nineteenth century was more democratic politically than
almost any other nation in the world at the time, it was also
more democratic than others when it came to innovation.
This was critical to its path to becoming the most
economically innovative nation in the world.
If you were poor with a good idea, it was one thing to
take out a patent, which was not so expensive, after all. It
was another thing entirely to use that patent to make
money. One way, of course, was to sell the patent to
someone else. This is what Edison did early on, to raise
some capital, when he sold his Quadruplex telegraph to
Western Union for $10,000. But selling patents was a good
idea only for someone like Edison, who had ideas faster
than he could put them to practice. (He had a world-record
1,093 patents issued to him in the United States and 1,500
worldwide.) The real way to make money from a patent was
to start your own business. But to start a business, you
need capital, and you need banks to lend the capital to you.
Inventors in the United States were once again fortunate.
During the nineteenth century there was a rapid expansion
of financial intermediation and banking that was a crucial
facilitator of the rapid growth and industrialization that the
economy experienced. While in 1818 there were 338
banks in operation in the United States, with total assets of
$160 million, by 1914 there were 27,864 banks, with total
assets of $27.3 billion. Potential inventors in the United
States had ready access to capital to start their
businesses. Moreover, the intense competition among
banks and financial institutions in the United States meant
that this capital was available at fairly low interest rates .
The same was not true in Mexico. In fact, in 1910, the
year in which the Mexican Revolution started, there were
only forty-two banks in Mexico, and two of these controlled
60 percent of total banking assets. Unlike in the United
States, where competition was fierce, there was practically
no competition among Mexican banks. This lack of
competition meant that the banks were able to charge their
customers very high interest rates, and typically confined
lending to the privileged and the already wealthy, who
would then use their access to credit to increase their grip
over the various sectors of the economy.
The form that the Mexican banking industry took in the