The Importance of Silver in the Early Modern Era

Potosi The Spanish plundered for gold and silver until the discovery of silver at Potosi in Bolivia in By 1570, Potosi had become a silver boomtown –13,000 feet elevation –150,000 people. Over the next century, thousands of tons of silver came out of Potosi.

Potosi Half of the New Worlds silver came out of Potosi. From 1503 to 1660, over 32 million pounds of silver and 360,000 pounds of gold were exported. Over the three centuries that Potosi operated, it is estimated that eight million Indians seven out of every ten--working in the mines died.

Why Silver? Where did the silver go? Who provided the demand for silver? The conquistadors had wanted gold, so why were they were pumping out silver? Why?

Why Silver? When the Portuguese sailed into the Indian Ocean and the China Sea, they discovered they had little money with which to buy Asian spices and manufactured goods. Consequently, they extorted the goods of Asia through an armed trading protection racket. When the Spanish stumbled onto the silver of the New World, they found the key to accessing the wealth of Asia.

Why Silver? Even though the silver flowed from the New World to Spain, the monarchs were constantly warring in their efforts to unite Europe under their empire. Consequently, the silver flowed out of Spain and into the hands of Dutch arms merchants and English and Italian financiers, who used the silver to finance trade missions to China and the Indian Ocean. The Spanish also lacked direct access to Asia. Those routes were held by the Portuguese, Dutch, English and French. In 1571, the Spanish seized Manila in the Philippines, established a colony there, and sent galleons loaded with silver directly from Acapulco to Manila.

Chinas Demand for Silver Approximately ¾ of the New World silver production from 1500 to 1800 wound up in China. China had a huge demand for silver. Silver served as the basis of its monetary system and helped economic growth. Because the Chinese valued silver, it was expensive there and very cheap in America.

Why Silver? In the period from 1500 to 1800, the bulk of the worlds population, economic activity, and trade remained Asian. In 1775, at only 1/5 of the worlds population, Europeans shared production of one-fifth of the worlds goods with Africans and Americans.

Why Silver? In the 1500s, Chinese manufactured goods were much better and cheaper than European ones. Chinese imports were so well made and cheap that they destroyed the Mexican silk industry. The English found cheap cotton textiles from India to be superior to anything that they could buy locally, so Indian imports climbed steadily during the 17 th century.