The Power of Gold: The History of an Obsession
Page 16
The Spanish government was extraordinarily effective and efficient in accomplishing the complex task of moving the treasure across perilous and hostile seas. The gold and silver were loaded on ships at Vera Cruz in Mexico, Trujillo in Honduras, Nombre de Dios on the Atlantic side of Panama, and Cartagena in Colombia. The area of the Caribbean enclosed by these ports came to be known as the Spanish Main, a name that has lingered on in romances ever since. From there, the ships traveled to Cuban waters to join together in convoys, or floras, for the long voyage to their home port of Seville. Two to eight armed galleons accompanied the flotas as protection against the pirates and buccaneers who roamed the seas waiting to pounce on treasure-filled vessels.* The flotas also provided at least a hope of rescue, of cargo if not men, when heavy storms threatened to sink one or another of the galleons.
When vessels were forced by storms or fear of attack to put in at any port other than Seville, passengers were forbidden to land or to make any offer to trade in treasure. Once the cargo reached Seville, everything was transported under the tightest security to the House of Trade, where it was weighed and placed in special chests in a treasure chamber; both chests and chamber were provided with triple locks, with each of the three keys carried by three different officials of the House. The metal was smelted and refined right there. Some of it was then minted, but significant amounts of bullion were delivered to the creditors of the Crown, most of whom resided in other lands.
It staggers the imagination to consider the skill required to gather together, organize, control, and maintain contact with that many sailing ships on a voyage of over three thousand miles of open ocean, with no handy means of communication such as the wireless systems or radar used on the convoys sent out four hundred years later from America to Britain in World War II.` By comparison, piloting one thousand camels across the wastes of the Sahara must have been a cinch. There was another big difference between the convoys of the 1500s and the convoys of the early 1940s. In World War II, the ships carried black goldoil-plus food and armaments to defeat the Nazis; in the 1500s, the freight amounted to nothing more useful than shiny metal ingots. People knew what to do with the precious cargoes carried through the submarine-infested seas of the North Atlantic, but the Spaniards had a far more open-ended set of options for the precious metals. More often than not, they made the wrong choices.
Although losses to the Spanish flotas from pirates were a lot smaller than losses from storms at sea-or from German submarines in World War II-the danger of attack was a constant worry. There was a rumor around Spain that Charles V cried with joy every time word came in of the safe arrival of a flota.4 Charles V, the reader should be reminded, was King Charles I of Spain through his mother, the daughter of Ferdinand and Isabella; he was also Charles V, emperor of the Holy Roman Empire (Charlemagne having been Charles I in that role). Generally known as Charles Quint at the time, he is most often referred to today as Charles V, the nomenclature that I follow here. He plays an active role in the later pages of this chapter.
As the historian Kenneth Andrews describes the times, piracy was elevated to a preferred branch of policy by Britain, France, and Holland, each of which was seeking a piece of the action in America that the Spaniards and Portuguese had claimed exclusively for themselves. Spain was also at war at one point or another with each of these countries during the sixteenth century. There were thirteen organized English expeditions to the Caribbean, and doubtless many free-lance junkets, just during 1570 to 1577.5 Nevertheless, despite all the romance about the pirates and their occasional dramatic successes, the records of the House of Trade contain many accounts of failed attacks and safe arrivals' Whole fleets were intercepted and defeated only three times, twice by the English and once by the legendary Dutch admiral Piet Heyn in 1628.' More often, stragglers ran into difficulty. In March 1569, for example, 22 Spanish and Portuguese ships were brought into Plymouth, where the English happily relieved them of their precious cargoes.8
The most serious and sustained threat to Spanish shipping came from Sir Francis Drake, who made a specialty of plundering gold from the Catholics of Iberia. His efforts made his crew rich, quite aside from the fortune he kept for himself and the even bigger sum that he turned over to the English Crown. His hatred of the Spaniards was reciprocated: they referred to him as "the master-thief of the unknown world."'
Drake kept at the task, off and on, for nearly 25 years. He even landed in Panama in 1572, aiming to capture the Atlantic-side port of Nombre de Dios and thereby interdict the north-south route of Spanish gold. A wound in his leg forced him to abandon that project, but he and his men succeeded in seizing a pack train loaded with gold en route to Nombre de Dios from Panama City on the Pacific, with £20,000 worth of coins to show for their efforts.
Drake's famous voyage on the Golden Hind during 1577-1579 snared more than ten tons of gold, silver, and jewels from Spanish ships, first on the Atlantic side, and later, after sailing through the Straits of Magellan, on the Pacific side.10 Drake then sailed up the coast of California before crossing the Pacific. He landed at Point Reyes on the shores of Marin County on San Francisco Bay and claimed the territory in the name of Queen Elizabeth of England. In 1586, the Venetian ambassador to Madrid reported that Drake had landed on Santo Domingo, Puerto Rico, and Cuba and had "returned to England with 38 ships laden with much booty."" In 1595, the queen sent Drake back to Panama to capture Nombre de Dios and Panama City and hold them for ransom. This time he succeeded in taking Nombre de Dios, but he in turn was conquered by a fatal case of dysentery, along with many of his shipmates, and was buried at sea.
One might think that Spain in the middle of the sixteenth century should have been the richest nation in Europe by a wide margin. It was not. The impact of this immense and sudden addition to monetary wealth was felt throughout the rest of Europe and even out to the Far East, but in Spain no lasting payoff remained from the spectacular exploits of the Conquerors and the fountains of blood that flowed from white men and Indians. The gold came in one end and went out the other like a dose of salts.
How was it that the Spaniards were able to mismanage one of the greatest windfalls of all time? Why did so much of the fruits of history's first gold rush end up in the hands of others? Part of the answer to these questions was local, indigenous to the character of sixteenth-century Spain. Part, and perhaps a larger part, was the result of the dynamic and restless environment of the era, in which the rigid structure of Spanish society was ill-fitted to participate.
Once the gold began arriving in quantity, the Spanish were far more proficient at spending than at producing. The massive imports of gold and silver stimulated the spending skills at the same time that they stifled Spain's incentive to produce. Spain acted like a poor man who makes a great windfall at the gambling tables but comes to believe that the money is his destiny rather than a nonrecurring event. This event was indeed nonrecurring: copious as the shipments of gold to Spain may have been during the 1500s, they peaked in midcentury and dropped off sharply after 1610; silver shipments peaked around 1600 and fell into a steep decline after about 1630.*12
During the sixteenth century, five-sixths of outgoing cargoes from Spain, primarily to the colonies, consisted of goods grown or manufactured in other countries." Late in the century, the Cortes, or Parliament, declared, "The more of [gold] that comes in, the less the Kingdom has. ... Though our kingdoms should be the richest in the world ... they are the poorest, for they are only a bridge for [the gold and silver] to go to the Kingdoms of our enemies." Another Spanish observer, Pedro de Valencia, wrote in 1608, "So much silver and money ... always has been fatal poison to republics and cities. They believe money will keep them and it is not true: plowed fields, pastures, and fisheries are what give sustenance." Still another complained, "Agriculture laid down the plough, clothed herself in silk, and softened her work-calloused hands. Trade put on a noble air ... went out to parade up and down the streets."14 Instead of transforming the gold and silver into ne
w productive wealth, the Spaniards paid the precious metals out to other countries and spent so much that debts to foreigners soared. As early as the 1550s, there was a popular saying that "Spain is the foreigners' Indies," because so much good Spanish money was being paid over to foreigners for "puerilities"-baubles like bangles, cheap glassware, and playing cards.15
Spain had also committed a costly economic blunder in the Columbus-year of 1492, even though the decision had brought joy and pride at the time it was made. The Jews and the Muslims were both expelled in 1492. Some Jews remained by converting to Christianity, but the vibrant intellectual community that had contributed so much to Spain for hundreds of years rapidly disintegrated. Most Christian Spaniards at that time were peasants or soldiers, illiterate and without any knowledge of the simplest kind of arithmetic. The nobility were either idle or romantic warriors.
The Jews and the Muslims, in contrast, were highly educated, leaders in mathematical and scientific developments, and immune from the Christian strictures against usury. They were the skilled governmental administrators and men of business. The Muslims in particular had a long heritage of trading, importing, and exporting. With their departure, Spain lost almost all of the native merchant class that was essential in a time of dynamic economic development throughout Europe. Instead, Cadiz and Seville, the primary economic centers of sixteenthcentury Spain, were filled with foreigners-Genoese merchants and bankers, German moneylenders, Dutch manufacturers, and purveyors of every kind of goods, services, and finance from all over Europe, even Bretons and people from as far away as the North Sea area."' Almost all of the massive borrowing by Spain in the sixteenth century was financed by foreigners.
The departure of the Jews and the Muslims was a loss in another sense. Because of its geographical location, Spain is not on the route that traders and travelers would take in going from one place to another. The line of countries from France eastward, and the projection of Italy and Greece down into the Mediterranean, were on the east-west crossroads of travel and trade through Europe. There was no need to cross Spain, unless you were coming from Africa, and even then Spain was not the only possibility. As a result, Spain tended to be more provincial and ingrown than the countries to the north and east; only Seville, Barcelona, and Bilbao had any significant connections with the rest of Europe. The cosmopolitan flavor came from the Jews and the Muslims, who had many contacts in other lands dating back for centuries. Their departure cut that link to the outside world, leaving Spain dependent on foreigners whose allegiance was elsewhere.
One authoritative study has summarized Spain's situation as a dreadful paradox:
Gold and silver merely acquired their international status in Spain, without being in any way connected with the Spanish economy.... There was an abundance of metals without any productive development, a rise in prices without any monetary alterations. In short, sixteenth century Spain was characterized by a separation between money and merchandise."
The greatest waste inspired by Spain's gold was not in the baubles or in the loss of commercial and financial sophistication. It was in the dreams of glory of the Spanish monarchs. Gold has always been associated with power. Once the kings of Spain realized how much new wealth the discoveries of gold in the American colonies would bring them, they convinced themselves that their wealth was great enough to bend the world to their will, especially in the fiery matter of Catholicism versus Protestantism. In the middle of the century, half of all business conducted in Spain was for the account of the king.18
Charles V, who ascended the throne in 1516 at the death of his grandfather, Ferdinand, was determined to make Spain the dominant power in Europe. But Spanish power was not sufficient for Charles. He also wanted to follow in his other grandfather's footsteps and become emperor of the Holy Roman Empire. That job did not pass by inheritance; you could become emperor only through election by a group of Germans appointed by the pope and called electors. Francis I of France had identical ambitions. An intense bidding war to buy the votes broke out, in a no-holds bribery contest, with Francis backed by Genoese bankers and Charles by the Fuggers, the great Augsburg banking family. Charles won, but at a cost of 850,000 florins, which pushed him in debt to his ears. He proceeded to engage in 27 years of warfare with Francis I, with intermittent truces that were invariably violated and at one point that almost led to a personal duel between the two monarchs. Charles also claimed the Netherlands as part of his empire, and left his son, Philip II, to deal with the fruitless eighty-year struggle to tame the Dutch and the Belgians, during which most of the fighters on the Spanish side were mercenaries who would fight only for payment in "good money"that is, gold or silver. Philip, in turn, was so bold as to try to topple Queen Elizabeth of England in 1588 with his ill-fated venture known as the Spanish Armada, to say nothing of his sporadic campaigns against the Turks, who had launched an aggressive move into the Balkans and eastern Mediterranean.
These adventures had to be financed. The 37 million ducats of external debt accumulated by Charles V during the forty years he was king of Spain exceeded by two million ducats the total value of the precious metals assigned to the crown that reached Seville from America in those years.'" In 1572, the cost of the war in the Netherlands was running at an annual rate of 14.4 million florins, but the Spanish were able to come up with only 7.2 million florins in all of 1572 and 1573. By July 1576, King Philip owed the troops 17.5 million florins. Stretched beyond his means, Philip ordered payments to his creditors stopped, confiscated two shipments of silver that he owed them, and forced the creditors to convert most of his debts into long-term loans-nearly wiping out the Fugger banking house in the process. Philip's bankruptcy led his army of mercenaries to break apart in mutiny and desertion. It was said that at one point the captain general did not have enough money for lunch .211 Philip thereby introduced the Western world to the relatively rare but shattering phenomenon of default by a sovereign or, in today's parlance, by a sovereign state. Spain would go on to repeated financial crises in 1596, 1607, 1627, and 1647.21
Meanwhile, a lot was going on throughout Europe, not just in Spain. In spite of the continuous depredations of warfare and religious turmoil, these unpleasant developments played themselves against the background of the High Renaissance, when artistic and scientific achievements reached extraordinary levels. Leonardo, Tintoretto, Raphael, Palladio, Cellini, Michelangelo, Titian, Diirer, Cervantes, and El Greco were all active during the 1500s. The great cathedral of Saint Peter's rose up on the banks of the Tiber, well splashed with gold in its interior. Copernicus and Galileo were exploring the solar system, while businessmen for the first time took the giant step of using double-entry bookkeeping.22 This was also a period when Latin was being replaced by vernacular languages, which facilitated communication among the great mass of individuals, including some very rich ones, who had neither been to universities nor joined the clergy.
The single most important event of the century occurred in 1517 when Martin Luther posted his 95 theses on the door of the church in Wittenberg. The Reformation tore through Europe like a hot poker, transforming beliefs and revolutionizing artistic styles while ripping across political and dynastic relationships. The Reformation was in some instances the cause of wars, but war was in any case an almost constant way of life in the 1500s.
England was at war for a total of fourteen years. In 1545, at war with Francis I and simultaneously threatened by an invasion from Scotland, Henry VIII had 120,000 men under arms-and drawing pay from his treasury. Henry was forced to borrow money at interest rates as high as 16 percent and even seized all the lead in the kingdom to be sold for export. In a vast privatization plan that bears some resemblance to those carried out in many countries during the 1990s, Henry sold off valuable properties that he had grabbed from the monasteries and the churches when he veered into Protestantism after his divorce in 1533.23 As a final step, Henry resorted to debasement of his currency.
No matter how painful and expensive the wars wer
e, the English spent much less time at war than the Spanish and the French, and the difference probably explains the relatively rapid economic development in England during the reign of the Tudors. The Spaniards fought with France for nearly thirty years. The major struggle was over who would dominate Italy, but that contest was in addition to Spain's ill-fated Armada against England and their brutal campaign to subdue the Netherlands. Religious wars were also fought within nations, many continuing at an unrelenting pace well into the seventeenth century. The result was repeated repudiation of debts by both the Spanish and the French.
The Europeans did not fight only among themselves. Just beyond the eastern Mediterranean, the Turks launched a sequence of campaigns against Europe that would continue with only brief interruptions for over one hundred years. In 1529, the Turks were at the gates of Vienna for the first time. They ravaged Italy and Sicily in the 1530s. They were at war with Venice from 1537 to 1540 and again from 1545 to 1564, but suffered a major naval defeat at Lepanto in Greek waters in 1571.
Most of the military activity within Europe resulted from the ambitions of the great dynasts of the age-Charles V in Spain and Francis I in France. Henry VIII (1509-1547), who was eager to establish and maintain the legitimacy of his own dynasty in England, acted as a kibitzer and occasional participant in the struggles between Charles and Francis, continuously playing one against the other. Henry's choices were limited in the early years, as Charles was the nephew of his first wife, Catherine of Aragon, but Henry also played at making alliances with Francis.
France was not among the lucky countries to discover gold in the New World, but France did gain gold from trade and from picking off Spanish galleons on the way to Seville from America. Francis I (1494-1547) was a great believer in the tradition that gold was essential for public relations, for ostentatious display, and for messages of power. His tastes were by no means unusual for an age in which Flemish and Burgundian embroidery was lavished with gold thread, when gold was becoming increasingly visible in church adornment, when nobles' ranks were distinguished by the weight of the gold chains they wore around their necks (Henry VIII had a "masseye gold cheyne" of 98 ounces), and when knights went into battle wearing doublets strewn with gold and gems.21