The Galleon Trade

The Dawn of Global Trade
In the 16th century, European ships established
trade routes across the Pacific. The circle was
complete. For the first time, the world was
connected in a global trading system.
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The Galleon Trade between
Acapulco and Manila
1565-1815
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Much of the
information
in this
presentation
can be
found in this
book →
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1493: Uncovering the New World Columbus Created
by Charles C. Mann, 2011
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The Galleon Trade – Columbus’ dream of a trade route to China was
realized 80 years after he arrived in America
These are the 16th Century Portuguese and Spanish Trade Routes
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The Chinese navigator, trader and explorer, Zheng He, built gigantic ships and
conducted trade from 1405 to 1433 as far as India, the Middle East and Madagascar.
They were enormous, much bigger than the European ships of the day.
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But after several decades of exploration, China cut it off and isolated itself. Why was
there such insularity? Perhaps it was because China met with no culture richer than
itself. There was nothing China really wanted from the outside world.
Because of the ban on foreign trade, there was rampant piracy on the coast west of
Taiwan in reaction to the ban on foreign trade.
The word wokou (倭寇) meant originally “Japanese pirates” but it came to be a
word for any kind of pirate on the Chinese coast.
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The ban on foreign trade was ended in 1567 as China decided to base its currency
on silver. Domestic silver, and supplies from Japan, dried up, but just then silver
from America started to reach China.
Foreigners were kept at a distance by making the trade go offshore through The
Philippines. Spain was officially the colonial power of Manila, but Chinese traders
outnumbered the Europeans.
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China had a great problem with money, which was probably a symptom of the
government’s difficulty in maintaining control over such a large territory. The
economy often ground to a halt as the population lost trust in whatever form of
currency the government was supporting.
They had two choices:
1. fiat money – paper currency, backed by a government, untied to a commodity
2. commodity money – liable to supply shocks
Just at the time when the Ming dynasty had discovered the error of printing large
amounts of money, which led to hyper-inflation, American silver was making its way
across the Pacific.
This silver also became the main currency of Europe at this time, and supply shocks
had wild impacts on the European economy.
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This was also the age of piracy in both the Atlantic and the Pacific Oceans. Rival
states supported independent pirates in attacking enemies. Many ships loaded with
silver are still at the bottom of the ocean with their treasures.
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The silver deposit in one mountain of Bolivia had a massive impact on global
trade – the Gualpa (Hualpa) silver strike (near the town of Potosi, Bolivia) – 300
ft. long, 13 ft. wide, 300 ft. deep – largest in history, 50% silver ore (the usual
was 5% ).
A huge deposit of mercury, found on another mountain nearby, was used to
extract silver from the ore – Indian and African slaves put to this task died in
short rotation – they were considered to be a consumable resource. There
were cases of Indian parents cutting off their children’s hands so that they
wouldn’t be taken as slaves.
In 1571, Spanish ships laden with silver showed up in Manila. For China, it was
like shiploads of money arriving to rescue them from their economic crisis.
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Exchange of People
It is important to keep in mind that during this time there was
a tremendous movement of people, animals, plants and germs
between all the continents. 400 years ago, there were already
thousands of Chinese, Philippinos, Africans, Japanese, Koreans,
Europeans and Native Americans living in Mexico City. Mexico
City was the world’s first cosmopolitan metropolis. And soon
the exchange went the other way to Manila.
Many of the government policies for managing race relations
were similar to those that have been tried since. Attempts
were made to share or not share resources, grant access to
land, education and occupations, and rights to marry into
other races, and there were futile attempts to define all the
various mixes that occurred.
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An interesting example of the cultural and ethnic mixing of the Columbian
Exchange is found in the result of recent international beauty contests.
The judges in such a contest would probably want to reflect a consensus, or
a compromise of global concepts of beauty.
The judges know that there would be an appearance of unfairness in
choosing a winner who was distinctly Indian, Caucasian, African or Oriental
according to traditional, clearly defined racial categories or stereotypes by
which we match race to national identity. So what do they do?
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The winner has to have broad marketing appeal for advertising campaigns that
come after the pageant, so a safe choice is a hybrid look. This global beauty
competition has selected many winners, probably unintentionally, from
countries with histories of ethnic mixing that began in the 16th century (Latin
America, The Philippines). The racial backgrounds of these women are not given,
but no one would be surprised to learn that they had ancestors from diverse
regions of the world.
Miss Universe 2011 (Angola)
Miss Universe 2010 (Mexico)
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They represent the past and future of a globalized, diverse human genome.
14 countries have won multiple times, and they are all multicultural
societies with a history of ethnic mixing. Since 1970, 29/31 titles have gone
to women from Canada, the USA, India, The Philippines and Latin American
countries.
Miss Universe 2009 (Venezuela)
Miss Universe 2008 (Venezuela)
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How races mixed and survived, or died
Laborers from Europe, slaves from Africa and America – they all
perished in great numbers in the age of exploration, but many
of the slaves also escaped to freedom in the inland areas
beyond European control. European powers had trouble
gaining control of any region except the coastal areas. South
American natives quickly became mixed-race with Africans. In
some ways, the slaves prospered more than the Europeans
who died by the boatload.
We tend to think of the Europeans as the dominating race that
kept everyone else in chains, but most of them were Europe’s
desperate and poor. It wasn’t unusual for most of a shipload of
settlers to be dead one year after arrival. In contrast, slaves
often escaped into the forest and blended in with the natives.
They had more resistance to the tropical diseases that
Europeans were dying of.
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The Spanish government of the time is often blamed for
creating the policy of exploitation, piracy and slavery, but the
situation was actually beyond the control of any government in
China or Europe. Communications and travel were slow, and
governments had limited ways to project power across the
world.
Spain actually wanted the silver from South America to come
directly back to Spain, but traders and pirates wanted it to go
to China because Chinese trading goods were highly valued.
Religious leaders opposed the enslavement of Indians, and
Spain made many attempts to stop the slaughter of natives,
end slavery, and get more of the silver back to Europe, but they
were usually powerless to stop what was happening across the
ocean.
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Just like the US and China today, Spain and China had a very ambivalent attitude
about each other. They were caught in a mutually dependent global trade network
that they couldn’t break, even though it worked against many of their political goals.
They never fought a war, but they sure didn’t like each other.
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A Love/Hate relationship
In 1591, relations between Spanish and Chinese in Manila
deteriorated and violence broke out. Charles Mann wrote,
“Incredibly, the massacre had no real consequences. Just
months after wiping out the Chinese in Manila, the city fathers
[Spanish]put down the welcome mat for new immigrants [from
China]. Spanish merchants were begging the junks to return.”
(1493, p. 159)
The Chinese government was eager to forget it too. It took no
action to punish Spain for a slaughter of 25,000 Chinese
residents of Manila. Both sides wanted to resume trade. The
cycle of expulsion (at least it was an improvement over
slaughter) and resumption of trade repeated in 1639, 1662,
1686, 1709, 1755, 1763, 1820.
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Politics or business?
Trade is a tool of statecraft; that is, states don’t
pursue trade relations only for the sake of
trade. States intervene in trade to pursue
political goals – China and Spain both had
reasons to limit the goals of merchants in the
galleon trade. They were often powerless to
control it, but sometimes business gave way to
politics.
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The end of the Galleon Trade
By 1640, the price of silver in China had fallen to international
levels. As we see in the modern world, differences in the
purchasing power of money tend to equalize after nations have
been trading for a long time. A hamburger in Tokyo costs about
the same as a hamburger in New York. Worker salaries in China
are slowly getting close to worker salaries in the US.
The devaluation of silver in China led to a revenue crisis for the
state treasury. The Ming dynasty lost its control of the country
and the Manchus conquered China, beginning the Qing dynasty.
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The disadvantages of China’s dependence on
silver
A big disadvantage of silver was that it wore down as it passed through hands – it
couldn’t be replaced like paper currency.
During the Galleon Trade, China spent huge sums of national effort to secure
from abroad the material that it used for money – a tremendous diversion of
national effort for something that had no real value.
In the late 16th century, China forced farmers to grow mulberry trees, for silk, to
pay for the silver coming from Mexico. This had a negative impact on the
environment, not to mention on food production.
Shortly after the silk for silver exchange got established, Chinese traders soon
learned European tastes and designs and began making not only the fabric, but
the clothes too – a remarkable precursor to the sort of trade that emerged as the
insular period of communism ended in the 1980s. It is similar to the way that
Chinese factories quickly learned how to produce Christmas decorations for the
US market.
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Friend + Enemy = Frenemy
Supporters of free trade say that it prevents war. Nations and groups of people will
come into contact, but they are less likely to fight if they depend on each other in
trading relationships.
However, this does not mean that love and friendship is the natural outcome of not
going to war. The history of international trade shows that trading nations have very
ambivalent and fragile relationships that can break down easily. This point was
made with comic effect by Stephen Colbert on his broadcast of February 13, 2007.
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Colbert’s report covers these aspects of the relationship
between the US and China, and hits on an eternal truth about
the nature of global trade:
1. The two countries have different political systems.
2. The two countries have different systems of criminal justice.
3. On principal, the US should not want to support China in any way because of points 1. and 2.
4. China resents criticism it gets from the US regarding its human rights record, criminal justice system
and lack of democracy.
5. China thinks America is lazy and unproductive; America thinks China exploits its workers.
6. Americans love to buy the cheap consumer goods made by China (tube socks!).
7. China loves to sell low cost goods to America because doing so makes China prosperous.
8. America needs to borrow money from China in order to continue buying cheap goods from China.
9. China likes to lend money to America so that America will continue to buy cheap goods from China.
10.China and America are mutually dependent like a drug dealer and a drug addict.
11.China and America don’t trust each other, so they build up their military capabilities and plan for
eventual war.
12.They will never go to war with each other because if America destroyed China, who would they
borrow money from?
13.If China destroyed America, how would China collect the money that America owes?
14.China and America are frenemies.
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