Precious Metals, Sugar, and Trade Commodities

Spices get the headlines in the history of the Age of Exploration, but the bulk commodities built the Atlantic economy. Silver, sugar, tobacco, and cotton — together with coffee, cacao, indigo, rice, and furs — drove the transoceanic trade that funded European industrialization, generated the wealth of the great port cities, and paid for the slave labor that produced them. The argument of this page: the early modern economy was wired together not by the high-value luxuries that European monarchs coveted but by the bulk flows of silver, sugar, and the agricultural staples of the New World, and the integration of these flows into a single global market in the seventeenth and eighteenth centuries is the foundation of the modern world economy.

The economic historian Dennis Flynn and the historian Arturo Giráldez have argued, in “Born with a ‘Silver Spoon’: The Origin of World Trade in 1571” (1995) and the longer follow-up Foundations of World Trade in the Sixteenth and Seventeenth Centuries (2008), that 1571 is the founding date of a true world trade system, since it is the year in which the Manila galleon route opened, linking the silver mines of the Americas to the consumer markets of China for the first time. Whether or not one accepts the precise date, the larger claim is right: silver was the commodity that integrated the early modern world, and the silver trade is the thread that ties the European, American, African, and Asian economies into a single system.

Silver: The Metal That Wired the World

The great silver deposits of the Spanish Americas transformed the European economy. The mountain of Potosí, in modern Bolivia, was discovered in 1545; the mines of Zacatecas and Guanajuato in Mexico followed in the 1540s. Between 1500 and 1800, Spanish American mines produced roughly 40,000 metric tons of registered silver, with another 10,000–20,000 tons smuggled unregistered. The peak years were the early seventeenth century, when production from Potosí alone reached an estimated 400–500 tons a year, and the late eighteenth century, when the new Mexican mines — especially Valenciana and Catorce — pushed registered production to perhaps 500–600 tons annually. The economic historian Peter Bakewell’s Mining and the Independent Economy in Colonial Potosí (1974, expanded 1985) remains the standard account of the Potosí operation.

The labor system that produced the silver was brutal. The Spanish used the mita, a system of forced labor inherited from the Inca Empire, to compel indigenous Andean workers into the mines of Potosí. The mineworkers worked at high altitude, in poorly ventilated tunnels, with constant exposure to mercury used in the patio refining process; mercury poisoning, silicosis, and accidents killed many of them, and the demographic historian Nicolas Sánchez-Albornoz estimated the population of highland Peru fell by perhaps two-thirds in the century after 1530. The long-run demographic effects of the silver trade are among the most debated topics in Latin American history, and the range of estimates — from 50 to 90 percent indigenous population decline across the hemisphere — is itself a measure of how contested the numbers remain.

The European response to the silver inflow was inflation. Prices in Spain roughly quadrupled between 1500 and 1600, and the inflation spread through Europe as silver moved through the Antwerp, Amsterdam, and London money markets. The “price revolution” of the sixteenth century, as Earl Hamilton’s 1934 study called it, has been the subject of intense scholarly debate for nearly a century. The monetary explanation — that the inflation was caused by the silver inflow — was the consensus view from Hamilton through the 1960s, but the revisionist scholarship of Pierre Vilar, Francis Deyon, and more recently Jack Goldstone has emphasized the role of population growth, harvest cycles, and fiscal policy. The monetary interpretation is no longer the only game in town, but no serious account of the price revolution can ignore the silver.

The Silver Drain to China

The most important fact about early modern silver is that much of it did not stay in Europe. It moved east. Dennis Flynn and Arturo Giráldez, building on the work of the Japanese historian Masaaki Iwata and the Chinese scholar Quan Hansheng, have argued that the silver inflow from the Americas was the necessary condition for the Ming and Qing monetary systems, and that perhaps a quarter of all American silver ended up in China. Kenneth Pomeranz’s The Great Divergence: China, Europe, and the Making of the Modern World Economy (2000) takes a different view, arguing that the silver flow was not a gift from the Americas to Asia but a payment for Asian goods that the European traders wanted and could not produce themselves. The two readings are not mutually exclusive: silver did flow east, and it did pay for Chinese silk, porcelain, and tea, and the resulting Chinese demand for silver was the key to the global integration of the period.

The mechanism was the Manila galleon trade. Spanish silver moved from Acapulco to Manila from 1565 to 1815, was exchanged for Chinese goods by Chinese and Filipino merchants, and was then partly carried back to Acapulco, partly retained in the Philippines, and partly absorbed into the Chinese economy. The English and Dutch East India Companies also shipped silver east, partly to pay for Indian textiles and partly for the China trade. By the late seventeenth century, the silver flow to Asia was, in aggregate, one of the largest commodity flows in the world. The political consequences for China were substantial: as Richard von Glahn’s The Myth of the Silver Century (1996) has shown, the silver inflow was the basis of the Ming and Qing monetary systems, and the disruption of the silver supply in the mid-seventeenth century — the result of the wars of the Ming collapse and a temporary decline in American production — contributed to the fiscal crisis that produced the Manchu conquest.

Sugar: The Sweet Commodity That Built an Empire

If silver wired the world economy together, sugar built the Atlantic plantation system. Sugar was first produced on a large scale by the Portuguese in Madeira, the Azores, and São Tomé in the fifteenth century, and then in Brazil from the 1520s. The Dutch, expelled from Portuguese Brazil in the 1650s, helped transplant the industry to the Caribbean in the seventeenth century. By 1700, the French colony of Saint-Domingue was the richest colony in the world, and the British, Dutch, Spanish, and Danish West Indies had developed extensive sugar economies. Sidney Mintz’s Sweetness and Power: The Place of Sugar in Modern History (1985) is the indispensable treatment; it is, in the end, a book about the dietary revolution in Europe, not just about the Caribbean economy.

The labor system that produced the sugar was the Atlantic slave trade. The slave trade and triangular system are treated in detail on their own pages. What the sugar economy required, above all, was a labor force that could be worked to death and replaced. Caribbean sugar mortality was so high — perhaps 5–10 percent of the enslaved population per year in the worst periods — that the slave population could not reproduce itself, and the trade had to continue indefinitely. The economic historian Russell Menard has shown that the price of a healthy enslaved worker in the eighteenth century could be amortized over perhaps seven years of productive labor, a calculation that made replacement cheaper than reproduction and shaped the brutal labor regime of the plantations.

Tobacco, Cotton, and the Second Slavery

Sugar was the first great American commodity; tobacco and cotton were the second and third. Tobacco was introduced to Europe in the sixteenth century, and the English colony of Virginia, founded in 1607, was established largely to grow tobacco for the European market. The Chesapeake tobacco economy of the seventeenth and eighteenth centuries was based initially on indentured servants and increasingly on enslaved African labor, particularly after the Restoration. By the late eighteenth century, tobacco was the second most valuable American commodity imported into Europe, after sugar.

Cotton’s rise came later. Indian cotton textiles had been the most prized goods in the world market through the seventeenth and eighteenth centuries, and the European powers struggled to break into the Indian trade. The European colonization of the Americas, however, introduced cotton cultivation to the New World, and the invention of the cotton gin in 1793 made short-staple cotton profitable in the American South. The resulting cotton boom transformed the Atlantic economy: between 1800 and 1860, American cotton production rose from perhaps 73,000 bales a year to nearly 4.5 million bales, supplying the mills of Lancashire and feeding the textile industries that were the central engine of the British Industrial Revolution. Sven Beckert’s Empire of Cotton (2014) is the indispensable treatment.

The cotton economy was intimately tied to slavery. The American South produced most of the world’s cotton with enslaved labor, and the British textile industry, the most dynamic sector of the British economy, depended on slave-grown cotton. The American Civil War (1861–65), which was fought in part over the future of slavery, was therefore a war over the material basis of British industrialization. Edward Baptist’s The Half Has Never Been Told (2014) is the strongest recent treatment of slavery’s centrality to American capitalism; Sven Beckert places the cotton economy in global context.

Other Major Commodities

A number of other commodities rounded out the Atlantic system. Coffee, native to Ethiopia and Yemen, was introduced to the Americas in the eighteenth century and quickly became one of the most valuable colonial imports. French Saint-Domingue was the world’s leading coffee producer until the Haitian Revolution; Brazil became dominant in the nineteenth century. Cacao, native to the Americas, was the source of chocolate, initially a drink rather than a food, and the Spanish plantations of Venezuela, Ecuador, and the Caribbean dominated the trade. Indigo, a dye plant, was a major Caribbean and Central American export until the development of synthetic dyes in the late nineteenth century. Rice, originally cultivated in Africa, became a major export from the American South, particularly from South Carolina, where enslaved Africans from the rice-growing regions of West Africa brought the cultivation knowledge with them. Furs, particularly beaver pelts, were a major commodity in the early modern period, and the French exploration of the Mississippi basin and the Great Lakes, and the founding of the Hudson’s Bay Company in 1670, were driven by the fur trade.

The Commodity Complex and Capitalism

The commodity systems of the early modern period were central to the development of European capitalism. The profits of overseas trade funded the growth of European financial institutions — joint-stock companies, central banks, maritime insurance, modern stock exchanges. The Amsterdam Bourse, founded in 1602, the Bank of Amsterdam, founded in 1609, and the Bank of England, founded in 1694, were all products of the commodity trade. The flows of capital generated by the sugar, silver, and cotton economies financed the wars of the seventeenth and eighteenth centuries, supported the rise of European nation-states, and enabled the European colonization of the Americas, Africa, and much of Asia. William Goetzmann’s Finance and the Founding of the Global Economy (1996) and John Micklethwait and Adrian Wooldridge’s The Company: A Short History of a Revolutionary Idea (2003) are the best single-volume treatments of the financial side.

The political and economic structures that emerged from the commodity trade are the structures of the modern world. The plantation system, the slave trade, the chartered company, the financial center, the colonial empire — all have their origins in the bulk commodity flows of the early modern period. The commodity system did not merely enrich Europe; it produced the integrated world economy in which we still live.