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New World silver and the rise of capitalism
by Louis Proyect
02 March 2002 00:15 UTC
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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Precious metals from America superseded land as the basis for wealth, 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 

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 

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@panix.com on 03/01/2002

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

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