Mexican Depression leading to the Revolution
Historians have long debated the idea that the U.S bank panic of 1907 was the reason why Mexico went into a depression which was a catalyst to the Mexican Revolution. The reason why the depression lead to the revolution was because many were unhappy with their economic situations and a lot of the blame was put on the current president of the time Porfirio Diaz. By freezing the nation’s financial network and precipitating a depression, the panic showed how unstable the nation’s financial system was. Although this event was called the U.S bank panic, the panic’s effects hurt many more countries than just the United States. Mexico in fact was destroyed and their country was soon in a depression. After researching about this topic I found that other scholars including Friedrich Katz and Michael Hart, who dedicated their careers to studying the Mexican Revolution, believe that the depression was a key factor to the start of the revolution. They believe that because Mexico was very dependent on foreign markets and capital, mainly that of the United States, the depression ultimately stopped growth in Mexico. Due to such a poor economy, many citizens were unhappy with the Porfirio Diaz’s regime which caused the Maderistas and Zapatistas and other revolutionaries to rebel in 1910.
The main cause of the U.S bank panic was what happens in most economic depression cases, the financial system allowed for questionable business practices by unqualified businessmen. An example of consumer confidence dropping was when the president of Mercantile National Bank of New York City used his bank to try and seize control of the hot copper market from John Rockefeller. Rockefeller very frustrated stopped the effort of Heinze by opening millions of pounds of copper on the market. This dropped the price of copper drastically and cause copper to depreciate in value. Soon after this scheme, many other depositors learned that Heinze misused his power which triggered clients to pull out their money and liquidate their accounts. Mercantile also had lots of control of six other banks which they managed and the other six banks were actually used as collateral against each other. In this case, if one bank fell, they would all then collapse.
To fully understand why the U.S bank panic was such an important part to the depression in Mexico, we need to understand how the Mexican economy was during the time of Porfirio Diaz as president from 1876-1910. One of Porfirio Diaz’s main goal was to boost the economy by expanding markets, getting more foreign involvement, and by helping the banking system. Many citizens were actually very upset during this period because the people in the lower class was upset at the extreme gap of those in the upper...