July 27th 2022

PA.018 | The great intermediation'. Sourcing American silver for the early-modern global economy (16th-18th centuries)

Parallel Sessions
The circulation of American silver in exchange for goods across the world was the engine of the growth of global trade in the early modern period. European intermediation of such exchanges between Asia and America was a differential factor leading to the Great Divergence before 1820. Several episodes in the economic history of Europe relate to the flow of silver through her economy, like the sixteenth century “Price Revolution”, the “Seventeenth Century Crisis”, the expansion of liquidity through the 18th century. Although economic historians have examined the effects of such flows, the incorporation of silver and gold in the general circulating medium of European economies, their role in the development of the economy, the concurrence with other means of payments and the transition to different modern monetary regimes of the 19th century remain to be explained. Because the bulk of silver extracted throughout time was coined the historiography is ambiguous about whether this was another commodity or money. Despite evidence on the contrary, since Earl Hamilton’ seminal articles, most of economic historians have overlooked the private ownership of the silver shipped out of Spanish America. In fact, the return of silver exports was a massive flow of merchandise, capital goods (slaves) and luxuries to America. In possession of superior naval transportation, and colonialism, Europeans intermediated goods and silver in both ends of the world commerce profiting from large mark-ups on merchandise and arbitrage on precious metals. Different European nations set up different institutions to participate, finance and carry on in this trade. Nations with a relatively more difficult access to the American silver sources developed fiduciary instruments and banks to save precious metals and direct silver to the Baltic, the Levant and Asia for trade. In so doing they developed a financial infrastructure and means of payments that fostered monetization and improved liquidity without jeopardizing their growing East India trade. Financial historians have identified this path with more efficient, superior, financial development. America and Asia, in turn, performed with metallic currencies and lacked banks and consequently were considered financially backwards. Bills of exchange were much less prevalent in these trades – if not unknown unless dealing within schemes such as the chartered East India companies. Agents turned to traditional contracts like respondentia and sea loans to ultimately exchange goods for silver in America, and silver for goods in Asia. In so doing they were financing the expansion of global trade. Historians of different European merchant communities involved in the Atlantic and Pacific commerce have found that there was a more diversified use of instruments and institutions varying according the specifics of the trade in question. Merchants of different national origins alternated instruments depending on the trade they were involved in. This panel examines the nature of transactions, contracts and instruments used to channel the American silver back into Europe in return for merchandise and capital goods (slaves); this will help to understand the mechanisms that financed Europeans’ commerce with the New World and with Asia and the role of their intermediation in the growing global trade. // Rules of engagement: paper presentation 15 mins; debate at the end of the session; short questions for claritication only
B - History of Economic Thought, Methodology, and Heterodox Approaches
B17 - International Trade and Finance
F - International Economics
Brilli Catia - University of Insubria
Alejandra Irigoin - London School of Economics (LSE)
The liquidity problem and the sophistication of the credit market in Habsburg Spain, 1568-1601
Monserrat Cachero - Universidad Pablo de Olavide [Sevilla]
Since the 15th century Europe was assisting to what scholars named as Financial Revolution. The phenomenon alludes to the increase on credit volume and in the sophistication of financial instruments on some of the most important financial centres [Dickson (1967), Tracy (1985), Neal (1990), Munro (2002), Fratianni and Spinelli (2006) or Hammarström (2011)]. From Genoa and Venice to Antwerp or London, historical records evidence a wide range of financial instruments that were frequently discounted on secondary credit markets. Indeed, notarial sources show how debt claims - short or long term, private or public- were commonly accepted in exchange of merchandise, for clearing other debts, and even, as contribution in a partnership. This is indeed an enormous hint to help us truly understand the nature of Early Modern trade. Certainly, the acceptance of debt claims to adquire commodities, to clear debts or as a contribution in a partnership raised the document to the status of money. What individuals were doing when trading debt claims at the notary office was literally creating money without State control to be used in commercial exchange when buying commodities, constituting trading companies or clearing other debts. Although the trading of debts on these secondary markets was private, it required the presence of a notary to legally enforce the act. In the case of Spain, the official name given by notaries to negotiations of credit was cesión (cession). The cession document contained the names, professions and personal details of the original holder of the debt claim and the endorsee together with information about the debts whose claim was transferred. The notarial records document a rich and heterogeneous market with a wide range of loans suitable for trading on the secondary market by individuals with very different profiles. Sailors, peasants, artisans, merchants, priests even women participated in the financial market trading and paying with debt claims without discrimination about gender, nationality or social status. The development of these secondary markets is a crucial variable to explain commercial expansion in the Age of Discoveries. From the outset, the nature of Atlantic Trade compelled the design of flexible terms for the repayment of debts. In sea loans for instance, merchants used tornaviaje (return trip) or cuando llegare la flota de Indias (with the arrival of the fleet) as final term for repayment. This flexibility together with very common adverse circumstances such as enormous distances, difficulties in communication or delays in the fleet, frequently forced individuals to turn to the secondary credit market. This paper studies the role played by these secondary credit markets on the development of the Atlantic Trade during the second half of the 16th century. We focuses on Seville as an international financial and trading centre. Why Seville? Only a few years after the discovery of America, inspired by the Portuguese, the Spanish monarchy designed a novel trade system with the New World centered on Seville. The city became the gateway between Europe and America when in 1503 it was designated the sole port for the Atlantic, becoming the point of departure and arrival for entire fleet. The development of the regional economy and city’s communications was remarkable. Seville became an international metropolis, every year receiving individuals and products from Europe ready to set sail to the New World. During the first half of the 16th century alone, more than fifty armadas crossed the ocean from Seville to Santo Domingo with the purpose of pacifying and colonizing the new lands. In this same period, approximately 50,000 Europeans migrated to the American colonies. Throughout the century, the colonization process intensified, and demand forces merged, diverting the center of gravity to Seville, connecting European supply and American demand, Mediterranean and Atlantic trade. The city then became bottle-neck, channeling commercial flows to the New World. Certainly, building up America required a great amount of resources. The establishment of cities and political institutions, the development of societies, markets or religious centers could not be done for free. During the second half of the 16th century when the flow of gold and silver intensified agents constantly recourse to the credit market. This paper wonders why, it was silver insufficient? How was America financed? What was the contribution of these secondary credit markets to the Atlantic Trade? Was the Iberian Peninsula only a hallway for American silver? By studying the evolution of credit in Seville, we can analyze the European expansion to the New World. Information from the different credit contracts will allow us to connect places and people, observing the flow of products and money between Europe and America and their impact on prices. This paper aims to shed light on this phenomenon describing the financial instruments used, their degree of sophistication, the enforcement, and the possibilities for renegotiation. Throughout the analysis of different cases of study we can estimate the size and evolution of this financial market and the role played by this active and flexible credit system in the intensification of commercial expansion during the 16th century.
Commercial credit in the Spanish colonial trade: rise and fall of the sea loan, 1700-1825
Xabier Lamikiz - Universidad del Pais Vasco
This paper analyzes the financing of the Carrera de Indias in the late colonial period and differs from the historiography in that it adopts a transatlantic perspective. We examine the main instrument of credit employed in the Spanish Atlantic, the respondentia (sea loan). The route studied is the one that linked Cadiz with the coasts of Peru and Chile. We trace the evolution of the loans, showing their boom before the 1778 free trade and their decline after 1785. To elucidate the origin of the money and the creditors’ place of abode, we have looked into both notarial sources and business correspondence. Our research shows that Peruvians and Chileans financed about a quarter of the capital lent in Cadiz. Transoceanic social networks played a key role in allocating and managing credit.
Actors and circuits of the Mexican silver trade in the Spanish Atlantic (1754-1796)
Arnaud Bartolomei - Université Côté d'Azur
In the second half of the 18th century, the Atlantic trade in Mexican pesos fuertes was dominated by three groups of merchants who each controlled a segment of the market (or commodity chain) linking producers to consumers. The so-called 'American' or 'Creole' merchants (in fact metropolitans living in America and registered with the Consulado de Mexico) controlled the transport of silver from their place of production to the Jalapa fair or the port of Veracruz; the cargadores, registered with the Cádiz consulate, transported the bulk of the pesos fuertes across the Atlantic and sold them in Cádiz; and finally, the colonies of foreign merchants in Cádiz were responsible for their redistribution from Cádiz to their places of consumption in Europe, the Mediterranean or East Asia. Although there were exceptions from this path of sharing the silver trade, it can be considered that each group of actors benefited a monopoly, or monopolistic situation, in the segment of the market they controlled. After presenting the different documentary evidence that validates this overall picture of the silver trade in the Hispanic Atlantic, my contribution proposes to reflect on the formal and informal mechanisms used by the actors to create such monopolistic situations and to defend them against their competitors. Indeed, the formal privileges obtained by the Consulados of Cadiz and Mexico City, and the role of these two institutions in their defense and extension, undoubtedly played an important role in the structuring of these circuits. However, they are not sufficient to explain the whole of this organization, since a large part of these privileges were abolished on the occasion of the reforms of the comercio libre in 1778 and 1789, and the foreign merchants of Cadiz never benefited from any formal privilege to protect their trade. Thus, if each of these three groups was able to impose and defend its dominance in the segment of the silver trade that it controlled, it was also because it had a certain number of commercial assets that made its intermediation unavoidable (close links with the political authorities, insertion in merchant networks that made it possible to secure the transport of piastres and the circuits of payment - based on the circulation of libranzas in Mexico and bills of exchange in Europe).
Risk and Rents in the Pacific Run: The Institutional and Financial framework of the Manila silver trade, 1668-1830
Juan Rivas Moreno - London School of Economics (LSE)
From the establishment of the city of Manila in 1571 until 1815, the Spanish Philippines served as Asia’s gateway to the silver of the Americas. Capitalising on the large endowments of silver in America, a large intermediary trade developed, carrying an estimated 50-70 tons of coined silver across the Pacific, in exchange for Asian textiles and raw materials. From the late-17th century until its official demise in the early-19th century, this trade was based on the twin foundations of the annual Manila Galleon, and the credit originated by hundreds of legacy funds that issued sea loans. This paper seeks to understand the logic behind the business model of the Pacific run, organised around the single annual vessel, by reconstructing the capital markets that financed the trade between Asia and Spanish America. It includes a census of over 250 identified legacy funds and over 530 sea loan contracts to understand the flows of cash within Manila, and places them in the broader context of the trade in silver pesos across the world, and the political economy of the Hispanic Monarchy, in order to ascertain the motivation of the agents involved in the institutional formation process, and the rationale behind the organisational models they devised. It is argued that the great demand for Spanish American silver pesos in Asia made the coins into a trade good that lacked any substitutes, creating a monopsonic market from the perspective of New Spain, and thus skewing the bargaining power in favour of New Spanish wholesale retailers that intermediated between the mine, the mint, and the fair. Parallelly, the emergence of professionalised legacy funds in Manila tied the welfare of the city inextricably to the interest rates charged by the sea loans on the Pacific run. In a bid to maintain prices at reasonably high levels, Manileños responded to the monopsonic structure of the market by exploiting the one-Galleon system as a way of achieving a dual objective: maintaining prices high by avoiding glutting the market - thus eliminating market risk - and guaranteeing a level of cooperation amongst the Galleon freighters in their dealings with New Spanish wholesale retailers.
Silver-Laden Junks: the Amoy trade and the inception of Manila’s “Chinese factory”
Guillermo Ruiz-Stovel - KU Leuven
With the opening of Qing ports in 1684, the island of Amoy (Xiamen), in Southern Fujian, became the commercial hub of the Chinese coastal and South China Sea trades, with hundreds of “passenger merchants” (huoke 貨客) sojourning in Manila each trade season. In 1758, the construction of the Alcaicería de San Fernando dramatically altered the centuries old logistics of the Manila junk trade, concentrating Chinese merchants and their goods in a fortified and heavily guarded octagonal structure that served as warehouse, lodging, and wholesale market, thereby secluding and segregating itinerant merchants from their Christian Chinese partners who resided in the Chinese Quarter and other suburbs of Manila. The alleged “factory” was the private initiative of the galleon merchant Fernando Mier y Noriega, constructed with state funds. As such, it was mired in controversy from the outset, and Noriega was sued by the “city and commerce” of Manila, accused of extorting the Chinese. The resulting depositions have left a micro-level picture of what economic cooperation between junk merchants and galleon traders was like at mid century. In this paper, I complement the fragmentary picture of business practices and organization at Amoy with the evidence from the Alcaicería, which in turn serves as context for the evidence of financial arrangements between galleon traders, resident Chinese Christians, and the passenger-merchants of San Fernando, extant in notarial records from the decade after its inception.
Central European merchants in Spanish Atlantic trade and financial circuits during the 18th century
Klemens Kaps - Johannes Kepler Universitat Linz
The structure of transatlantic trade in the institutional framework of Spain’s colonial trade system, the so-called Carrera de Indias, is usually described according to the model of a double dependence or asymmetry: on the one hand, Spanish-American markets depended on imports of manufactured goods destined for both consumption and further processing in various production branches, and on the other hand, peninsular Spain, from whichthese products were supposed to be shipped to America, had to resort to European suppliers in order to satisfy American demand. In the historiography devoted to this well-known subject, a double shift could be observed in recent years, that is, firstly, emphasis was placed on productive spaces that formed part of this exchange and which had been left aside in older research. Secondly, the emphasis was placed on the mercantile actors and their practices for this mercantile business, leaving aside the categories of nation-states or (proto-)national economies that marked the most pioneering studies on this topic. My paper is based on these historiographical considerations and observations and proposes an empirical case study that attempts to shed light on two questions: 1) what was the role of Central European merchants in this mercantile business; 2) what were the mercantile strategies and instruments for integrating into the financial and commercial circuits that supported this mercantile business; and 3) what were the mercantile strategies and instruments for integrating into the financial and commercial circuits that supported this mercantile business? In order to carry out such an approach, I analyze a sample of Milanese and Bohemian merchants settled in the Andalusian port city of Cadiz between 1670 and 1830, focusing on their mercantile activities and transactions linked to the colonial traffic in the Atlantic. We will therefore analyses the involvement of these actors in the export or rather re-export of different products to Spanish America, the dominant part of which came from the regions of origin of these merchants, that is Lombardy and Bohemia. However, what is of interest in this analysis is not so much the productive-material aspect, but the financial circuit in which this trade was inserted. Specifically, I will analyze contracts of respondentia bonds, obligations, and insurance contracts that have been identified in the Provincial Historical Archive of Cadiz in relation to Milanese and Bohemian merchants between 1670 and 1830. In this first analytical step, I will analyze the networks of intermediaries, the terms of payment and, above all, the mode of payment (if, when, in what way, what types of delays and/or problems existed). This analysis can be deepened in the case of one of the companies in the sample - the Greppi company - for which we have family letters that allow us to reconstruct the business and family logics in relation to these contracts. In a second step, this analysis will be extended to the bills of exchange protested before Cádiz notaries either by or against the merchant agents in the sample in order to understand the wider financial circuit of these merchants, i.e. beyond colonial trade. In the end, I try to conclude where the credit sources for the export of (Central) European products to America were located, the degree of success or failure of such business, and the strategies and financial instruments to carry out such business.
A Matter of Practice. The Instruments of the Genoese Intrusion in the Spanish Silver Trade (1750-1800)
Brilli Catia - University of Insubria
The paper explores the strategies implemented by the Genoese investors and brokers to make a profit from the silver trade in the second half of the eighteenth century. Despite the relative marginalization experienced by the Genoese bankers in the international financial system following the Habsburg monarchy’s repeated bankruptcies, many intermediaries coming from the republic continued to find in the overseas Spanish trade an interesting source of income. Historians have deconstructed the investments of the Genoese aristocracy and the way in which the Genoese expatriate community was able to survive in the main hubs of the Spanish transatlantic trade such as Cadiz and Lima, but the connections established between the two shores of the Atlantic and the financial instruments used to play in such different markets await for further investigation. This work tries to reconstruct these dynamics by examining the merchant letters of great investors in the republic and connecting them with the information contained in a variety of lawsuits concerning illicit foreign trades as well as controversies between Genoese intermediaries established in Spain and their partners. The aim is to shed light on the ways in which this often overlooked minority group kept a share of the silver trade by illuminating the strategies used to minimize risks and maximize profits, the web of collaborations established in both Europe and the Indias, and the role of overseas agents/consignees in stimulating this trade and ensuring the payment.
Sourcing and Mobilizing American Silver from Genoa in the Early Seventeenth Century
Benoit Maréchaux - Universidad Complutense de Madrid
Between 1570 and 1640, the Genoese merchant-bankers were among the major specialists in gathering and redistributing American silver in Europe. The instruments and institutional arrangements that underpinned this activity are still poorly understood, however, largely because scholarship has focused on loans to the Spanish Crown, without sufficiently considering the way that the Genoese merchant-bankers carried out their operations from a private perspective. The Genoese ability to source and benefit from American silver highly depended on the way they used specific financial instruments and mobilized business, political, naval, and social resources in order to mobilize money across other European and global spaces. This article explains the entrepreneurial and naval organization set up by the Genoese moneymen to mobilize Spanish bullion in the Mediterranean Sea, or in other words, to carry out financial activities paid for with American bullion. It proposes to shed light on two fundamental aspects of the problem by analyzing the correspondence and private accounting books of early seventeenth-century major Genoese companies operating between Madrid and Genoa (those of Giovanni Luca Pallavicini and the Spinola). First, it will describe some of the main instruments and institutions (bills of exchange, the Piacenza fairs, the galley squadrons, the San Giorgio’s bank, the general partnerships, the contracts with carriers, etc.) that the Genoese mobilized in order to obtain, transfer and exchange silver between Spain and Italy. It will also explain why – following the testimony of the own bankers – this was determinant to secure financial operations and make them profitable. Relying on account books, we will then provide new information on the exchange of silver in Genoa, whether as a commodity or as a means of payment (e.g.: used to wipe out debts, buy bills of exchange or acquire gold). Connecting the silver trade in Genoa with the asientos carried out by the Genoese financiers will allow a better understanding of the institutional and business arrangements that fostered the European intermediation of American silver.
"De las contratas del dinero". Instruments for trade finance in the early-modern global economy
Alejandra Irigoin - London School of Economics (LSE)
This paper examines the nature of transactions, contracts and instruments used to channel the American silver back into Europe in return for merchandise and capital goods (slaves); this will help to understand the mechanisms that financed Europeans’ commerce with the New World and with Asia and the role of their intermediation in the growing global trade.