WHAP; Early Modern Era

Topic 4.5, I

Find the author’s thesis & evidence to back it up. Stop to answer the questions in the boxes!

Born with a “Silver Spoon”: The Origin of World Trade in 1571

Journal of World History, Vol. 6, No. 2 © 1995 by University of Hawai‘i Press

DENNIS O. FLYNN AND ARTURO GIRÁLDEZ

University of the Pacific
THE birth of world trade has been described by C. R. Boxer (1969, p. 17) in the following terms:
“Only after the Portuguese had worked their way down the West African coast, rounded the Cape of
Good Hope, crossed the Indian Ocean and established themselves in the Spice Islands of Indonesia and
on the shore of the South China Sea; only after the Spaniards had attained the same goal by way of
Patagonia1, the Pacific Ocean and the Philippines—then and only then was a regular and lasting
maritime connection established between the four great continents.”
Although Boxer does not pick a specific date for the birth of global trade, his logic leads us to
choose 1571—the year the city of Manila was founded. Manila was the crucial entrepôt 2 linking
substantial, direct, and continuous trade between America and Asia for the first time in history.
For our purposes, global trade emerged when all important populated continents began to
exchange products continuously—both with each other directly and indirectly via other continents—
and in values sufficient to generate crucial impacts on all the trading partners. It is true that there was an
important intercontinental trade before 1571, but there was no direct trade link between America and
Asia, so the world market was not yet fully coherent or complete. To understand the global significance
of the direct Pacific trade between America and Asia—international trade history’s “missing link”—it
is useful first to discuss the underlying economic forces that motivated profitable world trade in the
early modern period. The singular product most responsible for the birth of world trade was silver.
1. What are the author’s arguments/thesis?
●

THE ROLE OF SILVER IN CREATING A WORLD MARKET

More than the market for any other commodity, the silver market explains the emergence
of world trade. China was the dominant buyer of silver. On the supply side, Spanish America
(Mexico and Peru) erupted with unprecedented production of the white metal. Conservative
official estimates indicate that Latin America alone produced about 150,000 tons of silver
between 1500 and 1800 (Barrett 1990, p. 237), perhaps exceeding 80% of the entire world production
over that time span (Cross 1983, p. 397). Despite America’s dominance in silver production over three
centuries, Japan may have been the primary exporter of silver to China in the late sixteenth and
early seventeenth centuries, shipping perhaps 200 tons per year at times3. Japanese silver
exports, however, fell off dramatically in the second half of the seventeenth century (Innes 1980, chap.
6). “The amount of Japanese silver poured into foreign trade in the heyday of Japan’s overseas
trade, 1615 to 1625, through Japanese, Chinese, Dutch, Portuguese and other ships, reached
tremendous value, roughly estimated at 130,000-160,000 kilograms—equal to 30% or 40% of
the total world silver production outside Japan. This explains why European and Asian
merchants were so enthusiastic about developing trade with Japan” (Iwao 1976, p. 10). The central
point is that all the great silver mines in both hemispheres sold ultimately to China.
We intentionally emphasize the role of China—and its tributary system (Hamashita 1988)—in
the silver trade because the scholarly literature in general has neglected this pivotal country,
certainly in terms of recognizing China as a prime causal actor. The literature on New World

1 The Southernmost region of South America

2 Center of trade
3 According to the calculations made by Barrett (1990, p. 225), Japan may have produced about 30% of the world’s silver in the sixteenth century and
around 16% in the seventeenth century.

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treasure is huge and multifaceted—sometimes focusing on sixteenth-century price inflation (the

price revolution), and/or the rise and fall of Spain, and/or the transition from feudalism to
capitalism, and many other issues—but it is unified in one central respect: it focuses virtually
exclusively on Europe as the fulcrum4. Europe is considered the epicenter of early modern
commercial activity. The sixteenth-century price revolution, for example, is mostly thought of in
terms of European price inflation, when in reality it was a global phenomenon. In a remarkably
clear summary of China’s participation in the global price revolution, Geiss (1979, p. 144) provides
an exception to the normal Eurocentric focus: “In the late sixteenth century, however, when
silver from Mexico and Japan entered the Ming empire in great quantity, the value of silver
began to decline and inflation set in, for as the metal became more abundant its buying power
diminished. This inflationary trend affected the values of all commodities; everything had been
valued in silver and silver lost its value. Ramifications of this change touched the lives of almost
everyone in the empire.”

2. Explain the significance of silver in China, Japan and Europe from what you have read so far.
●
<Cut from pg. 203-205 of the original article>

Manila had no purpose other than the trade in silver and silk. The city contained 42,000
inhabitants in the middle of the seventeenth century (Wolf 1982, p. 153), approximately the same
population as Barcelona, Danzig, Marseille, and other cities with more broadly based economies
(Mols 1977, pp. 42–43; deVries 1984, app. 1). Manila’s population circa 1650 included about 15,000 Chinese,
7,350 Spaniards, and an estimated 20,124 Filipinos. The Pacific route of silver to China was
Spain’s only avenue for entry into the lucrative Asian marketplace because the trade out of
Europe in the sixteenth and seventeenth centuries was controlled first by the Portuguese and later
by the Dutch. Spain’s Manila galleons5 initiated the birth of Pacific rim trade more than 420 years
ago.
Eurocentrism predisposes us to imagine that the East India Companies injected dynamism
into backward Asian economies in the early modern period. Recent scholarship (Hamashita 1988, for
example) suggests that the European companies simply plugged into the preexisting network of
intra-Asian trade. The export of Japanese silver provides a good example of this process. As was
the case in the west to-east trade, first the Portuguese—in competition with Chinese junks and
Japanese red-seal ships—and then (after 1639) the Dutch played the role of intermediaries in this
crucial Sino-Japanese trade. Again within Asia’s marketplace, the European role is most
accurately portrayed as that of middlemen, not prime movers. Europeans were important, but
potentially disposable, intermediaries who could be— and in the case of the expulsion of the
Portuguese from Japan in 1637, were—replaced at the convenience of Asian trading partners.

3. What was the importance of Manila in the Philippines?

●
4. Describe the role of Europeans in the Indian Ocean.
●

CHINA: THE WORLD’S SILVER SINK

The early modern production and distribution of silver in the western hemisphere has
been studied extensively, but the world’s biggest end customer, China, is routinely eliminated
from the story. This is peculiar. Nobody would think of analyzing, say, the world oil industry
today without paying considerable attention to the major oil importing industrial regions;
China’s dominance as an importer of silver was arguably at least as pivotal during the birth of
world trade as is the industrial world’s dominance as importers of oil in today’s global
marketplace. Godinho (1963, 1:432-65) aptly describes China as a “suction pump” (bomba
4 The important place that changed things.
5 Ships used by Spain (15th-17th c.).

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aspirante), a “vacuum cleaner” that attracted silver globally for centuries. Surprisingly, few
scholars have continued to investigate the nature of China's metamorphosis into a seemingly
bottomless silver sink; Atwell (1977, 1982, 1986, 1988) provides perhaps the most consistent exception
to this bias.
The market value of silver in Ming territory was double its value elsewhere. This fact
is reflected in the bimetallic6 ratios reported in Chuan (1969, p. 2): “From 1592 to the early
seventeenth century gold was exchanged for silver in Canton at the rate of 1:5.5 to 1:7, while in
Spain the exchange rate was 1:12.5 to 1:14, thus indicating that the value of silver was twice as
high in China as in Spain.” Divergent bimetallic ratios created tremendous prospects for
profitable arbitrage trade7. Economic theory predicts that gold should have flowed out of
China, where it was undervalued relative to the rest of the world, in exchange for Japanese and
Western silver, which was relatively over valued in China compared with the rest of the world.
This is precisely what happened from the middle of the fifteenth to the middle of the
seventeenth century (Chaudhuri 1978 and 1986; Flynn 1986). It is crucial to focus on silver to understand
the underlying motivation of world trade: it was the elevated value of silver inside China that
created the opportunities for profit around the globe. Rather than see the west-to east flow of
silver as a reaction to Europe’s trade deficit8 with Asia, we contend that the cause of the trade
centered in China and its tributary system. Demand-side causation was of Asian origin, to
which the rest of the world reacted.
How can we be confident that the arbitrage argument outlined above is superior to the
traditional European trade-deficit hypothesis? The trade-deficit argument says that “money”
would have to have been transshipped to Asia to cover the trade imbalance. “Money” here
refers to all types of high-value coins containing internationally recognized intrinsic content,
such as gold and silver. However, we have already established that gold and silver did not
travel jointly into the Asian marketplace as a balancing item called “money.” New World silver
did indeed travel from Europe to Asia, but it crossed paths with gold coming in the opposite
direction—out of Asia and into the West. Abstract “money” did not balance a trade deficit in
the passive way commonly portrayed in the literature; rather, it was a specific commodity—
silver—that traveled to Asia, not gold. Gold was one of the products for which silver was
exchanged. The cause of this trade rests with developments endemic to the silver market, not
with developments 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 for
Chinese gold, which flowed into Japan, for exactly the same reasons that gold flowed to the
West. In sum, Europe was not the causal center in early modern trade; more-over, the East-
versus-West “trade imbalance” was not the mechanism driving world trade. There was no
“trade imbalance” for which to compensate, so long as we recognize that silver itself was the
key commodity distributed globally and that it was exchanged for items—mostly silk and
porcelain but also gold— from the Asian mainland. Causation was located in the silver market
itself, with America and Japan anchoring the supply side and China dominating the demand
side.

5. Explain the author’s argument about silver & the silver trade in the preceding paragraphs.
●

China’s metamorphosis from a paper-money system (dating from at least the eleventh
century) to a silver-based economy was crucial. Over-issue of paper money in China had
reduced the value of this fiduciary medium to virtually nothing by the middle of the fifteenth
century (Gernet 1982, p. 415). Daily commerce required a medium of exchange to replace the worthless
paper money, and silver evolved as the metal of choice. Gold was too valuable for most ordinary
transactions, but copper coinage was a candidate for monetary preeminence. Geiss (1979, p. 155)
6 A bimetallic standard is a monetary system in which a government recognizes coins composed of gold or silver as legal tender. The bimetallic standard (or bimetallism) backs a
unit of currency to a fixed ratio of gold and/or silver.

7 The buying and selling of currency. Usually people do this to take advantage of places where currency is worth more.
8 A trade deficit occurs when a country's imports exceed its exports during a given time period. It is also referred to as a negative balance of trade.

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explains how silver defeated copper, in a passage 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 piece of precious
metal. While silver could, if necessary, be assayed for purity, copper coins
could not. To assay a copper coin entailed its destruction. The only way to
ascertain the copper content was to melt the coin, and this would defeat the
purpose of coining money. But with coins of varying weight and metallic
content in circulation, setting a price in copper coins became a tricky business.
The rice merchant would have to specify what kind of copper coin he had in
mind, each had a different value in the marketplace, and the price of the
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 happened. Silver came
to be the preferred medium of valuation and exchange.

Geiss’s explanation is straightforward and compelling. Silver’s gradual “conquest” of the

Chinese economy may seem relatively innocuous to some at first glance—just another detail in
“area studies”—but this development fundamentally altered the direction of international
commerce. It also influenced the structure of power among nations throughout the world.
The Ming tried repeatedly to retard the intrusion of silver into (and from) the coastal
centers of merchant power. Silver’s penetration was irresistible, however, and local
governments in maritime regions began specifying that taxes be paid in silver. Gradually Ming
rulers abandoned their resistance to silver and implemented the Single-Whip tax system around
the 1570s (Huang 1974; Liang 1970). The Single Whip system specified two things: first, myriad existing
national levies were consolidated into a single tax; second, all tax payments were to be made in
the form of silver. Considering that China contained perhaps one-fourth of the earth’s
population by the seventeenth century, with urban centers of up to 1 million inhabitants (five to
seven times greater than the largest cities in western Europe), the “silverization” of China
inevitably had global ramifications.9 China’s tributary system also converted to silver, so we are
talking about far more than one-quarter of the globe’s population. Conversion of the world’s
largest economic entity to silver caused the metal’s value to skyrocket in China relative to the
rest of the world.
The early modern world silver trade involved structural transformations that penetrated
much deeper than the mere movement of a couple of hundred thousand tons of the white metal to
its most lucrative market. The process yielded prodigious profits for key individuals and
institutions. From mines in the Andes and Japan to the streets of China, profit was the motive
force at each stage of the trade. European middlemen profited mightily from intercontinental
trade and perhaps even more from the inter-Asian trade linkages, but the truly grand profiteers
in the silver saga were those entities that controlled the centers of its production: imperial Spain
and the Tokugawa shogunate. Conversely and ironically, the silver trade may have contributed
indirectly to the overthrow of the Ming dynasty.

6. Why did China demand so much silver?

●
7. What were the positive and negative impacts of China’s demand for silver?
●

SILVER AND THE POWER BASES OF IMPERIAL SPAIN, THE TOKUGAWA SHOGUNATE, AND MING CHINA

The richest silver mine in the history of the world was discovered at more than 15,000
feet altitude in the Andes in Potosí (present-day Bolivia), a one-way journey of two and one-
half months via pack animal from Lima. Nothing grew at that altitude, so there was no
population at the time silver was discovered in 1545. During the ensuing sixty years, Potosí’s
population swelled to 160,000, about equal to that of London or Paris.10 This would be the
9 Demand for silver along China’s coastal region alone must have been significant, considering that Nanjing contained more than 1 million inhabitants and Beijing around 660,000 in the late
Ming period (Rodzinski 1979, p. 201).

10 Cross (1983, p. 404) states that “despite the decline of Potosí, beginning in the 1640s, the viceroyalty of Peru accounted for 60% of the world’s silver production in the six-
teenth and seventeenth centuries.”

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modern-day equivalent of, say, 20 million people moving to a spot on Alaska’s North Slope.
Evidently something unusual was going on in Potosí.
Potosí’s cerro rico (rich mountain) may have produced 60% of all the silver mined in
the world in the second half of the sixteenth century. Its veins were incredibly rich. In addition
to naturally bountiful deposits, a series of new production technologies—the most famous
being the mercury-amalgam “patio process11”—combined to render Spanish American mines
the world’s lowest cost sources of silver (Jara 1966). This supply-side phenomenon was particularly
fortuitous because it coincided chronologically with the extraordinary rise in the value of silver
caused by the Chinese demand-side forces culminating in the Single-Whip tax reform. The
combination of low supply-side production costs in Spanish America and Chinese-led demand-
side elevation in silver’s value in Asia generated probably the most spectacular mining boom
in human history. This combination of supply-side and demand-side forces implied enormous
profits.

8. What forces combined to increase the importance and value of silver?

●

No entity reaped greater rewards from the silver industry than the Spanish crown,
which wisely allowed favored “private sector” entrepreneurs to operate New World mines,

rather than attempting to do so 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,
but there were many indirect taxes as well. According to Hamilton (1934, p. 34), 27.5% of total
registered precious metals entering Seville between 1566 and 1645 belonged to the crown of
Castile13. Revenues from overseas mines provided the fiscal foundation for the Spanish empire.
Spain was a small country of perhaps 7.5 million inhabitants by the middle of the
sixteenth century, about half the population of France (Elliott 1961, p. 57). Elliott (1961, p. 62) has
described Castile of 1600 as “an economy closer in many ways to that of an East European
state like Poland, exporting basic raw materials and importing luxury products, than to the
economies of West European states.” Carande (1965, p. 340) and many others classify Spain as
backward domestically, substantiating the observation that the financial foundation of the
Spanish empire was based on resources outside the Iberian peninsula. Mine profits were
enormous, and there was no comparable profit center elsewhere, so we conclude that the New
World mines supported the Spanish empire (Flynn 1982).
This view of Spain leads to surprising but inevitable conclusions. We have already
established that domestic developments inside China elevated the value of silver in world
markets far beyond what it could have been otherwise. The largest beneficiary of silver’s high
value must have been the Spanish crown, the institution that reaped enormous profits by way of
its control and taxation of the low-cost New World centers of production. Thus, the silver-
industry profits that financed the Spanish empire were huge because China had become the
world’s dominant silver customer. This implies that ultimately China was responsible for a
power shift within early modern Europe. In the absence of the “silverization” of China, it is
hard to imagine how Castile could have financed simultaneous wars for generations against the
Ottomans in the Mediterranean; Protestant England and Holland and the French in Europe, the
New World, and Asia; and against indigenous peoples in the Philippines.

11 This consisted of mixing silver ore with mercury on a large flat surface which helped to separate the silver from other rock or metals.
12 The crown did directly control the famous mercury mines near Huancavelica on the Peruvian coast. Potosí’s resurgence after 1573 was
attributable to the reforms enacted by Toledo, which included successful adoption of the mercury-amalgam mining process (Cross 1983,
p.402).
13 Note that the 27.5% of shipments belonging to the crown represents far more than 27.5% of the total profit. Much of the crown’s revenues
could be considered “profit,” while huge costs had to be subtracted from private receipts before arriving at private net profit.

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9. Explain the author’s view of Spain & how China had a significant impact on it.
●

Even giant China could not prop up Spain indefinitely. As tens of thousands of tons of
silver accumulated on the Asian mainland, 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 know that this portrayal of silver’s loss of value is accurate
because by about 1635 it took about 13 ounces of silver to buy an ounce of gold in China, while
a half century earlier it took 6 ounces of silver (Geiss 1979, p. 165). The value of silver also fell
relative to other things, not just gold, which is to say that price inflation occurred. “In the late
sixteenth century. . . when silver from Mexico and Japan entered the Ming empire in great
quantity, the value of silver began to decline and inflation set in, for as the metal became more
abundant, its buying power diminished. This inflationary trend affected the value of all
commodities; everything had been valued in silver and silver lost its value. Ramifications of this
change touched the lives of almost everyone in the empire” (Geiss 1979, p. 144). As silver lost value,
more silver money was required to purchase items that had maintained their value. Price
inflation is defined as the surrender of more pieces of money for a given set of items, so the
descent of silver to its cost of production is what ultimately caused prices to inflate in China to
about the same extent as in Europe and elsewhere (Carrier 1981, p. 464; Geiss 1979, pp. 159–64, 198; Goldstone 1991,
p.360).
The unavoidable fall in the value of silver is a crucial issue because each year as it
descended closer to its cost of production in America, profit per unit of silver also shrank.
Declining profits were not due to inefficient operations; rather, they were the inevitable result of
the laws of demand and supply (Doherty and Flynn 1989). The existence of arbitrage profits motivated
the trade, and the trade itself, in turn, led to the elimination of such profits. Faced with declining
profits from its silver industry, Castile could no longer afford its vast empire. China contributed
mightily to the duration of the Spanish empire, but even China’s prodigious demand for silver
could not prevent the eventual erosion of mine profits and therefore the decline of Spain.
Spanish American silver production may have peaked in the 1590s, but large production coupled
with vanishing profits per ounce of silver still implied a vanishing overall profit level by this
time (Flynn 1982, p.142).
Historians tend to focus too much attention on the quantity of silver shipments, while
the participants themselves cared only about the profits associated with the trade. In the words
of an executive in a standard business joke today, “Since we are losing money on each item
sold, we simply must make up for it in volume!” Spain experienced multiple bankruptcies in the
late sixteenth and early seventeenth centuries, during a time of record silver production,
because the value of each unit of silver continued to decline. When profit per unit of a product
declines to zero, multiplication of zero per-unit profit times any quantity of output must yield
zero total profit. Spanish American mines were not yet yielding zero profits per unit of product,
but the trend was clearly in that direction. Silver’s declining value affected the crown so
profoundly that interest payments on Castile’s federal debt alone - “the equivalent of at least
ten years’ revenue” by 1623 (Parker 1979, p. 188) - eventually exceeded total crown receipts. Spain
vanished as a serious Western power as its silver basis eroded, but the Iberian surge to power
had been lengthy and impressive. The fact that Spain’s empire owed its financial foundation to
distant Ming China is a forceful reminder that much of what passes for local history in the early
modern period can only be understood in terms of world history.

10. Explain the factors that led to the decline and fall of the Spanish Empire.
●

Since China’s hunger for silver altered the balance of power in the West by transferring
huge profits to the Spanish crown, it is logical to suspect an Asian power shift as a result of the
inter-Asian trade in silver. The laws of supply and demand apply on all continents. As noted
earlier, China’s primary source of silver in the late sixteenth and early seventeenth centuries was

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Japan, which shipped as much as 200 tons per year at times (Innes 1980, especially chap. 6; Tashiro 1986, p. 2).
Contrast this figure to the conservative average estimated by Attman (1986, p. 78) of 150 tons of
silver flowing annually through Europe and into Asia in the seventeenth century. Who captured
the Japanese mine profits, and what became of them?
The Tokugawa shogunate provides an interesting example of East West comparative
history because, like the Spanish crown and its American mines, the shogunate gained control
over Japanese silver mines (Tashiro 1986, p. 3) and sold to China. Flynn (1991) has argued that profits
from silver mines financed the defeat of hundreds of rival feudal lords (daimyo), thereby
permitting the consolidation of Japan. The shogun was forced to align himself with the merchant
class, creating an indigenous market-based economy with Asian (not Western) roots. Unlike
Spain, the Tokugawa invested heavily in agricultural and urban infrastructure. Japan succeeded
in withdrawing from the Chinese tributary system and even sent hundreds of thousands of
troops in an unsuccessful attempt to conquer China.
Europeans were important middlemen in the Sino-Japanese silver trade, with Japan as the
dominant supplier and China the end customer. It is ironic that China’s demand for Japanese
silver generated the profits used by the latter to withdraw from China’s tributary system. With
the help of profits from its silver mines, Japan established commercial capitalism in Asia at
roughly the same time that capitalism was taking root in northwestern Europe. Capitalism’s
Japanese track evolved independently from, and almost simultaneously with, developments in
northwestern Europe. But where Japan used mining profits to establish commercial capitalism in
Asia, Spain used mining profits to attack the emerging capitalist powers of northwestern Europe.
It is difficult to imagine how either one of these developments could have occurred in the absence
of Chinese demand for silver.

11. Explain the impact of silver on Japan, and why it did not experience the same decline as Spain.
●

What about the impact of silver on China itself? Atwell (1977, 1982, 1986, 1988) has long
argued that American silver played a critical role in the commercial and political evolution of
domestic China. Basing his argument on Geiss (1979), Goldstone (1991, p. 371) has challenged
Atwell’s emphasis on forces external to Asia (i.e., American treasure), insisting instead that
intra-Asian factors explain structural changes within Ming and Qing China. Goldstone says that
domestic price inflation in late sixteenth- and early seventeenth century China destroyed the
financial basis of the Ming dynasty. Taxes formerly paid in rice had been converted to
payments in a fixed quantity of silver. But over a period of a century, silver itself had lost two-
thirds of its value. Even if the quantity of silver collected had increased during the late Ming, it
would still be true that the purchasing power of silver taxes definitely declined. The fiscal
foundation of the Ming dynasty eroded because China’s tax revenues declined continuously in
terms of purchasing power. Institutionalization of fixed silver taxes during an era of global
price inflation (in terms of silver) may have created a fiscal crisis on the Asian mainland that led
inexorably to overthrow of the Ming (accomplished by the Manchus in 1644).
It appears that the core arguments of Atwell and Goldstone are not incompatible. Along
with its Japanese counterpart, American silver contributed mightily to developments inside
China. On the positive side, America and Japan were instrumental in the victory of a rising
merchant class that succeeded in converting China to a silver zone. Unhappily for the Ming
dynasty, however, fixing taxes in terms of silver may have created a fiscal crisis that led to the
emergence of the Qing dynasty.

12. Describe the problems in China that led to the decline of the Ming dynasty.
●

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SUMMARY AND CONCLUSION

Truly global trade dates from the founding of the city of Manila in 1571, which formed
the first direct and permanent trade link between America and Asia. From this date forward, all
heavily populated continents traded with each other directly and indirectly in substantial
volumes. Silver was the sine qua non14 of this global trade. Spanish America was the source of
an estimated 150,000 tons of silver between 1500 and 1800, comprising perhaps 80% of world
production. The second-leading source of silver was Japan, responsible for around 30% of world
output in the sixteenth century and perhaps 16% in the seventeenth century. Not coincidentally,
entrepot Nagasaki was founded at virtually the same time as Manila. Silver was shipped to
China, the world’s dominant end-customer, regardless of whether it was produced in Asia or in
the West.
Much American silver traversed the Atlantic Ocean, passing through Europe on its
journey to Asia. Europe exported at least 150 tons of silver annually to Asia, a significant portion
of which passed through Amsterdam. Attman has been most vocal in calling attention to the
Baltic route, which carried eastward at least 50 tons per year. Traditional Mediterranean-
Levantine trade routes carried vast quantities of silver too, but the Cape route was the biggest of
the three. Direct trade out of Acapulco, through Manila, and onward to China has been mostly
ignored in the scholarly literature, despite evidence that 128 tons annually may have been
shipped through Manila in the late sixteenth and early seventeenth centuries (and 307 tons in
1597, according to a single source). Recent research seems to indicate that the Manila trade did
not drop off after the 1620s or the 1640s, notwithstanding the claims of Chaunu (1960). The
tremendous volume of unofficial trade (smuggling) rendered official figures misleading. Chuan
(1969) indicates that the Pacific leg of silver’s journey carried more than 50 tons of silver per year
throughout the seventeenth century, equal to the combined European shipments of Portugal and
the Dutch and English East Indies Companies.

13. Explain the importance of trans-Pacific trade from the Americas to Manila in the 16th c.
●

The conventional explanation of this west-to-east flow of “money” is that Europe had to
send treasure to Asia because the West had to settle its trade deficit with Asia. Europeans liked
Asian silks, spices, and porcelain, but Asians had not yet developed an appreciation for European
wares. This conventional view is flawed for at least three reasons. First, it was not “money” or
“treasure” that flowed out of Europe, but silver. Silver, not gold, was attracted to Asia; Asian
gold and sometimes copper (both “money” substances) flowed in the opposite direction, into
Europe. It is best to look at factors affecting the supply and demand for silver in its own right,
rather than confusing the issue by aggregating this unique substance with Other metals as
“money,” which is alleged to have played a passive, reactive role. Second, the role of Japan
needs to be considered. Japan was the Asian counterpart of America (site of production) and
Spain (country controlling production) combined. We prefer to focus on the supply side and the
demand side of the silver industry, irrespective of which hemisphere contained centers of
production, rather than to visualize global trade as an abstract East-West issue. Third, there is a
basic anomaly in the treatment of America in the conventional view. Since treasure is alleged to
have flowed from Europe to Asia because of a European 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 insatiable appetite for
Asian goods, which in turn caused an American trade deficit with Asia.
Depicting precious metals as passive “money” that adapts to trade imbalances diverts
attention from the central issues. Silver was produced for profit. It migrated from points of
production (Japan and America) to end-customers (mostly in China). Developments within China
have been largely ignored in the diverse literatures dealing with global flows of precious metals
and early modern price inflation, yet China was the pivotal country. International business

14 Essential part

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entities would not have shipped tens of thousands of tons of silver to China unless significant
profits induced that activity. Profits from the silver trade were immense for two reasons. First, on
the demand side, China’s monetary and fiscal systems had substantially converted from a paper-
money system to silver by the time of the Single-Whip tax reform of the 1570s. Conversion of
more than one-quarter of the world’s population (and its government) to silver customers
contributed to the rise in the price of silver in China. Second, on the supply side, extraordinarily
rich silver mines were discovered in Japan and Spanish America, and new technologies reduced
production costs. Supply and demand forces created disequilibrium: silver’s value in China was
double its value in the rest of the world. This is what drove the silver trade—the birth of world
trade—and not some abstract notion of trade deficits.

14. Explain why the author keeps insisting that we not consider silver as “money,” but another trade
good.
●

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

15. The authors claim the effects of the silver trade were global. What is another Empire we have
studied that felt the effects of the Silver Trade? What happened to them?
●

We have consciously neglected any attempt to tie the African continent into the global
trade of silver. Nonetheless, it seems that the Portuguese swapped huge numbers of (mostly
smuggled) African slaves directly for (mostly smuggled) New World silver via the Rio Plata in
Brazil:

During the decade 1616–1625, recorded imports for Buenos Aires (the sum of legal and
confiscated goods) were 7,957,579 pesos, while 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

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Topic 4.5, I

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 slaves legally imported and
those which evaded port officials. The size of these figures clearly indicates a
flourishing and considerable illicit trade up the Rio Plata from the 1580s until
probably the 1640s. During 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 equaled from 15% to 30% of the silver output
of Potosí. (Cross 1983, p. 414)

Not all the slaves remained in Brazil, nor were all of them plantation laborers. Palmer
has provided demographic information suggesting that between 10,000 and 20,000 Africans
(1995)
were domestic slaves in Mexico City in the early seventeenth century. Since, as we have argued,
the Spanish enterprise in America was financed by the world silver market (as were the activities
of the Portuguese 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 indirectly, influenced by
monetary and fiscal developments in Ming China. In other words, end-customer China created
profitable trade in the New World, and profitable trade in America created the demand for
African slaves. Clearly, a global view of early modern trade may suggest many research topics
that might otherwise be overlooked.

16. Explain how, from a world history perspective, China was involved in instigating the
Transatlantic slave trade.
●

Scholars have long been interested in the impact of Europeans on Asia (and the rest of the
world). The focus has shifted in recent years, however, especially among Asian scholars who
increasingly emphasize the dominant historical role of the intra-Asian marketplace. These revisionists
view Europeans as having participated in a vast and sophisticated existing Asian commercial network,
rather than as having introduced modernization to backward Asia. This essay is in the revisionist camp;
it even suggests a reversal of causality. The economic impact of China on the West was far greater than
any European influence 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.”15 Perhaps a reversal of this logic would be more accurate: Seville was an out-
post or a world economy that had not one center but three (Beijing on the demand side, and America
and Japan on the supply side).
The physical presence of Europeans in Asia in early modern times —and the simultaneous
physical absence of Asians in the West—has understandably led scholars to pay attention mostly to
the impact of the West on Asia. Superior naval firepower may explain the presence of Europeans in
Asia, but the most powerful economic undercurrents ran in the opposite direction. Without the
Chinese demand for silver, there would have been no finance mechanism for the Spanish empire.
Without China, there would have been no century-long price revolution. Without China, the birth of
world trade would have been delayed to some unknowable extent. But China did convert, both
monetarily and fiscally, to silver. This fact reverberated across all continents and gave birth to world
trade in 1571, providing a powerful force in shaping the modern world.

17. Explain the author’s conclusions from the last two paragraphs above. Do you agree or disagree
with them? Explain.
●

15 Moloughney and Xia (1989, pp. 67– 68) have criticized Atwell for insisting on the importance of American silver in early modern
Chinese history. The basis of the Moloughney-Xia counter-argument is empirical: the influx of American silver peaked during, rather
than before, the decline of the Ming in the 1640s. This essay is consistent with both sides of this debate. American silver may have been
crucial in the decline of the Ming dynasty

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Topic 4.5, I

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