was not so much to create +an artificial shortage by storing the hemp, as to form some sort of +organization which would have first chance to buy the henequen crop +and thus make the hacendados participants in the profits made by the +jobbers or middlemen.</p> + +<p>The organization which resulted, in 1914, was called the “<i>Comisión +Reguladora del Mercado de Henequén</i>” (Commission for Regulating +the Henequen Market), or, for short, the “Reguladora.” It was not, +however, a great success, for the Reguladora was only an organization +buying in competition with the old established agents, and the +growers still pursued their own immediate interests in seeking their +markets. Coöperation has never been one of the outstanding virtues +of<span class="pagenum" id="Page_167">[Pg 167]</span> the Mexicans, and in the selling of their crops the Yucatecan +hacendados have never shown any sign of a break away from the national +individualism. The hacendados have always done their business in +Merida, the capital and business center of Yucatan. They pass from one +sunlit office to another, wailing dismally over the terrible prices +the comfortably ensconced buyers offered them and their unfortunate +fellows, but seeking and ready at a momentary hint to drive a bargain +which would cut their neighbors’ throats on the possible chance of a +temporary personal profit. The gentlemanly agreement of the Reguladora +was not, under these circumstances, a controlling factor in the +henequen market.</p> + +<p>This was the situation when, in March, 1915, General Salvador Alvarado, +a doughty retainer of President Carranza, “captured” the state of +Yucatan with an army of 8,000 men which he had brought from Vera +Cruz. Although Mexico has been in revolution since 1911, Yucatan had, +till this time, taken little part, accepting new governors with mild +surprise but no opposition as one administration succeeded another +in Mexico City. Yucatan is a great peninsula far to the east of the +Mexican mainland, unconnected by railways, and thirty-six hours’ +journey by fast steamer across the Gulf of Mexico from Vera Cruz. The +Yucatecans have always considered themselves as a<span class="pagenum" id="Page_168">[Pg 168]</span> people somewhat +apart from other Mexicans, and during many of the revolutions previous +to Diaz, the peninsula remained aloof and politically independent, +re-entering the Mexican confederation only toward the close of the +pre-Diaz era.</p> + +<p>General Alvarado is a product of northern Mexico. He belongs with +the true Carrancista group in Mexican politics, has been a candidate +for president of Mexico and has made many trips to the United States +as a financier, most recently as an envoy of the de la Huerta +government in search of a rehabilitating loan. All this, however, has +come since his spectacular experience in Yucatan. In that state he +gained the experience, and political record, which made him aspire +to the presidency of Mexico, and earned his diploma as revolutionary +financier. There, also, he probably first acquired those radical ideas +which enabled him to assert, as he did in the Mexican Chamber of +Deputies in November of 1920:</p> + +<p>“I am a bolshevist, I have always been a bolshevist, and I shall always +be a bolshevist.”</p> + +<p>General Alvarado’s first government work was as a custom-house +employee, but he joined the Carranza movement early and early rose to +the rank of general through the manifestation of a thoroughly forceful +personality and a ruthless preoccupation with his own advancement.</p> + +<p>Yucatan, in its isolation, in its great wealth, and<span class="pagenum" id="Page_169">[Pg 169]</span> its easy-going +manners, presented General Alvarado with the opportunity of his career. +Here were ungathered riches for revolutionary spoils, here was noble +opportunity for the uplift of the “submerged 85 per cent,” here was +waiting easy military glory of conquest with no one to oppose. In going +to Yucatan, General Alvarado was, moreover, encumbered by none of the +political and business experience which delays the prompt execution +of inspired ideas. Nor was he inhibited by any preconception of the +needs of the commonwealth or its chief industry, for this was his first +visit to his future principality. All he knew or heard was that Yucatan +was rich and that its proletariat was “oppressed,” largely by wicked +foreigners of shocking and predatory manners.</p> + +<p>When he arrived in Yucatan, General Alvarado noted with interest +the beauty of that gem of Mexican state capitals, Merida, with its +sun-clear streets and its beautiful parks and public buildings. He +saw the luxurious equipages and homes and visited the great haciendas +of henequen. In the meantime, he looked over the documents in the +governor’s office and the stock of gold in the state treasury. +He scowled his disapproval, as was the Carrancista habit, at the +foreigners engaged in the henequen business. Then his attention was +called to the charter of the Reguladora, the harmless agreement of the +hacendados to keep the price<span class="pagenum" id="Page_170">[Pg 170]</span> of the fiber as high as they could and +still not soil their hands with trade.</p> + +<p>This charter had courteously made the governor of the state ex-officio +head of the Reguladora. Promptly, and without more authority, General +Alvarado took charge of the organization. His first act was to force +upon the unhappy hacendados, through the authority of their own +instrument, a corporation which took their own business utterly out of +their own hands and forced them to the acceptance of official dictation +without dissent or question.</p> + +<p>To the end of organizing his Reguladora in line with modern thought and +to thorough efficiency for his own ends, he invited in from Mexico City +the one set of brains in the Carranza administration, those of Luis +Cabrera, and called in the motley company of self-styled “socialists” +who had been drawn to Yucatan by the lurid tales of revolutionary +propagandists who had predicted the inevitable uprising of the +oppressed proletariat when opportunity should be given them.</p> + +<p>This cabinet laid out the Reguladora plan, and two American bankers of +New Orleans, Saul Wechsler and Lynn H. Dinkins, organized a syndicate +which agreed to finance the cornering of the henequen market up to +$10,000,000. There was no socialism in this phase of the plan, for the +bankers were to receive a commission of $4 per bale on all<span class="pagenum" id="Page_171">[Pg 171]</span> henequen +marketed, plus the current banking rate of interest for all moneys +needed, the loans to be fully secured by mortgages against hemp in +storage or in transit.</p> + +<p>So far all was well, but here Alvarado met his first difficulty. The +henequen growers were not socialistically inclined, nor were they +as trusting of his good faith, or so well secured as the American +bankers, nor had they so much to gain or so little to lose as the +“socialist” advisers of the governor. Many of them refused to be bound +by the new rules of the Reguladora, which included, amongst others, a +provision that no hemp should be sold to any agent or interest save the +Reguladora.</p> + +<p>But Alvarado’s government called on the hacendados to subscribe to +his rules for the Reguladora, and to those who refused it threatened +(and gave evidence of the fullness of its intentions to carry out its +threats) to fire the fields and throw the offending hacendados and +their families into the flames. It organized the Red Guard of Yucatan +(called the “Leagues of Resistance”), and spread terrorism throughout +the peninsula. It drove out the tiny group of foreigners who for +twenty-five years had been engaged in “exploiting” the unfortunate +Yucatan proletariat by keeping the capitalistic hacendados from getting +too much money out of American farmers. Along with them<span class="pagenum" id="Page_172">[Pg 172]</span> went hundreds +of the hacendados and their families, and also priests and nuns, while +the simple Indians who could not take steamers for foreign ports +emigrated quietly back into the forests of interior Yucatan.</p> + +<p>For Alvarado’s henchmen closed the churches, burned their priceless +historical records, and outraged nuns and priests. They turned the +church buildings into “labor temples” and barracks and storehouses +from which later was sold, over the counter, the liquor which had +been confiscated in enforcement of “prohibition” in Yucatan. They +turned the schools of towns and plantations into centers of propaganda +and espionage under imported “teachers” who knew none of the Indian +language, and many of whom could not write their own names. They +confiscated great haciendas under the elaborately “socialistic” +agrarian law, and for those upon whom the iron hand did not fall +directly, established a reign of terror in the raids of the “Leagues of +Resistance,” whose crimes, from night-riding and burglary to rape and +murder, the Legislature declared to be “political offenses” in the name +of “socialism,” and thus outside the jurisdiction of the common courts.</p> + +<p>His henchmen, foreigners, Mexicans and Yucatecans, raised up the +previously contented “industrial workers,” railway men, porters +and longshoremen (numbering in all less than 9,000<span class="pagenum" id="Page_173">[Pg 173]</span> out of a state +population of 300,000), forming them into unions whose increasing wages +were overlapped more rapidly than they were raised by the rising costs +of the handling of the imported commodities upon which they, like +every one else, must live in desert Yucatan. Their wages, and the cost +of living, multiplied eight times in the four years, while the wages +of the farm workers little more than doubled, and a grievously added +burden was placed upon the hacendados who from time immemorial have +taken up the loss in increased food prices so that their farm workers +may live.</p> + +<p>By such means, and with such control, General Alvarado acquired the +domination of the industrial life of Yucatan and of henequen production +upon which he built up his market corner. In the selling of the product +so controlled, he raised the price of raw henequen from 7 cents a +pound in New York to more than 19 cents a pound in the same market. +So firm was his grip on production and on distribution that he could, +and did, withhold stock which was sorely needed in the harvest fields, +bringing about, in 1916 (through this means and through the soaring +prices which had to be asked for the binder twine which was sold), +an investigation by a committee of the United States Senate. This +committee, after months of investigation, completely exonerated the +American manufacturers from the charge of profiteering, and<span class="pagenum" id="Page_174">[Pg 174]</span> perhaps +for the first time in the history of that august body, placed itself on +record as asserting that a foreign government had acted the rôle of an +iniquitous trust in creating an artificial shortage and artificially +inflated prices for a product vital to the business of America’s farms.</p> + +<p>In the four years that the Reguladora corner lasted, more than +$200,000,000 in advanced prices were taken from American buyers, an +average advance of more than 200 per cent. Thus, granting a legitimate +doubling of the price of the fiber in keeping with the doubling of the +costs of other commodities in this period (1915-1919), the accepted +figure of $112,000,000 of direct loot through the Alvarado henequen +corner may be taken as literally true. And this was loot that never +reached either the cruel hacendados who owned the farms or the workers +who furnished the labor for the creation of the product. All this and +more went into the bottomless pit of Mexican revolutionary graft.</p> + +<p>This henequen corner was, it must be remembered, created in the name +of socialism and the salvation of the downtrodden peon. Along with it +went a mass of other activities, wherein the funds derived from the +sale of henequen at the advancing prices were turned to schemes of +ostensible government ownership, socialization and coöperation. Before +even the hacendados were given the<span class="pagenum" id="Page_175">[Pg 175]</span> 4 cents a pound guaranteed them +as first payment against the great profits to come from the “corner,” +the Reguladora funds were invested in the purchase of the state +railways, at prices to this day unknown. These funds also financed the +organization of the <i>Compañia de Fomento del Sur-Est</i> (Development +Company of the South-East) and bought nine old Mexican coasting +steamers at a cost of $4,000,000 so that the socialists of Yucatan +might not be dependent on capitalistic steamship lines. The Reguladora +also financed the drilling of oil wells, and built a flock of tanks +to contain the oil—which never came out of the ground. It also built +a railway, confiscating therefor, “for the common good,” one-tenth of +all the rails and equipment of the private plantation railways on the +henequen farms; in a few months it sold this railway to a favorite for +$150,000, a tenth of its cash cost, payable in ten years.</p> + +<p>The <i>Cia. de Fomento del Sur-Est</i> entered upon the business of +relieving the oppressed proletariat from the wicked prices for the +necessities of life fixed by capitalistic grocerymen. It bought its own +supplies in the United States, transported them in its own steamers, +and sold them—for more than the current retail rates! The proletariat +did not benefit from any of these schemes, but the government henchmen +who bought in the United States, and those who sold in Yucatan, waxed +fat<span class="pagenum" id="Page_176">[Pg 176]</span> and comfortable, although remaining firm and loyal socialists to +the end.</p> + +<p>All these things were done in the name of socialism, and in that name, +also, the power of Reguladora gold was felt even in the heart of the +United States, in a heart made sensitive to such machinations by the +nervous strain of the war which was already at our throats. Not a +little of the money derived from the sale of henequen at prices four +and five times normal was used in the conducting of a campaign of +propaganda. Mexican and foreign “socialists” were kept in the United +States lecturing and writing and publishing magazines and books. These +activities were radical and, in part at least, I. W. W., in general +character but they were devoted also to spreading the fame of the +Alvarado brand of socialization of industry in Yucatan and to the +dissemination of anti-American ideas under the guise of socialism.</p> + +<p>It was glory and it was madness to strike thus at the heart of the +“Colossus of the North” as the anti-foreign Mexican orators like to +call the United States, and at the very same time at the “Colossus of +Mammon,” as the wilder socialists referred to us in Yucatan. Carranza +had tried the former form of baiting, but the combination of the two +was an orgy of glory reserved for the satellites of Alvarado. Never +was anything quite so daring and quite so magnificent ever done by a<span class="pagenum" id="Page_177">[Pg 177]</span> +Mexican revolutionist before, and not even Carranza dared do more.</p> + +<p>So glory and madness traveled together, but meanwhile, out in the +henequen fields and in the Indian villages, Yucatan toiled on. The +simple natives could not quite appreciate the “socialists” and +literally fled in terror before some of their manifestations, so that +in that day, and in this as well, they tell you with eager friendship +to “beware of these terrible socialists.” To them, “socialist” is a +name associated with things that are, to their simple minds, quite +unsocial.</p> + +<p>Alvarado, in his “conquest” of Yucatan, had frankly spread terror +throughout the peninsula. Opposed, on his triumphal march to Merida, by +a small “home guard” of upper and middle class youths, he had captured +and shot scores of them in cold blood, as “traitors,” and pursued his +way. He had, as I have noted, closed and sacked the churches, remarking +that “As the revolution advances, God recedes.” Then, on one of the +main boulevards of Merida, he had allowed the dead bodies of two who +had offended him to swing from sunrise to sunset from a limb of an oak +tree, so that thereafter the simple words, “Remember the oak tree,” +were sufficient to bring the stoutest-hearted conservative to terms.</p> + +<p>But for all that, General Alvarado protested unfailing friendship for +the peons and the Indians,<span class="pagenum" id="Page_178">[Pg 178]</span> grieved somewhat by their distrust of him, +but pronouncing his devotion to their welfare in no measured terms. In +his carrying out of his “socialistic” policies, he did not, however, +consult their wishes or even their possibilities of development. His +one panacea for the ills of the Indians was “land,” and land he and +his imported advisers were determined to give them, no matter whether +they wanted it or not. Never did the ideals of socialism, beautiful in +themselves, have an uglier distortion.</p> + +<p>“Land distribution” is, as I have said, the crux of the protestations +of all Mexican revolutionists. Upon the alleged land hunger of the +Indians the revolutionists have based most of their appeals for +foreign sympathy. The actual facts of the labor situation, in Mexico +and especially in Yucatan, are therefore worth brief description in +this connection. The so-called “peonage system” of Mexico goes back +historically to pre-Spanish times. It is based on the psychological +difficulty of obtaining continuous labor. Continuous labor being vital +to such an industry as henequen growing, there flourished in Yucatan, +previous to 1914, a system of indebtedness which was practically +slavery. Laborers on the plantations were allowed to get into debt in +order that they might be held on the plantations on the pretext of +working out the advances which were made from time to<span class="pagenum" id="Page_179">[Pg 179]</span> time by the +hacendados. These debts averaged about 200 pesos ($100) a man, and it +is undoubtedly true that the system was the origin of wicked abuses, +a plantation store credit system being devised to keep the peons +always in debt, and workers being sold by the head for their debts. +Confinement in barbed wire enclosures was common in some sections, and +altogether the picture of the Yucatan situation especially was a very +unlovely one.</p> + +<p>But the system of debt advances was really effectively abolished under +Madero, two full years before Carranza and Alvarado entered upon the +scene, and it is worth noting that the hacendados, many of whom had +fortunes tied up in peon debts, found themselves far happier to be free +from the system than were the peons. It is indeed questionable whether +the peonage system, as such (and where it was not abused), was entirely +distasteful to the Indians who were its victims. Lacking any ability to +save, the abolition of the system of debt advances wrenched from their +grasp the only possible form of enjoying the fruits of their labor +outside their usual hand-to-mouth existence. Under the old systems they +were able to have some of the good things of life by getting an advance +in money, which they spent gayly, careless of the future, and then +proceeded to work out the debt in the months or years which followed. +Basically,<span class="pagenum" id="Page_180">[Pg 180]</span> the system had its redeeming features, when considered from +the viewpoint of Indian psychology, even though the abuses were such +that its abolition was inevitable.</p> + +<p>Linked up with the peonage system was the land distribution question, +far too complicated for its origins to be gone into here.<a id="FNanchor_6" href="#Footnote_6" class="fnanchor">[6]</a> In +Yucatan, the most heavily populated section is not the most fertile. +Henequen is not grown in the forests back from the sandy seacoast where +prehistoric civilization left the great ruins of a rich and glorious +empire, but on the seacoast itself. This virtual desert, extending in +some places twenty-five miles back from the coast, is the land which is +adapted to the growing of henequen, for a slow maturing of the plant is +vital to the creation of those long, strong fibers which constitute the +valuable portion of the leaves.</p> + +<p>This so-called desert land is sometimes capable, when first cleared of +brush, of one or even two croppings of corn. Then it must lie fallow +for many years before another food crop can be raised. The native +Indian, therefore, has little or no use for a small plot, or indeed +for the ownership of any plot of ground, unless he can crop it once or +twice and then sell it to a henequen planter, while the Indian seeks +other corn-lands elsewhere. If the government hampers him in moving +about, he<span class="pagenum" id="Page_181">[Pg 181]</span> prefers not to try to live as an independent farmer, but to +work on a plantation where he can get regular pay for cutting henequen +leaves, and also can cultivate a little corn-plot lent him by the +hacendado and renewed each year.</p> + +<p>Now the Indian, despite the fortunes which have been made by the +hacendados in the henequen business, has no interest at all in +becoming a henequen grower. He knows from experience that the value +of the leaves he himself produces are little more than what he would +be paid on an hacienda for cutting the hacendado’s own leaves, and +he knows that he has not the capital or the initiative to go into +hemp production himself. The result was that some years ago, when the +communal land was first distributed to the Indians, it was cropped once +or twice and then sold to the nearest hacendado to become henequen +plots.</p> + +<p>Sometimes indeed, the communal land was so worthless for corn that the +hacendados were allowed to take it over without payment or protest and +to plant it to henequen. This loss, from the Indian viewpoint, was +far from an unmixed evil, for the natives of the commune profited in +the gaining of an opportunity for assured livelihood close by their +homes—difficult enough except on the henequen farms, in the desert +sections of Yucatan.</p> + +<p>Henequen production is far more of an industry<span class="pagenum" id="Page_182">[Pg 182]</span> than it is a farming +project. Primarily, it requires from the planting of the shoots until +the first leaves are ready for cutting, eight years of continual and +expensive care, for the fields must be kept clear of brush and weeds, +the plants tended and those which die replaced with regularity. After +eight years of continuous outlay, the leaves are cut, brought into a +great industrial plant where machinery and many workers are required to +remove the pulp, to dry the hemp fiber on racks under the sun, to pack +it into 400-pound bales in hydraulic presses, and to ship it to the +distant American market. The agricultural end of the henequen business +is but a small item in its process, and no individual farmer, even if +he has moderate capital, can prosper on it.</p> + +<p>The land distribution planned by Alvarado was to be made from the +great henequen haciendas, and some of the oratory defending the +confiscation of those haciendas pointed out the fact that this very +land had been stolen from the Indian communes in years gone by and was +now being returned to the original Indian owners. That was interesting +to the pitying audiences of the Alvarado propagandists in the United +States, but it was of not the slightest interest to the Indians of +Yucatan. They had once owned that land, and had or had not cropped it +in corn once or twice. They knew quite well it was hardly worth the<span class="pagenum" id="Page_183">[Pg 183]</span> +trouble and the expense in taxes it would be for them to own it again, +especially as they saw the hacendados being skillfully put out of +business and knew that with their disappearance went the only market in +which Indians could sell the land after they got it, or the henequen +leaves if they raised them.</p> + +<p>Thus it came about that despite the apparent incongruity of the fact, +the Indians of Yucatan paid almost no attention to Alvarado’s land +distribution plans, listening to the alluring official announcements +with stolid indifference. They attended the festivals which accompanied +the distribution, but they took up no land grants.</p> + +<p>There were indeed, many Indians who actually took flight into the +interior of the state as a result of the efforts to force land upon +them. The Mexican Indian, of whatever tribe, in reality desires deeply +but one thing—to be left alone to pursue his half-savage life in +his own way, an aboriginal ambition which should not be difficult to +understand by those who know anything of the North American Indian +of the United States. Socialism, like the responsibilities of land +ownership, is beyond his ken and he literally ran away from the offers +of either in Yucatan.</p> + +<p>Some Indians, of course, remained, along with a great number of the +mixed-blood “slaves” who had been imported from the Mexican mainland<span class="pagenum" id="Page_184">[Pg 184]</span> +into the state during the boom period of the henequen business. These +were thoroughly “unionized” in the Mexican sense. That is, they were +forced to pay their poor little three pesos for a big red card which +proclaimed their membership in some union or other, were promised all +that the human heart could desire—and were allowed to subsist as long +as possible upon the promises. The unions were used to the double +end of ruining the capitalistic landlords and reducing the output of +henequen so that the price would go higher.</p> + +<p>On the plantations where these “unionized” workmen remained, the old +task system, by which each man cut from 2,500 to 3,000 leaves a day, +was abandoned for a regular “eight-hour day” in which the workmen did +as little as they cared to do, and worked, not under instructions, but +wherever they chose to work. As a result the cutting of leaves was +reduced fully one-half, and the plants near the roads were overcut +while those deep in the fields were allowed to blossom and go to seed. +Both processes killed the henequen, which has to be cut regularly and +skillfully in order to prolong its life of usefulness. For miles the +great pole-like blossoms marked the henequen fields like a forest, and +thousands of productive acres went to ruin. Thus Nature’s inevitable +process of flowering and decay marked, itself, man’s crass flinging +back of her riches into the dust from<span class="pagenum" id="Page_185">[Pg 185]</span> which those riches had come in +the long slow years of his care of her.</p> + +<p>Meanwhile, other forces had been at work, some building the pyramid +of mad ideas and madder methods, others undermining the pyramid’s +foundations upon the rocks of the conservative past or disintegrating +its mortar of imitation socialistic idealism. Of these forces, the +greatest was the financial cycle of paper money, “short” drafts and +towering mortgages against increasing stocks of unsold henequen.</p> + +<p>By 1915, when Alvarado arrived in Yucatan, the system of paper money +which Carranza used to finance his revolution had already engulfed +Mexico. Carranza had recently issued his famous dictum that if +Gresham’s law (one of the fundamental laws of economics, which holds +that bad money, in any quantity, inevitably drives out good money) was +interfering with the circulation of the Carranza paper, Gresham’s law +should forthwith be repealed by executive decree. Billions of Carranza +paper had been printed, and it was already the circulating medium in +Yucatan; gold and bank bills were in hiding. Alvarado decided that the +time was ripe for a currency of his own, and issued, before he had been +long in the state, the Reguladora paper money, ostensibly guaranteed by +hemp in storage in Yucatan and in the United States. By decree, this +money had to be received<span class="pagenum" id="Page_186">[Pg 186]</span> at the old value of the silver peso, two for +one American dollar.</p> + +<p>It was a beautiful idea, except for economic law. The bayonets of +Alvarado’s soldiers helped keep up values for a while, but slowly the +theory that power can achieve anything the “proletariat” wants was +blasted by fact. Alvarado had promised to redeem his Reguladora paper +in gold or in New York exchange, but he did not bother to back up his +promises by a limitation of the currency to the amount he could redeem, +so that at one time he had $34,000,000 in paper in circulation, against +henequen stores of half the value, stores which he could not liquidate. +The currency’s value dropped, cent by cent, then by groups of cents, +and finally it was almost waste paper, like that of Carranza. There was +not enough henequen in New York, nor enough gold in Yucatan, to redeem +the paper, and the political nostrum for the economic ill of bad paper +currency failed.</p> + +<p>The failure was colossal enough, in any case, without the financial +complication of the currency. Alvarado had closed the ports to all +hemp from the interior that was not consigned to the Reguladora. That +beneficent monopoly allowed no shipments by rail, and before he got +through Alvarado had to close the roads with soldiers, so that no +carts could reach the port. Meanwhile, he had been boosting the price, +deliberately and virtually<span class="pagenum" id="Page_187">[Pg 187]</span> by decree, until, as I have said, it +reached more than 19 cents, as against less than 7 cents a pound which +had been its price before the Reguladora took charge of the market.</p> + +<p>This raising of the price cut off a large portion of the market,—and +that had not been anticipated. Virtually all consumption of henequen +except for binder twine ceased. At 19 cents Manila hemp could +compete—and it is far better hemp. At 19 cents jute cord can compete, +and jute cord is soft and pleasant to handle, and where previously +henequen cord had been used for big bundles of newspapers and magazines +and mail, jute was substituted—and now the men who handle the bundles +of newspapers and magazines and mail refuse to go back to the rasping +henequen cord which cuts their hands so uncomfortably.</p> + +<p>The consumption of henequen was actually reduced to half by this +deliberate destruction of its market. In spite of the new low prices +to-day, this condition in the general fiber market combines with the +cutting off of the Russian and some of the other European demand to +reduce the world consumption of the Yucatan fiber to about 70 per cent +of what it was prior to 1914. All this loss the Reguladora had to take +up, in addition to the stores which it laid aside to push up the price. +Economic law was at work, and all the contentious statements that the +price was going up only in<span class="pagenum" id="Page_188">[Pg 188]</span> proportion to the rising costs the world +over was answered by the fact that henequen was driven out of the +general fiber market by other hemps which had increased in price, to +be sure, but had never approached the geometrical progression which +henequen assumed under the lordly sway of Alvarado’s corner.</p> + +<p>When all is said and done, however, it was Mother Nature and Gresham’s +law which finally broke the corner. Corners in the products of Nature +have a way of piling up unexpected responsibilities and finally loosing +unexpected forces which swamp the unwary juggler. So it was in Yucatan. +With about a year’s supply of fiber in storage in the United States and +Mexico, more than half of it mortgaged to American bankers, and with +about $10,000,000 in Reguladora currency in circulation with nothing +but photographs of gold stores to guarantee it, Alvarado’s henequen +corner went the way of all the corners of history. That was in the +spring of 1920 when, after a year of price fluctuation, Nature and the +eternal laws of economics began gently wafting the prices downward +until they reached the lowest level in fifteen years. Then it was +that the banking syndicate, which had loaned money against henequen +shipments, foreclosed on 250,000 bales in storage in New York, marking +the final chapter in the story of Alvarado’s Reguladora experiment.</p> + +<p><span class="pagenum" id="Page_189">[Pg 189]</span></p> + +<p>When the smash came, there was an Association of Henequen Growers which +had been begging in Yucatan and in the Supreme Court of Mexico for a +chance to take back their business. As the financial difficulties and +the financial needs of Alvarado’s henchmen increased, the Reguladora +had all but given up paying any money to the haciendas where the +henequen was produced. The mule that lived on sawdust up to the day he +died is a fable of ancient times, but even under such loudly acclaimed +“socialism” as that of Yucatan something has to be paid for a product +which is produced and exported. The growers had all but reached the +end of their resources, and Alvarado offered them only paper money, +which he would or could not change into gold drafts. So just before the +crash, to satisfy the clamor, Alvarado took his way to Mexico City and +royally presented the Reguladora to the Association of the Producers of +Henequen.</p> + +<p>The hacendados had hardly had time to look over the ruins when those +financial interests which had loaned money on hemp that was to sell +around 20 cents a pound foreclosed on those 250,000 bales in New York +and New Orleans, placing thereon a value of 5 cents a pound. Alvarado +was safe in Mexico City preparing to visit New York in an effort to +get a loan of a few hundred millions for the government of Carranza. +The hacendados<span class="pagenum" id="Page_190">[Pg 190]</span> held the sack, and watching the sack was a group of +financiers, including the Equitable Trust Company of New York, the +Royal Bank of Canada and the Interstate Trust Company of New Orleans, +the latter the Dinkins concern through which most of the loans on the +henequen had been placed.</p> + +<p>Down in Yucatan the hacendados had their farms back, the Indians +were returning at night to look things over and see whether the +“socialists” had retired far enough for them to return in safety to +their comfortable “slavery”—but nobody had any money. When Alvarado +left, the hacendados had inherited the Reguladora offices, and had +opened its money vaults. These vaults, photographs of whose gold stocks +had been circulated by Alvarado to sustain his paper currency, were +quite empty. The haciendas were in terrible condition, and there was no +way of getting funds with which to rebuild and replant them. The only +hope was for capital from outside—Alvarado’s “socialism” had passed on +its way. Of the possible sources of rescue, the chief was in the group +of unhappy banks in New York, New Orleans and Montreal, which were +already in the henequen business with their 250,000 bales of foreclosed +stock. The second hope was the International Harvester Company, which +needs henequen in its business. The hacendados chose the banks, and +the Equitable Trust Company, the Royal Bank of<span class="pagenum" id="Page_191">[Pg 191]</span> Canada, the Interstate +Trust Co., and the Comisión Reguladora (which still existed in name if +not in spirit) formed a company, and taking the four initials, called +themselves the Eric Corporation.</p> + +<p>There was much rejoicing in Yucatan, for the Eric was going to lend +a few more paltry American and Canadian millions and reëstablish the +great state industry. The Reguladora (now consisting of the hacendados) +turned in some 300,000 more bales of hemp that were stored at Progreso, +the Yucatan port, as their part of the capital stock of the Eric, and +the hacendados went back to work.</p> + +<p>Now one of the peculiar things about “economic ruin” is that it +seldom ruins a business—individuals are the only victims. Yucatan +was devastated, many thousands of acres put on the non-productive +list. There was no money to pay labor or to finance the crops, but the +henequen business went on. To all intents and purposes about all that +had happened was the elimination of most of the surplus planting which +there would have been if all had gone along properly and there had been +no Alvarado to corner and destroy the market. Henequen kept on growing +on the haciendas and, despite increased costs of handling, it continued +to move to market.</p> + +<p>Don Avelino Montes, a Spaniard who had been the chief buyer of the +International Harvester<span class="pagenum" id="Page_192">[Pg 192]</span> Company, returned from his exile in Cuba and +resumed buying. Don Arturo Pierce, the honorary British vice-consul who +did the buying for the Plymouth Cordage Company, abandoned consuling +and returned to the henequen trade. The price of Yucatan hemp kept +slumping, but to the surprise of the Eric people, the demand was +supplied with new hemp, and the Eric’s stocks of old hemp diminished +but slightly. The money to rehabilitate the Yucatan haciendas was not +forthcoming. The old hemp stock had to be sold first, and the wretched +hacendados refused to coöperate and let the Eric unload.</p> + +<p>Henequen deteriorates, and also it requires insurance, as the many +fires in Progreso and New Orleans at the time testified. The cost +of holding the half million bales of henequen of the Eric is about +$2,500,000 a year, and the price at which it was bought in, plus +insurance, represents a cost of about 8 cents a pound. The price of +hemp had been stabilized at that very figure by Señores Montes and +Pierce, with some outside assistance from New York brokers, but the +sales were made in Yucatan, of new hemp. So the Eric, in righteous +anger, cut the price from 8 cents to 7, and then to 6. The price of +new hemp also fell, and the hacendados, partners in the Eric, wailed +at the evil which was being done them. However, they continued to sell +the new crop at the new<span class="pagenum" id="Page_193">[Pg 193]</span> price, to the Harvester and the Plymouth +and Henry Peabody & Co., and Hanson and Orth, while the gradually +deteriorating stocks of the Eric went begging. The price was finally +cut to 5 cents, by the Eric. Yucatan has met this price, too, with new +hemp, and because it is still possible to make money out of henequen +with the price at 4 cents in New York, it seems likely that Yucatan +will continue to grow henequen, and to sell it. Meanwhile, however, +the business doctors of the Obregon administration in Mexico City at +one time succumbed to the pressure of the unhappy hacendados and even +agreed to try the “Reguladora” experiment all over again, with the +central government buying 60 per cent of the henequen crop at 6 cents +a pound, and again “controlling” the market, a step in the spiral of +destruction which had but a brief life and little significance. For +the story of Yucatan is written and the state and its great industry +are to-day being ground between the wheels of the “capitalism” which +the beautiful theories of Yucatan’s “socialistic” autocrats sought to +destroy.</p> + +<p>This is the outcome of Yucatan’s experiments in Alvarado’s brand of +so-called socialism. The price of the fiber is back to less than it +was before the inflation began, the production has been cut from +1,000,000 bales in 1914 to less than 700,000 in 1919, a decline of 30 +per cent, while, taking the<span class="pagenum" id="Page_194">[Pg 194]</span> potential production from the plantings +up to 1914, the present production is about half of what it would have +been if Alvarado had never come to Yucatan. The haciendas are back +in the hands of their original owners, the market is in the hands +of foreign capital, and foreign capital is fighting over the spoils +with what seems to the Yucatecans utter and cruel disregard of the +amenities of gentlemen. The $112,000,000 squeezed from American farmers +and the other untold millions taken from Yucatan by loot, by false +prices in “coöperative stores,” by freight rates on the graft-owned +railways, and all the other means used by Alvarado’s retainers, have +gone to the enrichment of his group and to the upkeeping of the +Carranza government. No noticeable part of it has remained in Yucatan, +and save for increased wages all around (and the world has surely +learned that this is not prosperity) no possible profit has remained. +The spiral cycle is complete, and none has gained, not even the +predatory capitalists, who are unhappily cutting each other’s throats +in an effort to solve the problems into which they were swept by the +machinations of Alvarado and his henchmen.</p> + +<p>To-day Yucatan is not free from the domination of the “socialists,” but +that domination is political, marked by those outrages which have come +to be merely a part of politics in Mexico. Elections are held from time +to time, elections wherein two<span class="pagenum" id="Page_195">[Pg 195]</span> parties of socialists alone confronted +each other. The battle is bitter, as battles are when brothers are the +contestants. There is still killing and loot, and women and children +suffer death and worse in the solution of such glowing political +questions as whether, we might say, the flag of Yucatan should be all +red or merely red with a black bar across it—its problems are daily +forgotten, for the real issue is only to find out who should have the +next hand at the graft. Socialistic, to be sure, because all Mexican +manifestations to-day are masquerading under the name of socialism, +but quite as little in tune with true socialistic ideals as a battle +between two factions in Tammany Hall over the control of New York +politics would be socialism.</p> + + +<div class="footnotes"><h3>FOOTNOTES:</h3> + +<div class="footnote"> + +<p><a id="Footnote_6" href="#FNanchor_6" class="label">[6]</a> Both peonage and the Mexican systems of land distribution +are discussed at some length in <i>The People of Mexico</i>.</p> + +</div> +</div> +<hr class="chap x-ebookmaker-drop"> + +<div class="chapter"> +<p><span class="pagenum" id="Page_196">[Pg 196]</span></p> + +<h2 class="nobreak" id="CHAPTER_VIII">CHAPTER VIII<br><span class="small">THE ROMANCE OF MEXICAN OIL</span></h2></div> + + +<p>When you cross the Mexican border at Laredo, oil enters your +consciousness—and your clothes. It is everywhere, the thick, odorous +<i>chapapote</i> which furnishes the fuel for Mexico’s locomotives, +the energy for every Mexican industry which has no water power, the +pavements for her streets, and, I am still convinced, the heavy +lubricant with which the sandal-clad brakeman of our train eased an +incidental hot-box. In Tampico, whence comes all the oil of Mexico, the +heavy, black “crude” is even more ubiquitous. It “tars” your shoes when +you walk abroad; it decorates your clothes when you ride in anybody’s +motor car or motor boat; it oozes between your toes and sticks in your +hair when you bathe at the beach.</p> + +<p>But the physical presence of oil is as a whiff from the dead well at +Dos Bocas compared to its spiritual domination in all Mexican affairs. +Oil is the greatest—I had almost said the only—wealth of Mexico +to-day, its possession the issue of one of the mighty diplomatic +battles of recent times, while the taxes and graft of it have fed the<span class="pagenum" id="Page_197">[Pg 197]</span> +wellsprings of ten years of devastating revolutions.</p> + +<p>Far and away and by many fold, oil is the largest single item of +export of Mexico, and the varied needs of the oil industry and of the +beneficiaries of that industry dominate the imports as well. To Tampico +go shiploads of steel, machinery and supplies, and trainloads of soap +and shoes; the factors which build civilization go chiefly and all but +alone, in Mexico, to the oil fields.</p> + +<p>Oil dominates the political life of the country not because oil +companies or oil millionaires seek to control the Mexican government +but because the vast unbelievable wealth which is pouring into the +coffers of that government in taxes and in tribute makes revolution a +game the stakes of which eclipse any sum or any potentiality of wealth +or power which has ever been known in Mexico.</p> + +<p>Oil is the inspiration for the “nationalization” policies which, +forged by foreign radicals and given edge by Mexican cupidity, the +Carrancistas wrote into their Constitution of 1917. This policy of +nationalization, the decrees, the laws, the taxation and the graft +which have come in its train, have brought into the field of diplomatic +controversy the whole problem of the right of a government to enforce +radical, socialistic or, if you will, bolshevik policies against +foreign interests which<span class="pagenum" id="Page_198">[Pg 198]</span> may have entered a country and developed it +under older, more conservative ideals and systems of government.</p> + +<p>For the oil industry of Mexico is overwhelmingly a foreign enterprise. +American and British and Dutch are the flags which should fly from the +oil derricks, for neither Mexico nor Mexicans have had a hand worth +the naming in the opening of the nation’s richest treasure-house. The +search for oil in Mexico has taken on the nature of a race, a battle, +between British and American oil interests, a battle not without its +tremendous significance in the world oil situation. But behind this +struggle, which is still and, we may hope, will remain a friendly one, +loom controversies which are vaster than Mexico or England or America, +problems on whose solution the very future of our civilization depends.</p> + +<p>For the real battle in Mexico is not between the two great Anglo-Saxon +powers, but between the powers of light and the powers of darkness. In +Mexico’s oil fields to-day is being settled the question of whether +enterprise shall have the right to bring the riches of the earth +to the aid of humanity, of whether industrial power belongs to the +backward people who by accident find that power in their inept hands, +or to those who can develop and raise it up to the service of mankind. +Upon the issue in Mexico depends not only the usefulness<span class="pagenum" id="Page_199">[Pg 199]</span> of all the +petroleum resources of that country, but the future development of +oil in Colombia, Venezuela, all South America, all Asia, all Africa. +And the future of oil development in those lands is the future of the +world’s oil supply, for there, alone, remain stores sufficient to meet +the multiplying needs of the world.</p> + +<p>The solution of this question is vastly complicated. Within the +oil situation itself are many problems such as those just noted. +Bearing upon it is the tangle of cross-purposes, indirections and +varying psychologies. That solution is made all but impossible by the +conditions of Mexico to-day, by the flabby weakness of the rulers of +the Mexican people, by their blindness and selfishness. It has been +jammed, time and again, by the failure of the oil companies and their +representatives to assert their rights with a skill equal to that of +the Mexicans in casting up mountains of controversy out of mole hills +of technicality.</p> + +<p>But the story of Mexican oil is not all ugly calling of names, not all +mere hopeless tangle. The history of its discovery and development is +rich with color. The romance of an oil field, like the romance of a +gold camp, is always a thrilling tale. But the story of Tampico has +this other element, for it is indeed the great romance of our race, +the tale of the white man round the world, the building of gigantic +enterprises, the harnessing of unknown<span class="pagenum" id="Page_200">[Pg 200]</span> forces, neglected for centuries +by apathetic natives, unlocked by the vision and the enterprise of the +Anglo-Saxon.</p> + +<p>Oil began with Tampico, but the story of Tampico antedates oil. It +goes back to the late 80’s, when one of the great railway builders of +America’s youth left Kansas for Mexico. A. A. Robinson, who surveyed +and built the Santa Fe Railroad from the Kansas prairies to the Pacific +Ocean, who swung the track of the Denver and Rio Grande Railroad above +the rapids of the Royal Gorge, was also one of the great builders of +modern Mexico. Leaving the Santa Fe in 1889, he became president of +the Mexican Central and built almost the whole of this first standard +gauge line in the country, its branches and tributaries toward the +rich granary of Mexico about Guadalajara in the west, to the mines of +Pachuca in the mountains and to Tampico on the Gulf of Mexico.</p> + +<p>Tampico, a wretched, fever-ridden village beside a beautiful river, +was no port in those days. The railroad which brought Mr. Robinson to +Tampico brought also the engineers who built the great jetties which +cleared the bar and opened Tampico to the world, carried the ores of +Pachuca to their markets and began the conscious development of what is +now the busiest seaport of Mexico. The railroad company built and paid +for the jetties, and under Mr. Robinson a short-line to Mexico<span class="pagenum" id="Page_201">[Pg 201]</span> City +was surveyed and construction was begun, to be halted, in 1908, by the +government merger of the lines.</p> + +<p>All this seems to lead far away from oil, but it was in 1900, two years +before the jetties were completed, that Mr. Robinson invited Edward L. +Doheny and his partner, the late Charles A. Canfield, to Tampico to +develop oil wells. Doheny, who had made himself famous and unpopular by +discovering petroleum in the middle of Los Angeles, came to examine the +seepages of which Robinson had told him in the hope that he might find +an oil to help the Mexican Central solve its fuel problems, for the +coal of Mexico is scarce and poor, and all the fuel for the railways +had to be imported.</p> + +<p>Mr. Robinson agreed to buy the oil for fuel if Mr. Doheny developed +it, and it was this encouragement, this faith of two great believers +in Mexico, which brought about the discovery and the later development +of Mexican oil. The board of directors for the Mexican Central later +repudiated the Robinson contract, but the development of the Mexican +oil fields had been begun, and it has never stopped from that day to +this.</p> + +<p>It was in 1905 that I first visited Tampico. I was the guest of Mr. +Robinson, and as we looked out, one day, over the marshes along the +river which runs past Tampico to the sea, six miles away, he told me of +his dreams for his port, of the<span class="pagenum" id="Page_202">[Pg 202]</span> day when not only the Tampico side of +the river, but the barren jungle on the other bank would be lined with +wharves and great steamers, greater than any of the coasters and tramps +that to the number of half a dozen a month were then carrying coal and +ore and, amusingly enough as we look back on it now, crude oil from +Pennsylvania for use in Tampico’s one industrial establishment, the +Waters-Pierce Refinery.</p> + +<p>I visited Tampico twice again, the last time in 1908. And then this +year! It was as if the dream of the builder of the port had come true +since the setting of yesterday’s sun. To-day the river is lined, from +its mouth all the six miles to Tampico and above, with wharves and +warehouses and hundreds of great tanks of oil, and throughout all this +length are ships, tankers and cargo boats, while on the hills above are +refineries and modern towns, and at night the lights are like those +of great cities. The dream, indeed, of a builder of civilization, of +civilized Mexico, has apparently come true.</p> + +<p>A. A. Robinson is gone, laid away with his honors and his vision +these four years. But still there is that other American, who twenty +years ago rode off into the jungles of the coastal plain, saw with +his own eyes the thick, slimy puddles of asphalt at Ebano, and there +drilled his first wells. Years later, after his railway contracts were +abrogated, seeking lighter, better oils, Mr. Doheny<span class="pagenum" id="Page_203">[Pg 203]</span> went, with the +frontiersman’s unquenchable optimism, nearly a hundred miles farther +into the jungle till he heard the unforgettable baby murmur and saw +the unforgettable bubbling spring of viscous black oil of the great +seepages of Cerro Azul, and there located what was to become the +greatest oil well in the history of the world, the Cerro Azul No. 4.</p> + +<p>Oil is the most fascinating of all the treasures of earth. No geologist +has ever approached the solution of either its source or the contours +or formations within which it lies. An oil spring such as that +wonderful bubbling pool at Cerro Azul may mean the presence of a great +reservoir of oil directly beneath or it may mean that the oil has come +a dozen or fifty or a hundred miles along a crack in the mother-rock. +Experience, faith, intuition, these determine the location of a well. +It was these factors that Doheny brought with him to Mexico, for the +fields which he finally drilled and proved had been rejected by many +geologists before he came and after.</p> + +<p>At Ebano, a way-station on the Mexican Central a few miles inland +from Tampico this pioneer of the Mexican oil fields found his oil and +developed it, and his success brought hundreds of other prospectors to +Ebano in 1900-1902. But Ebano oil is heavy with asphalt, and it was +dangerous to handle in the crude burners of the time<span class="pagenum" id="Page_204">[Pg 204]</span> because its fumes +ignite at low temperatures. Thus, although it is rich in lubricating +oils, it was not the petroleum which the world wanted in that day. With +his contract with the Mexican Central abrogated, virtually without a +market excepting for asphalt paving in Mexican cities, Doheny turned +southward in search of lighter oils.</p> + +<p>His trips into the swamps and forests of the <i>huasteca</i> or coastal +plain led him to the great seepages at Cerro Azul, sixty miles below +Ebano. It also took him to Juan Casiano where he located his first +wells and in 1908 opened the first of the great producing pools of the +Tuxpam district. Drilling and exploration went hand in hand and not +only Doheny but the British interests of Sir Weetman Pearson (now Lord +Cowdray) and other American companies began to make this field famous.</p> + +<p>Since that time the story of the Tampico oil fields has been the +story of the Americans and other foreigners who followed them. No +Mexican name and no Mexican interest are connected with the vast +development which has come. Yet so vast is the busy zone of production, +so tremendous and so varied the forces and elements working there, +that one feels something false in this appearance of preponderance +of individuals and of foreigners in the epochal industry of Mexico. +When, however, one glimpses the long diplomatic struggle,<span class="pagenum" id="Page_205">[Pg 205]</span> the legal +tangle, the endless problems which make the Mexican oil question so +complicated, one finds that in every phase there are always only +these foreigners on the one side and the predatory, scheming Mexican +revolutionary leaders on the other. Never is there a Mexican on the +production side, never a foreigner on the side of the elements which +retard production.</p> + +<p>It was Mr. Robinson who opened up Mexican oil, and it was Doheny and +other early foreigners who first dared drill, and the foreigners alone +who in the years past have dared to put millions into pipe lines, +storage tanks and wonderful fleets of oil-carrying ships. Only they +dared or would dare to go into the sleepy villages of the Vera Cruz +plains and pay fifty cents a day to peons who had lived for generations +on less than a quarter as much. Only the foreigners dared give their +labor a decent wage, dared teach their men to be worth more and more +until to-day they pay the commonest peon the equivalent of two American +dollars a day. Only these foreigners dared believe in Mexico, dared +insist on the good faith of all her faithless governments, dared to go +on with their work when all else in Mexico stagnates and cringes before +the continuing revolutions.</p> + +<p>And on the other hand are the Mexicans who govern the land, making it +their chief business to bait and loudly curse these same foreigners. +The<span class="pagenum" id="Page_206">[Pg 206]</span> name of the foreign oil men is anathema in Mexico to-day, and the +busiest game of any Mexican official is the oratorical denouncing of +the sponsors of the industry. But, we cannot forget, these Mexicans +have not and do not turn a finger to the replacing of great foreign +activity by any constructive form of Mexican enterprise.</p> + +<p>At basis the difficulties of the oil companies and the Mexican +governments are psychological—and an understanding of those +psychological bases is the rarest flower in the intellectual nosegay +of most of those who discuss either Mexico or oil. First of all is +the companies’ belligerent insistence on the principles of vested +rights as the first and only basis for the oil discussion—naturally +distasteful to those whose single idea is to upset those rights. +Another psychological element is that the foreigners’ very respect for +law and the continuity of government and their insistence that Mexico +live up to their own ideals is in the first place quite beyond the +conception of the Mexicans in power to-day and in the second place such +an attitude is inevitably maddening to the weaker brother whom it seeks +to benefit. Because the foreigners believe in Mexico, the Mexicans will +not believe in the foreigners.</p> + +<p>Another disturbing factor is the very success of the oil companies and +of the foreigners whom they employ. I have told, above, something of +the<span class="pagenum" id="Page_207">[Pg 207]</span> picture of the Tampico that was and of the Tampico that is. It +has changed in yet other ways, and most of all in the makeup of her +population.</p> + +<p>In 1908 there were perhaps two score Americans and English in the +town, and the chief industry of the place was—tarpon fishing! To-day +there are 8,000 Americans and a thousand British and Dutch, and the +swaggering, free-money, noisy, busy atmosphere of the frontier, of +the oil fields, of the white man on his bully-ragging, destructive, +inconsequential “education” of the dark brother round the world, +permeates the place. Its influence is not academic, but somehow one +feels that Tampico is a monument to the genius and faith of the +Americans who made it great. The restless power is there, the restless +making over of the world that it may be a better place for the white +youth of the future to stamp about in, for the dark brothers to build +their new homes in.</p> + +<p>Yet strangely enough, if you will, it is to my mind largely because +of this same energy, the achievement which this spirit indicates and +predicates, that the difficulties of the foreign oil companies in +Mexico have been the sort they are. Their persecution has sprung from +the realization of the Mexicans that these Americans, these English, +these Dutch, are doing in Mexico and for Mexico what Mexicans can +not, dare not, do. The Mexicans from generals to peons, are frantic,<span class="pagenum" id="Page_208">[Pg 208]</span> +baffled, rabid, at the wretched Gringoes who dare to pour their +millions out to drill wells, to build pipe lines and terminals and +ships, to take and to convert this black and liquid gold from the soil +of Mexico.</p> + +<p>Of the hundreds of wells drilled in the Tampico-Tuxpam fields, some +of them the veriest “wildcats” on the flimsiest of chances, hundreds +of them as sure as opening a bank vault, only a half dozen, and none +a “wildcat,” have been drilled by Mexicans as individuals or in +corporations, and not a single ship, not a single storage tank, not +a mile of pipe line, is Mexican. Were the Mexican government to take +over the administration of the oil fields to-day, drilling would cease +utterly, to-morrow development would stop and when, a year hence, +it became vital to open more wells, the event would be marked by +government ceremonies and stifling graft.</p> + +<p>Every one who knows Mexico knows that this is the truth. The Mexicans +themselves know it, and from the Tampico policeman who howls in +outraged anger when an American motorist refuses to be disturbed by +official anathemas, up to the presidential secretaries who devise +complicated and childish schemes to force the oil companies into +recognizing the dignity of Mexican sovereignty, the whole attitude +toward the oil business has been fraught with effort to maintain that +hazy<span class="pagenum" id="Page_209">[Pg 209]</span> halo of the weakling, delicate “sensitiveness,” national pride, +<i>amour propre</i>.</p> + +<p>When I left New York to study Mexican problems for the present writing, +I was convinced that the full facts of the case, on both sides, were +to be found in the United States; Washington was indeed the battle +ground of lawyers and diplomats. Not until I reached Tampico, however, +not until I went out to the oil fields, did I realize that the real +problem is not the question of diplomatic controversy or commercial +adjustment. There, on the long roads, where but one <i>peon</i> of +all the thousands whom we passed, took off his hat to the white +<i>patrones</i>, as every one would have done twelve years ago, I found +the touchstone. I knew then why reason will not prevail, why justice is +non-existent, why no white man has yet been able to feel firm ground +beneath his feet in the discussion of the oil problems. These problems +have had their rights and wrongs, as we shall see, but I think that the +great difficulty we at home have had in believing that our own people +could be right has been our inability to conceive how, being right, the +Mexicans could be so hostile to them.</p> + +<p>This, I think, is the point of departure in our misunderstanding of the +Mexican situation, especially as it applies to oil. Mexican jealousy +and Mexican realization of the weakness of the national psychology +in great enterprise have set<span class="pagenum" id="Page_210">[Pg 210]</span> Mexico frantic with the success, the +triumph, the apparent imperturbability of the great foreign oil +companies. This alone has made their hostility to the American +drillers, linemen and engineers who night and day, month after month +through the years of the war, kept the lines open, the oil flowing. +Unarmed, and slaughtered by the score from ambush, grim, unkempt, +often happily drunk in town, these frontiersmen added their bit to +the fire, to be sure. But note this—it was not the white man’s rough +assertion of superiority or the companies’ “tactless insistence,” but +the Mexican’s conception of his own inferiority, personal, commercial, +political, which lit the flame and kept it burning.</p> + +<p>The world has entered upon a new industrial era, the age of petroleum. +The commercial struggle is to-day not the war for markets, but the race +for oil lands. And of all the petroleum fields known to exist, those in +Mexico are the greatest in actual production, the greatest in potential +extent, and the most favorably situated for distribution—all vivified +by the greatest individual oil wells in the records of the world.</p> + +<p>The story of the development of that oil field is linked with the +history of Mexico, inexorably, inevitably a part of it, influencing it, +all but dominating it.</p> + +<p>The first oil well in Mexico was brought in in<span class="pagenum" id="Page_211">[Pg 211]</span> 1900; production +began on a commercial scale in 1903; about 1904 a British company +secured its first “concession” for oil drilling; in 1905 the status of +petroleum as belonging to the owner of the surface land was definitely +settled, and development began on a large scale; in 1912 the Madero +government established, over the mild protests of the producing +companies, the principle of special taxation on the oil business; in +1914 President Huerta extracted 200,000 Mexican pesos from an American +oil representative in Mexico City, and the oil company, under advice +of the Department of State, repudiated his draft and paid the money to +Carranza; in 1914 the principle of “shaking down” the oil companies +was originated by Candido Aguilar (later son-in-law of Carranza), who +made a mild $10,000 collection; in 1915 Manuel Pelaez made his first +call for tribute, some $1,500, under the exchange conditions of the +day, which the companies paid with the advice of the American State +Department and the American Ambassador, a precedent which later netted +Pelaez a regular $30,000 a month; in 1915 Carranza began to devote the +brains of his finance minister, Luis Cabrera, to devising oil taxes, +with the result that to-day the foreign oil companies pay a total of +nearly $4,000,000 a month, derived from export taxes on the product, +stamp taxes on their business, occupation taxes on their offices, +harbor taxes<span class="pagenum" id="Page_212">[Pg 212]</span> on their ships, customs duties on their supplies, +etc.; in 1916 Carranza issued the decree requiring foreigners who +did business in Mexico to renounce their rights of recourse to their +home government; in 1917 came the new Mexican constitution declaring +all petroleum in the subsoil the property of the nation; in 1919 the +drilling of new wells was stopped unless the companies agreed to accept +this principle of nationalization; in 1919 the second of the big oil +pools went to salt water and the need of new drilling to keep up the +supply of oil (and the Mexican taxes) became imperative; in January, +1920, temporary drilling permits were issued by Carranza; in May, 1920, +Carranza was overthrown and murdered in the revolution of Obregon, said +to have been financed by certain oil interests; in 1921 Obregon doubled +the oil taxes, bringing about a shutdown, temporary but salutary; in +1921 drilling is going on, however, and the shipment of oil continues.</p> + +<p>While drilling is going on in small sections in spite of obstacles, +the full development of the petroleum fields of Mexico waits on the +final decision of the confiscatory provisions of Carranza, whose dead +hand still guides the policies of his successors along the road of +anti-foreignism. In 1921, then, the oil companies are still uncertain +of their status, still the objects of astonishing taxation, still +subject to government annoyance and graft,<span class="pagenum" id="Page_213">[Pg 213]</span> still buying, in taxes and +annoyances, the “privilege” of working their properties.</p> + +<p>The plants of the foreign companies are probably the greatest +installation in any single oil field in the world. The investment in +pipe lines, pumping stations, storage tanks, refineries, terminals and +ships represents close on $750,000,000; the length of the 161 pipe +lines (practically all of them eight or ten inches in diameter) totals +nearly 1,000 miles, while nearly 1,500 steel tanks, with a capacity of +60,000,000 barrels, furnish enough storage to fill a thousand ships. +Through the pipe lines can pass, under high pressure, 750,000 barrels +a day, although the average production for 1920 was about half of this +amount.</p> + +<p>In the Mexican fields in April, 1920, the latest date for which figures +are available, there were 304 wells in production, 148 located and 123 +drilling. The total of commercially unproductive wells to that date +was 464, including only 35 which showed oil in too small quantities. +Three-fifths of all the wells drilled in Mexico have been dry holes, +and to-day of 1,113 wells drilled and projected, only 75 which have +actually flowed oil have run out of production. These last, however, +include some of the greatest in the history of the petroleum industry.</p> + +<p>The vast investment and plant in the Tampico-Tuxpam fields produced +in 1920 over 140,000,000<span class="pagenum" id="Page_214">[Pg 214]</span> barrels of oil, one-fourth of all that +was produced in the entire world, equaling some 40 per cent of the +production of all the fields in the United States. The 1920 production +was nearly five times that of 1913, when less than 26,000,000 barrels +were extracted from the Mexican wells, and when Mexico’s total oil +output was only one-ninth that of the United States and contributed +less than one-twelfth to the production of the world. The growth has +been steady and by tremendous strides, for when the pressure of war was +on, the men who were taking out Mexican oil built up a production which +between 1916 and 1917 brought an increase of 40 per cent and began a +development that despite superhuman difficulties gained such momentum +that between 1919 and 1920 the increase was 60 per cent.</p> + +<p>On your map you will easily find, on the eastern shore of Mexico, the +city of Tampico, located in the center of the palm of the hand with +which Mexico grasps the great Gulf. A little to the south you will +find, with difficulty, the town of Tuxpam, midway between Tampico and +Vera Cruz. From Tampico directly south to a few miles west of Tuxpam +runs the “line” along which lies virtually all the oil yet developed +in commercial quantities in Mexico. The “line” is thirty-five miles +long; the great producing territory never extended over twenty miles; +momentarily<span class="pagenum" id="Page_215">[Pg 215]</span> the section which is giving the oil of the Tuxpam district +is along ten miles in the middle of the “line”—and the territory is +hardly a half mile broad at its greatest width. This section produced +in the past ten years 500,000,000 barrels of oil. In 1920 it produced +about 140,000,000 barrels, close to one-quarter of all the oil taken +from all the wells in the world.</p> + +<p>Now trace the “line” north to Texas and Oklahoma—it is an extension +of the great mid-continent field of the United States. Now go south, +through the old Furbero field, swing a little in toward the Gulf, +and south of Vera Cruz, on the Isthmus of Tehuantepec, you will find +Minatitlan, the site of early drillings, and of the refinery of the +Mexican Eagle Oil Company. Still south, on the “line,” and you will +find, if your map is large enough, the village of Macuspana, in the +state of Tabasco. Here oil of a grade so fine that the natives burn +the crude seepage in their lamps has been oozing through the soil for +centuries, and here, long ago, the British drilled many test holes. The +“line” runs true, skirting the Gulf of Mexico.</p> + +<p>Still more. There are oil seepages on the West Coast, an extension, +perhaps, of our California fields. Other indications have been found, +even far inland, and indeed on the Gulf side, the “line” does not by +any means cover the seepages, even of the coastal plain. All this +section, off into the<span class="pagenum" id="Page_216">[Pg 216]</span> interior toward the states of Puebla and +Hidalgo, has been leased for oil. But production sticks to the “line.”</p> + +<p>The Tuxpam field, the heart of the “line,” will ultimately go to salt +water. Of this there is no question. Every pool of oil that has been +drained—now three in number—has given its 100,000,000 barrels, and +the steaming, brackish water, still under terrific pressure, has wiped +out the property, often between sunset and sunrise—a few hours between +50,000 barrels a day and nothing. Dos Bocas at the northernmost end +of the “line,” came in on July 4, 1906, hailed as the greatest well +of history, blew out her casing, caught fire and burned for months, +a torch of gas and flame 850 feet high, till (if it was oil and not +gas she burned) she had easily spent her 100,000,000 barrels. Another +great British well, Portrero del Llano No. 4, flowed eight years, +giving nearly her 100,000,000 to industry, and went to salt water over +night. The Casiano field, of the Doheny interests, paid a similar toll. +Cerro Azul No. 4 of the same company came in at a full rate of 162,000 +barrels a day. She has never been allowed to flow full, for the whole +field is owned by the company, and the pool is considered safe from +drainage. Further south, the Doheny companies have, in 1921, opened +another vast field, the Chapapote Nuñez—but that, still, is “on the +line.”</p> + +<p><span class="pagenum" id="Page_217">[Pg 217]</span></p> + +<p>During the past year the Naranjos field has been showing salt water; +the Chinampa, with a hundred wells located on a relatively few acres, +is being drained at top speed, and salt water has been cutting closer +in at its edges. To-day the Zacamixtle camp, the last of the “line,” +which was drilled like mad by scores of crews putting down wells that +cost in Mexico $100,000 each, has been narrowed to a strip of an oil +river only a few hundred yards wide.</p> + +<p>With Chinampa and Zacamixtle gone, only the Cerro Azul, the sixty +square miles of the Chapapote field, and the adjacent Toteco pool will +remain on the “line” with no reserves save to the south, in a territory +recently proved by the “Toteco” and “Chapapote” districts, or to the +north, in the Tampico or Panuco field proper. This last is a heavy oil +section, and here, too, the largest portion of the territory is owned +by the Doheny companies.</p> + +<p>Why, with this dwindling field, this steady reduction in reserves, +has there not been more development in Mexico? You know the basic +answer—revolution. But through revolution and graft and theft and +murder the American operators in the oil fields, working for British +and American companies, have kept on the job. Revolution is not the +only answer.</p> + +<p>Carranza, when he became president of Mexico,<span class="pagenum" id="Page_218">[Pg 218]</span> cast envious eyes toward +the oil fields, and sought to make them his own, for loot and for +graft, and not for conservation, be it noted here. He “nationalized” +petroleum, by his new constitution, and tried to force the companies +to give up their properties. They did not surrender, in fact or in +principle, and for five years have fought for their rights, and for +what they believe is the hope of oil development in all the backward +lands of the globe.</p> + +<p>In 1919 Carranza stopped the drilling of new wells, in an effort to +force the companies to submit to his decrees, and not until Tepetate +and Juan Casiano went to salt water and the tax returns of nearly +$30,000,000 a year (at that time) were direly threatened, did he give +temporary permits for drilling. He might fight for the nationalization +of the oil, but he was routed by the danger to the vast sum upon +which he ran his government and upon which his generals and favorites +fattened and grew rich.</p> + +<p>Thus in the oil fields drilling has been resumed. But off the “line” +there is virtually no drilling, none of the “wild-catting” which is the +life of the oil industry. Until the new government, if it ever does of +its own free will, loosens the death-grip of Carranza, the oil industry +will remain paralyzed and confined to its narrow, shrinking bed between +Tampico and Tuxpam.</p> + +<p><span class="pagenum" id="Page_219">[Pg 219]</span></p> + +<p>But why does Mexico go on? Why does she see so little of the way before +her? The situation is complicated by many factors, two of which stand +out in relief. These are the support given the Carranza ideas first by +the British companies and second by some new American companies. The +British needs in Mexico have from time to time been identical with the +American, and then the two have worked together, but the British occupy +a peculiar position, going back to the Madero revolution of 1910-11. At +that time the Mexican Eagle company (which is a Mexican corporation) +was caught with a number of the old Diaz “reactionaries” as its company +officials, and it was also the holder of the hated Diaz “concessions.” +As a result it had to walk the chalk line very carefully under both +Madero and Carranza, a condition which has always made its position +weaker than the American. The large local business of the Eagle +Company, in refined gasoline and oils, as well as in fuel oil, has also +complicated the matter. It was due to these and similar factors that +the Eagle Company placed itself under the “protection” of the Carranza +decrees when they were first issued, although with protests, both +legal and diplomatic. With a single American exception, the English +interests were the only ones which gave any comfort to those early +Carranza plans. Upon their support the former president built<span class="pagenum" id="Page_220">[Pg 220]</span> many of +his subsequent activities, including the ruling on drilling permits. +He gave these permits to the Eagle Company without conditions, at the +very time withholding them from the “unfriendly” Americans under a +demand for a written waiver of all protest against future petroleum +legislation.</p> + +<p>The second form of support which the Mexican governments obtained is +more recent, and more complicated. Under the Carranza decrees oil lands +were open to “denouncement” (or filing of claims) and the taking out +of a “denouncement” even to protect one’s own property was taken as an +unqualified recognition of the right of Mexico in confiscating the oil +rights of that property. The American and British companies united in +an agreement not to denounce their own lands and not to buy or lease +denouncements upon any other lands.</p> + +<p>In 1919, some new American interests, which had had other experience +in oil, entered the Mexican field. They spent some $500,000 in looking +up titles to the properties and leases held by the old companies. They +found many defects, for the inheritance laws, the poor records and the +negligible value of the properties as farm lands make questionable +titles the commonplace of the oil game in Mexico. Where there was an +apparently defective title, these interests acquired the outstanding<span class="pagenum" id="Page_221">[Pg 221]</span> +lien, and so laid claim to some of the finest producing lots.</p> + +<p>So far the plan was a not unexpected move toward getting a hand in +the oil game, a chance to sit in with big stakes alongside the big +companies. The new elements, however, next “denounced” their new claims +before the Carranza government, thus placing themselves quite outside +the old-crowd oil camp. This “denouncing” of their properties brought +them many favors from Carranza officials, but it made negotiation with +the old companies difficult.</p> + +<p>The Mexican oil problem, in its simplest, is three-fold. It has to +do, first, with the nationalization of the petroleum in the subsoil, +which threatens to wipe out vested property; second, with the question +of taxation, which may at any time, and indeed actually threatens to +become confiscatory; third, with the problem of concessions which are +to-day the most obvious form of political graft and to-morrow may +precipitate a Mexican war over petroleum rights.</p> + +<p>First, the nationalization of petroleum. The Constitution of 1917, +adopted by Carranza, and continued by de la Huerta and Obregon, +definitely declares petroleum the property of the nation. In the grants +of land made by the Spanish crown (the basis of all land titles in +Mexico to-day), gold, silver and other metals were especially reserved<span class="pagenum" id="Page_222">[Pg 222]</span> +as the property of the king, and in colonial times and since have been +worked only by special permission or grant under “denouncement,” quite +independently of the owner of the land. Neither coal nor oil was known +to commerce in Spanish times, but in 1884, when the mining laws were +revised, the Mexican government as inheritor of the rights of the Crown +of Spain and retaining, as it did and does, the royal control over gold +and silver, specifically stated that coal and oil belonged to the owner +of the surface. This was confirmed later in the mining laws of 1892. +In 1905, after oil was discovered and certain concessions for drilling +had been issued to Sir Weetman Pearson (now Lord Cowdray), head of the +Mexican Eagle Oil Company, an effort was made to have oil declared +the property of the nation, like gold and silver, and thus subject +to concession and denouncement. This was opposed by the American +interests, which held no concessions. The issue was decided virtually +unanimously by the Academy of Jurisprudence, and in the mining laws of +1909 the title to oil was definitely and unequivocably vested in the +title to the surface soil.</p> + +<p>Until 1917, the vast development of Mexican oil fields went on apace, +based on the old property rights and apparently safe from molestation. +Carranza switched the matter completely around by the simple expedient +of adding oil to the list<span class="pagenum" id="Page_223">[Pg 223]</span> of minerals which are national property and +placing the new ruling in that famous Article 27 which contains most of +the anti-foreign provisions of the new constitution.</p> + +<p>The Mexican defenses of this action are two. The primary thesis is +that the subsoil has always belonged to the government, whether king +or republic, and that it was beyond the power of ministers or courts +or legislatures to alienate those rights. In other words, Mexico is +only “taking back her own.” The opposition to this is on the basis +of vested rights, on the long periods during which the owners of the +lands had actually enjoyed possession of the subsoil, paying taxes +on full valuations, and on the virtual obligation of contract of all +Mexican governments to support developments under the laws of their +predecessors.</p> + +<p>The other contention, more general and yet with a stronger appeal to +modern radicals, was that such nationalization was in line with the +trend of the times, a trend later manifested in the Russian revolution. +Candido Aguilar, then Carranza’s foreign minister, gave voice to this +phase in his note of August 12, 1918, to the British Foreign Office, +where he stated that “the modern conception of property is that it is a +social function bound closely to the prosperity of the State.”</p> + +<p>Both these contentions might in fact be worthy<span class="pagenum" id="Page_224">[Pg 224]</span> of consideration if +the government of Mexico were of a character to be trusted, if it were +indeed genuinely devoted to any sincere ideals of social reform, if it +were truly interested in the conservation of the nation’s resources for +the benefit of the people. But the Mexican governments have been none +of these things, truly believe none of these things. The radicalism +of Mexico, the socialism of Mexico, are means to an end, not ends in +themselves, means to power and position, for loot and for the pelf +which goes into private pockets and not even into national coffers.</p> + +<p>Certainly if government could be depended on, the idea of paying +fixed royalties to a national treasury is financially preferable to +dickering with individuals, and obviously more businesslike. But since +oil has been known, the great organizations which handle the product +have been accustomed to dealing with private owners; it is a game they +know, a business they understand. In Mexico there is the other factor +which one can never lose sight of, and that is that government control +means graft, favoritism, chicanery, the meddling of foreigners and big +business in the very heart of the councils of government. And those +things, until now avoided, must never come into being.</p> + +<p>In the final analysis, the proposed nationalization of petroleum has +never been a conservation measure, the only excuse (to radical or to +conservative)<span class="pagenum" id="Page_225">[Pg 225]</span> for its promulgation. The Mexican governments, from +Carranza to Obregon, accepted “denouncements” upon petroleum lands +already developed, granted vast concessions for drilling, on a royalty +arrangement with the government, in so-called navigable streams and +other “federal zones,” and in every way in their power carried on a +<i>redistribution</i> of petroleum titles. This single fact of the +government acceptance of such denouncements and concessions indicates +that the intention is not to conserve, but to get a new deal with +somebody besides the Gringoes and the Indians who own the oil lands +sitting around the table.</p> + +<p>The whole interpretation of the oil features of Article 27 seems at +variance with the ideas of genuine radicals as completely as it is at +variance with the ideas of dyed-in-the-wool conservatives who still +dare talk of “vested rights.” The effect of the enforcement of the +nationalization plan would be first to change royalty payments from +the land owners to the government and second to move the dealings for +oil leases from the open field and the negotiations of plain buying +and selling to the conferences of government officials where honor is +to-day a more commercial commodity than land, and where the proportions +of lease money to graft would be as one to ten. It would indeed, bring +on the era of concessions and favoritism<span class="pagenum" id="Page_226">[Pg 226]</span> with a vengeance, and the +dismal pictures of the foreigners’ corruption and exploitation of +Mexico would become a bitter reality.</p> + +<p>At present, the chief hope of avoidance of such a condition lies in +Article 14 of the same Constitution of 1917, which declares that none +of the provisions of that instrument shall be construed as being +retroactive. The interpretation of non-retroactivity has been the +subject of much discussion. At one time Carranza’s foreign minister +told the oil companies that it should be understood to mean that the +government would not collect for the oil already extracted. At other +times it has been held that the expropriation of petroleum rights would +not affect the properties where wells were opened prior to May 1st, +1917; then not to land acquired for drilling purposes before that date. +It was this detail which was taken up by the Mexican Supreme Court in +August, 1921. But after years of fighting single incidents, and working +along the theory that American companies could demand only their own +rights, the issue has actually broadened to the whole question of +property rights of Mexicans as well as foreigners. There are millions +of acres of potential petroleum land in Mexico, not one per cent of +which is owned or leased by foreigners, and all this would be wiped +out, along with foreign properties, if the oil were declared definitely +confiscated to<span class="pagenum" id="Page_227">[Pg 227]</span> the nation, or even if merely the “oil” lands were +exempted.</p> + +<p>Were non-retroactivity interpreted to nationalize only the oil and +coal in federal lands to which no title had ever been given to private +individuals, the vested rights of land owners would be protected +whether petroleum had been discovered on the property or not. Such +an idea of nationalization would approximate the control of oil in +national lands in the United States under the new leasing laws. It is +this interpretation which the oil companies and the Mexican land owners +are seeking, and which has not been touched by the Mexican Supreme +Court decisions noted above.</p> + +<p>The second issue in the oil controversy is taxation. Until the +1921 temporary increase, export duties on oil were collected at a +theoretical rate of 15 per cent of its value. This valuation is +supposedly on the basis of sales of oil in Mexico. There are hundreds +of such sales, but their prices are not taken, and arbitrary estimates +ostensibly based on the prices for which oil is sold abroad, less +another arbitrary allowance for transportation, are the criteria. The +results of this system have been confusing to the exporters, to say the +least. Some of the lower grades of oil, for instance, were actually +paying, not 15 per cent of their value, but 40 or 50 per cent. The +valuations fluctuate also according to government caprice and<span class="pagenum" id="Page_228">[Pg 228]</span> the need +of tax money; the result is another difficulty in making close prices +to consumers, which in the end all must feel in the price of gasoline. +A peculiar tax difficulty of the oil companies was over an exact +doubling of the valuations and thus of the taxes, made by the Carranza +government a few days before it fell—an increased tax which the de +la Huerta and Obregon governments have sought to collect. Still more +recent is the virtual doubling of oil taxes which shut in many of the +wells during July, 1921.</p> + +<p>The direct oil taxes are now about $2,000,000 a month, so that the +doubling is an item of no small moment. At present no immediate +solution of the tax difficulties is in sight, and the companies have +been split by favoritism into two camps. One is largely British, +which finds it profitable to accept the decrees. The other is largely +American and finds the enforcement of the new regulations oppressive. +Some plans for relief have been discussed. One of the proposed oil +bills based on Article 27 interprets it not as nationalizing petroleum, +but as nationalizing the right of taxation, taking all tax privileges +from the states and vesting them in the federal power. The idea would +be to provide a single direct tax on petroleum extracted from the soil +instead of upon that exported. Apparently this tends toward a solution +of the tax question. But here again enters the difficulty of<span class="pagenum" id="Page_229">[Pg 229]</span> dealing +with Mexicans, for such a direct tax would be without recourse, until +its provisions became confiscatory, while at present the companies have +at least a chance of defense in protests against arbitrary valuations.</p> + +<p>The outstanding fact in the tax situation, as in the nationalization +question, is the bad faith of Mexican government. The much discussed +reforms are non-existent, and government in Mexico is for the benefit, +not of the governed, but of those who rule, and taxes fill not the +treasury but the pockets of officials, and appropriations are not for +schools and civic welfare, but for the army and “public works,” where +graft is so colossal that it passes the conception of citizens of +simpler lands.</p> + +<p>The third element of the Mexican oil problem has to do with +concessions. This is a phase of nationalization, but to-day it has +taken on an importance which recently obscured other issues. The +government had issued a number of what are called “federal zone +concessions,” giving to individuals and companies the right to explore +and extract oil from the rivers, lakes, etc. The federal zones are +narrow strips along the seashore and navigable rivers on which an +easement has been reserved for the public use. The American oil +companies contend that this mere easement cannot be converted into +absolute ownership, which is the effect when the government grants to +third<span class="pagenum" id="Page_230">[Pg 230]</span> parties the right to drill wells there and thus to tap the pools +of oil which the companies have discovered and developed and on which +they are paying rentals to land owners.</p> + +<p>There were a few oil concessions under Diaz, practically all to English +companies. One of the great shibboleths of the Madero revolution was +the wiping out of the system of concessions, so no more were given +until toward the end of the Carranza régime. Beginning then, becoming +almost an orgy in the brief rule of de la Huerta, and continuing +into the days of Obregon, concessions have become common, some +going indirectly to a few American companies, many to the British +corporations and more to Mexican favorites of the ruling group. The +concessions issued cover practically every river and semi-arid gully +(regarded as a “navigable stream” for the purposes of the concession) +in the whole Tampico-Tuxpam field, a stretching of the “federal zone” +idea in order to make possible the penetration of the producing fields +by concessionaires.</p> + +<p>Other concessions are of different sort. Under de la Huerta one was +issued giving the right to explore rivers, lakes and government lands +over the entire republic, with preferential drilling rights up to a +production of 400,000,000 barrels per year, the chief consideration +being a return to the Mexican government of 40 per cent of the<span class="pagenum" id="Page_231">[Pg 231]</span> gross +value of the oil found. Another, to a company, also American, gives +rights to explore Lower California and other West Coast states, with +the privilege of denouncing not only government lands, but private +properties as well—the return to the government in this case is 10 per +cent of the gross.</p> + +<p>The concession feature of the oil question, like the others which I +have described, has its rights and its wrongs, but the fact of giving +concessions, and in such blanket form, to take oil from the lands of +private property holders, is in itself proof of but one thing—the +intention of the Mexican government, not to conserve its resources +of oil for the benefit of its people and the generations yet unborn, +but to get out of the oil business as much as possible as quickly as +possible—and solely for itself and its favorites.</p> + +<p>The final phase of the oil problem in particular and of the entire +Mexican question in general is anti-foreignism. Article 27 of the +new constitution contains a number of anti-foreign provisions other +than petroleum nationalization. One is that only Mexican citizens may +develop oil (and other properties) in the republic. Another section of +the Constitution, as I have mentioned, gives this provision force by +requiring that foreigners who sought to work such properties should +appear before a government department and waive all<span class="pagenum" id="Page_232">[Pg 232]</span> rights of appeal +to their home government for protection. This and other anti-foreign +provisions are summed up in the so-called “Carranza Doctrine,” one of +the interesting developments of his picturesque reign. This has been +stated as follows:</p> + +<div class="blockquot"> + +<p>“No individual should aspire to a better situation than that of the +citizens of the country to which he goes; legislation should be +general and abstain from distinctions on account of nationality. +Neither the power of nations nor their diplomacy should serve for +the protection of particular interests or to exert pressure upon the +governments of weak peoples with the end of obtaining modifications of +laws which are disagreeable to the subjects of a powerful country.”</p> +</div> + +<p>The world outside largely persists in taking Mexican professions at +their face value, and in solemnly accepting the beautiful Mexican laws +and the beautiful Mexican arguments as literally true. On this point +I have quoted elsewhere the words of a great Mexican publicist, who +has written: “The carpet baggers of Mexico have traditions rooted as +far back as colonial times. They combine the shrewd and subtle wit +of the Indian with the grandiose words of modern civilization, with +which they have gained the sympathy of uninformed outsiders.” Our own +State Department has answered the “Carranza Doctrine” in no uncertain +terms and once wrote that “the Department<span class="pagenum" id="Page_233">[Pg 233]</span> is of the opinion that ... +an attempt is being made to coerce American companies ... to admit in +advance ... the correctness of the contention of the Mexican government +in the matter of ownership of oil deposits, against which the American +government has made solemn protest as threatening confiscation of +rights legally acquired by American citizens.”</p> + +<p>In fact, there is no reason to doubt that virtually all of the oil +decrees of Carranza, all the rulings of his ministers, all the +regulations which have been enforced with such insistence on petty +details have been, first, appeals to sentimentalism abroad and, second, +childish expedients to force recognition by the foreigners of some +sort—any sort—of superiority in the Mexicans. In the last, so well +set forth in the State Department message quoted just above, lies the +basic cause of the failure of the companies to reach an agreement with +the Mexican government. Every willingness to discuss a point, every +slackening of their demands, has been accepted, not as an approach to +a solution, but as a weak concession to Mexican “national pride” and +personal dignity.</p> + +<p>There are two remaining reasons why the oil question remains unsettled. +They are extremely practical,—loot and incompetence. Of the former, +George Agnew Chamberlain, the novelist, recently American Consul +General in Mexico City, has<span class="pagenum" id="Page_234">[Pg 234]</span> written in his book, “Is Mexico Worth +Saving?” that:</p> + +<div class="blockquot"> + +<p>“Today it is taken as a matter of course that ninety per cent of all +Mexican officials in positions of trust are openly corrupt and will +inevitably continue so until controlled by some greater power than +any single faction of their peers.... The graft of Mexico is outright +loot; its effect is to open simultaneously all the arteries of the +body politic and to pour the entire life blood of the nation into the +gullets of the group in power.”</p> +</div> + +<p>The oil companies are the ripest prey for loot in all Mexico. Their +individual employees pay graft of certain kinds—of that I have no +doubt, although there is vigorous and official denial. The companies +themselves, however, pay a tribute, through the channels of astonishing +taxation and contributions to public works, which is no less than the +buying of the privilege of doing business. Another phase appears in the +gossip which is general that one of the English companies materially +aided the Obregon revolution—certainly every moneyed interest in +Mexico had ample opportunity to do so. The American companies were, +after Obregon’s occupation of Mexico City, “shaken down” for about +$1,000,000 which was credited against taxes—and the taxes afterwards +proportionately increased!</p> + +<p>As a whole, the companies have resisted the temptation to ease their +way along the broader<span class="pagenum" id="Page_235">[Pg 235]</span> paths of high government by the voluntary use of +money—they have generally confined their expenses to the ample totals +of taxes and assessments. It is for this reason that one of the most +serious phases of the Mexican congressional discussion of petroleum +legislation is that practically every member of the Mexican congress +expects “his,” and when it is not forthcoming, will see to it that +nothing favorable to the foreign companies finds its way to the statute +books.</p> + +<p>Lastly, incompetence. Perhaps the most appalling factor of the whole +Mexican situation is the utter and profound ignorance of the men in +control of the national affairs, men to whom the culture, the very +procedure, of modern civilization are as a closed book. I believe that +the oil problem is made serious chiefly because the Mexicans who might +otherwise be willing to solve it are so uneducated, so limited in +viewpoint and understanding, that they cannot conceive of the vast sums +of money which must be invested in pipe lines, storage tanks, pumping +stations, wharves and ships and refineries before the oil taken from +their country’s soil becomes the fabulous treasure of which they hear +so much. They seem utterly incapable of grasping the fundamentals of +their national problems; the pity of the condition almost obscures the +significance of the fact. It has not been easy for me to explain the +oil problem in its simplest<span class="pagenum" id="Page_236">[Pg 236]</span> phases to Americans, yet in this chapter +you who have read it have learned more than the floor leaders of the +Mexican congress will ever know.</p> + +<p>It is through this forest of ignorance, this slime of graft, that the +foreign oil companies are making their way. They have committed many +mistakes in their handling of the situation, selfish mistakes, mistakes +of ignorance, but the struggle has been against forces whose depravity +has been literally unbelievable. Personally, I am no fire-eater, but I +have seen much of Mexico and I have seen something of the psychology +of depravity, and I believe that the last lingering hope of Mexican +adaptability to world conditions lies in Mexican recognition of the +need of grasping truth rather than theory, of facing facts with manly +faith in Mexico and in Mexican ability to solve her problems as other +nations solve theirs, by honesty and patriotism and not by graft and +personalism. This attitude the oil companies have nurtured, and in this +their policy has been a policy of weakness. Seeking here an outlet +for the day, there a hope for the morrow, they have put a premium on +Mexican dishonesty, given a prize for Mexican argumentative skill. I +know some of the problems the companies have faced, I know the need for +oil during the war, I have written here something of the magnificence +of their achievement, but for all that, I hold that they have had much +to<span class="pagenum" id="Page_237">[Pg 237]</span> do with the vacillation, the inefficiency, the watery, grafting +policy of the Mexican governments from Carranza to Obregon. They have +had a large part in making such a policy successful by not refusing +unjust demands firmly and directly, by not challenging Carranza to +close the oil fields, by not taking a mighty loss to save the endless +leak of graft and taxes and cynical legislation which is their heritage +to-day. Even yet their policy is one of conciliation to Obregon, the +newest president; still they are offering compromise, still giving the +subtle Mexican mind to understand that perhaps they might agree to +Article 27, perhaps they might accept a little higher taxation, perhaps +they would like a few concessions, perhaps they might be counted on to +get the hopefully predicted Mexican loan.</p> + +<p>All this is the last phase of the complicated problem. We have said, +in days gone by, that this is the problem of the oil companies, that +theirs is the gain and theirs should be the cost. But if I have +succeeded here I have conveyed an idea of the breadth of the oil +problem. It is no longer a question of whether the American State +Department is making the proper moves to support honest and industrious +American investors and workers abroad. It is no longer the academic +problem of whether the oil companies are handling their business in an +intelligent and efficient manner.<span class="pagenum" id="Page_238">[Pg 238]</span> The problem is ours, yours and mine, +of you in Kansas, of me in New York, of our cousins in England and +China. It is the problem of the chap who runs a Ford and of the man who +is cutting our freight bills by renting us a truck, of the steamship +company which is carrying our goods, of the captain of the battleship +which keeps us safe from near and distant enemies.</p> + +<p>The problem is not merely whether the white peoples of the world +are to have the right to develop the riches of the backward nations +for the benefit of the world, but of <i>how</i> they are to do it. +So far, even in forward-looking lands, it has been impossible to +eliminate private ownership and colossal private fortunes from the +wheel of oil production; in Mexico, to-day, it would be disaster beyond +understanding to turn the right of concession and oil privileges over +to corrupt and inept government. The battle of the oil companies in +Mexico is to save, first themselves from such a fate, and second to +save all the unopened oil resources in the world from the strangling +hold of such governments and such peoples everywhere. The oil industry +can no longer carry the burden of such conditions, for the prices of +your gasoline and your ship’s fuel oil are reflections not of a world +scarcity, but of the uncertainty, the colossal artificial difficulties +of oil production in the backward lands.</p> + +<p><span class="pagenum" id="Page_239">[Pg 239]</span></p> + +<p>Commerce has fashioned the world into one brotherhood, and the Great +War, for all its appearances, has welded us all into a mightier machine +of civilization than history has ever known. Oil is the fuel of that +machine, and oil must come to its engine, though all the power of +politicians and bandits combine to keep it in the soil. The backward +countries are swept into the forefront of commercial importance when +oil begins to flow from their soil. The process is going on all over +the world. In Mexico it is at its zenith. The oil must come, and from +Mexico before all others, for Mexico lies in the heart of the world, +her shores touched by more waters in proportion to her area than any +other continental nation. And her stores of oil are the greatest man +has yet found or dreamed of.</p> + +<p>To-day the world’s need of oil threatens the life of Mexico. It +is eating out her body by revolutions, by bandit governments, by +colossal graft which feeds on the ever growing river of gold from +the oil fields. The world’s need for Mexico’s oil threatens her with +intervention, not because of capitalistic machinations, but because of +the crass and wicked injustices which the wealth has tempted her to +wreak upon her foreign residents, because wealth has undermined her +government and given her over to demagogues.</p> +<hr class="chap x-ebookmaker-drop"> + +<div class="chapter"> +<p><span class="pagenum" id="Page_240">[Pg 240]</span></p> + +<h2 class="nobreak" id="CHAPTER_IX">CHAPTER IX<br><span class="small">THE GOLDEN GEESE</span></h2></div> + + +<p>In all these devious ways Mexico has tried to kill the goose which lays +her golden eggs. Not the least onerous of her efforts in this direction +has been the seeking she has always done to make the United States +government and American business men take the responsibility for this +precious goose of commerce. And sad to tell—to the Mexican mind at +least—we have not always awakened quite promptly enough to our sudden +new responsibilities, and the goose has more than once dropped near to +dying in our arms.</p> + +<p>That golden goose was the product of the nature of Mexico and of the +régime of Porfirio Diaz. Long before Mexico became independent, long +before the social problems which assail her now had been allowed to +gain impetus, Nature had given up vast riches from the Mexican soil. +Spain garnered them in, and gave Mexico such care as she knew how to +give, and the golden era of the three centuries of Colonial life rolled +out. Then came the first revolution, and the destruction of such wealth +as Spain had left, until Diaz organized what remained and with it began +his thirty years of peace.</p> + +<p><span class="pagenum" id="Page_241">[Pg 241]</span></p> + +<p>In those thirty years. Mexico was changed from a land whose wealth +poured out in bonanzas returning only caprice for industry and wealth +for caprice, into one where industry, solidly invested capital, +and wise foresight gained the golden fruit. In other words, the +goose became domesticated, and produced golden eggs when she was +appropriately fed with golden capital and golden brains.</p> + +<p>It was literally the wealth imported and created by those years +of peace and domestication which made possible the outbreak of +revolutionary activity in 1910 and drove Diaz from Mexico in 1911. +Prosperity was too much for poor Mexico.</p> + +<p>The revolution, indeed, came at a moment of Mexico’s saturation +with prosperity. And it has continued by the continuation of that +prosperity, which has furnished and still furnishes the fuel of +banditry and revolution. It was not until after Diaz fell that the +great wealth of Mexican oil became patent. And not until Carranza began +imposing his taxes on the oil industry do we find the upsurgence of the +ideas of socialism, bolshevism and nationalization which have been the +battlecries of all the governments which have followed him. Oil, as we +have seen, has furnished the sinews of war, and continues to furnish +them, despite all that can be done to turn the tide.</p> + +<p>In the days of the revolutions previous to Diaz<span class="pagenum" id="Page_242">[Pg 242]</span> the rewards of +success were governorships, sometimes presidencies, and always some +brief spell of peace. But to-day the reward is too vast, the graft +quite too colossal, to slow down the round of struggle. Wealth pours +into the national capital in amounts which would be quite hopeless of +comprehension to the revolutionists of the older day. More tax money +reaches Mexico City to-day from oil alone than Diaz had from every +source at his command—while, save for the oil fields, Mexico is to-day +a desert waste.</p> + +<p>It is no wonder, then, that the nation can and does buy herself honors +and praise in the world outside, that she considers it criminal that +she cannot buy recognition, cannot force aid and trade and gold to flow +to her. Is she not wealthy and can she not buy pages of advertising and +the services of hundreds of propagandists of every type known to the +trade? Gold is here and more gold she expects to bring to her through +other channels than her own genuine advancement. She is back again in +the days of the bonanza mines, when wealth went to caprice and labor +and industry meant nothing.</p> + +<p>And so she is killing the golden goose, just as she killed it long ago +under the Spaniards, by forcing it to lay and lay and lay, till at the +height of its productivity it is trembling to its death. Destructive +legislation, the bitter threat of its confiscation,<span class="pagenum" id="Page_243">[Pg 243]</span> the continuing +theft of vast sums in exchange for the privilege of struggling against +these laws and threats—these are striking down the golden bird. To-day +that goose is dying, and all Mexico seeks is to bring in, somehow, +another goose to feed her hungry office-holders. She is willing that +it shall be a relatively tame domestic goose, if only it will lay the +golden eggs of foreign investment, trade, commerce—she would gladly go +back to the relatively mild, but sure, wealth of the time of Diaz.</p> + +<p>And what does she offer to induce that timid, wabbling goose across +the national fence? I can see behind her promises of privilege nothing +more substantial than outraged rights, and beside them, the panting, +half-dead corpses of two golden geese of bonanza days—the almost dead +mining industry, the sadly ill oil industry. For Mexico has limited +mining by confiscatory taxation and by revolutionary outrages which +left the mines in such a state that to-day the cost of operation is too +great for them to continue under present prices. And she has set about +the starvation of the oil industry, as we have seen, by limiting it to +the narrow field of the Tampico-Tuxpam district, when the opportunities +for oil development throughout the whole of Mexico are probably +unequaled in any similar area in the world!</p> + +<p>It is with such pictures as these that she would<span class="pagenum" id="Page_244">[Pg 244]</span> tempt trade and +commerce and investment to Mexico. No, the “centennial expositions,” +the trade excursions, the special trips for special friends of the +government, even the official telegrams of thanks to American officials +who breathe a misplaced idealism with regard to Mexico—none of these, +nor all of them, can quite make a screen before the unhappy corpses of +the once lively golden geese of Mexican prosperity.</p> + +<p>Let us resume, briefly, the list of the events which have marked the +process of the years in the Mexican revolutions which began with the +uprising of Madero—and which have been the means of killing foreign +enterprise and native faith in Mexico’s succeeding governments. The +list is long, but it cannot be forgotten.</p> + +<p>The revolution in 1917-1918 virtually wiped out religion in Mexico, +profaned, sacked and burned churches, killed and outraged priests, +violated nuns and girls in the convents, and drove into exile thousands +of priests. The Constitution of 1917 virtually abolished religion, +and yet the Protestant churches have been allowed to continue their +work (with the result that many Protestant missionaries of Mexico were +active Carranza and Obregon propagandists in this country). While most +of the exiled Catholic clergy have now been allowed to return, they +still work under conditions which make religion a virtual monopoly of +the<span class="pagenum" id="Page_245">[Pg 245]</span> state, and practically eliminate religious freedom in Mexico.</p> + +<p>Ten years of revolution have all but wiped out education in Mexico: +first, by destroying the Catholic schools, which were almost the only +educational system in the country outside the great cities, and, +second, by so curtailing the appropriations for public school expenses +as to make educational organization impossible.</p> + +<p>The revolutionary hordes, when Mexico City was taken in 1915 by General +(now President) Obregon, sacked the city almost as thoroughly as +Attila sacked Rome, the public being invited by proclamation to join +in the looting. Beautiful houses were made barracks for the soldiers; +automobiles and horses, including those of foreign diplomats, were +taken; stores and homes were broken open and robbed, and trainloads of +rich furniture, including carloads of pianos, were shipped out, much of +the loot coming to the United States to be sold. While the population, +rich and poor, starved, no food was allowed to enter the city, and +trainloads of beans and corn, the staples of Mexican food, were shipped +out.</p> + +<p>The revolution virtually suspended the political rights of the Mexican +people. Under Carranza’s decrees, which to this day form the chief +basis of government in Mexico, no one may hold office who ever served +under Diaz or Huerta, or who was not<span class="pagenum" id="Page_246">[Pg 246]</span> known to be a Carranzista +before the Huerta uprising—save by special permission, granted only +on personal appeal to the president himself. The revolutionists +continuously refused to allow any Mexicans but those of known +sympathies with themselves to participate in elections, so that only a +fraction of the eligible voters have ever taken part in any election.</p> + +<p>The revolution exiled from Mexico, on one pretext or another, virtually +all the higher type of Mexicans, the men who throughout all Mexican +history have been the stable and stabilizing element in the government, +leaving Mexico in the hands of demagogues of the worst type, from +the highest offices to the lowest. There has been talk of political +amnesty, but none has yet been forthcoming, and the few Mexican exiles +who return do so under personal assurance of their personal safety.</p> + +<p>Mexico is to-day taxing her people, both natives and foreign +corporations, to an extent and with a recklessness unknown even in +war-ridden Europe. Taxes on imports and exports have been doubled and +sextupled. The stamp tax has been quadrupled and broadened to cover +almost every possible human activity; direct taxation on every form of +industry and export taxes on the country’s products have become the +normal, where, before, these<span class="pagenum" id="Page_247">[Pg 247]</span> forms of taxation were distinctly avoided +in order to encourage enterprise. Mexico is still spending more on +her army, mostly in graft, than Diaz spent on his whole government, +including interest on foreign indebtedness (which the revolution has +never paid).</p> + +<p>The present taxation system has been coupled with favoritism and graft +to an extent that punishes with ruin any enterprise (save those fed +from the natural resources of the soil, such as oil) which is engaged +in a business where profiteering is not possible.</p> + +<p>Carranza, as we have seen, financed his revolution by issuing +2,000,000,000 pesos of paper money, forced into circulation at the +points of bayonets. None of this has ever been honestly redeemed. +The paper money orgy covered three years, and absolutely wiped out +all semblance of credit and all use of paper in business. In its +course, the revolution took from the banks in “loans” approximately +$28,000,000, completing the ruin of the banking system, as I have +described above.</p> + +<p>Carranza took over the railways of the republic in 1914, and since that +date the revolutionary group has operated them for the profit of the +government and themselves. They have increased passenger, freight and +express rates to figures many times the normal, forcing the properties +to<span class="pagenum" id="Page_248">[Pg 248]</span> yield the national treasury $1,500,000 a month, meanwhile paying +nothing of rental to their owners, whose fixed charges are being +defaulted at the rate of $1,000,000 a month—a total theft of nearly +$400,000,000, growing at the rate of $1,000,000 a month.</p> + +<p>The revolutionaries gained the support of the sincere Mexican +progressives and of American students on the ground of a defense of +the Mexican Constitution of 1857, but after they came to power they +promulgated the Constitution of 1917, a new instrument, although the +old Constitution was amply provided with means for its amendment. +The new document is the most radical written Constitution in effect +in the world to-day, but its provisions have been used so far only +for the aggrandizement and enrichment of those who can abuse its +privileges. The provisions for the confiscation and distribution of all +pieces of land of large area have been used only to take properties +of foreigners and Mexicans of the old régime to hand them over to +revolutionary leaders. The provisions against the operating of mines, +etc., by foreign companies have so far been used only to transfer +such properties to friendly Mexicans and Germans. The provisions +“nationalizing” oil deposits have been used only to exact towering +taxes and millions of dollars of loot from the foreign companies and +to drive the properties<span class="pagenum" id="Page_249">[Pg 249]</span> more and more into the hands of the British, +Dutch and Germans, and away from the Americans.</p> + +<p>The revolution has allowed and abetted the looting and ravaging of +Mexico by every method known to brigandage. Hundreds of thousands +of cattle have been killed for their hides; thousands of acres of +standing crops have been wantonly ruined; seed grains have been stolen +or destroyed; the vast sugar industry, left stagnant by Zapata’s +depredations has, since the government regained possession, been wiped +out by the shipping away for “junk” of the machinery of the sugar +mills; graft has been levied against relief trains sent by the American +Red Cross to feed starving Mexicans and the contents of such trains +even stolen and sold for personal profit of generals.</p> + +<p>Carranza encouraged and abetted a military oligarchy which supported +brigandage as a means for its own profit. Campaigns against the +bandits and rebels were not pressed, arms and ammunition were sold by +the federals to the bandits and rebels, in order that the military +might continue to have work to do. The officers, acting as their own +paymasters, padded the army rolls to many times their actual size, +and the balance between the expenses and pay of the actual army and +the phantom army was pocketed by the officers. The Obregon process, +a variation of the Carranza plan, paid millions of pesos in cash +and land to<span class="pagenum" id="Page_250">[Pg 250]</span> ex-bandits and revolutionaries, setting up Villa on a +rich hacienda, and paying out the resources of the nation to buy the +appearance of a peace.</p> + +<p>Revolutionary favorites, as we have seen, were given the rich state of +Yucatan for loot. They foisted upon that community (the only spot in +Mexico where any wealth has ever been created through manufacturing +and industry as opposed to the sacking of the riches of the soil), a +so-called “socialistic” régime. A “modern state” was set up, and the +experiment of taking from the rich for the benefit of the poor was +set in full swing. By means of a great national monopoly of the hemp +industry, prices were so inflated that in the course of five years the +American farmer paid, in artificially-increased prices for twine for +his wheat-binding machinery, $112,000,000 to the Mexican revolution. +The state-controlled hemp trust has been forced to relinquish its +control, and the costly experiment seems passed. Here is the first +collapse of the Mexican fetish of socialistic demagogy, but it seems +safe to believe that it will not be the last.</p> + +<p>So stands the record, incomplete, shorn of detail, but each item taken +from the history of shame which has been written in Mexico in the years +just passed. Hidden behind a curtain of fair words and lofty idealism, +the shame has been committed, but behind that same curtain to-day +disintegration<span class="pagenum" id="Page_251">[Pg 251]</span> is hurrying on, coming as it came to Yucatan in the +grist of inevitable retribution. That we may understand the end, it +behooves us not to close our eyes to the beginnings.</p> + +<p>The killing of the golden geese of recent years in Mexico carries a +responsibility from which the United States cannot be entirely free. +The eight years of the Wilson régime, when American foreign policy, +as enunciated by Secretary of State Bryan, held that Americans who +ventured abroad did so at their own risk and had no right to ask the +protection of their government, was a mighty factor in the despoliation +which followed in Mexico. Carranza, seeking the excuse for the policies +to which the great wealth of the oil fields tempted him, found in this, +our official attitude, his opportunity for baiting the Americans and +with them most other foreigners in Mexico. His virtual espousal of the +German cause in the Great War gave him still further opportunities, and +the result has been written in the outrages which he committed against +the Americans. This is a list only less appalling than the list of the +outrages which were perpetrated against Mexico and the Mexicans in the +name of the revolution. Here, briefly, is the record. Although many of +its outrages were committed only during the Carranza régime, it must be +remembered that that régime is the direct ancestor of those which have +followed it, for the personalities<span class="pagenum" id="Page_252">[Pg 252]</span> seem the same, the shift in their +places being the only change.</p> + +<p>The revolution has killed over 3,000 foreigners, most of them in cold +blood, probably not one per cent in fair and open battle.</p> + +<p>The revolution has murdered over 600 Americans since 1910, and the +revolutionaries have violated scores of American women.</p> + +<p>The revolution has ruined over $1,000,000,000 worth of American +property in Mexico through wanton destruction, cynical recklessness and +savage bravado.</p> + +<p>The revolution has driven from their homes in Mexico more than 30,000 +Americans, men, women and children, who, in carrying to Mexico the high +standards of American living, American business and American ethics, +were pioneers of our trade and influence, and potential civilizers of +Mexico.</p> + +<p>The revolution has, as we know full well, promulgated that Constitution +of 1917 which has been the bane of American, even more than it has of +Mexican, business.</p> + +<p>The Mexican revolution, by its baiting of the American government +through nearly a decade, has nurtured in Mexico and sought to spread +throughout Latin-America a hatred and fear of Americans and hostility +to the Monroe Doctrine. This is threatening not only our own prestige +on this continent, but the peace of the established<span class="pagenum" id="Page_253">[Pg 253]</span> governments of our +Latin-American sisters, through the fomenting of hostility and unrest +within their frontiers.</p> + +<p>More than all, the revolution has made of Mexico a refuge for the +enemies of the United States, first by allowing to be set up in its +capital the central organization of the German spy and sabotage system +in the Western world, and since the war by welcoming and aiding the +bolshevists and radicals who are working openly for the overthrow of +American institutions in this country and the destruction of American +industry and trade in Mexico.</p> + +<p>This is a bitter record, but without it, as I have had to say of many +things in this book, the picture cannot come clear to our eyes. We +cannot, in justice to our own understanding, forget that since the +death of Madero, and even before, the Mexican revolution has been +but one movement. The rulers who have succeeded each other have all +been of the same group, and those in power in 1921 are those who +were scrambling for place within the same ruling group in 1913. “The +revolution,” as one of them has said, “is the revolution.” And so it +is in more senses than one. We but deceive ourselves if in our very +genuine desire to give each new Mexican president a chance, we close +our eyes to the obvious facts of his political heritage and the human +tools he must use.</p> + +<p><span class="pagenum" id="Page_254">[Pg 254]</span></p> + +<p>Only one word more, and the tale of the golden geese is done. The +protection which the American government has failed to give its traders +and investors who have gone abroad has had an effect which those +traders and investors must obviate before they step forth, at least +into Mexico, again. Through the years of the Great War, our government, +along with those of the Allies, put into effect in neutral countries, +a “Black List” which was designed to keep German, Austrian and Turkish +firms and their sympathizers from dealing and trading with the neutrals +or with the peoples of the allied countries.</p> + +<p>Mexico was of course our chief field for activity, and there our Black +List had its severest test. In those months of struggle, we committed +many faults; we shut off friendly firms from trade with this country; +we encouraged, by many stupidities, the activities of smugglers and +“cloaks” who bought for the Germans in Texas jobbing towns; we created +for ourselves a phalanx of enemies of American trade who will not soon +forget. Worse than this, even, when the war was over the tremendous +machinery of the enforcement of the provisions of the Enemy Trading +Act, with its literally priceless information regarding the business +of Mexico, the capital and trade of the Germans, the Mexicans, and the +Americans in the whole country—all this was thrown away. Literally<span class="pagenum" id="Page_255">[Pg 255]</span> it +was cast into the waste-basket, and the information which if followed +up and kept even partially up to date would to-day be the richest mine +of information for American importers and exporters was scrapped like +worn-out machinery. I do not know how many millions of dollars were +spent in gathering this data for the War Trade Board, but I do know the +nature of that data. It is gone, and the advantage which might have +come from it is lost forever.</p> + +<p>But the unfriendliness which was engendered by our mistakes, which was +only slowly being wiped out by the correction of those mistakes when +peace came—that unfriendliness remains. That is our only heritage of +our Mexican activity in the war; it couples up with our own mistakes of +ignorance or of carelessness during the same period.</p> + +<p>From 1915 to 1919, literally all the foreign trade of Mexico passed +through the United States. Imports and exports, the goods from and for +England and Japan and China and Africa no less than our own domestic +trade with Mexico went through the border ports by rail. Of necessity, +the advantages of ship traffic were lost, and our manufacturers and +our buyers of Mexico’s raw materials had the greatest opportunity of +all time to capture the vast bulk of the Mexican trade. The tremendous +apparent increases in our Mexican trade during<span class="pagenum" id="Page_256">[Pg 256]</span> the war years were only +the record of the world’s commerce passing through our border towns. +But to-day we have retained only a little of the gains recorded then, +and we shall lose still more of what we have kept. And why? Because we +have never truly sought Mexican trade and do not seek it to-day.</p> + +<p>Ah, yes. We want to trade with Mexico, but, I repeat, we have never +sought Mexican trade. We have wanted to sell Mexico our surplus, +to have her take our extra runs and use the goods we have made in +quantities for other countries. But we have never sought to meet the +exigencies of the Mexican market. We have never done (as a nation, I +mean, of course) what England and Germany have done; we do not follow +specifications literally and send cloth, for instance, with exactly +the number of threads per inch which the Mexican must have to get his +best customs classification. We do not rearrange our patterns to meet +a special demand of the Mexican market, carefully described to us by +our customers. It is the old story of American trade everywhere in +the world—our manufacturers have heard it in a dozen ways, and they +are justly tired of the sound of it. My only point is that during the +period of the war, when Mexican trade had of necessity to come to us +in great volume, we did not link the Mexican buyer<span class="pagenum" id="Page_257">[Pg 257]</span> to us, either by +meeting his demands or by helping him to understand our difficulties.</p> + +<p>So it was that when the golden goose of Mexican business was +surreptitiously put into our arms when we were busy with a lively war +in Europe, we did not take the care of it that its parents might have +expected of us.</p> + +<p>The result is that to-day we have little hold on the trade of Mexico, +despite the astonishing figures of our preponderance in it. For what we +ship to Mexico is largely food and what we take from Mexico is largely +oil—an exchange which is more significant than columns of figures in +showing the economic condition of the land we trade with. Again we +swing back to the one great, significant fact, the need of an activity +which transcends mere barter, which has little to do with whether we +are deceived by Mexican conditions or whether we are willing to risk +them now for the sake of the great possible gains of the future. This +is the issue of our duty to learn how we can serve in the solution of +the problem—and to devote something of our energy to that solution.</p> +<hr class="chap x-ebookmaker-drop"> + +<div class="chapter"> +<p><span class="pagenum" id="Page_258">[Pg 258]</span></p> + +<h2 class="nobreak" id="CHAPTER_X">CHAPTER X<br><span class="small">THE HIGHWAY TO SOLUTION</span></h2></div> + + +<p>The solution of the problems of Mexico’s commerce and business seems to +rest in hands alien to Mexico. The destructions of the past ten years +are bringing her steadily nearer to annihilation, and Mexico herself +seems helpless to save herself. These make the appearance, and it is +vivid indeed. But it may still be only an appearance, if the forces +which are acting and must act can be brought to see that they can and +must work in Mexico herself.</p> + +<p>The cycle of destructions insists upon showing itself as the round from +the materialism of Diaz on to the destructions of an era of profaned +utopian idealism and now to an era of materialism again. But this +time it is an era of materialism which differs from the Diaz time, +and is more potent, at the moment, for good and for ill. For to-day, +in the high places of government, controlling through their greed the +very minions of government, is an animating power which is not the +idealism nor the self-sacrifice of devoted rulers, but the worship of +wealth alone. That power is mighty for destruction, but at the very +moment that it functions thus, another form of wealth,<span class="pagenum" id="Page_259">[Pg 259]</span> “capitalism” +if you will, is working slowly for the saving of such of Mexico as is +being saved. For “capitalism,” in foreign guise, in such enterprises +as even the mad radicals of the day point to as the signs of their +“progress”—here capitalism is giving Mexico her only surcease from the +destructions of her rulers.</p> + +<p>Wealth is the one power which men recognize in Mexico. It is to-day +above government, for it dominates government and destroys government +by the very temptation which it holds out to successful revolution. It +rules to-day in Yucatan, even as it ruins the individuals of Yucatan. +Yet, too, it rules in the oil fields, for it makes the vast production +of oil possible, because it alone has the power and the foresight to +develop oil’s potentialities. And there, in the oil fields, it is being +turned, ever so slightly, to the beginnings of its ultimate destiny, +which must be, I believe, the saving of Mexico.</p> + +<p>Strange tales I have told of the oil fields, and yet it is a far +stranger tale which I have now to tell. For I would point out the vast +opportunity which awaits that wealth of oil for the saving of Mexico. +In the light of that possibility, the mighty stream of oil which in a +thousand ships pours from Mexico into the industries of the globe, is a +helpless Niagara, childishly unconscious of its own power.</p> + +<p><span class="pagenum" id="Page_260">[Pg 260]</span></p> + +<p>The constitutions and laws and decrees of the Mexican revolutionaries +still hold the wealth of oil in their grip. There has been, in the +summer months of 1921, a mild effort to break that grip, to stay the +hand of strangulation which is at the throat of the oil industry, but +this is still self-defense. There is a yet more persistent force than +mere taxation or even than mere confiscation at work in the oil fields +of Mexico. This force savors of elements mightier than mere industry; +it seems to be taking the form of a sinister elaboration of the vital +principles of bolshevism—the bolshevism which rules in Russia and is a +battle cry in Mexico.</p> + +<p>Among these principles of bolshevism, enunciated by Lenin himself a +year ago, was the setting of the capitalistic powers at each other’s +throats, such powers as Japan and America, that they might destroy one +another.</p> + +<p>In Mexico we see that threat from Russia developed with the +thoroughness of a too-eager pupil. In Yucatan the cycle has brought +two vast financial interests to battle—the millions of the Equitable +and the Royal Bank of Canada, against the International Harvester with +other unlimited resources. In mightier and more daring terms, and even +more deliberately, in Tampico and in the false issues of concessions, +Mexico and the governments, radical, bolshevist indeed, of the +revolutionary era, have been setting not merely<span class="pagenum" id="Page_261">[Pg 261]</span> groups of financiers +but the interests of nations at each other’s throats. The issues of +concessions on the one side and open oil fields on the other seem to +have been planned and fomented and distributed with a deliberation +which is not Mexican to bring the United States and England to +grips—in Mexico. So the spoken threat of Lenin finds elaborate action +in distant Mexico.</p> + +<p>Oil has been the victim, the tool, then, of those who would destroy +our civilization? We do not know. But this we do know—that to save +itself, to save great nations from war, to save the world’s oil for +the uses of civilization, oil must come to its own rescue. It may be +saved temporarily in other ways than by itself, but itself it must +save sooner or later. If sooner, the power will be for good; if later, +it will be for destruction, even as the powers in Yucatan are being +expended for destruction. The comparison is inadequate, perhaps unfair, +but the vision is crystal clear. It shows the last great power of the +world—wealth—diverted from its proper channels to battle within +itself. The dragon’s teeth of capitalism have raised up armies and the +stone cast by bolshevism has thrown them at each other’s throats.</p> + +<p>And this cannot be, and must not be. Our civilization rocks. Were it +to pass on to the millennium, the rocking would be worth the price. +But we see, not the millennium, but, as in Yucatan,<span class="pagenum" id="Page_262">[Pg 262]</span> the coming of new +destructions, with capital, and labor, in rôles of ignominy.</p> + +<p>For to-day oil, and the capitalism it represents, as yet does little +good for Mexico. It pours its wealth—nearly $50,000,000 a year—into +the coffers of government and there, like the golden apple, it creates +discord and wars and bloodshed. It feeds and fattens the group in power +and makes it worth the while for other groups as fast as their petty +agitations will allow, to rise up and overthrow their predecessors, +to the end of getting their share of the loot, and a new distribution +of favors. The gold which pours into the national treasury inspires, +as we have seen, all manner of radical legislation and constitutional +provisions and oppressions to make the capitalism which develops the +oil disgorge more and more of oil’s wealth, and bow more deeply beneath +the yoke of political personalism.</p> + +<p>Thus is the gold which flows from the oil wells dynamically active—as +a poison and a weapon against those who create it. The oil companies of +themselves take no part in Mexican politics. This, I admit, is almost +unbelievable, but I am convinced that except where government—our +government or that of England—has directed them, the oil companies +have not used their power politically. The United States and England +have both taken<span class="pagenum" id="Page_263">[Pg 263]</span> hands in Mexican politics, and particularly was +Washington active in arbitrating the destinies of Mexico in the eight +years just closed. But that does not concern us just now. The liquid +gold from the oil fields has never used its power alone.</p> + +<p>It has not yet used its power for its great possible good, either. +Not even for so much good as the International Harvester and the Eric +corporation have used theirs in Yucatan to the discomfiture of Alvarado +and the chastening of the henequen industry. Never, for the sake of a +principle alone, has an oily hand been lifted to say “thus far and no +farther.” Never has an oil official done more than cry aloud over the +pressure of the thumb-screws—cries which do no more than extract more +wealth to fatten the generals who, with added strength, only gave the +screw another turn.</p> + +<p>For seven years the oil companies paid the rebel general, Manuel +Pelaez, a comfortable tribute. In that time they also paid Carranza all +he asked in “taxes.” They were helpless, and the war was the excuse, +not for strength on their part, but for submission to unwarranted +and unjust oppression, oppression which had no object save personal +aggrandizement and enrichment.</p> + +<p>Here is the one power in Mexico which is potent, accepting the rule of +corrupt government, passing on its power of gold to those who use it +for nothing<span class="pagenum" id="Page_264">[Pg 264]</span> but their own ends, and for the destruction of all that +our civilization holds dear.</p> + +<p>They buy privilege in Mexico, the privilege to do the business which +they must do, while the sinister powers to whom they pay tribute cut +them from the development of new fields upon which their ultimate +future and Mexico’s immediate future depend. The whole power of Mexican +revolution and of the groups which control the revolution lies in that +one principle which I have reiterated: they give no rights, they sell +no rights; only privilege is on the auction-block. Those who buy it +to-day and those who contemplate the buying of it as a way to enter +a promising foreign trade and investment field are the upholders of +the shameful exploitation under which Mexico herself bows. And of +these, the greater sinner, to my mind, is he who plans to enter Mexico +now. After all, we must in fairness admit that the old companies have +the potent excuse of their vast holdings and of their duty to their +stockholders.</p> + +<p>The plan which I hold as the solution of the economic and political +chaos of Mexico would comprise a shifting of the center of control +from politics to economics, where the motive force, at least, has +ever rested. I would no longer tolerate the application of political +remedies for economic ills, but would go so far as to suggest an +economic remedy for both economic and political afflictions.<span class="pagenum" id="Page_265">[Pg 265]</span> +Apparently this is what our government plans, and what Mexico’s +government will not bring herself to accept.</p> + +<p>Years of observation of the Mexican problem has led to the conviction +that the international difficulties of Mexico are between the Mexican +politicians and the American government—their interests decidedly +conflict. But there is no division of interest between Mexican business +men and American business men; the former are just as disturbed over +the confiscatory policies of the Constitution of 1917 as are the +latter. So recently as April 7, 1921, a petition was sent to President +Obregon by a group of landowners in the Mexican state of Jalisco, +protesting against the enforcement of the rulings of the “National +Agrarian Commission” which confiscated their properties in the name of +the “social revolution” under the same Article 27 which attacks foreign +property rights. Its words are worth recording as an indication that it +is not alone the American business man who feels the pinch of the rule +of privilege in Mexico.</p> + +<div class="blockquot"> + +<p>“Such commissions,” the petition reads, “are nothing more than +partisan centers where laws, reason and justice are mocked.</p> + +<p>“This atrocious work will be judged by public opinion as soon as the +deep and serious damage which has been done is known, and history will +in time establish the<span class="pagenum" id="Page_266">[Pg 266]</span> responsibility. Suffice it to say that in every +case it has been a work of destruction and never of construction....</p> + +<p>“The local agrarian commission is inventing fantastic plans of +taxation, confiscating large and small properties, and sugar, +<i>mezcal</i> and orange plantations, which have cost their legitimate +owners years of toil and the investment of considerable capital. The +federal tribunals, deaf to all appeals, follow an invariable line of +conduct in every case against the landowners. Should the landowner +invoke in his behalf the same doctrines which have been applied to the +benefit of others, he finds out that these same doctrines are never +interpreted in his favor. The authorities only favor those they wish +to favor and to accomplish this end they do not hesitate to override +justice and reason.”</p> +</div> + +<p>It is to this Mexican business man, still a stable factor in Mexico, +that we must look for the change in government attitude toward business +which is indispensable to the solution of the social, economic and +political chaos of Mexico to-day. In numbers these Mexican business +men are few; in grasp of world affairs they lag behind men in similar +positions in this country. Nevertheless, their interests, those of the +American companies now operating in Mexico and those of the Americans +and other foreigners who hope to share in Mexican trade, are and will +be one. It is in the way of supporting such Mexicans in their efforts +to influence the government of their own country that I speak of an +economic remedy for all the afflictions<span class="pagenum" id="Page_267">[Pg 267]</span> of Mexico. I would, if I +could, put them in control, would bring back to their aid the brains +and the energy of the exiles who belong, in one way or another, to +their class of producers.</p> + +<p>It is to such an end that the foreign business man who hopes, in the +immediate or in the distant future, to share in Mexican trade should +turn his hand. He should demand, in the councils of his government, in +the congress of the country, in the powerful conventions of chambers of +commerce, that Washington insist definitely on a return to civilized +and economic rule in Mexico. This Washington seems to seek but they +and they alone have the power to compel the decision by the powers of +this world that the day of privilege in Mexico must be put aside, and +the era of equal rights shall dawn. In the hands of American business +interests the tool of pressure is very powerful. This is a moment, not +to rush in to get easy markets on the “ground floor,” but to demand +conditions which will give the opportunities and the profits to those +who can best use them—the truly Golden Rule of business the world +around.</p> + +<p>When that day comes, all will profit. Until that day comes, none can +have aught but risk and chance, the chance of the gambler. For who +can say how the wheel of politics will turn? And only he who knows +Mexico and the Mexicans of old can<span class="pagenum" id="Page_268">[Pg 268]</span> assume that he can buy his way +to privilege with the next pirate crew. The solution is in the hands +of American business men because it is in the hands of the Mexican +business men whom they can support and aid. And in the group of such +Mexican business men we must include not only the true Mexicans, but +the foreign companies which have worked long in Mexico and so have made +themselves a true part of Mexico, vitally concerned in her progress and +prosperity.</p> + +<p>Those foreign companies of Mexico are the business world of Mexico. And +they know Mexico and her needs better, in many ways, than Mexico knows +herself. They know, as every one who is honest with himself knows, that +the hope of Mexico is in truly devoted, native government. Yet we still +see them pass the power which could to-morrow restore Mexico to the +family of nations over to those who use it for their own ends and for +the utter destruction of all Mexico that is outside the influence of +the oil fields and of their civilization.</p> + +<p>The great companies are Mexican, in essence. They have rights as +Americans and as Englishmen, to be sure, but their greater right is in +Mexico. And they have the right to use their power as they will. They +seek to be good and to be honest and just, but the ends of justice +are defeated by their very honesty. I do not advocate activity in<span class="pagenum" id="Page_269">[Pg 269]</span> +politics, nor even the tangible aid of oil companies to revolutionists +of any stamp. I hold only that if the oil companies would give over +their profits (as they did temporarily in the summer of 1921) long +enough to shut off the stream of gold from corrupt government, if they +would thus render revolution and loot unprofitable, the solution of +the problem of Mexico would soon come, in a return to an age of honest +work and honest government, free from the temptation of vast unearned +wealth. We need not ask how or by whom the change shall be made, +whether by a sincere Mexican government ready to cast out its evil +elements, or by a government yet to be born. That is not our concern, +for our concern is to search for our part and having found that part, +to play it well.</p> + +<p>Is not this a solution of the Mexican problem? Should we not say to the +foreign companies:</p> + +<p>“You are in Mexico, you are of Mexico. You represent all that is +stable in Mexico. You know those Mexicans who can solve the country’s +problems, and make Mexico again a land where white men can keep the +altar fires burning bright, where honest Mexicans, and foreigners if +they will, may help to make it all that it should and must be.”</p> + +<p>Revolutionary radicalism has run its course in Mexico, and we are back +again at a rule of capitalism, a rule which capitalism, for right or +wrong, cannot longer avoid. The eyes of the world are on<span class="pagenum" id="Page_270">[Pg 270]</span> the moneyed +powers of the world. It is childish to try to deceive radicals or +conservatives with saying anything else. To-day, in Yucatan, capitalism +(because circumstances have forced it to do so) is exacting the toll of +penalty from the henequen industry and its native spokesmen. To-day in +Tampico, capitalism hesitates to move on, and waits for the ruin which +will tumble about it, forcing it, in its turn, to grind Mexico beneath +its heel. Somehow, dimly, seems to emerge the lesson which Mexico has +for us and for the world. Capitalism must in the end save the world +from the ruin of revolution. To-day in Mexico it can move quickly and +freely. To-morrow it may be clutched in the very destruction which is +upon it, and be forced, itself, to the destruction not alone of the +enemies of our civilization, but of the fabric of progress of that +civilization. The story of Yucatan is written. Is the story of Tampico +and all Mexico to follow the same plot, and is the world to go blindly +on, believing that in compromise it shall gain strength?</p> + +<p>Truly the crimson feast is preparing for the vultures, and vultures +will our eagles of business become if they wait longer on their distant +heights for revolution to finish its bloody orgy. To-day there is +yet time. In Mexico there is yet time. Why wait for the chaos, from +which there seems but one emergence, the emergence to intervention<span class="pagenum" id="Page_271">[Pg 271]</span> +and blood and long foreign rule? The one stable force, the wealth +of Mexico, must choose a nobler course than that waiting, than that +cynical hoping. It can choose and it must choose. Old worlds are indeed +passed away and the paths of new stars are to-day being plotted. In +the courses of those new stars power will be used without apology, +as the revolutionary radicalism which our old civilization created +moves without apology. Our duty is to the future, not to the dead past +of compromise and convention and self-righteousness. Is capitalism +honest and sincere and bound up with the welfare of the human race? Or +is it indeed the vulture which waits to feast only upon dead bodies +amid ruins? To-day in Mexico it waits vulture-like. Its sincerity and +its true righteousness are to be determined not by slavish waiting +for the ruin which will force it to use its power, as it is using it +in Yucatan, but by its moving, to-day, to the solving of the great +problems of a great nation as it alone can solve them. Capitalism and +not revolution, the corporations and people of Mexico, and not foreign +pressure, must in the end give answer before the last Tribunal.</p> + + +<hr class="chap x-ebookmaker-drop"> + +<div class="chapter transnote"> +<h2 class="nobreak" id="Transcribers_Notes">Transcriber’s Notes</h2> + + +<p>Page <a href="#Page_18">18</a>: “southermost point” changed to “southernmost point”</p> + +<p>Page <a href="#Page_114">114</a>: “outrage perpetated” changed to “outrage perpetuated”</p> + +<p>Page <a href="#Page_142">142</a>: “or for propety” changed to “or for property”</p> + +<p>Page <a href="#Page_200">200</a>: “Sante Fe Railroad” changed to “Santa Fe Railroad”</p> + +<p>Page <a href="#Page_236">236</a>: “pyschology of depravity” changed to “psychology of depravity” +</p></div> +<div style='text-align:center'>*** END OF THE PROJECT GUTENBERG EBOOK 75469 ***</div> +</body> +</html> + diff --git a/75469-h/images/001.jpg b/75469-h/images/001.jpg Binary files differnew file mode 100644 index 0000000..3619b28 --- /dev/null +++ b/75469-h/images/001.jpg diff --git a/75469-h/images/cover.jpg b/75469-h/images/cover.jpg Binary files differnew file mode 100644 index 0000000..b1bb3ec --- /dev/null +++ b/75469-h/images/cover.jpg diff --git a/LICENSE.txt b/LICENSE.txt new file mode 100644 index 0000000..6312041 --- /dev/null +++ b/LICENSE.txt @@ -0,0 +1,11 @@ +This eBook, including all associated images, markup, improvements, +metadata, and any other content or labor, has been confirmed to be +in the PUBLIC DOMAIN IN THE UNITED STATES. + +Procedures for determining public domain status are described in +the "Copyright How-To" at https://www.gutenberg.org. + +No investigation has been made concerning possible copyrights in +jurisdictions other than the United States. 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