Five centuries after the Spanish Conquest of the Aztec Empire, Latin American countries stand out for their relatively high levels of economic inequality. A substantial body of social science literature argues that high inequality is a long-term consequence of the extractive institutions imposed by the European elite. This literature, however, has failed to properly assess pre-colonial inequality levels. We fill this gap by providing an estimate of per capita income and of income inequality in the late Aztec Empire, a polity which spanned much of nowadays Mexico and parts of Guatemala.

The Aztec capital city of Tenochtitlan fell on August 13, 1521 after a long siege carried out by a small number of Spanish troops and thousands of indigenous allies. This event marks the onset of 300 years of Spanish colonial domination. The rapid fall of the Aztec Empire is even more surprising because when the Europeans arrived it was still relatively young and thriving. Established in 1428 through the alliance of the city-states of Tenochtitlan, Texcoco, and Tlacopan (the “Triple Alliance”), the Empire had come to rule a vast territory, encompassing 38 provinces by the eve of the Conquest. These were subject to a highly developed imperial tax system, of which we have substantial historical records. There is no doubt that on the eve of the Conquest the Aztec Empire was the most militarily, politically and economically powerful state in Mesoamerica. It also had a very aggressive stance, fueled by competition between the elites of the ruling city-states, which ultimately led Tenochtitlan to consolidate its leading position within the Alliance. Intense factional competition shaped many aspects of society; the continued state of war, a tax system growing ever more extractive and pro-elite political reforms exacerbated social stratification across the Empire. High levels of imperial extraction contribute to explain why, upon the arrival of the Spaniards, many provinces rebelled to the Triple Alliance and joined forces with the invaders.

If we focused solely on average (per capita) income levels, we could conclude that the Aztec Empire was relatively prosperous. In our own estimate, obtained by exploiting the strong correlation that exists, across ancient societies, between population density and income levels, Aztec per capita income was $690 (1990 PPP), or 1.72 times the subsistence minimum of $400. This is comparable to the income level estimated for the Euro-Mediterranean region at 150 CE, Byzantium around 1000 CE, or even England on the eve of the fourteenth-century Black Death and India around 1600. Although much lower than the $800-900 per capita income of late-fifteenth century Spain, the Aztec average income was respectable. The average, however, hides substantial differences between the provinces (Figure 1, Panel A). The four richest provinces had a per capita income of over $900, and the imperial capital city of Tenochtitlan, which enjoyed special administrative status, even reached $1,980. In contrast, many other provinces were stuck in the $500-600 range.

Figure 1: Per capita income and inequality in the Aztec Empire. a, Per capita income. b, Income inequality. c, Imperial extraction.

Between-province inequality, then, was substantial. But inequality across the Empire also depended upon high within-province inequality, mirroring steep differences in the conditions enjoyed by the different socio-economic classes that composed the Aztec society. The primary social distinction was between the nobility, the commoners and the slaves. The nobility controlled the commoners by holding sole control over productive resources. Among the commoners, the sources of economic inequality were labour specialization and chiefly the specific mechanisms through which they gained access to land from the nobles, in exchange for their labour of for part of the produce. Among the nobility, inequality depended upon juridical status (imperial vs provincial nobility), the economic potential of their respective provinces and the extraction levels imposed locally by the imperial institutions through taxation. The taxes established by the Triple Alliance for each province were variable. Those peoples that had militarily resisted the Aztec Empire, once conquered, suffered the highest imperial tax rates (Figure 1, panel C). Hence, high economic inequality in the Empire was also the result of an unequal distribution of political power. Unsurprisingly, we find that the provinces that paid the highest taxes were among the first to join anti-imperial alliances upon the arrival of the Spaniards.

In our estimate, the per capita income of the lower nobility was 13 times that of the richest peasants, and 3 times that of the richest commoners with a specialized occupation (guild merchants, luxury artisans, etc.). But the imperial ruling class, a small group representing about 0.01% of the overall population, was vastly richer: their per capita income was 71 times that of the lower nobles, and 905 times that of the richest peasants. These steep differences between the economic (and political) elite and the rest explain why, if we look at the Aztec “one-percenters”, they earned 41.8% of the total income, growing to 50.8% if the richest 5% is considered. As the income share of the poorest 50% was just 23.3%, this makes for a very skewed income distribution. As seen in Figure 2, the income share of the richest was much higher in the Aztec Empire than in modern Mexico or the United States. Interestingly, also the income share of the poorest was higher – but in the Aztec Empire, the 4.6% earned by the poorest 10% (a social stratum composed for one third by slaves) corresponded to a situation close to mere physical subsistence, which is clearly not true for the poorest 10% citizens of today United States even if their income share is just 1.9%.

Figure 2: Income distribution in the Aztec Empire compared to modern American states. D1=First decile (poorest 10%), D10=Tenth decile (richest 10%).

Overall, the Aztec Gini index of income inequality amounted to 50.4. This is higher than the 36-39 found in the Roman Empire in 14 CE, the 41-43 reported for Byzantium ca. 1000 CE and the 33-37 of England and Wales in 1290, but in line with the 50 of the northern Low Countries ca. 1500. However, the Aztec Empire was much poorer than the Low Countries, hence similar Gini indexes have deeply different implications. This is revealed by inequality extraction ratios, which measure how close a society is to the maximum inequality that it could theoretically experience without pushing all of its members (except for a single super-rich) below subsistence. With a ratio of 89%, the Aztec Empire was much closer to the boundary than the northern Low Countries (71%), which implies a social organization strongly tweaked in favor of a small elite.

Our findings challenge the view that the Europeans, and especially the Iberians, unilaterally determined the institutional framework of the New World, bringing to Latin America their inefficient and/or predatory institutions – at least in the case of the Aztec Empire, in many provinces the institutional framework had a marked “predatory” and pro-elite character from before the Conquest. This is not to deny that the Conquest worsened the conditions of the indigenous population: per capita income contracted to about $400 (1990 PPP) in the early colonial period, growing back to about $600 only at the turn of the seventeenth century. But pre-Conquest institutions were important landing strips for colonial institutions, and what is more, the highly hierarchical Aztec social stratification survived in colonial times, benefiting the indigenous nobility as well as the new Spanish elite. Hierarchical stratification and socio-economic inequality, however, were strengthened by the economic activities introduced by the Spaniards, such as mining. Additionally, the Spaniards introduced a new caste system based on race, which also promoted socio-economic inequality. As a result, by 1790 New Spain had a Gini index of income inequality of 63.5: considerably higher than most contemporary societies, and basically as high as it could have been without compromising the simple survival of large masses of the population. But, without negating the plight and terrible sufferance that the Conquest caused to the native population, we argue that colonial institutions did not create high inequality in Latin America, they only exacerbated it.