Silver's Discovery and Its Global Societal and Economic Effects

Categories: Taxation

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The discovery of silver and it's newfound use as a key form of currency had a great impact on social and economic behavior around the world during the period of 1500-1750. The great influx of this wealth dug up by the Spanish colonies in America, as well as that which was found within Japan, was used as a great element when trading with China. The Ming (China's ruling dynasty at the time) eventually imposed that all taxes and trade fees be paid in silver, as their previous currency of paper money had begun to crash.

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For many, this change was great, and would cause issues to arise. As for Spain, damage was inflicted as well, as all their newly acquired wealth was being pushed out in exchange for luxury goods with no real use. As silver's discovery may have seemed to be a great addition to civilizations around the globe and their economy, it resulted in more of a harmful change to both the lifestyle of many and the nation's' wealth during the mid-sixteenth to the late eighteenth centuries, although there may have been a numbered few who benefitted from the new world trade system.

China's trading economy may have seemed to increase for the better, however in reality, it was more of a change for the worse. Silver became the main currency because paper money had several issues in its usage: the money could easily be forged, so its legitimacy was questioned, and as well as this, not many people believed in the government's ability to distribute this money as something valuable.

The Ming's decision to change tax payments and trade fees' payments to silver in the 1570s is what ultimately offset the economy in the long run. The increasing and unrestricted flow of silver into China from nations like Japan and Spain caused a major economic inflation, causing silver's worth to greatly decrease. Damaging the economy, China began to struggle with their new currency. Silver started to become scarce when Spain's ruler, King Philip IV, put increasingly strict rules on the trade between China and Spain's American colonies during the mid 17th century. These colonies were an important supplier of silver, so when the silver began to dwindle with the decline of it's previously great flow, people began to have serious issues trying to pay their taxes. This led to the poor becoming poorer and conditions in China worsened. However, before this, there was a constant and unregulated flow of silver into China for over a century, so the restrictions came pretty late in the game. Japan, however, was China's main exporter of silver, so most of China's currency came from there. As well as this, the silver that was already in China was stuck among the elites, as there was no way for the silver to trickle down to the poor. Public work projects were not being put into play, and because peasants were in such debt from being unable to pay their taxes, when the rich bought agricultural goods from the poor farmers, they did not have to pay, meaning the peasants got no silver for their efforts. Ye Chunji, one of the Ming Dynasty's country officials, stated how the "frugal man' was very sparing with the silver he had, while the rich man was always looking for more and more money. (Doc 1) This describes how the rich were becoming almost greedy, to the point where they would try to get as much of the silver as they could in order to get as much wealth as possible. The poor, who didn't get much silver at all, were very cautious with their spending habits, because they wouldn't be able to replace it easily once it was all gone. The rich wouldn't (and couldn't, really, as there was no way to) pass it down. Once silver was imported into China, it was generally lost among the elites. China was described to be a "bottomless sink' of sorts, a place where the metal was "buried and never returns. (Doc 8)' Socially, this would have caused more of a gap between the rich and the poor, as the poor had next to nothing and the higher ups were taking all the wealth to keep for themselves, although the silver eventually substantially dropped in its value anyway. To add onto this, Wang Xijue, another Ming Dynasty official (a court official this time, however) commented on the conditions of farmers and how their labor was affected by the scarcity of their new currency. In 1593, he writes to the emperor so that he may describe the problems occurring in his village. The problem describes how the grain prices were falling due to the lack of flowing currency in China, and because of this, when peasants did eventually get paid for their labor, they got very little, as the prices were so low (Doc 3). This was another cause of the poor population's suffering in China, as they simply could not afford to live. A cause of the little pay peasants were getting was revolts against the elites and the government, who was practically hoarding all the silver. As well as this, many peasants turned to banditry and thievery, as there weren't many other options when it came to the matter of life or death. The city streets filled with beggars, and it became unsafe to walk alone in the night, as the threat of being robbed was at a high chance. The desperate need of silver in China was imminent. He Qiaoyuan, also a court official during the Ming Dynasty, informed the Emperor in 1630 how trade with Europe would help to gain more silver for the nation's use. He proposes to lift the ban that was put into place in 1626 that restricted foreign trade, saying that their Chinese goods "are currently desired by the foreigners.' (Doc 7) If the ban was lifted, trading with Europe would mean that they would receive more silver. The Chinese's silk was worth a great price in the Philippines as well, which was all the more cause to look into trade. The Ming previously had no interest in any foreign contact, as they were an extremely xenophobic nation. This being stated, the fact that they were even considering an open foreign trade system suggests that the lack of silver in China was becoming a serious problem that needed an immediate fix. Therefore, the continuous flow of silver into China led to the Ming Dynasty's ruin, as the poor began to struggle and revolt, and the economy suffered several inflations and depressions as silver's worth decreased, and as it diminished in the nation, becoming lost.

In Spain, silver discovery in 1545 also did not lead to a positive outcome for the economy or for Spain's social state of being. Although Spain was able to increase its trade with China immensely, the nation did not make much profit off of the silver itself. The King and Queen were not able to tax the silver, as it basically was exported straight into China after it was collected. There was absolutely no regulation on silver's path out of Spain for a good while, until the mid-17th century. This being said, from the day it was first mined, silver has ceaselessly flowed out of the nation. A Spanish priest by the name of Antonio V?quez de Espinosa, writes about this loss of riches in the 1620s. He writes about the previously rich silver mine, Potos?, and how much work went into collecting all the silver that is used in the global trade. Mining the silver wasn't easy, as it required mercury tools to get the ore out. Indians were usually used to collect the silver in a mita, or forced labor system, as a way to pay head-taxes or tribute to the Spanish rulers. He then says how "326,000,000 silver coins' have been shipped out of Spain and into China, not counting the value that has been smuggled into China and other countries off the record. (Doc 6) V?quez seems to view this as almost a waste, that Spain has such access to this great amount of work done by these hardworking people that could be used to strengthen their empire and make it great, but instead, it's being shipped out and across the ocean, never to be seen again. No real profit is being made of this; the only thing the Spanish traders brought back was luxury goods, for which the Spanish elites began to develop a thirst for. Once they had their hands on all the wondrous things China had to offer, like tea, silk, porcelain, spices, so on and so forth, the higher ups were hooked, even though these goods did practically nothing to actually help or benefit anything. An English scholar by the name of Charles D'Avenant writes about this in 1697, describing how even England would not quit the trade with China, as their colorful assortment of items provided great comfort and leisure for the people of Europe. He was writing this in response to a bill debating to restrict the trade of Indian textiles, which was another item greatly popular in Europe, although not very relevant to the silver situation (Doc 8). A good part of Europe was becoming addicted to China's products like this, especially Spain, so a social effect on Spain that this had was that great increase of the elite's greed became overwhelming, and caused the empire's economy to fall into distress, and its people began to struggle with the lack of money to pay for their basic needs. And so, the Spanish wasted their wealth away on useless shipments of luxury goods from China. Tom?s de Mercado, a Spanish scholar, wrote about what effect this was having on Spain's economy, saying that "high prices ruined Spain,' as those Chinese goods obviously wouldn't come cheap, as China's struggle to gain as much silver as possible was in its process. The Chinese merchants took all the wealth in exchange for those useless goods, and so Spain's economy began to crash with their sudden lack of wealth (Doc 2). The great silver mines of Spain would eventually run out of silver as well, running the nation dry of its money. As the silver disappeared, Spain also fell as one of the great Western powers, as it had now made itself broke as the greedy wasted their wealth on Asian products. And so, Socially, Spain was thrown into a turmoil where none could buy what was needed, similar to China, and the economy eventually crashed, bringing the nation down with it.

Although it might seem like nobody benefitted from this trade, there were people who made some sort of profit and ultimately benefited. Japan was one of the nations who really made no mistakes when investing in the new global trade the flow of Silver had created. Ralph Fitch, a british merchant, observed how Japan functioned in the trade as one of China's main silver suppliers in 1599, writing to those who would like to see how other nations took part in the vast international trade. The Japanese imported many Chinese goods, like the Spanish did, and in return gave a great value of "600,000 coins' worth of Japanese silver.' This is noticeably a smaller amount compared to what the Spanish almost carelessly gave away to China (Doc 4). Unlike Spain, Japan was able to use the silver it had access to for the nation's own benefit. The Tokugawa shogunate, the ruling party during this time period, took this new wealth and used it in order to build up and strengthen their empire. This is where Spain had made a mistake that had caused its fall. Japan also must have had regulations on the precious metals' flow, so it was easier to keep track of what was lost and gained. Other parties were also able to gain from this trade. European middlemen were some who were able to make a profit off this trade. The Dutch and the British both played a small role in the silver's flow, making some money off trade with China and other nations as well. Merchants were a final group who made a lot of money off this trade. Charles D'Avenant also touches upon this subject, stating how many goods were transported between nations besides the silver, as the metals' flow did technically open a new general global trade in which other nations could interact. Trade between the English, the Dutch, and the East Indies was facilitated, and the commodities being exchanged were also sold in "France, Germany, the Netherlands, Spain, Italy, and other colonies' (Doc 8). Overall, some groups of people were able to take some good things out of the new widespread trade that the discovery of silver created.

China and Spain, two previously great nations, both fell victim to poor choices when silver grew to become such a greatly valued and widely traded item. Their social states and their economies both took substantial amounts of damage, where in China, rebellions and a state of unrest was clearly present, while in Spain, greed caused the whole nation to become practically broke and without access to wealth. During the sixteenth and eighteenth centuries, the flow of silver essentially damaged two formerly strong empires socially and economically, while smaller nations may have gained a good profit out of the trade.