1571 - The beginning of globalized capitalism

Manila - 'the world's first global city' and 'the road of silver'.

In Peter Frankopan's book The Silk Roads - A New History of the World, the chapter 'The Road of Silver' sets out the way this trading route transformed world trade. China is ever present in this narrative, as are the multiple routes and connections that have shaped the modern world. The Spanish city of Manila was founded on June 24, 1571, by Spanish conquistador Miguel López de Legazpi, and is regarded as the city's official founding date.

Frankopan writes:

In 1571, the foundation of Manila by the Spanish changed the rhythm of global trade; for a start it followed a programme of colonisation whose character was markedly less destructive for the local population than had been the case after the first Atlantic crossings. Originally established as a base from which to acquire spices, the settlement quickly became a major metropolis and an important connection point between Asia and the Americas. Goods now began to move across the Pacific without passing through Europe first, as did the silver to pay for them. Manila became an emporium where a rich array of goods could be bought.

Manila was, in the words of one modern commentator, 'the world's first global city'.

The amount of silver heading from the Americas through the Philippines and on into the rest of Asia was staggering: at east as much passed this way as it did through Europe in the late sixteenth and seventeenth centuries, causing alarm in some quarters in Spain as remittances from the New World began to fall.

(pages 239-240)

This bowl is a particularly fine example of late Ming blue and white export porcelain produced in the provincial kilns at Jingdezhen (Jiangxi province).

Known as kraak porcelain (probably after the Dutch word ‘carrack’, meaning a Portuguese galleon that traded with the East Indies), it was the first type of Chinese export ware to reach Europe in bulk, initially via Portuguese traders and subsequently via the Dutch East India Company (voc). Impervious to water, unlike other luxury imports such as textiles or spices, kraak was used as ballast cargo, and has been discovered in great quantities in shipwrecks. Kraak porcelain features prominently in seventeenth century Dutch still-life paintings of exotica, and was often fitted with fashionable silver-gilt mounts, as here, to protect its edges and increase its preciousness.

The silver road . . .

The silver road was strung round the world like a belt. The precious metal ended up in one place in particular: China. It did so for two reasons. First, China's size and sophistication made it a major producer of luxury goods, including the ceramics and porcelain that were so desirable in Europe that a huge counterfeit market quickly grew up. The Chinese, wrote Matteo Ricci while visiting Nanjing, 'are greatly given to forging antique things, with great artifice and ingenuity', and generating large profits thanks to their skill.

China was able to supply the export market in volume and to step up production accordingly.

The second reason why so much money flowed into China was an imbalance in the relationship between precious metals. In China, silver's value hovered around an approximate ratio to gold of 6:1, significantly higher than in India, Persia or the Ottoman Empire; its value was almost double its pricing in Europe in the early sixteenth century. In practice, this meant that European money bought more in Chinese markets and from Chinese traders than it did elsewhere - which in turn provided a powerful incentive to buy Chinese. The opportunities for currency trading and taking advantage of these imbalances in what modern bankers call arbitrage were grasped immediately by new arrivals to the Far East - especially those who recognised that the unequal value of gold in China and Japan produced easy profits.

(pages 240-241)

Cheap Money . . .

In the chapter 'Cheap Money' of A History of the World in Seven Cheap Things - A Guide to Capitalism, Nature, and the Future of the Planet by Jason W. Moore and Raj Patel (see Guardian Review), they look at this particular history of exchange:

"Once again we can see cheapness at work. Cheap lives turned into cheap workers dependent on cheap care and cheap food in home communities, requiring cheap fuel to collect and process cheap nature to produce cheap money - and quite a lot of it. Potosi was the single most important silver source in the New World, and New World silver constituted 74 percent of the world's sixteenth century silver production. Silver does not make trade, but global trade can be traced from the mines of Potosi. Unless it forms parts of circuits of exchange, silver is just shiny dirt. It's the fusion of commodity production and exchange that turns it into capital. That's why some commentators have suggested that the birth year of global trade was 1571, when the city of Manila was founded. Silver from the New world didn't stay in Europe but was propelled along the spice routes and later across the Pacific. Japanese silver flowed to China from 1540 to 1620 as part of a complex network of exchange and arbitrage. Without the connection of exchange of silver for Asian commodities, money couldn't flow from the New World into East Asia. Because the Portuguese and then the Dutch controlled maritime silver flows through Europe to Asia, the Spanish short-circuited them, annually sending as much silver (fifty tons) across the Pacific and through Manila as they did across the Atlantic through Seville. Similar volumes of silver found their way to the Baltic. In eastern Europe, silver combined with credit, quasi-feudal landlords, and enserfed labor to deliver cheap timber, food, and vital raw materials to the Dutch Republic. To remember this is to insist that, although Europe features in it, capitalism's story isn't a Eurocentric one. The rise of capitalism integrated life and power from Potosi to Manila, from Goa to Amsterdam." (pages 84-85)

Potosí

Potosí lies at the foot of the Cerro de Potosí—sometimes referred to as the Cerro Rico ("rich mountain") — a mountain popularly conceived of as being "made of" silver ore that dominates the city. The Cerro Rico is the reason for Potosí's historical importance, since it was the major supply of silver for Spain during the period of the New World Spanish Empire.

A China crisis?

Picking up again from  Peter Frankopan's book The Silk Roads - A New History of the World, and the chapter 'The Road of Silver' sets out the way globalisation was no less problematic five centuries ago than it is today:

"Maps like the Seldon Map, recently rediscovered in the Bodleian Library in Oxford, likewise demostrate the increasing Chinese interest in trade and travel in this period, offering an extensive overview of South-East Asia, complete with shipping routes. however, these are something of an exception: in this period, as before, Chinese maps typically retained a cloistered view of the world, with visual representations bounded to the north by the Great Wall and to the east by the sea. This was symptomatic of China's readiness to play a passive role at a time when the world was opening up; but it also reflected European naval superiority in East Asia where Dutch, Spanish and Portuguese vessels targeted each other - but also regularly seized Chinese junks and their cargoes too.China was not keen to take part in running battles between aggressive rivals, let alone to be made to suffer as a result; in the circumstances, the inclination to become increasingly introspective, but at the same time reap the benefit of traders coming to them, seemed entirely logical."

"Much of the silver that flooded into China was spent in a series of major reforms, not the least of which were the monetisation of the economy, the encouragement of free labour markets and a deliberate programme to stimulate foreign trade. Ironically, China's love of silver and the premium it placed on this particular precious metal became its Achilles heel. With such great quantities of silver reaching China, above all through Manila, it was inevitable that its value would start to fall, which over time caused price inflation. The net result was that the value of silver and above all its value in relation to gold, was forced into line with other regions and continents. Unlike India, where the impact of the opening up of the world produced new wonders of the world, in China it was to lead to a serious economic and political crisis in the seventeenth century. Globalisation was no less problematic five centuries ago than it is today."

(pages 241-242)

The Selden Map - an early seventeenth-century map of East Asia formerly owned by John Selden.