CHAPTER 1
Silver, Mercantilism, and the Impulse for Colonization
Silver and gold coin and bullion permeated world markets as never before in the sixteenth and seventeenth centuries. The inexorable current of metals, especially of silver, from the Americas and Japan permanently transfigured some of the most important political, economic, and social institutions in Europe and across much of the globe. Affluent merchants and companies in select cities in western Europe controlled much of the global silver trade; in silver, they finally possessed a good as highly in demand in China and India as Eastern goods were in Europe. The economic advantages accruing to these merchants and companies, and the political advantages accruing to the countries to which they belonged, were extraordinary. Silver and gold not only provided merchants and consumers with the means to buy an unprecedented abundance of merchandise abroad, but also financed the steady accretion of state power and military might in the several Atlantic-bordering countries in Europe—all resulting in the formation of a highly competitive, multinational, European managed, global empire of silver.
The underlying significance of silver and gold to the state and economy—to power and to plenty—provoked a calculated scramble between rival European empires for the two coveted metals. By the early decades of the seventeenth century, in England especially, a new way of thinking about the state and economy—an order retrospectively labeled mercantilism—came to dominate most ideas and conversations about the general benefits but also potential pitfalls of foreign trade. This development carried vast political implications. Mercantilism emphasized the role of the state in managing trade so that silver and gold accumulated and remained within national borders. For this accumulation of metals, a favorable balance of trade was most necessary. Exports, on balance, must exceed imports. Only through an overall trade surplus would silver and gold enter into and, on balance, remain within a country. Mercantilists no doubt were a heterogeneous bunch, particularly in England, deviating broadly on specific strategy and policy prescriptions. All agreed, however, on the balance-of-trade doctrine, and all agreed that while the incoming current of silver and gold was not the end in itself, it was in fact the optimum way to enhance national power, prestige, security, and plenty. Money was the means to secure the empire’s chief ends.
Mercantilism, as such, became as good as sacrosanct in most economic and political thought in seventeenth-century England. An often tense alliance of merchants and government—of capital and coercion—propagated, debated, and furthered the predominant principles and divergent methods of mercantilism, resulting in the growth of an English empire that functionally benefited both groups, broadly considered. Colonial plantations, in particular, ranked among the most emphasized and prized of all mercantilist assets.
On the eve of the sixteenth century, the world’s most lucrative trade routes passed through the Middle East into Asia. Porcelain, silk, cotton, and spices traversed hundreds and thousands of miles, with gold and silver mediating, as money, a great bulk of this exchange. Most gold derived from West Africa, with smaller sums produced in Nubia, Ethiopia, Zimbabwe, the Balkans, the Caucasus, and Southeast Asia; the bulk of silver derived from central Europe, with smaller quantities arriving from Persia and China.1 China and the Indian subcontinent each boasted populations exceeding one hundred million; China comprised the world’s largest economy even after the recent turn of the Ming dynasty inward from maritime trade and overseas exploration. The Ottoman Empire governed a smaller, more diffuse population of twenty million; Ottoman rule, nonetheless, brought much-needed stability and order to overland trade routes, its merchants profiting signally as middlemen between Asia and Europe, even before the empire’s conquest of Constantinople in 1453.2
Europe was on the periphery of this semiglobal trade network. Approximately seventy million inhabited the continent, but with a much lower population density than either China or India and with greater political fragmentation than any other core region. During the High Middle Ages, however, and accelerating through the fifteenth century, Europe’s political and economic condition had rapidly altered. Its princes fielded larger armies and mobile artillery, rendering castles and fortifications less secure while encouraging more consolidated political units capable of extracting the money required to finance these new, more expensive methods of warfare. European rulers still extracted the bulk of their revenue from tribute, fees, and land rents, but an increasing number of states now also turned to merchants for loans, and some foresaw tremendous revenue potential in taxing commercial enterprise.3 European market activity had widened considerably in recent centuries; more and more capital accumulated in mercantile hands, centered in towns and cities where a budding class of urban and semiurban artisans and tradesmen signaled the onset of a more commercial future for Europe. Though the peasantry remained rural and mostly bound to the land, the older feudal world in which static, immobile landholdings constituted the highest form of wealth was already giving way gradually to a commercial world demanding fluid capital and a vibrant merchant class for the distribution of international goods, setting the stage for silver and gold to supplant land as the most desired commodity in Europe.
Italian merchants, centered largely in Venice, handled vast sums of gold and silver coin in this period. Like the Ottomans, they functioned as commercial middlemen, but between the rest of Europe and the Near East. The continent’s overall trade deficit compelled Venetian merchants to exchange European silver to the eastern Mediterranean for imported goods; from there the silver either remained in Ottoman hands or flew further eastward to Persia and onward to India. Europe’s silver supply derived primarily from the mines of present-day Germany, Austria, and the Czech Republic; Hungary and Transylvania supplied moderate quantities of gold, but most gold in Europe arrived from the western Sudan and Gold Coast (Ghana), traveling by caravan across the Sahara, passing through Ottoman hands before settling in Italian trading centers, whence the gold then dispersed across continent.4 The stock of gold in Europe had grown appreciably since the late twelfth century, and though European silver mining languished in the fourteenth and early fifteenth centuries, the continent’s silver mines rebounded after the 1460s in spectacular fashion, providing merchants and consumers with still more currency to purchase imported goods.5
The sequence from here is very familiar. Anxious to break Venetian and Muslim hegemony over currency and trade, Portuguese explorers ventured southward to and around Africa: first to access gold from the western part of the continent, and then to establish direct commerce with the Indies. Bartolomeu Dias rounded the Cape of Good Hope in 1488, and only ten years later Vasco da Gama reached the Indian subcontinent. The length of the voyage still made it too impractical to carry on the bulk of Europe’s trade with the East; that trade carried on via overland routes long afterward. The inexpediency of the route around Africa had already prompted Christopher Columbus to undertake a daring voyage west for Asia. But in doing so, Columbus inadvertently unveiled an entirely new world, presaging a shift in the balance of power from Mediterranean to Atlantic. Less than three decades later, Ferdinand Magellan’s crew had circumnavigated the globe for Spain.
Few could have anticipated the coming monetary windfall for Spain in the Americas, yet Columbus and his men received strong hints of it on their inaugural voyage. Many of the people they encountered, Columbus said, wore “very large rings of gold on their arms and legs,” claiming knowledge of lands possessing “more gold than earth.” Within only a three month period, Columbus’s diary mentioned the quest for gold no fewer than sixty-five times. “Without doubt,” he concluded one month after his arrival, “there is in these lands a vast quantity of gold”: enough, indeed, to return to Spain in 1493 with 64 pounds of the metal; his second voyage the following year yielded 141 pounds of gold.6
The invasion of Mexico in 1519 revealed the main fount of this gold. In the thriving metropolis of Tenochtitlan, Hernán Cortés and his men saw in the marketplaces, temples, and palaces such indescribable marvels of gold and silver ornaments, buckles, headdresses, necklaces, and other jewelry, that they could hardly believe their eyes: “things so remarkable,” Cortés wrote, “that they cannot be described in writing nor would they be understood unless they were seen”—“so marvelous,” indeed, “that considering their novelty and strangeness they are priceless.”7 An indigenous witness later recounted that upon seeing these items, “the Spaniards grinned like little beasts and patted each other with delight … they hungered like pigs for that gold.”8 Cortés quickly seized Montezuma and “begged him to show me the mines,” demanding a ransom of gold for the emperor’s release. After a months-long struggle, Tenochtitlan fell in 1521, the city razed and the gold confiscated, with a fraction of the treasure, the “Royal Fifth,” consigned to the Habsburg king of Spain, while “the remainder of the gold was divided up between myself [Cortés] and the other Spaniards.”9 The conquerors then spent the next several years scouring the land for gold, notoriously wreaking havoc over much of the population to satiate their lust for more metal. Francisco Pizarro’s conquest of Peru in 1532 inflicted similar cruelties.
Before the 1530s, treasure confiscation accounted for most of the incoming silver and gold to Spain from the Americas, and of that treasure, gold dominated (about 70 percent of the total value of metals).10 But the land now subdued, the Spaniards soon opened up mines across the country, forcibly recruiting many of the natives to labor under extraordinarily strenuous and often deadly conditions. Mining, at first, was mostly limited to the areas surrounding Mexico City, where the first colonial mint opened in 1536. But in April 1545 the Spaniards uncovered massive silver deposits deep in the mountain of Cerro Rico, at Potosí in Upper Peru (present-day Bolivia). The following year, the Spaniards discovered additional silver deposits at Zacatecas, about 350 miles northwest of Mexico City, and a decade later, smaller silver deposits at Guadalajara, in western Mexico. A major technological advancement, the separation of silver from other minerals via mercury amalgamation, further aided the boom after 1557, together with the amazingly convenient discovery of mercury deposits in Peru in 1563. A second mint opened at Lima two years later.11 Mines in Ecuador, Chile, and New Granada (northern South America) also produced copious quantities of gold, but already by the 1570s, silver made up almost 90 percent of the value of all metals shipped from the Americas to Spain.12 The silver mountain at Potosí alone supplied an estimated 40 percent of all the silver mined in the world between 1580 and 1610.13
The numbers indeed are staggering. Between 1550 and 1700, the total output of silver from American mines exceeded 40,000 tons.14 This is all the more incredible when one considers that at the beginning of the sixteenth century, the estimated global stock of silver was only 35,000 tons.15 The data from the eighteenth century is even more impressive, approaching 50,000 tons of newly extracted silver. Peru, for many decades, was the source of most silver production, but after 1670 Mexico jumped ahead and accounted for almost 70 percent of all American silver production in the eighteenth century.16 It was the most phenomenal expansion in the silver money supply in all of human history: “so prodigious a quantity of gold and silver,” observed Montesquieu, “that all we had before could not be compared with it.”17
The principal coin to emerge from this profusion of American silver was the “piece of eight,” so-called because it had the silver content of eight reals (royals), a smaller denomination of Spanish money (see figure 1). The coin contained roughly one ounce of silver and measured nearly four centimeters in diameter. Between 1520 and 1700, the silver extracted from American mines supplied nearly 1.5 billion pieces of eight: Mexico produced 634 million and Peru 855 million.18 Through the entire colonial epoch, from 1520 to 1810, the sum totaled 3.5 billion pieces of eight.19 The coin utterly dominated commercial exchanges in America and the Atlantic, and even in the Pacific, China, and other parts of East Asia. Though most European nations, including England, required the reminting of foreign coin before entering domestic circulation, English law never prohibited the use of foreign money w...
