by Henry Kamen
From the end of the sixteenth century the government banned the entry of Chinese silks into Spain, in 1582 it prohibited direct trade between Lima and the Philippines, and from 1587 onwards passed decrees (always ignored and therefore continually repeated) restricting trade between Mexico and Peru.22 The illegal trade continued, as the merchants of Panama complained in 1601: ‘the ruin of this province has been the trade between Lima and Mexico, which absorbs all the silver that used to come here. And above all the greatest ruin is caused by the goods brought from China, which are so cheap that they displace the goods from Castile.’23 An exception was permitted when from 1604 onwards one ship a year was allowed to go from Callao in Peru to pick up merchandise from Acapulco. The prohibitions continued throughout the seventeenth century, with negative consequences for the economy of Manila, Macao and the China coast. In the early eighteenth century the royal council was still dealing with the disputes between Spanish and Manila merchants over the regulation of the trade. It was only one part of a broader problem of attempts to regulate trade between the different markets of the empire. In 1631, for example, the Spanish government went so far as to prohibit all trade between New Spain and Peru, because of complaints of unfair competition.
With or without controls, the Manila trade was in its day ‘probably the most lucrative branch of international trade with the Orient’.24 The cargo of Chinese silk in the Manila galleon was usually estimated as worth between two and three million pesos on each shipment. The silver ship from Acapulco brought in return about two million pesos in an average year. The consequence of this inflow of Mexican silver was that during the first half of the seventeenth century Spanish coins became the effective international currency of Southeast Asia.25 The Chinese themselves used Spanish coin when trading in Maluku. Spain was drawn into the Asian economy and became a market for goods from China, where silver was worth twice as much as in New Spain, making Chinese items correspondingly cheaper to purchase.26 Silver pesos therefore flowed to Manila and thence to China in much greater quantities than appeared in official registers. In the early seventeenth century the New Spain authorities informed Madrid that around five million pesos a year crossed the Pacific to Asia on the Acapulco galleons. A large part of this went straight from Manila to China, causing an official in Manila to comment that ‘the king of China could build a palace with the silver bars from Peru which have been carried to his country’.27
In the same way, American silver crossed the Atlantic but not necessarily towards Spain. In 1599 the governor of the La Plata region reported that the silver which passed through the area did not go to Spain; ‘some may go to Lisbon but it is very little, virtually all goes to Flanders and England; almost all the ships that come to the Brazil coast are Flemish and German, which are sent from Lisbon to take on sugar which they then exchange in Brazil for silver, at prices even lower than those in Lisbon’.28 He calculated that in the last four years one and a half million pesos had left the area this way.
From the moment the Spanish government began to get involved in military and naval enterprises outside the peninsula, it faced the problem of financing them. In the early sixteenth century there were no public banks, and no generally accepted currency except pure gold or silver. To make payments abroad to financiers, suppliers, and its own troops, governments (like traders) had to use credit notes called ‘bills of exchange’. These little bits of paper became the oil that kept the wheels of the empire running. ‘One can no more trade without them’, a sixteenth-century Antwerp financier commented, ‘than sail without water.’ The notes could travel rapidly with the mail, making credit available immediately; real payment would come later, when the relevant bullion arrived. As countries spent more money on war and foreign policy, the credit that they demanded stimulated the business of international financiers and traders, who arranged themselves into consortiums to take on the huge loans (or ‘asientos’) asked for by the Spanish empire.
Spain became caught up in the credit boom. The trade fairs in Spain, of which the best known are the fairs at Medina del Campo,29 no longer handled cash; most transactions were in international credit. ‘People from all nations go to these fairs,’ reported Tomás de Mercado, ‘you hardly see coin, all is paper.’ But credit, of course, had to be backed by traded goods and bullion. Mercado felt that the wealth of Spain, precisely because it was drained away through trade, no longer remained in Spain but was going to foreign countries. ‘In Flanders, in Venice and Rome, there is so much money from Seville that the very roofs could be made of escudos, yet in Spain there is a lack of them. All the millions that come from our Indies, are taken by foreigners to their cities.’ He complained that the trend now was to ‘subject us covertly to the foreigners, giving them the leadership in all our main enterprises’.30
When Mercado wrote ‘foreigners’ he meant above all the Genoese, the financiers who attracted most hostility from Castilians. The Genoese, went the complaint in the Cortes of Madrid in the 1540s, controlled everything, and charged interest at extortionate rates. In 1569, for example, large quantities of bullion from the Indies were being shipped to Genoa, to pay above all for the wars in Granada, which depended heavily on weapons imported by the Genoese from Italy.31 The Genoese dominated and financed the high tide of Spain's empire. Despite the attempts to weaken their role, from 1557 (with the accession of Philip II) to 1627 they decided the destinies of Spain.32 An English trader of the time observed that Spaniards did not control their own commerce because of ‘the residence of many Genoa merchants among them, whose skill in trade far surpassing the native Spaniard and Portuguese, by means of their wealth and continual practice of exchanges, devour that bread which the inhabitants might be sufficiently fed with’.33
The foreign financiers, it has been pointed out by the leading authority on the subject, dominated Spain's business affairs for two centuries.34 They had been active in the Iberian peninsula since the thirteenth century and were primary backers of the Portuguese overseas programme. Many settled and became citizens of the major commercial centres. However, commentators like Mercado, who presented a picture of greedy foreign financiers feeding on the wealth of Spain, failed to understand that Spain needed their help in order to set up a network of international payments for trade and for war. Though there had for some time been small groups of Castilian financiers in the trade centres of Western Europe – in Bruges, in Antwerp, in Rouen, in Lyon, in Florence – they had neither the means nor the status to handle the transactions (‘asientos’) required by the crown. Many foreign financiers, by contrast, such as those of Augsburg and Genoa, employed a highly efficient system for their contracts. In return for their loans, the crown began from 1551 onwards, and regularly from 1566, to give permission for something that had till then been prohibited by law: the export of precious metals from the country.
At perhaps the most difficult moment of his reign, in 1575, when it seemed to Philip II that he must break the stranglehold of foreign finance, the king cancelled his asientos with the Genoese and turned instead to Portuguese, Castilian and Florentine financiers. Particularly between 1579 and 1583, the Florentines and their businessman grand duke, Francesco de' Medici, were energetically courted by Spain.35 They co-operated efficiently but failed to come up to expectations, and the king returned to the Genoese. An important step had been taken, however. The Portuguese financiers now had excellent relations with the crown, and when Philip II became king of Portugal in 1580 they were in a good position to develop their contacts.
The triumph of the Genoese financiers and their central role in the formation of the Spanish empire, was made possible by a simple but fundamental reality: the debility of Castilian capitalism. When Charles V took over power in Castile, foreign financiers were (as we have seen) in a good position to give weighty backing to the enterprises associated with the New World and the empire. They advanced huge sums to the crown in Italy, Germany, France and the Netherlands; in return, they were obliged to accept payment only within Cast
ile, because of the ban on exporting specie. What could they do with their money? For the most part, they bought up property in Castile, and invested in Castilian industry and commerce; in the process, they operated through Castilian capitalists.36 The result was a boost for the boom period in the Castilian economy.
But the effort of creating an international network to support Spain's role as a world power meant in real terms that virtually all aspects of the peninsular economy became closely integrated into outside markets and were often dependent on them. A very clear example is supplied by the fortunes of the wool trade, which in the early sixteenth century had been the pride of Castile and the backbone of its merchant élite. From about 15 60 the Italians and other foreigners came to dominate Castilian wool exports.37 Between 1560 and 1612 the proportion of wool shipped by foreigners from the north coast of Spain rose from fourteen to sixty-nine per cent.38 Castilians always continued to control an important core of the trade, but their role was firmly superseded by that of other European traders and financiers.
After about 1566, when the export of specie from Spain by individuals was permitted, foreign financiers were no longer obliged to make their capital work within the Castilian economy. They withdrew from peninsular trade, dedicating themselves, as the Venetian ambassador reported in 1573, mainly to the international money market. Their Castilian contacts, like Simón Ruiz, were left to face the cold by themselves. Many went out of business, others resorted to buying land to shore up their family fortunes. In the chief seaports of the peninsula, foreign traders began to dominate.39 The great empire was at the most delicate stage of its formation, but all its nerve centres – trade, finance, the economy – slipped firmly into the hands of outside businessmen who did not intend to let pass the opportunity to control the source of their profits. Without exception, Castilian traders and financiers were relegated to a secondary role. Simón Ruiz, for example, took part in no asientos after 1581. ‘The foreigners do with us as they wish’, he lamented.40
The wealth of the empire became, in the final decades of the sixteenth century, the great prize. Castile had been part of a small local market, living off home produce and exporting a few raw materials. Now it became a vast emporium of the produce of the entire world, only some of it consumed within Spain but all of it serving to enhance the business activities of the planet. The import registers of the great ships that entered Seville, laden with tobacco, hides, dyes, sugar and precious stones, were only a small part of the productivity created by the Spanish territories. For the first time in history, an international empire integrated the markets of the world, as vessels from the St Lawrence, the Río de la Plata, from Nagasaki, Macao, Manila, Acapulco, Callao, Veracruz, Havana, Antwerp, Genoa and Seville criss-crossed in an interminable commercial chain that exchanged commodities and profits, enriched merchants, and globalized civilization. African slaves went to Mexico, Mexican silver to China, Chinese silks to Madrid.
The immense trade generated by the empire was never in fact controlled by Spain, despite official attempts in that direction.41 As the precious metals and colonial produce made their way to the peninsula, they became prey to systematic fraud. Since those who really controlled the economy were outsiders, it was to them that the bullion and profits went rather than to Spain. Moreover, throughout the great age of trade the peninsula functioned neither as exporter nor as importer but merely as an entrepôt. This was especially true of the bullion trade. In the 1560s and 1570s the war effort in the Netherlands demanded the export of vast quantities of bullion to northern Europe, so silver destined for Spain ended up there; after about 1578 the main recipient was Italy. Philip II made efforts to check the process, and in 1583 once again prohibited the export of specie. The controls, however, soon collapsed. The officials of the royal treasury calculated in 1594 that huge quantities of silver arrived at Seville annually from America, of which after smuggling and fraud not more than ten million ducats remained. Of this sum, six million left the country immediately to pay for royal and traders' debts, leaving only four millions. Since debts were mainly to Italian financiers, the bullion leaving annually for Italy tended to be in the region of six million ducats.42 Financiers in Florence in 1584, for example, reported that the fleet which arrived at Genoa from Spain that year, under the command of Gian Andrea Doria, carried four millions in silver for Florentine financiers.
The international dimensions of business may be seen in the career of one of the significant traders of the Atlantic world, the Corsican merchant Gian Antonio Corso Vicentelo, archetype of his profession.43 His uncle and father-in-law Antonio Corso ‘el Viejo’ had commenced before him the building of the family's fortunes on the basis of the American trade. Gian Antonio left his native Corsica at the age of thirteen around the year 1530, travelled around the Mediterranean, served in the ill-fated campaign of Algiers under Charles V, then at the instance of his uncle went to Lima. He made his money during the civil wars in Peru, built up his fortune in association with his countrymen and members of his family, and brought into being a firm that did business in Peru, central America and Seville. In 1575 he successfully established a claim in Seville to noble status. He returned in 1585 to Seville, where he died in 1587. Members of his family rose into the Castilian nobility (his daughter, with a generous dowry, married the count of Gelves), and he amassed a fabulous personal fortune, consisting of galleons, three houses, lands, investments, and silver. Though fully integrated into Sevillan society, Corso remained all his life a Corsican, surrounded by people from his home country and working mainly with them.44
By the end of the sixteenth century Spain had become an integral part of a cosmopolitan network, which included the two largest channels of Europe's intercontinental trade, that to the Americas, whose trade in official terms was estimated as at least ten million ducats annually, and that to East Asia, estimated at half that sum.45 The real figures for the trade, if we take into account all its sectors, are impossible to quantify. This vast commercial enterprise had the outward form of an empire dominated by Spain. Viewed from inside, however, it was a structure in which all the essential arteries were controlled by non-Spaniards. An important role, as we have seen, was played in the sixteenth century by the Genoese, without whose crucial help at every stage the great Spanish empire might never have come into existence.46 They were the vital link with the kingdom of Naples, where they dominated the shipping industry, the export trade, the supply of food and the machinery of finance.47
The international system inevitably linked up with broader trading interests. For example, the crucial links between Spaniards and the business centre of Antwerp in the southern Netherlands, were extended yet further by the links of Antwerp with England, with Germany and with Italy.48 Belgians carved out for themselves a significant part in the trade of the Iberian peninsula.49 The links with the New World fell into the hands of traders who, like Corso, were on the spot. Italians, Belgians, Germans and Portuguese New Christians became by the seventeenth century the key agents in a commercial chain that connected Amsterdam, Antwerp, London and Hamburg with La Rochelle, Nantes, Rouen, Livorno, Venice, Genoa and Naples, and beyond them with Africa, Brazil, Goa and the whole of Spanish America.50 One small bit of evidence underlines the true relation between foreign traders and Spain. Had Spain really been the centre of wealth, the great banking houses would have moved their head offices there. Instead they stayed where they were, in Antwerp, or Augsburg, or Genoa. Cities such as Lisbon, Seville, and Cartagena de Indias merited only commissioned agents. With good reason did the merchants of Seville protest (in 1626) that ‘our people are without sustenance and income, the foreigners are rich; and Spain, instead of being as a mother to her sons has ended up as a foster-mother, enriching outsiders and neglecting her own’.51
The relation between ‘power’ and ‘business’ in the functioning of the empire was not a smooth one. Those who manipulated the political power were not always those who ran the business side of affairs. The Genoese were well aware
of the distinction. ‘At present’, one of them wrote in the early seventeenth century, ‘our Republic and its liberty are founded on its own fortunes and on the protection of Spain, and we must hope to find strength in the arms of this monarch.’52 The reality was that Spain and the Genoese depended on each other heavily, a position from which both were anxious to escape. Notable attempts were made by Philip II, and later by Philip IV, to do without the Genoese. Within the republic of Genoa, an influential section of the oligarchy was also opposed to Spanish predominance, and in the course of the seventeenth century made strenuous efforts to emerge from underneath the Spanish umbrella. They never succeeded in doing so.
As it happened, the decisive year 1578 confirmed the need for Philip II to rely yet more on vital outside help in order to keep the empire together.53 The year had started well, with military successes in the Netherlands, and the birth of a son and heir in the spring. There were, however, harvest problems in the country, and protests against tax increases. When a street prophet in Madrid called Miguel de Piedrola started making dire forecasts, the king asked his officials to ‘question him and try to find out from where he gets these prophecies’. A more serious problem arose when on 1 April Philip was awoken with the news that one of his secretaries, Juan de Escobedo, had been murdered in a Madrid street near the royal palace the night before. ‘It's all very strange,’ he wrote from his bed to his secretary Mateo Vázquez, ‘it was very bold for someone to kill so important a person under my very eyes’. The affair very quickly assumed dimensions that clearly implicated one of Philip's most important secretaries, Antonio Pérez, and subsequently made the king decide to remove him from his post.