The Colonial Economy
Mexico, as the colony of New Spain, existed for the benefit of the mother country. At least that was the view of the Spanish crown’s economic advisers. Like other European colonial powers, Spain subscribed to the economic philosophy of mercantilism, which held that the purpose of a colony was to make the mother country stronger and more self-sufficient. If a colony did not return such advantages to the mother country it could be more of a liability than an asset. There were other considerations, both religious and strategic, but profit was no doubt the primary consideration.
Spain’s colonial economic policies were protectionist in the extreme, which meant that the economy in New Spain was very much restricted by limitations imposed by the imperial system. Thus the natural growth of industry and commerce was significantly impeded, because manufacturers and merchants in Spain were protected from the competition of those in the colony. In accord with the classic pattern, the Spanish Indies were to supply Spain with raw products, which could be made into finished goods in the mother country and sold back to the colonists at a profit. In the case of Mexico, silver would become the main export to Spain, where it promoted inflation and Spanish imperial wars.
In early years of the colony whites lived parasitically off many Indians and a few blacks, but the picture changed considerably after a time. The importance of the encomiendas in the overall economy of New Spain did not last long, for not many of those who came after the conquerors received grants of Indian villages. Within a short time the encomenderos formed but a small minority of the Spaniards in Mexico. Of perhaps eight hundred first-generation encomenderos, their numbers dropped to just over five hundred by mid-sixteenth century, and at the beginning of the seventeenth century, there were only about fifty left in central Mexico. Most of the encomienda towns escheated to the crown for lack of legitimate heirs.