New World silver and the rise of capitalism

[Louis Proyect <lnp3@xxxxxxxxx>]

Jack Weatherford, "Indian Givers: How the Indians of America
Transformed the World":

At the time of the discovery of America, Europe had only about $200
million worth of gold and silver, approximately $2 per person. By
1600 the supply of precious metals had increased approximately
eightfold. The Mexican mint alone coined $2 billion worth of silver
pieces of eight.

The silver coins flowing through Europe at first promised to
strengthen the feudal order, but in the end they forged whole new
classes and changed the fortune of many countries. The new coins
helped to wash away the old aristocratic order in which money games
could be played only by the privileged few; massively larger amounts
of money opened up new games to new people. Even though all the
silver and gold went into Spain, it did not stay there. From Spain
the money spread throughout Europe. The Hapsburg monarch Charles V
occupied his throne both as emperor of the Holy Roman Empire and as
the king of Spain; this facilitated the spread of the money from
Spain to the Hapsburg holdings in the Spanish Netherlands and across
Germany, Switzerland, Austria, and the Italian states. Three-fifths
of the bullion entering Spain from America immediately left Spain to
pay debts, mostly those incurred by the profligate monarchy; as
Cervantes wrote in Don Quixote, Spain had become "a mother of
foreigners, a stepmother of Spaniards".

Precious metals from America superseded land as the basis for wealth,
power, and prestige. For the first time there was enough of some
commodity other than land to provide a greater and more consistent
standard by which wealth might be measured. This easily transported
and easily used means of wealth prepared the way for the new merchant
and capitalist class that would soon dominate the whole world.

The impact of this new money showed clearly in the port of Antwerp,
which had belonged to the Duke of Burgundy before he became Emperor
Charles V. Writing in 1560 about the great trading city of Antwerp, a
Florentine diplomat, Ludovico Guicciardini (1483-1589), wrote that he
found in the market "innumerable kinds of merchandise, precious
stones, and pearls of various quality and prices, which the Spaniards
bring from their West Indies and from Peru called 'America,' and the
New World." In particular they bring in "a large amount of gold, of
pure silver in bullion and hand-wrought, which is likewise for the
most part from that new and happy world". By 1555, Antwerp had grown
to a city of over 100,000, even though at the time of the discovery
of America it probably still had less than 20,000.

Jean Bodin (1530-1596), a French lawyer, writing in 1568, first
realized the inflationary effect of the American money. He concluded
that there were several reasons for the rising prices in the
sixteenth century but that "the principal and almost the only one
(which no one has referred to until now) is the abundance of gold and
silver, which is today much greater in this kingdom than it was four
hundred years ago".

The tremendous volume of new currency influenced the economy of all
Europe. For example, in Naples there were only 700,000 ducats in
circulation and in savings in 1570. In less than two centuries, by
1751, there were eighteen million ducats. These eighteen million
ducats, moreover, could be used many times in a year for various
types of transactions. The total number of ducats used in buying and
selling would be approximately 288 million. Similarly, in France,
which received its wealth from the New World much later than Spain,
approximately 120 million francs circulated in 1670, but by 1770
there were two billion in circulation, a fifteenfold increase in a
century.

The American silver traveled around Europe very quickly, and it made
a quick and heavy impact on the economy of neighboring parts of the
Old World, such as the Ottoman Empire, which controlled Turkey and
Greece and most of the Near East, North Africa, and large parts of
eastern Europe in the sixteenth century. The Ottoman silver akce coin
suddenly fell to half its former value before the end of 1584 in a
bout of uncontrolled inflation. The coin lost its important place in
world trade and never regained it. After centuries of struggle
between the Moslems and the Christians, American silver probably did
more to undermine Islamic power for the next half a millennium than
did any other single factor.

In The Wealth of Nations, Adam Smith discussed at great length the
impact of American silver in causing worldwide inflation. He wrote
that within a generation of the opening of the mines of Potosi, the
silver from them started an inflation that lasted for approximately a
century and caused silver to fall to its lowest value in history. The
new wealth in the hands of Europeans eroded the wealth of all the
other countries in the world and allowed Europe to expand into an
international market system.

The silver of America made possible a world economy for the first
time, as much of it was traded not only to the Ottomans but to the
Chinese and East Indians as well, bringing all of them under the
influence of the new silver supplies and standardized silver values.
Europe's prosperity boomed, and its people wanted all the teas,
silks, cottons, coffees, and spices which the rest of the world had
to offer. Asia received much of this silver, but it too experienced
the silver inflation that Europe underwent. In China, silver had
one-fourth the value of gold in 1368, before the discovery of
America, but by 1737 the ratio plummeted to twenty to one, a decline
of silver to one-fifth of its former value. This flood of American
silver came to Asia directly from Acapulco across the Pacific via
Manila in the Philippines, whence it was traded to China for spices
and porcelains.

Asia experienced a temporary gain from the discovery of America, but
Africa suffered. America had all the silver and gold Europe needed,
and this destroyed the African gold markets and the dependent trade
networks. Cities such as Timbuktu and the Songhai Empire of which it
was a part crumbled as merchants abandoned the ancient trade routes.
To replace the Mediterranean trade of cloth, beads, leather, and
metals upon which the Africans had become dependent, the Africans now
had only one commodity that the Europeans wanted-slaves. For
centuries the African merchants had sold a small but steady number of
slaves to the Middle East, but with the decline of their traditional
European trade and with the opening of America, the slave trade
became a boom. The Africans thus became victims of the discovery of
America as surely as did the American Indians.

In the first few years after the discovery of Potosi, the Spaniards
brought in six thousand African slaves to work the mines, but they
soon died at that high altitude. The colonial administration then
turned to the Indians to work the mines without pay as a form of
forced labor, or mita as it was called in Quechua, the Inca language.
Indians had to walk from hundreds of miles away in every part of the
highlands of Peru and Bolivia. They worked for approximately one in
each four years, even though by law they were not required to work
more than one year in each seven. Each miner's family supplied him
with his food and with the candles he needed for light inside the
mines. The Indians entered the mines on Monday morning and did not
emerge again until Saturday. Each man had to chisel out his daily
quota of one and a quarter tons of ore. He then loaded it in bags of
a little over one hundred pounds and carried it up to the main
tunnel. This required that he drag and push the bag through a
labyrinth of small tunnels barely large enough to squeeze through,
and then carry it up ladders at odd angles for hundreds of feet. In
the first decades of this system, four out of five miners died in
their first year of forced employment in the mines.

In the modern era, with a battery-powered light on my head, I had
great difficulty maneuvering through the older channels even without
trying to haul a quintal of silver ore. As I climbed ladders from one
level to another, mud constantly dripped down on me from the boots of
the man ahead of me. I had to grasp the rungs tightly to keep my hand
from slipping off in the mud, but slivers of wood then embedded
themselves in my fingers. When I could walk, I was constantly
standing in water up well above my ankles, and even though I wore
modern miner's boots, the moisture still managed to get through to my
socks. All the while the temperature inside was so cool that I could
see my breath whenever the dust subsided enough for the air to clear.
All of this was made all the more difficult by the thin air at well
over fourteen thousand feet above sea level, almost three times the
altitude of Denver, Colorado.

Despite these working conditions, if the Indian worker failed to fill
his quota the Spanish overseers forced him to work on Sundays, held
him over for a longer mita, or forced his family to pay in goods or
other services for the work he had not been able to do. Thus several
members of a family, including women and children, often worked to
fulfill what was supposedly the obligation to supply a single person.

Even though the Indians made possible the greatest economic boom in
the history of the world and even though this boom gave rise to the
great capitalist world economy, they still languish in poverty. They
live in a struggling country in which prices sometimes increase by
the hour, and where the value of a day's pay can plummet by a fourth
overnight.

Today a second mountain rises up from the valley floor next to Cerro
Rico in Potosi. This artificial mountain arose from the millions of
tons of crushed rock residue that remained after the precious metals
were extracted. The people call this artificial mountain Huakajchi,
the mountain that cried. This new structure of refuse is a giant
mountain turned inside out and made from the core of Cerro Rico. It
too is being mined now, or more precisely "picked over." Now that the
wealth of the Cerro Rico has been nearly exhausted, the Indian women
who still live in the area have turned to searching through the
mountain of rubble for small bits of metal that were overlooked in
the original mining. They are forced to scavenge from the garbage of
their ancestors.

Potosi, the city which supplied the silver for the rise of
capitalism, is now out of silver, and the miners mine only tin, but
the price of tin has dropped to almost nothing as the plastic
revolution spread around the world. The great mint of Potosi that
swallowed eight million Indian miners and turned out billions of
coins from the sixteenth century into the twentieth century operates
now as a museum for visiting schoolchildren. Bolivia has no more
coins. Now robbed of its wealth, Bolivia uses only cheap paper money
that must be imported. In the middle and late 1980s, with inflation
running at an annual rate fluctuating between 2,000 and 15,000
percent, paper currency in denominations of millions of pesos printed
by companies in Germany and Brazil composed Bolivia's main import.

Europe also paid the price for its greed. Spain, the greatest
beneficiary of the Potosi silver, soon bankrupted itself. By 1700,
Spain was reduced to a minor power of neither economic nor political
importance, and even the Hapsburg dynasty lost Spain to the Bourbons.
Since then Spain has continued to sacrifice occasional generations of
its young men in bloody foreign and civil wars. Spain, which had
ruled an empire larger than any in the world today, degenerated into
a poor hinterland of Europe. It lost huge chunks of its American
holdings to Portugal, England, France, and even Sweden and the
Netherlands, and the admittedly vast areas to which Spain retained a
nominal claim were being ransacked by merchants and companies from
England, the Netherlands, and France. By the time of the American
Revolution, the English-speaking colonies of North America had more
Mexican silver dollars circulating within them than Spain itself did.

The silver of Potosi helped to destroy Spain, almost as though it
carried with it a curse written in the blood of the legions of
Indians who died to supply it. And the curse did not stop with Spain.
The money passed into the hands of the greedy Dutch, British, and
French traders and pirates, and for a while it seemed that they were
able to use it more wisely and profit from it more than the Spanish
had done. They used it to build large modern navies and armies that
colonized almost every country in the rest of the world, dividing
Africa, Asia, and the Pacific islands among themselves to make vast
new empires on which the sun never would set. But they also fought
with one another in war after war. By the middle of the twentieth
century, these empires too had fallen, leaving the British no better
off than the Spanish. By then, economic power on the European
continent had shifted to Germany and the Soviet Union, the two
nations that had participated in and profited the least from the
blood money of Potosi.

Cerro Rico stands today as the first and probably most important
monument to capitalism and to the ensuing industrial revolution and
the urban boom made possible by the new capitalist system. Potosi was
the first city of capitalism, for it supplied the primary ingredient
of capitalism-money. Potosi made the money that irrevocably changed
the economic complexion of the world.

--
Louis Proyect, lnp3@xxxxxxxxx on 03/01/2002

Marxism list: http://www.marxmail.org



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