Production and Consumption in the First Global Economy .1571-1700.
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Historians Explore
Silver Mining in Spanish America
Given the importance of silver to this era, it should be no surprise that histori-
ans have worked hard to understand the local and global effects of its production
and distribution. The American silver industry did not spring up immediately
with the arrival of Europeans. At first, Europeans simply took the silver stock of
indigenous societies; over time, this gave way to a more complex plan to extract
the hemisphere's silver from the earth itself. This required a labor force as well as
raw materials and other inputs: tools, timber for support beams for the mines,
leather to make sacks for ore, and animals to haul them. Food for the populations
of the silver mining regions also had to be produced and distributed. The two
most important silver mining sites in the Western Hemisphere—one in the cen-
tral Andes and the other in today's Mexico—had different human and natural
resource bases, but both followed the same general pattern of a dramatic increase
in production during the first century of European control followed by a stagna-
tion of production after 1650.
Potosí, the most famous and productive silver city in the Americas, lies high in
the Andes Mountains of what is today Bolivia. It is one of the highest human set-
tlements in the world, at twice the altitude of Denver, Colorado. Spaniards first
tapped into its veins in 1545. By the end of the 1960s, the richest ore and local
fuel sources for ore-smelting furnaces began to run out. Just twenty years after
Europeans began exploiting Potosí's silver, it seemed poised to decline.
Producing precious metals in the Americas was vital to the Spanish Crown,
which claimed a monopoly on the output of some mines and claimed a tax of
20 percent—the quinto or “royal fifth"-on all precious metals produced in the
empire. Enormous revenue was at stake if the mines closed, so the Spanish tried
to revive them. Supported by the Crown, mine operators in the Andes changed
the production process with profound repercussions for the local population and
for world history. The first change was a new technique to extract silver from a
toxic sludge of crushed ore, mercury, copper sulfate, and water. Using a newly
discovered, local source of mercury at Huancavelica, silver production in Peru
grew to over three thousand tons per year in the 1990s. The new production pro-
cess also left a legacy of poisonous mercury runoff in the local environment that
survives to this day.
The second change involved the labor working the mines. To maximize prof-
its, mine operators were unwilling to pay wages sufficient to attract enough free
laborers, so the colonial state helped them with the force of law. The government
imposed a labor tax, called the mita, on the indigenous villages of the Andes. Sys-
tems like this (called corvée) in which a tax was assessed, not in cash or goods, but
in labor, were common in the early modern world and remain so in some societies.
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Chapter 4
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Under the mita system, more than eleven thousand indigenous workers from
the Andean highlands were forced into the mines and refineries. This forced
labor impoverished local communities to enrich mine operators and landown.
ers, with lasting consequences for colonial society. Even as the costs of other
factors of production increased and ore quality decreased, cheap labor enabled
mine owners to continue squeezing a profit. Some indigenous people chose
avoid the onerous—often deadly—labor obligations by migrating, making the
painful decision to permanently leave their communities. Others made cash
ments to mine operators who could use the money to hire workers or
the profit. As the city's silver production skyrocketed, so did its population, ex-
ceeding 150,000 by 1610. By the mid-seventeenth century, Potosí was one of the
world's largest cities, about the same size as the Dutch capital, Amsterdam.
Other parts of Spanish America relied on different systems, using indigenous
communal labor, enslaved Africans, indentured workers, and free labor. Between
1550 and 1650, these workers produced three hundred thousand tons of silver,
dwarfing the production of the rest of the world combined. New Spain over the
long run produced even more silver than Peru. From the beginning of the six-
teenth century to the end of the eighteenth, American silver probably accounted
for more than three-quarters of the world's supply.*
As the example of Potosí illustrates, states and their rulers made important
decisions about how wealth could be created and maintained and about the
relationships between states and the economy. In the next section, we explore
the assumptions behind those decisions, the actions that flowed from them, and
the repercussions that ensued.
States and Economic Activity
In 1615, a Frenchman by the name of Antoine de Montchrestien (1575-1621)
wrote A Tract on Political Economy, introducing to western European readers this
new term that reflected a growing sense among philosophers, financiers, and
rulers that the acquisition and distribution of wealth were intimately related to
4
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"Mining in Colonial Spanish
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Peter Bakewell,
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