As China and the West look at decoupling, it’s worth remembering that the world has been through this several times since they first coupled three-quarters of the way through the 16th century. That’s when the Manila Galleon connected Asia and the Americas, a trade that was, to mix metaphors, oiled by silver.
The Chinese money supply, serving more than a quarter of the world’s population, had by the 16th century, been standardized on silver. Yet China, had insufficient silver of its own. Spain’s colonies in America, however, had supplies that could at times seem unlimited.
These initially came almost entirely from a single set of mines in what is now Bolivia: the cerro rico (“rich mountain”) of Potosí.
Kris Lane’s new book tells the story of Potosí, a boomtown like no other. Silver was discovered there in 1545, little more than a decade after the Spanish defeat of the Inca Empire. The perhaps apocryphal story includes a llama, a gust of wind and dirt carried in a blanket. Potosí, it turned out, was literally a mountain of silver. It soon became the single largest source in the world, at times producing more than half the world’s supply: silver which paid for imports from China, found its way to the Mughal Empire and paid for Emperor Charles V’s European wars. The resulting liquidity drove global economic growth and rearranged markets; inflation and currency shocks shook Empires worldwide.
Lane’s book, however, is not so much about the financial implications of this flood of silver as it is about the city that grew up around the mines. At its height, Potosí’s population was well over 100,000, “more inhabitants than all but a few European cities.” It was a city of churches, drinking, commerce, vice and—more than anything—money.
Rollicking is not a term normally applied to books from an academic press, and it is perhaps an exaggeration, but only a slight one, to use it here. Lane includes technical, mineralogical, chemical, historical and other background, but his focus is on the stories, la comédie humaine, that played out in Potosí during the two and three-quarter centuries between the discovery of silver and Simón Bolívar’s declaration of independence delivered from the Cerro Rico’s peak. The country of Bolivia now bears his name.
One anecdote worth repeated in full is from Inca Garcilaso de la Vega’s Royal Commentaries of the Incas,
In Potosí, in 1554 and 1555, there was a parrot that spoke so well that when the Indian men and women passed by in the street it would call them by their respective tribes, saying “Colla”, “Yunca”, “Huairu”, “Quechua” and so on, without any mistakes, as if it realized the meaning of the different headgear they used to wear in Inca times to distinguish themselves. One day a beautiful Indian woman passed down the street where the parrot was. She was attended by three or four servants, who treated her as a lady palla, or member of the royal blood. When the parrot saw her, it shrieked and laughed: “Huairu, Huairu, Huairu!” the name of a tribe that is looked down upon by all the rest. The woman was very much humbled in front of the bystanders, for there was always a crowd of Indians listening to the bird. When she was opposite it, she spat at the bird and called it supay, “devil”. The Indians said the same, for it recognized the woman though she was disguised as a palla.
The story is fun, but it echoes a theme of Lane’s: that in Potosí a hybrid society sprang up, where native people and Spaniards, as well as slaves from Africa, lived and worked together, cross-pollinating culture, technology (indigenous smelting technology using wind was one of the most effective), politics and culture. While there was certainly a hierarchy and terrible exploitation of the indigenous people through the infamous mita forced labor system, neither the indigenous community nor, indeed, women were locked out of either mining or other commercial activities; some became quite affluent:
Diego de Ocaña, who begged for alms in Potosí in the year 1600, describes a visit to the house of “a very rich Indian,” Pedro de Mondragón, who advanced silver coins to mine owners in exchange for raw ingots… “And he has all of his capital in his house at all times,” Ocaña claims, “before his eyes. He has a room filled with silver, in one part the bars, in another the ingots [‘pinecones’], and in another, in some jugs, the coins [reals]. I was quite stunned to see so much silver in one place and I asked him how much was there, that I was seeing, and he replied to me: ‘There are 300,000 pesos of assayed silver.’” Mondragón was in fact a mestizo, son of a Spaniard and an indigenous noblewoman. He dressed in the Spanish fashion yet he preferred to live “like an Indian.” This social and economic hybridity left Diego de Ocaña perplexed, but it was pure Potosí.
Potosí had its ups and downs; from the 17th century, mostly downs. The easiest silver was tapped out and the solution—the use of mercury to extract the metal from the ore—was deadly. In a geological twist of fate, Peru also had one of the world’s largest supplies of mercury.
There were floods and plagues, corruption and a huge fraud in which the silver in the coins was debased:
On the far side of the world, Potosí coins had been routinely rejected in the spice ports of India and Southeast Asia. Frustrated merchants working for the English East India Company complained from Surat to the home office beginning in the early 1640s, but even when the new and improved coins appeared after 1652, pepper kings in Sumatra would not touch them. As far as they were concerned, “P” was for poison. It took decades to restore confidence in the once-famous money of Potosí. Mughal India had another solution: millions of suspect Potosí coins were recycled as rupees, discounted as scrap to bullion dealers happy to extract all the good silver.
This was a calamity that didn’t befall the other main colonial mint in Mexico. Indeed, Potosí progressively lost ground. The Manila Galleon was exclusive to Acapulco, silver deposits rivaling those at Potosí were found at Zacatecas, while in 1733, the Mexico mint launched coins whose blanks were made on a milling machine to ensure a consistent weight and size. Their edges were also raised with serrated edges, meaning that it was easy to tell if they have been tampered with. It was these “milled” pesos, from Mexico not Potosí, that became a global currency that evolved into the US dollar, the yuan and yen.
But Lane writes that Potosí kept on bouncing back, perhaps not as high as before, but high enough to allow some residents to live in the style to which Potosí had been accustomed. Even today, there are miners are Potosí; they were critical to former President Evo Morales climb to the top job.
Potosí’s history has some lessons for today: wealthy cities can pop up in the most unlikely places, whether a wind-swept mountain plateau, a swamp-filled jungle or a barren rock. But it is also one of the first and archetypal examples of what has become known as the “resource curse”: its economy never diversified, something admittedly difficult at 4000 metres.
The mountain, however, endures.