Coerced indigenous labor and free mestizo peasantry: a property-rights, rent-seeking view of colonial Paraguay

Here I first survey the evidence on forced and free labor in a resource-abundant, sparsely settled Spanish-American colony on the American Indian and Portuguese frontiers. The focus among forced labor forms is on the compulsory labor service obligations the Spanish exacted as tribute from the indigenous people they eventually resettled in segregated towns. The “encomienda” and “congregación,” respectively, were justified by right of conquest and in exchange for the protection and conversion to Catholicism of the new subjects of the Crown. Among free labor forms I focus on the free peasantry that arose in the lands left vacant as the indigenous population declined. Free peasants included the American born offspring of Spanish parents (creoles), as well as the “mestizo” offspring of Spanish and indigenous parents, which in distant and isolated Paraguay had led to legally consider mestizos as Spaniards, not subject to paying tribute in the form of labor services. I then offer a conceptual framework based on Domar’s hypothesis on the causes of slavery or serfdom (which I previously reviewed in Pastore 1990), augmented to include property-right and rent-seeking considerations. Next, I use this conceptual framework to interpret the evidence presented earlier. Subsequently I find the analysis to be robust, particularly in connection with the previously expressed contention that the labor services “encomienda” in Paraguay were a tax-farming scheme. Last, I recapitulate and gather the conclusions.