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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 Precious metals from America superseded land as the basis for wealth, power, and prestige.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 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@panix.com on 03/01/2002 Marxism list: http://www.marxmail.org
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