Mexico, as we have learned, entered upon the contest with neither money nor revenues nor credit. From nothing, nothing comes; and many supposed she was too poor to fight. But she did fight—or at least men fought in her name—and one cannot help asking how they contrived to do so. In full the question cannot be answered, but some of the facts lie within our view, and these are not only valuable in themselves but highly suggestive.[1]
Aside from loans, the income of the government in 1844 was figured roughly as follows: import duties, seven million dollars; duties on commerce in the interior, four and a quarter millions; profits from the monopolies of the mints, tobacco, stamped paper, playing cards, national lottery, post-office, etc., two and a quarter millions; miscellaneous taxes and revenues, three millions; total, sixteen and a half millions net. But the American blockade cut off nearly fifty per cent of this income at one stroke; and not only our progressive occupation of territory, but the dislike of the people for national taxes, their growing dissatisfaction with Santa Anna’s régime, and their increasing destitution caused a rapid shrinkage of the residue.[2]
It was proposed to contrive a general plan of taxation for the emergency; but probably the interests principally threatened put a stop to it, and at all events it mysteriously disappeared. The government was given ample authority, but could do nothing. A war tax was laid on house-rents, for example; but it could not be collected everywhere, and probably its net proceeds amounted to little. In November, 1846, it was decided to issue drafts for two millions, to be accepted by the clergy and then purchased by designated citizens; but the scheme, though actually decreed, proved a failure, and the famous laws of January 11 and February 4, 1847, were no more successful. June 17, 1847, a special tax of one million was assessed upon the entire population; but only a small fraction of this appears to have been paid. In November, 1847, the government offered to deduct one half of the pending national taxes levied before May 1, 1846, if citizens would pay them by February 1, 1848; and this indicates clearly how the people had been acting. A few of the states, besides maintaining National Guards, erecting fortifications and manufacturing cannon, remitted some cash to the central government; but when we find the richest of them all, Mexico, boasting that she had sent the insignificant sum of about $160,000, we have reason to place a rather slight value upon this kind of assistance. Moreover, accepted drafts on that state, payable in one, two and three months, could not be sold—even at a discount.[3]
The clergy gave nominally a million and a half, but they appear to have taken up indirectly, at a discount of forty per cent, the drafts of which this donation consisted. Citizens provided a large part of the new ordnance, but aside from this we hear of few substantial gifts. Just after the battle of Molino del Rey, in order to obtain bread for the army, the government requested the bakers of the capital to meet, but only a part of them came. A “positive supreme order” then brought them together, and they promised contributions; yet the promises were not kept.[4]
Every possible effort was made to borrow. Once the treasury offered a national loan of two and a half millions, but it fell flat in the states that might have paid the most. Just before the battle of Cerro Gordo there was a door-to-door canvass at Mexico; but only small sums can have been picked up. About three months later the government imposed a forced loan, of which more than $280,000 were assigned to the capital; but the Mexicans had learned to evade such extortions, and it proved hard to collect the allotted amounts. In July, 1847, the British consul general, Mackintosh, loaned $600,000 in exchange for the ratification of an arrangement negotiated with the British bondholders. In four loans the clergy furnished some three millions, all told. The President raised money, it was reported, on public and private securities, sold bonds freely at very low rates, and borrowed in effect by giving contracts on terms favorable enough to make the transactions worth while as gambling propositions. The principal mint, for example, was turned over to the British consul general for a period of ten years in February, 1847, in exchange for some $200,000 in cash and a promise to pay one per cent on the amount coined; and on similar principles arms and other necessaries were sometimes obtained.[4]
All of these financial operations were at least ostensibly lawful, but Santa Anna did not pause here. Wherever money could be found, he seems to have taken it, holding that the exigency outweighed all rights and all pledges. Funds belonging to the tobacco revenue were illegally seized, for instance; and a large sum due the Academy of Fine Arts fell into this voracious maw. Not only cash but everything needed for the army went the same way. At Jalapa early in April, 1847, for example, all the owners of horses received orders to bring them in. Grain, forage, lead, lumber, arms, ammunition, tools, cattle, mules and laborers were taken by force; and sometimes military officers exhibited the burglar’s predilection for a midnight hour. Here was a kind of finance that saved the expenses of accounting, and without it even the low cost of the Mexican soldier would not explain Santa Anna’s holding out so long.[5]
THE AMERICAN FINANCIAL OUTLOOK
The United States, happily, stood far above this level, but not so far that probably mere good luck did not save us from grave trouble; and it was easy to foresee many dangers—all the worse because they naturally made capital timid—when the hostilities began. The total receipts of the treasury for the fiscal year ending with June 30, 1845, were nearly thirty millions and the ordinary expenditures $22,935,828. It was estimated that during the next year the receipts would fall about three millions, and Walker—allowing the munificent amounts of something more than two and a half millions for the army and something less than five for the navy—expected to reduce the total disbursements a little, anticipating for the period ending with June, 1847, a further saving of more than four millions. The receipts for July-September, 1845, proved to be more than two millions below those of the corresponding months of 1844, and the customs income for the fiscal year 1845–46 was $815,445 less than for the preceding twelve-month. In a word, shrinking revenues and curtailed outlays were the prospect.[6]
In this condition of things, not only had the unpredictable costs and embarrassments of war to be faced, but those of war in a distant land. Money was to be sent out of the country, never to return, and the bills for supplies to be increased by the burdens of marine transportation, insurance and losses; while risks from privateers and European complication could be seen. Before such an outlook business men shrank from large enterprises. People with money felt disposed to keep it.[7]
Where, then, were funds to come from? The currency had been inflated by the paper issues of many banks. Stocks were selling far below the prices of twelve months before. Even the business men who did not endorse the tariff of 1842 had adjusted their affairs to it, and now everybody understood that a new scale of duties, based upon free-trade ideas, lay on the treasury anvil. Calls for the government funds held and used by state depositories and for the specie of all the banks were feared. The banks cannot support a loan, and even in peace our capitalists have never done so, remarked the financial editor of the New York Herald, probably the best newspaper authority.[7]