Born with a "Silver Spoon": The Origin of World Trade in 1571 Author(s): Dennis O.

Flynn and Arturo Girldez Reviewed work(s): Source: Journal of World History, Vol. 6, No. 2 (Fall, 1995), pp. 201-221 Published by: University of Hawai'i Press Stable URL: http://www.jstor.org/stable/20078638 . Accessed: 07/03/2013 20:49
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Born with a "Silver Spoon;;: The Origin ofWorld Trade in 1571

DENNIS O. FLYNN AND ARTURO GIR?LDEZ

University of thePacific

birth of world trade has been described by C. R. Boxer (1969, The

terms: "Only after the Portuguese had 17) in the following their way down the West African coast, rounded the Cape of in themselves and established Good Hope, crossed the Indian Ocean and on the shore of the South China the Spice Islands of Indonesia p. worked Sea; only Patagonia, then was between had attained the same goal by way of after the Spaniards and only the Pacific Ocean and the Philippines?then a regular and connection established lasting maritime

the four great continents." Boxer does not pick a specific date for the birth of global Although trade, his logic leads us to choose year the city of Manila 1571?the was founded. Manila was the crucial substantial, entrep?t linking for the first trade between America and Asia direct, and continuous time in history. For our purposes, all important popu global trade emerged when to lated continents with began exchange products continuously?both in values each other directly and indirectly via other continents?and to generate It is sufficient crucial impacts on all the trading partners. true that there was an important trade before intercontinental 1571, so the but there was no direct trade link between America and Asia, or complete. To understand world market was not yet fully coherent the global significance of the direct Pacific trade between America is useful first and Asia?international trade history's "missing link"?it to discuss economic the underlying forces that motivated profitable world trade in the early modern singular product most period. The for the birth of world trade was silver. responsible
Journal ofWorld History, Vol. 6, No. 2 of Hawai'i Press by University 201

?1995

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The Role More

of Silver

in Creating

a World

Market

the market for any other commodity, the silver market was world the of China the trade. dominant emergence explains buyer of silver. On the supply side, Spanish America and Peru) (Mexico of the white metal. Conserva erupted with unprecedented production tive official estimates indicate that Latin America alone produced tons of silver between 1800 and about 150,000 1500 1990, (Barrett

than

over 80% of the entire world production P- 237)> perhaps exceeding in that time span (Cross 1983, p. 397). Despite America's dominance over three centuries, silver production have the been pri Japan may in the late sixteenth and early seven mary exporter of silver to China teenth centuries, shipping perhaps 200 tons per year at times. Japanese in the second half of the fell off dramatically silver exports, however, amount of Japanese seventeenth "The (Innes 1980, chap. 6).1 century silver poured into foreign trade in the heyday of Japan's overseas trade, 1615 other and Dutch, 1625, through Portuguese Japanese, Chinese, at reached tremendous estimated value, roughly 130,000 ships, to 30% or 40% of the total world silver pro 160,000 kilograms?equal to

and Asian mer outside Japan. This explains why European were so enthusiastic about developing trade with Japan" (Iwao chants in both 1976, p. 10). The central point is that all the great silver mines to China. sold ultimately hemispheres duction its tributary the role of China?and We intentionally emphasize the silver trade because the scholarly system (Hamashita 1988)?in in in general has neglected this pivotal literature country, certainly as a prime causal actor. The on terms of recognizing China literature treasure is huge and multifaceted?sometimes New World focusing on (the price revolution),2 and/or the price inflation sixteenth-century to capital rise and fall of Spain,3 and/or the transition from feudalism one it is in unified central respect: it ism,4 and many other issues?but on as is the fulcrum. focuses exclusively virtually Europe Europe considered the epicenter price sixteenth-century of early modern commercial activity. The is mostly for example, revolution, thought of

1 to the calculations made by Barrett (1990, p. 225), Japan may have pro According and around 16% in the silver in the sixteenth about 30% of the world's duced century seventeenth century. 2For an overview of the price revolution of the main theoretical literature, arguments see Outhwaite 1977, chap. 2; Flynn 1971; Flynn 1984a and 1984b. 1969; Ramsey 3See Hamilton 1937; Elliott 1975; Kamen 1964; Gordon 1978; Israel 1961; Kamen 1981; Flynn 1982. 1981; Kamen 4 Hamilton 1952; Felix 1929; Keynes 1930, vol. 2; Neff 1956; Nadal 1936; Hamilton 1974 and 1976; Brenner 1977; Hunt 1959; Wallerstein 1984. 1978; Flynn

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in reality it was a global in terms of European price inflation, when a In clear summary of China's participation remarkably phenomenon.5 in the global price revolution, Geiss (1979, p. 144) provides an excep tion to the normal Eurocentric focus: "In the late sixteenth century, and Japan entered the Ming empire silver from Mexico however, when and inflation set in great quantity, the value of silver began to decline more as its abundant the metal became in, for buying power dimin the values of all commodities; trend affected inflationary in silver and silver lost its value. Ramifica valued had been everything in the tions of this change lives of almost the touched everyone ished. This
empire."

are often viewed and English East India Companies Europe's Dutch as prototypes lit The scholarly of modern multinational corporations. erature recognizes of silver flowed to Asia, but this that huge quantities a reflection is considered of Europe's balance-of-trade phenomenon Asian a far greater taste for east Asia; Europeans developed to conventional other than the around, way according finery so treasure had to flow from west to east to pay for Europe's wisdom, framed in terms of In short, all the key issues are normally trade deficit. deficit with European perspectives. instead of the predominant of a global perspective Acceptance view. view outlined different above yields a startlingly Eurocentric role in did indeed play an important It becomes clear that Europeans in the vast the birth of world trade, but their role was as middlemen the supply side (except silver trade; they were prime movers on neither nor in of silver demand side the the worldwide America) Spain in the trade between the New market. Europeans were intermediaries amounts of silver traversed the Atlantic. and China. Massive World in the sixteenth it had reached European After soil, the Portuguese in dis became dominant seventeenth Dutch the and century century conserva of routes into Asia. Attman tributors of silver by a multitude that 150 tively estimates on an annual basis. Asia solutions for the arranging on her land, acting mainly tons of silver passed through Europe into in "The country which supreme reigned in world trade was Hol deficit problems own behalf in the Baltic area, the Levant . . .Even when other coun for other nations.

and Asia, but also acting tries needed precious metals Holland acted in many cases as a clearing . .. But centre and in the final stage as an exporter of precious metals. came Asian for the trade from the bulk of the precious metals required
5For Innes see Cartier in China, inflation 1981 and Wilkinson price see Blum 1983; and for Russia, 1980; for Turkey, see Sahillioglu 1980; 1956. for Japan,

see

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to (Attman 1986, p. 6). It is worthwhile Europe around the Cape" on ex tons Attman's estimate reflect momentarily of 150 of silver to Asia. Attman that his ported each year from Europe emphasizes estimates is excluded include only specie shipments from (i.e., bullion and that he has studied only port records (i.e., overland consideration) IfAttman trade is excluded). had included bullion shipments through ports, as well as specie and bullion shipments over land routes, his esti mate of west-to-east silver flows would have been far greater. He and partial nature of his estimates, this when citing his figures. rarely acknowledge it The Pacific the attention trade has not received leg of the China deserves. Writing of the period 1571-1620, TePaske says that an enor mous quantity of silver passed over the Pacific, especially out of Acap warned readers of the conservative but scholars on its way to China. and through Manila "Mexican silver also out to the islands in large sums, far exceeding the 500,000-peso In fact at the opening of the seventeenth limitation. century the drain was esti to the Orient of pesos from Mexico the through Philippines a 12 at 5 million mated with [128 tons] annually, pesos reported out in million pesos [307 tons] being smuggled 1981, 1597" (TePaske are shocking this alleged average of p. 436). These figures because ulco flowed pesos (128 tons per year) over the Pacific, is century, only 15% less than the 150 tons minimum Europe shipped to Asia on an annual basis. Moreover, pesos (307 tons) in 1597 ismore than double Attman's entire European leg of the journey of silver to China. like fantastic (1990, p. figures to some, but Barrett out a glaring discrepancy between Spanish American ures and estimated to Europe: exports production 5 million at the turn of the that Attman says the 12 million estimate of the These may seem 236) has pointed fig production seems to have

exceeded pesos (135 tons) per year. exports to Europe by 5.5 million Barrett reasons that this 5.5 million pesos must have either remained or been exported in America It will become through the Philippines.6 of such a vast amount of silver through clear shortly that exportation sense in global terms, while in the New its retention Manila makes does not. World How Using (1969, scholars? has the Philippines trade been perceived by Asian the Blair and Robertson collection of primary sources, Chuan that at least 50 tons of silver (2 million p. 79) estimates pesos)

6 trade in the sixteenth Cross century: "Quanti 1983, p. 420, talks of a vast smuggling ties of silver left the New World and Sacramento and the ports of Buenos Aires through as 6 million At the peak of these activities, the Manila Galleons. perhaps as much through to these channels from pesos per year (159,000 kg), or half the output of Peru, was diverted the Seville trade."

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the seventeenth century; throughout passed over the Pacific annually 1620 and precipitously after silver shipments did not decline slightly after 1640, as previously sig (i960, p. 250).7 How argued by Chaunu is 50 tons in relative terms? Fifty tons of silver equals the aver nificant to Asia and English age annual exports by Portugal plus the Dutch in the seventeenth combined century (Flynn was also the amount tons of silver that was Fifty trade (the Russian and Polish the entire Baltic through shipped to is interest It Attman Lithuanian markets), according (1986, p. 81). to contrast of the the trade, notoriety ing Portuguese historiographie in combination with that of the East India Companies, with the situa tion of the Manila galleons on the Pacific side; each may have shipped East India Companies and Gir?ldez 1994a). of silver annually, yet the Pacific trade approximately equal quantities is rarely mentioned. Manila had no purpose other than the trade in silver and silk. The in the middle of the seventeenth inhabitants 42,000 city contained as the same population (Wolf 1982, p. 153), approximately century and other cities with more broadly based Danzig, Marseille, deVries (Mols 1977, pp. 42-43; 1984, app. 1). Manila's circa 1650 included about 15,000 Chinese, 7,350 Span population 20,124 Filipinos.8 The Pacific route of silver to iards, and an estimated China was Spain's only avenue for entry into the lucrative Asian mar in the sixteenth because the trade out of Europe and seven ketplace teenth centuries was controlled first by the Portuguese and later by the Barcelona, economies Dutch.
more

Spain's Manila
than 420 years

galleons
ago.

initiated

the birth of Pacific

rim trade

us to imagine that the East India Compa predisposes into backward Asian in the early economies injected dynamism modern (Hamashita 1988, for example) period. Recent scholarship into the pre suggests that the European companies simply plugged of intra-Asian trade. The export of Japanese silver existing network provides a good example of this process. As was the case in the west to-east trade, first the Portuguese?in with Chinese competition junks Eurocentrism nies and Japanese
7Pierre

red-seal

ships?and

then

(after

1639)

the Dutch

played

covered only was rampant estimates 1995). 8

were based on study of the almojarifazgo Chaunu's conclusions duties, which the taxed portion of the trade. It is widely that smuggling known, however, in the Manila side of the Pacific provide trade, and sources from the Asian of silver exports far in excess of Chaunus numbers 1994a and (Flynn and Gir?ldez too, including "fifth column" times several

were in Manila, thousands of Japanese Phelan (1959, p. i78).There at home. Spaniards feared a Japanese Japanese Catholics fleeing persecution the Philippines, within of Japanese and expelled however, large numbers (Innes 1980, p. 59).

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2o6

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within

in this crucial Sino-Japanese intermediaries trade. Again Asia's marketplace, the European role is most accurately por not prime movers. were trayed as that of middlemen, Europeans intermediaries who could be? important, but potentially disposable, and in the case of the expulsion of the Portuguese from Japan in 1637, at the convenience of Asian were?replaced trading partners. the role of

China: The

The World's

Silver

Sink

and distribution of silver in the western early modern production has been studied extensively, but the world's biggest end hemisphere is routinely from the story. This is pecu eliminated customer, China, liar. Nobody would think of analyzing, say, the world oil industry today to the major attention without considerable paying oil-importing as an importer of silver was industrial China's dominance regions; at least as pivotal the birth of world trade as is arguably during the industrial world's dominance as importers of oil Godinho

in today's global as a China describes marketplace. (1963, 1:432-65) aptly a "vacuum cleaner" "suction pump" (bomba aspirante), that attracted silver globally for centuries. few scholars have continued Surprisingly, to investigate into a seemingly the nature of China's metamorphosis silver sink; Atwell bottomless (1977, 1982, 1986, 1988) provides per most to this bias. consistent the exception haps The market value of silver in Ming its value territory was double in the bimetallic in ratios reported elsewhere. This fact is reflected to Chuan "From the seventeenth 1592 century gold early (1969, p. 2): was exchanged at the rate of 1:5.5 to 1:7, while in for silver in Canton was rate to the thus that the 1:14, 1:12.5 exchange Spain indicating as in Spain." Divergent in China value of silver was twice as high for profitable prospects arbitrage have flowed out of that should theory predicts gold to the rest of the world, in it was undervalued relative China, where was over for and Western which silver, exchange Japanese relatively in China is precisely valued compared with the rest of the world. This to what happened from the middle of the fifteenth the middle of the bimetallic tremendous trade. Economic It is seventeenth century (Chaudhuri 1978 and 1986; Flynn 1986). to focus on silver to understand the underlying motivation of world trade: it was the elevated value of silver inside China that cre ated the opportunities for profit around the globe. Rather than see the to Europe's west-to-east flow of silver as a reaction trade deficit with in China that the cause of the trade centered and its Asia, we contend crucial ratios created

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causation was of Asian origin, to which tributary system. Demand-side the rest of the world reacted. can we be confident that the arbitrage argument outlined How trade-deficit above is superior to the traditional European hypothesis? to have The trade-deficit says that "money" would have argument to cover the trade imbalance. to Asia been transshipped "Money" here coins containing refers to all types of high-value recog internationally we have intrinsic content, such as gold and silver. However, nized already established Asian marketplace that gold and silver did not travel jointly into the as a balancing item called "money." New World silver did indeed travel from Europe to Asia, but it crossed paths with in the opposite direction?out of Asia and into the West. gold coming a not in the passive way balance trade deficit Abstract "money" did in the literature; rather, it was a specific com portrayed commonly to not traveled Asia, gold. Gold was one of the modity?silver?that was silver The cause of this trade rests for which exchanged. products to not with develop endemic the silver market, with developments ments in nonsilver markets. Moreover, the exchange of silver for gold was not a Europe-versus-Asia issue in any case. Japanese silver also flowed to China in exchange into for Chinese flowed gold, which to the West. In the same reasons that gold flowed Japan, for exactly in early modern sum, Europe was not the causal center trade; more "trade imbalance" was not the mechanism over, the East-versus-West was no "trade imbalance" for which to com trade. There world driving so long as we recognize that silver itself was the key commod pensate, for items?mostly and that it was exchanged ity distributed globally

silk and porcelain but also gold?from the Asian mainland. Causation was in the silver market and Japan located itself, with America the supply side and China dominating the demand side. anchoring China's metamorphosis from a paper-money system (dating from at was crucial. to a silver-based least the eleventh economy century) in China had reduced the value of this fidu Overissue of paper money cen to virtually nothing of the fifteenth ciary medium by the middle commerce of (Gernet 1982, p. 415). Daily required a medium as to worthless and silver the evolved money, paper exchange replace the metal of choice. Gold was too valuable for most ordinary transac for monetary tions, but copper coinage was a candidate preeminence. how Geiss silver defeated copper, in a passage (1979, p. 155) explains tury worth quoting at length:

The value of the coin lay in the metal, not in the mint. In that respect copper coins were hardly different from silver; each was valued as a

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piece of precious metal. While

purity, copper The coins only could way not. destruction.

silver could,
To assay the

if necessary, be assayed for

a copper copper coin content entailed was to melt its

to ascertain

the coin, and this would defeat the purpose of coining money. with coins of varying weight and metallic content in circulation,
ting a price in copper coins became a tricky business. The

But set

rice mer

chant would have to specify what kind of copper coin he had inmind, and the price of the each had a different value in the marketplace, merchant's rice depended on the type of coin offered in payment. How much simpler to set the price in silver, and that in fact is what hap and pened. Silver came to be the preferred medium of valuation
exchange.

Geiss's

is straightforward and compelling. Silver's gradual explanation to innocuous economy may seem relatively "conquest" of the Chinese some at first glance?just in "area studies"?but another detail this altered the direction of international fundamentally development commerce. It also influenced the structure of power among nations

the world. throughout to retard the intrusion of silver into The Ming tried repeatedly power. Silver's penetration (and from) the coastal centers of merchant was irresistible, however, in maritime and local governments regions taxes in silver. rulers that be Ming Gradually paid began specifying to silver and implemented the Single their resistance abandoned tax system around the 1570s (Huang 1974; Liang 1970). The Whip two first, system existing myriad things: specified Single-Whip into a single tax; second, all tax pay national levies were consolidated ments contained to be made in the form of silver. Considering that China of the earth's population by the seven perhaps one-fourth inhabitants teenth century, with urban centers of up to 1million (five to seven times greater than the largest cities in western the Europe), were

China's of China inevitably had global ramifications.9 are so we to far also about converted silver, system talking tributary more of the Conversion of the globe's population. than one-quarter to silver caused the metal's value to world's entity largest economic rest to in of the world. relative the China skyrocket "silverization" The mations couple transfor structural world silver trade involved early modern mere movement of a than the much that penetrated deeper to its most tons of the white metal lucra of hundred thousand

9 coastal region alone must have for silver along Chinas Demand i million more than inhabitants contained that Nanjing sidering in the late Ming 660,000 1979, p. 201). (Rodzinski period

con been significant, and Beijing around

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The process yielded prodigious profits for key individuals in the Andes institutions. and Japan to the streets of From mines force at each stage of the trade. European China, profit was the motive from intercontinental trade and perhaps middlemen profited mightily even more trade linkages, but the truly grand from the inter-Asian in the silver saga were that controlled the those entities profiteers and of its production: imperial Spain and the Tokugawa and the silver trade may have ironically, Conversely to of the Ming dynasty. the overthrow indirectly centers shogunate. contributed

Silver

and

the

Shogunate,

Power and Ming

Bases China

of

Imperial

Spain,

the Tokugawa

at in the history of the world was discovered The richest silver mine more in the Andes in Potos? (present-day than 15,000 feet altitude a one-way via pack months Bolivia), journey of two and one-half so was no pop at animal from Lima. Nothing there that altitude, grew was at in 1545. During ulation the time silver discovered the ensuing swelled to 160,000, about equal to that sixty years, Potosi's population of London or Paris.10 This would be the modern-day of, say, equivalent to a spot on Alaska's North Slope. Evidently people moving was unusual going on in Potos?. something Potosi's cerro rico (rich mountain) 60% of all may have produced cen in the world in the second half of the sixteenth the silver mined to naturally bountiful tury.11 Its veins were incredibly rich. In addition a series of new production most famous technologies?the deposits, to render the mercury-amalgam "patio process"?combined mines the world's lowest cost sources of silver (Jara Spanish American was particularly fortuitous 1966). This supply-side phenomenon it coincided rise in the with the extraordinary because chronologically value of silver caused by the Chinese demand-side forces culminating tax reform. The combination in the Single-Whip of low supply-side costs in Spanish America and Chinese-led demand-side production in silver's value inAsia generated probably the most spectac elevation ular mining boom in human history. This combination of supply-side and demand-side forces implied enormous profits. being No entity reaped greater rewards from the silver industry than the 20 million

10 DeVries 1984, app. 1. 11 states that Cross (1983, p. 404) of Peru accounted 1640s, the viceroyalty teenth and seventeenth centuries."

the decline "despite for 60% of the worlds

in the of Potos?, beginning in the six silver production

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allowed favored "private sector" entre crown, which wisely Spanish to to do so New World rather than attempting mines, preneurs operate itself.12 Instead, the crown took a substantial fraction of mining profits through taxes. The most famous tax was the quinto, a 20% severance tax on gross value, taxes as well.13 but there were many indirect to Hamilton (1934, p. 34), 27.5% of total registered pre According to the cious metals entering Seville between 1566 and 1645 belonged crown of Castile.14 Revenues overseas mines from the fiscal provided for the Spanish empire. foundation inhabitants Spain was a small country of perhaps 7.5 million by the middle of the sixteenth of France century, about half the population of 1600 (Elliott 1961, p. 57). Elliott (1961, p. 62) has described Castile as "an economy state closer in many ways to that of an East European like Poland, basic raw materials and importing exporting luxury prod of West European states." Carande ucts, than to the economies (1965, as backward others p. 340) and many classify Spain domestically,

the observation that the financial of the foundation substantiating was on resources based Iberian outside the Spanish empire peninsula.15 Mine and there was no comparable enormous, profits were profit so we conclude center elsewhere, that the New World mines supported but inevitable conclusions. that domestic China inside developments in world markets it could far beyond what elevated have been otherwise. The largest beneficiary of silver's high value must the institution have been the Spanish that reaped enormous crown, its taxation of control and of the low-cost New World profits by way centers of production. the Thus, silver-industry profits that financed were because China the Spanish had become the world's empire huge was silver customer. This that dominant China implies ultimately a shift within In for modern ab the power early Europe. responsible have already established the value of silver
12 The Peruvian Toledo, crown coast. which on the control the famous mercury mines near Huancavelica did directly to the reforms enacted Potosi's after 1573 was attributable resurgence by successful of the mercury-amalgam included process (Cross mining adoption

the Spanish empire (Flynn 1982). This view of Spain leads to surprising

We

1983, p. 402). 13 to far less than 20% in amounted For discussion of the quinto, which frequently and Cross 1972. reality, see Brading 14 to the crown represents far more than Note that the 27.5% of shipments belonging revenues of the crowns could be considered "profit," while 27.5% of the total profit. Much from private receipts before arriving at private net profit. huge costs had to be subtracted 15 and Lynch Scholars such as Elliott both (1984, 2:i), have (1961) long emphasized of the Spanish foundations discussion and domestic external empire. For a more complete not domestic, see Flynn and of empire was external, that the foundation of why we believe Gir?ldez 1995.

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sence of the "silverization" it is hard to imagine how Castile of China, wars for generations the simultaneous financed could have against in the Mediterranean; Protestant and Holland and Ottomans England in Europe, the New World, and Asia; and against the French indige nous peoples in the Philippines. As tens Even giant China could not prop up Spain indefinitely. on the Asian mainland, of tons of silver accumulated of thousands its value gradually fell there (as it had already been doing in the West and Japan) toward its cost of production. Imports eventually glutted even China's vast silver market. We of know that this portrayal is accurate because by about 1635 it took about silver's loss of value a half while of silver to buy an ounce of gold in China, 13 ounces it took 6 ounces of silver earlier 1979, p. 165). (Geiss century to other The value of silver also fell relative things, not just gold, is to say that price inflation occurred. "In the late sixteenth which . . Mexico the Ming and when silver from century. Japan entered to in of the value silver decline and great quantity, empire began set in, for as the metal its became more inflation abundant, buy trend affected the value of This ing power diminished. inflationary in had valued silver and all commodities; been silver lost everything its value. Ramifications the lives of almost of this change touched in the empire" 1979, p. 144). As silver lost value, (Geiss everyone was more to purchase items that had main silver money required as is defined the surrender of more tained their value. Price inflation set of items, so the descent of silver for a given pieces of money to its cost of production is what ultimately caused prices to inflate as in Europe to about in China the same extent and elsewhere 1979, pp. 159-64, 1991, (Cartier 198; Goldstone 1981, p. 464; Geiss p. 360). fall in the value of silver is a crucial issue because The unavoidable as in America, it descended closer to its cost of production each year were not due to unit of silver also shrank. Declining profits profit per were the inevitable result of the inefficient rather, they operations; laws of demand and supply (Doherty and Flynn 1989). The existence the trade, and the trade itself, in turn, of arbitrage profits motivated of such profits. Faced with declining led to the elimination profits from its silver industry, Castile could no longer afford its vast empire. China to the duration of the Spanish contributed empire, but even mightily not for silver could the eventual demand China's prevent prodigious of Spain. Spanish erosion of mine the decline profits and therefore in the 1590s, but large American silver production may have peaked with of silver still vanishing profits per ounce coupled production

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implied
p. 142).

a vanishing

overall

profit

level

by

this

time

(Flynn

1982,

on the quantity attention Historians tend to focus too much of silver shipments, while the participants themselves cared only about in a the profits associated with the trade. In the words of an executive we are on "Since item standard business each money joke today, losing sold, we simply must make up for it in volume!" Spain experienced cen in the late sixteenth and early seventeenth multiple bankruptcies the value of because turies, during a time of record silver production, to decline. When of silver continued profit per unit of a zero to of declines zero, per-unit product multiplication profit times zero must of total any quantity output yield profit. Spanish American zero profits per unit of product, mines were not yet yielding but the trend was clearly in that direction. Silver's declining value affected the crown so profoundly on Castile's that interest payments federal debt each unit of at least ten years' revenue" by 1623 (Parker exceeded total crown receipts. Spain van 1979, p. 188)?eventually as its ished as a serious Western silver basis eroded, but the Ibe power rian surge to power had been lengthy and impressive. The fact that to its is owed financial distant foundation China Spain's empire Ming a forceful reminder in the of what passes for local history that much alone?"the equivalent in terms of world history. early modern period can only be understood Since China's hunger for silver altered the balance of power in the it is logical to West crown, by transferring huge profits to the Spanish as a an Asian shift result of the inter-Asian trade in power suspect on continents. silver. The laws of supply and demand all As apply source in noted earlier, China's of silver the late sixteenth and primary as 200 centuries was Japan, which early seventeenth shipped as much tons per year at times (Innes this figure to p. 2). Contrast Attman (1986, p. 78) of 150 into Asia in the and Europe 1980, especially 1986, chap. 6; Tashiro the conservative average estimated by tons of silver flowing annually through

seventeenth the century. Who captured mine what and became of them? profits, Japanese an interesting The Tokugawa shogunate example of East provides crown and its like West the because, comparative history Spanish over the silver American control mines, gained shogunate Japanese to mines and sold China. has (Tashiro 1986, p. 3) Flynn (1991) argued that profits from silver mines financed the defeat of hundreds of rival feudal lords (daimyo), the consolidation of Japan. thereby permitting The shogun was forced to align himself with the merchant class, creat an Asian market-based with economy (not Western) ing indigenous roots. Unlike Spain, the Tokugawa invested heavily in agricultural and

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in withdrawing from the Chi urban infrastructure. Japan succeeded nese tributary system and even sent hundreds of thousands of troops in an unsuccessful attempt to conquer China. were in the Sino-Japanese silver important middlemen Europeans as the dominant and China the end trade, with Japan supplier customer. It is ironic that China's demand for Japanese silver gener from China's ated the profits used by the latter to withdraw tributary the help of profits from its silver mines, system. With Japan estab at roughly the same time that in Asia lished commercial capitalism Europe. Capitalism's capitalism was taking root in northwestern Japa nese track evolved from, and almost independently simultaneously in northwestern with, developments Europe. But where Japan used to in establish commercial Asia, Spain used mining profits capitalism to attack the powers of northwest mining emerging profits capitalist ern Europe. to imagine how either one of these develop It is difficult ments
silver.

could

have the

occurred

in the absence

of Chinese

demand

for

itself? Atwell impact of silver on China (1977, American has that silver played a crit 1982, 1986, 1988) long argued ical role in the commercial and political evolution of domestic China. on Geiss his Goldstone argument (1979), Basing (1991, p. 371) has on to Atwell's forces external Asia (i.e., Ameri challenged emphasis can treasure), struc instead that intra-Asian factors explain insisting What about and Qing China. tural changes within Ming Golds tone says that in late sixteenthdomestic inflation and early seventeenth price the financial basis of the Ming century China destroyed dynasty. to payments in a fixed Taxes formerly paid in rice had been converted of silver. But over a period of a century, silver itself had lost quantity of its value. Even if the quantity two-thirds of silver collected had it would still be true that the purchas increased during the late Ming, declined. The fiscal foundation of ing power of silver taxes definitely tax revenues declined con the Ming dynasty eroded because China's in terms of purchasing Institutionalization of fixed power. tinuously taxes silver (in terms of silver) during an era of global price inflation that led inexo may have created a fiscal crisis on the Asian mainland rably to overthrow of the Ming (accomplished by the Manchus in 1644). It appears

are not that the core arguments of Atwell and Goldstone its with American silver Along Japanese counterpart, incompatible. to contributed inside On the China. mightily positive developments in the victory of a rising and Japan were instrumental side, America to a silver zone. in converting merchant class that succeeded China

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Unhappily silver may Qing

for the Ming dynasty, however, fixing taxes in terms of have created a fiscal crisis that led to the emergence of the

dynasty.

Summary

and Conclusion

in of the city of Manila Truly global trade dates from the founding formed the first direct and permanent trade link between 1571, which conti America and Asia. From this date forward, all heavily populated nents traded with each other directly and indirectly in substantial vol umes. Silver was the sine qua non of this global trade. Spanish was the source of an estimated America 150,000 tons of silver between 80% of world production. The comprising perhaps was source of silver for around Japan, responsible 30% second-leading in the sixteenth and perhaps 16% in the of world output century was Not seventeenth century. entrep?t coincidentally, Nagasaki founded at virtually the same time as Manila. Silver was shipped to 1500 and 1800, the world's dominant end-customer, China, was produced in Asia or in the West. Much American Europe on regardless of whether it

silver traversed the Atlantic Ocean, passing to at least 150 its Asia. journey Europe exported through a significant to Asia, tons of silver annually portion of which passed most in calling attention Attman Amsterdam. has been vocal through to the Baltic carried eastward at least 50 tons per year. route, which Traditional Mediterranean-Levantine trade routes carried vast quanti route was biggest of the three. Direct ties of silver too, but the Cape trade out of Acapulco, and onward to China has been through Manila, evidence that 128 literature, despite mostly ignored in the scholarly tons annually may have been shipped through Manila in the late six centuries teenth and early seventeenth (and 307 tons in 1597, accord seems to indicate a to Recent research that the ing single source). Manila trade did not drop off after the 1620s or the 1640s, notwith of tremendous volume the claims of Chaunu (1960K The standing official trade rendered unofficial figures misleading. (smuggling) Chuan indicates that the Pacific (1969) leg of silver's journey carried cen more than 50 tons of silver per year throughout the seventeenth to and the the combined of Portugal tury, equal European shipments Dutch and English East Indies Companies. of this west-to-east The conventional flow of "money" explanation settle is that Europe had to send treasure to Asia its trade deficit with Asia. Europeans because the West silks, had to liked Asian spices,

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an appreciation and porcelain, but Asians had not yet developed for wares. at view is This conventional flawed for least three European reasons. First, it was not "money" or "treasure" that flowed out of to Asia; Asian Europe, but silver. Silver, not gold, was attracted gold and sometimes in the oppo flowed copper (both "money" substances) site direction, into Europe. It is best to look at factors affecting the for silver in its own right, rather than confusing supply and demand the issue by aggregating this unique substance with other metals as "money," which to have played a passive, is alleged reactive role. the role of Japan needs to be considered. Second, Japan was the Asian of America and Spain (country con (site of production) counterpart combined. We prefer to focus on the supply side trolling production) and the demand side of the silver industry, irrespective of which hemi centers of production, contained rather than to visualize global sphere trade as an abstract East-West issue. Third, in there is a basic anomaly the treatment in the conventional of America view. Since treasure is to have flowed to Asia from Europe of a European because alleged trade deficit, then why has the Pacific trade not been explained in the same terms? We know of no one who argues that the Manila galleons carried huge quantities of treasure to Asia because of America's insa an in turn tiable appetite for Asian which caused American goods, trade deficit with Asia. as passive "money" that adapts to trade precious metals Depicting diverts attention imbalances from the central issues. Silver was pro duced for profit. It migrated from points of production (Japan and to in end-customers within America) China). (mostly Developments China have been largely ignored in the diverse literatures dealing with and early modern global flows of precious metals price inflation, yet China was the pivotal country. International business entities would not have shipped tens of thousands of tons of silver to China unless induced that Profits from the silver trade significant profits activity. were immense for two reasons. First, on the demand side, China's and fiscal systems had substantially converted from a paper monetary to time tax reform of silver the of the money system by Single-Whip the 15 70s. Conversion of more than one-quarter of the world's popula tion (and its government) to silver customers contributed to the rise in on the price of silver in China. the supply side, extraordinarily Second, rich silver mines were discovered in Japan and Spanish America, and new technologies costs. Supply and demand forces reduced production created disequilibrium: its value in silver's value in China was double the rest of the world. This is what drove the silver trade?the birth of not some abstract notion of trade deficits. world trade?and

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Both the Spanish empire and Tokugawa shogunate captured a sub stantial portion of silver profits from mines controlled. they Spain's war and empire. The shogun mines financed a century of multifaceted used mine profits to finance consoli (and his immediate predecessors) from the economic of dation of Japan and withdrawal domination powers of north nearly crushed the emerging capitalistic was established a while market-oriented economy Europe, and demand within The laws of that the guaranteed Japan. supply to cost its is would decline of which of silver price slowly production, is that profit per ounce A direct effect of this process what happened. of Spain. of silver was steadily squeezed out. This caused the decline China. western Spain too, but gold and copper pro Japanese silver-mine profits plummeted duction soared in Japan in the second half of the seventeenth century. in infrastruc in improvements The shogun had also invested heavily ture, so there was no decline of Japan in the seventeenth century. in the value of silver in the early modern decline The worldwide into global price inflation. When translated money directly period in value with respect to goods, the result is called price infla declines tion. Geiss this process clearly for late Ming (1979, p. 158) explains the purchasing infusions of silver diminished China: "Such massive like any commodity, lost its high value Silver, power of the metal. in turn affected the the usual demand. This when supply exceeded structure in for of the the of almost prices empire, prices everything was tied to the value of silver." Transportation technology permitted interconnec connection the world. The of silver markets throughout tion of world markets that the fall in silver's value was guaranteed turn in that which price inflation was a global phenom implies global, enon in all areas on a silver standard. con to tie the African We have consciously any attempt neglected it seems that the tinent into the global trade of silver. Nonetheless, swapped huge numbers of (mostly smuggled) African slaves

Portuguese Brazil:

directly for (mostly smuggled) New World silver via the Rio Plata in

recorded imports for Buenos Aires (the During the decade 1616-1625, sum of legal and confiscated pesos, while goods) were 7,957,579 exports for the same period amounted to only 360,904 pesos. The annual trade deficit, which was met with smuggled silver from Upper
Peru, amounted to at least three-quarters of a million pesos per year.

Between 1619 and 1623, port officials seized a total of 3,656 slaves from illegally landing vessels; their market value in Lima would have approached two million pesos. These numbers do not include those

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Flynn & Gir?ldez: Silver andWorld Trade slaves legally imported and those which evaded port officials. The size illicit of these figures clearly indicates a flourishing and considerable trade up the Rio Plata from the 1580s until probably the 1640s. Dur ing its most successful years, no less than 1-2 million pesos (roughly 25,000 to 50,000 kg) flowed illegally from the mines of Peru out through the port of Buenos Aires. These totals equalled from 15% to 30% of the silver output of Potos?. (Cross 1983, p. 414)

217

Not

all of them plantation information sug (1995) provided demographic were Africans domestic slaves that between and 10,000 20,000 gesting as we have in Mexico in the early seventeenth century. Since, City was in the America financed enterprise by the world argued, Spanish all the slaves Palmer laborers. has

remained

in Brazil,

nor were

of the Portuguese silver market (as were the activities traders), and since China was the dominant factor in the global silver market, then it appears that the trans-Atlantic slave trade was heavily, though indi in Ming fiscal influenced and by monetary rectly, developments In other words, end-customer China China. created profitable trade in the New World, and profitable trade in America created the demand a global view of early modern for African slaves. Clearly, trade may be overlooked. suggest many research topics that might otherwise on in the impact of Europeans Scholars have long been interested rest recent in of the world). The focus has shifted Asia years, (and the scholars who increasingly however, among Asian especially emphasize the dominant historical role of the intra-Asian These marketplace. as having participated in a vast and sophis revisionists view Europeans ticated existing Asian commercial rather than as having network, to Asia. backward This essay is in the revi introduced modernization sionist camp; it even suggests a reversal of causality. The economic influ impact of China on the West was far greater than any European ence on Asia in the early modern period. We agree with the sentiments of Moloughney and Xia (1989, p. 68), who protest that "late Ming China was not an outpost of a Seville-centered world economy."16 Per haps a reversal of this logic would be more accurate: Seville was an out

16 and Xia have criticized Atwell for insisting on the Moloughney (1989, pp. 67-68) silver in early modern Chinese of American importance history. The basis of the Molough is empirical: the influx of American silver peaked during, rather counter-argument ney-Xia in the 1640s. This essay is consistent than before, the decline of the Ming with both sides in the decline of this debate. American silver may have been crucial of the Ming dynasty not because its abundant of its scarcity but precisely because accumulation the depressed macro value of silver. Views that are contradictory from the perspective of conventional economic logic become compatible in terms of our cost-of-production model.

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that had not one center but three (Beijing on post of a world economy the demand and America and Japan on the supply side). side, in Asia in early modern The physical presence times of Europeans in ?and of Asians the simultaneous absence the West?has physical to the impact of led scholars to pay attention understandably mostly on the West Asia. Superior naval firepower may explain the presence in Asia, economic of Europeans but the most powerful undercurrents ran in the opposite direction. Without the Chinese demand for silver, there would have been no finance mechanism for the Spanish empire. there would have been no century-long Without China, price revolu tion. Without the birth of world trade would been have China, to some unknowable extent. But China did convert, both delayed across all con and fiscally, to silver. This fact reverberated monetarily tinents force trade and gave birth to world in shaping the modern world. in 1571, providing a powerful

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