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By Root 3052 0

courtyard—and slaughtered it. As word of the massacre leaked out, Zhang wrote, thousands of Chinese fled to the hills outside Manila. After an inconclusive clash, the Spaniards sent a peace emissary. “The Chinese worried that it was a trick to lure them out, and killed the emissary,” Zhang admitted. “The barbarians grew angry, and set up an ambush outside the city.” When the Chinese ran out of food, they decided to take it from Manila—and walked into the Spanish ambush. Three hundred Spaniards died in the ensuing battle. So did as many as twenty-five thousand Chinese, most of them Fujianese. According to Zhang, only three hundred Chinese survived. A second wave of deaths followed, as some of the new widows in Fujian, many of whom now faced bondage to pay their husbands’ debts, killed themselves.

Incredibly, the massacre had no real consequences. Just months after wiping out the Chinese in Manila, the city fathers put down the welcome mat for new immigrants. And Spanish merchants were begging the junks to return—they wanted to buy cheap Chinese silk. “The Spaniards who had seen the Chinese as such a grave threat that their survival depended on their complete disappearance didn’t hesitate to do everything possible to ensure the massive repopulation of the Parián,” Manel Ollé Rodríguez, a Barcelona historian of Spanish-Chinese relations, observed in 2007.

In Beijing, the Wanli emperor decided that the three treasure mountain officials were responsible for the explosion in the Parián, and ordered them beheaded. Although he accused the Spaniards of “murder[ing] people without license,” he also conceded that the dead Fujianese “were base people, ungrateful to China, their native country, to their parents, and to their relatives, since so many years had passed during which they had not returned to China.” Translation: they weren’t worth the cost of a punitive expedition. Besides, the government still needed the silver.

Within two years the galleon trade and the Parián were almost back to normal. “The Chinese gradually flocked back to Manila,” reported the Ming Shi, the official history of the dynasty. “And the savages [Spaniards], who saw profit in the commerce with China, did not oppose them. The Chinese population began to grow once more.”

Because the situation had reverted to its pre-massacre state, the Spaniards in Manila were as few, dependent, and scared as ever they had been. Eventually they again tightened restrictions on the Chinese. Rebellions flowered in the Parián, followed by expulsions and massacres. The cycle repeated itself in 1639, 1662, 1686, 1709, 1755, 1763, and 1820, each time with an awful death toll.

To modern eyes, the scenario is hard to credit: why would the Chinese keep returning? It is one thing to take a onetime risk, as small-time Fujianese traders did when they made their single visits to Manila; it is another to set up an establishment that will be sacked every few years, with great loss of life. During these incidents the Parián Chinese frequently managed to kill a third or more of the Europeans in the Philippines, as they did in 1603. Yet Manila’s merchants invariably invited them back, even smuggling their potential executioners past customs. Why would they repeatedly set up a situation in which they had an excellent chance of being killed?

In Power and Plenty (2007), a history of trade in the last millennium, Ronald Findlay and Kevin O’Rourke suggest one way to think about this situation. When economics textbooks describe trade, Findlay and O’Rourke write, they describe two countries “endowed with a certain amount of the various factors of production—land, labor, capital, and so on.” The two nations have technologies that transform those factors into goods, “together with a set of preferences over those goods.” Private entities within each nation “trade with each other, or not as the case may be, and the consequences of trade are derived for consumers and producers alike.”

Typically one country (the United States, for example) can produce Good A (wheat, say) cheaply and well, while the