A History of the World in 100 Objects - Dr Neil MacGregor [202]
The Potosí mines produced the raw material that made Spain rich, but it was the Potosí mint, fashioning the silver pieces of eight, which laid the foundations of a global currency. From Potosí the coins were loaded on to llamas for the two-month trek over the Andes to Lima and the Pacific coast. There, Spanish treasure fleets took the silver from Peru up to Panama, where it was carried by land over the isthmus and then across the Atlantic in convoys.
But this silver trade was not centred only on Europe – Spain also had an Asian empire, based in Manila in the Philippines, and pieces of eight were soon crossing the Pacific in huge numbers. In Manila, pieces of eight were exchanged, usually with Chinese merchants, for silks and spices, ivory, lacquer and, above all, porcelain. The arrival of Spanish-American silver destabilized the East Asian economies and caused financial chaos in Ming China. Indeed there was hardly any part of the world that remained unaffected by these ubiquitous coins.
In the coin collection of the British Museum there is a display that gives a wonderfully clear idea of the global role of pieces of eight made in the Spanish-American mints. One coin has been counter-stamped by a local sultan in Indonesia, while others were stamped by the Spanish themselves for use in their province of Brabant, now in modern Belgium. Other coins here have been inscribed with Chinese merchants’ stamps, and a coin from Potosí was found near Tobermory in the Hebridean islands off the west coast of Scotland; it comes from a ship that was once part of the Spanish Armada, wrecked in 1588. Pieces of eight even reached Australia in the nineteenth century. When the British authorities ran out of currency there, they bought Spanish pieces of eight, cut out the Spanish king’s face and re-engraved them to read five shillings, new south wales. The presence of these coins from the Hebrides to New South Wales shows that, both as a commodity and as a coin, pieces of eight engendered a fundamental shift in world commerce, as the financial historian William Bernstein describes:
This was a godsend, this Peruvian and Mexican silver, and very quickly hundreds of millions and perhaps even billions of these coins got minted, and they became the global monetary system. They were the Visa and the MasterCard and the American Express of the sixteenth through to the nineteenth centuries. They are pervasive enough that when you, for example, read about the tea trade in the eighteenth and nineteenth centuries in China, which was a vast trade, you see prices accounted for in dollars, with dollar signs; and of course what they were talking about were Spanish dollars – these pieces of eight.
Across Europe, Spanish-American treasure inaugurated an age of silver, ‘the wealth which walketh about all the countries of Europe’.
But the very abundance of silver brought a new set of problems. It increased the money supply – much like governments printing money in modern terms. The consequence was inflation. In Spain there was bemusement, as the wealth of empire in both political and economic terms often seemed more apparent than real. Ironically, silver coin became a rarity within Spain itself, as it haemorrhaged out to pay for foreign goods while local economic activity declined.
When the British authorities in Australia wanted to create a local currency, they converted Spanish pieces of eight into five -shilling coins
As gold and silver vanished from Spain, its intellectuals grappled with the gulf between the illusion and the reality of wealth, and the moral consequences of the country’s unexpected economic troubles. One writer in 1600 describes it like this:
The cause of the ruin of Spain is that riches ride on the wind, and have always so ridden in the form of contract