POLS 071 Lecture Notes - Lecture 15: Encomienda, The Incentive
Document Summary
Spanish colonization rested on exploiting the native people for extraction of resources for the settlers and commercial interests: extractive institutions: Mita: mining labor force; required indigenous people to serve as miners. Encomienda: indigenous people paid the spanish with tributes of labor in order to be converted to christianity for their salvation (1) grants of indigenous people given to spaniards. Mexico had too much political turmoil and weak constitutions that continuously led to dictators overthrowing each other: property rights violated, land expropriated, and monopolies and favors granted to supporters. Institutional environment provided no incentives for innovation and technological development. Patent law creates an incentive to innovate by guaranteeing exclusive profit for a period of time. Antitrust laws create an open market for financial institutions that leads to low interest rates and easy access to loans as a result of high competition.