Silver and World Trade

Check Out the World’s Bling, Yo

First Things First

Law of Supply and Demand

Chinese Dynasty Song

“Born With a Silver Spoon”• What is the thesis?

• What evidence is provided to support the thesis?

• What are Flynn and Giraldez revising?

World Trade

• World trade did not begin until all important populated continents began to exchange products continuously – both directly and indirectly

• Flow of silver West to East– Originally explained through a European trade deficit

Silver

• 1571 – Manila was founded marking the beginning of a global trade network. This cities major products included silk and silver.

• China became the prime causal actor in the silver trade

• Europe was important as a middleman– The East India Companies were NOT the one to

inject life into the “backward Asian economies”

Ming China• Ming China became “the suction pump” for

silver in the early modern world• Silver had an elevated value in China

– The value in China was double that in the rest of the world

• China had paper money from the 11th Century, but by the mid 15th Century Chinese were using silver – Paper money caused high inflation

• China’s “One-Whip System”– Silver only

Ming China

• China and her Tributaries were 25% of the world’s population in the 16th Century

• This type of shift in product demand would ultimately affect the world economy

Ag !

• “Silver was the magnet, the engine, the driving passion, the dazzling reward.”

• Sources of Silver in 16th Century – Spanish America at Potosi– Japan

• The Potosi silver mine was discovered in 1545

Rich as Potosi

I am rich Potosi,Treasure of the world,The king of all mountains,And the envy of all kings.

- Coat of Arms from late 16th Century

Potosi

Potosi in the 16th Century

• Physical appearance: – classical elements of a boomtown combined with

extravagant Baroque culture – A canal divided the city– A maze of byways and the Villa Imperial

• Climate– Harsh– 13,000 feet above sea level

• Two and a half day journey by pack animal

Potosi in the 16th Century

• The Populous:– Population in 1600 was 160,000 people (60 yrs.)– About the same as London and Paris – This is the modern day equivalent of 20 million

people moving to a spot on Alaska’s North Slope

• In addition to mine workers, the populous was composed of artisans, grocers, jewelers, gamblers, prostitutes, and thieves

• Machismo – encouraged dueling

Mining a Potosi

• Most spectacular mining boom in history.

• New technologies of the Spanish miners caused the cost of mining silver to be low.

• Low cost + Large Chinese Demand = Enormous Profits!

Ag !

• From 1500-1800 The Americas produced perhaps 80% of the world’s silver, while Japan produced much of the rest

• Transportation technological changes (such as faster and better ships) help move the silver

• The possibility of great profits created motives for smuggling

Global Economy

• China provide the demand for silver• The Spanish Americas, and also Japan,

provided the supply of silver • The Portuguese traded vast numbers of slaves

for the silver (the slaves worked in the mines to help the supply meet the demand)

• Europe in general participated in a vast and sophisticated existing Asian commercial network. (Europe did not introduce modernization to “backward” Asia)

Global Ramifications

• Spain:• Silver supported the Spanish Empire and the

Crown at Castile – Once the Ag supply and demand costs had

equalized the Ag profit diminished

• When we study this, the point isn’t the quantity of the Ag traded, but the profits of the Ag declined.

• Spain vanished as a serious world power as the Ag profits declined

Global Ramifications

• China:– Ming declined, in part, because China’s tax

revenues declined in purchasing power– The One-Whip System was a fixed in Ag, creating

later a fiscal crisis

• Americas and Japan:– Rising merchant classes