Global Economic Effects of No Inca Silver

[John Fredrick Parker]

For those who don't know, @King of the Uzbeks is doing a really good TL on how the Tawantinsuyu Empire might have avoided conquest by the Spanish (at least in the 1530's). OTL, one of the biggest consequences of this conquest began about a dozen years after Pizarro's Conquest (or 1545), with the founding of a mining town called Potosi on what might be considered a literal mountain of silver; beginning in the 1570's, the mining process began incorporating mercury, further compounding the mountain's output (and making the work more deadly).

It was this silver that filled the coffers of the Spanish Empire, funding the wars of Phillip II among other projects. About a third (or more -- accounts differ) of said silver ended up not in Europe, but in China, to feed the massive demand for the precious metal, already in short supply inside of its imperial borders (largely due to a change in tax policy in the latter 15th Century); this was a cornerstone of the global trade that had emerged by the late 16th Century, as China exported massive amounts of manufactured goods to meet its silver demand.

So my question is, what if this silver had stayed in South America?* I'm particularly interested in how this changes the economic situation in Europe and China in the latter 16th and 17th Centuries, how those changes in turn change the history of said civilizations (politically, militarily, culturally, religiously, etc).

Will Spain curb her military ambitions under Phillip II? Will China change her tax policy again when Japan can no longer support the silver demanded by the state? Will Europe, and other places outside China, see fewer consumer goods, and does that endanger the emergence of Capitalism (and subsequently the Industrial Revolution)? Or do the underlying trends of globalization still continue, only now with different geopolitical centers? Or some other massive changes entirely? Or does this make little difference at all?

*I want this thread to be focused mainly on the silver of the Andes and the global economic effects of keeping it in the earth; as such, discussion of the details of what happens to the empire of the Incas can best be left in the linked TL thread. As for our purposes, let's just say: the Andes remain unconquered for at least another couple generations; that silver mining around Potosi doesn't start until the latter 17th Century (or later); and that the start of massive silver exports in the latter decades of the 16th Century isn't seen TTL until at least the dawn of the 18th Century (or even indefinitely).

 

[Arkenfolm]

Is it even possible uncoupling the fate of the Inca from their silver? Because the Inca will want to modernise their country (assuming they don't go into hyper-isolationism), and modernisation--gaining European technology, resources, and goods--will cost something, and obviously, they will pay in silver. At some point, the extraction of precious metals would probably increase to pay for European goods. So "no Inca silver" is basically impossible.

That would overall not be as much silver as was extracted OTL, at least immediately.

 

[John Fredrick Parker]

Is it even possible uncoupling the fate of the Inca from their silver? Because the Inca will want to modernise their country (assuming they don't go into hyper-isolationism), and modernisation--gaining European technology, resources, and goods--will cost something, and obviously, they will pay in silver.

The only Europeans (or non-Americans) they can realistically trade with are the Spanish, who have eyes on conquering them; they won't be in any hurry to throw they're jewelry to them, and won't go to the trouble of expanding their mining operations for Spanish benefit, certainly nothing on the scale of horrors that was Potosi. So, in effect, no, the Inca silver won't be exported, at least not to the world changing level of OTL.

 

[Escape Zeppelin]

Well it certainly affects Europe's access to Chinese goods and the value of silver in China. No silver means no trans-pacific trade and perhaps a stronger push by Spain for a trans-Africa trade route since there's no reason to go via the Americas.

 

[SlyDessertFox]

The only Europeans (or non-Americans) they can realistically trade with are the Spanish, who have eyes on conquering them; they won't be in any hurry to throw they're jewelry to them, and won't go to the trouble of expanding their mining operations for Spanish benefit, certainly nothing on the scale of horrors that was Potosi. So, in effect, no, the Inca silver won't be exported, at least not to the world changing level of OTL.

What about the Portuguese?

 

[Karolus Rex]

What about the Portuguese?

The 1530's 40's weren't good decades, economical depression and all, so if the Spanish fail to conquer the Incas we wouldn't try to replace them, at the time the Americas weren't a interest of the Crown and I doubt we would sell modern weapons to them given that would cause conflict with Spain, we meddling with their enemies in the Americas would be seen very badly in Madrid and with the Habsburg dominance in the Seventeen Provinces our economy would suffer a hit considering our dependence on Antwerp for money at the time.

 

[John Fredrick Parker]

What about the Portuguese?

The 1530's 40's weren't good decades, economical depression and all, so if the Spanish fail to conquer the Incas we wouldn't try to replace them, at the time the Americas weren't a interest of the Crown and I doubt we would sell modern weapons to them given that would cause conflict with Spain, we meddling with their enemies and all.

Plus, they'd have to regularly make their way across the Pacific, so I don't see them really establishing the route in the timeframe we're talking about.

AAR, we're really getting into the FP and nature of the surviving Tawantinsuyu at this point, when really, I was hoping this thread could focus on the effects of (the vast majority of) the silver staying in South America.

Well it certainly affects Europe's access to Chinese goods...

This will have at least noticeable effects in Europe; for example, I'd heard that Chinese silk flooding into the continent meant that local silk production went under.

...and the value of silver in China.

I wonder what the impact on China would be -- does this simply lead to stabilization of prices, or possibly deflation, or do the Ming decide to try to transition back to paper money? Or some other effect entirely?

 

[TheYoungPretender]

Early Meiji. Why? Read on.

I'm thinking of something more fundamental here: the general metalism of Europe until the 20th Century. The view that money is precious metals, and isn't "real" without the backing of those metals is something sunk very deep into European economic thought for centuries. However (and trigger warning for all you bold, free-thinkers of the Austrian school) what allowed Europe to expand economically while viewing the divine essence of shiny metals reached out and drove trade was that they kept finding more of them. From Potosi in the sixteenth century all the way up to the Witerwatersrand Basin in South African in the 19th, finding more metal aided European economic stability because it allowed them to put the expansion of trade and industry in the shiny tokens they were used too. The strains a metal standard can have were shown in the Great Depression, and now we use fiat money.

So returning to no Andean silver, I'd say you have a much more volatile international economic situation, and a more chaotic trade situation. Also, the importance of Mexico and Japan, both big silver producers in parts of the 17th and 18th, are likely to increase. I think the interest of outside powers in Japan's silver would likely increase. How the events actually happen is beyond me at this stage of the day.

 

[Jürgen]

Well it's a net positive for Spain, the American silver was like the oil is for the Gulf States or the Slave Trade was for Africa, an easy access to money, which demanded little investment in infrastructure and kept the country from modernise and reforms. It's more or less a example of the Dutch Disease.

If the Inca controlled the Silver production, the European would be forced to trade for it, which would result in developing manufacturing and infrastructure, and also create a strong mercantile class. Of course the Inca would on the other hand suffer under a economy building on one form of export goods, I think looking at Venzuela today woould serve as a good example on what it could cause.

 

[John Fredrick Parker]

Well it's a net positive for Spain, the American silver was like the oil is for the Gulf States or the Slave Trade was for Africa, an easy access to money, which demanded little investment in infrastructure and kept the country from modernise and reforms. It's more or less a example of the Dutch Disease.

Very true. Speaking of which, how much does this change the reign of Phillip II? With less silver, does he show more caution about getting into wars earlier in his reign? If so, that alone would have some fairly important effects in its own right.

 

[Deleted member 94708]

China's development proceeds differently from the 1550's on, and if the Ming fall, they will do so in an entirely different way. Spanish silver caused rampant inflation in the Chinese monetary system which led to severe devaluation of the Imperial treasury and its continuing revenues such that it was essentially unable to pay its armies or for the public works which were necessary to maintain intensive agriculture in Jiangnan (flood control especially). Then the flow of silver was cut off by the Spanish court when it cracked down on smuggling from the Philippines, just as the Chinese were implementing economic reforms to deal with the inflation.

Without that silver the Ming state's problems in the 17th century are literally cut in half:

1. Where IOTL it had to deal with the climatic effects of the Little Ice Age on Northern China at the same time as Jiangnan's flooding issues, ITTL it would only have to handle the former, and the North China Plain was less critical to the Ming's economy and food supply than it would be for the Qing.
2. IOTL the Manchu were only able to successfully overcome the Ming because they were in the midst of a civil war (technically a revolt but the scale was sufficient to consider it a major civil war) over grain assistance to Shaanxi. ITTL the Ming state will almost certainly still be functional enough and solvent enough to ship grain to Northern China, having its breadbasket in Jiangnan intact, which means that the Manchu will bounce, hard, when they try to come south of the Great Wall.

The Ming will likely fall sooner or later in the same pattern as most of the Chinese dynasties did, but it's hard to foresee exactly when and how, if not due to the Manchu. It might be the Europeans who kick in the door a century earlier than OTL if the Ming have ossified sufficiently by then, as they'll not be as vigorous as the Qing were at that time. However, if that's the case China is likely to get back on its feet and begin modernizing much more quickly than they were able to in the 1840's IOTL since they won't have an insurmountable industrial and technological disadvantage with which to contend. I'm not clear that a Europe without Andean silver would be able to do so, however. I'm much less clear on exactly what the monetary effects on Europe were, aside from rendering the Spanish completely dependent on it.

 

[Jürgen]

China's development proceeds differently from the 1550's on, and if the Ming fall, they will do so in an entirely different way. Spanish silver caused rampant inflation in the Chinese monetary system which led to severe devaluation of the Imperial treasury and its continuing revenues such that it was essentially unable to pay its armies or for the public works which were necessary to maintain intensive agriculture in Jiangnan (flood control especially). Then the flow of silver was cut off by the Spanish court when it cracked down on smuggling from the Philippines, just as the Chinese were implementing economic reforms to deal with the inflation.

Without that silver the Ming state's problems in the 17th century are literally cut in half:

1. Where IOTL it had to deal with the climatic effects of the Little Ice Age on Northern China at the same time as Jiangnan's flooding issues, ITTL it would only have to handle the former, and the North China Plain was less critical to the Ming's economy and food supply than it would be for the Qing.
2. IOTL the Manchu were only able to successfully overcome the Ming because they were in the midst of a civil war (technically a revolt but the scale was sufficient to consider it a major civil war) over grain assistance to Shaanxi. ITTL the Ming state will almost certainly still be functional enough and solvent enough to ship grain to Northern China, having its breadbasket in Jiangnan intact, which means that the Manchu will bounce, hard, when they try to come south of the Great Wall.

The Ming will likely fall sooner or later in the same pattern as most of the Chinese dynasties did, but it's hard to foresee exactly when and how, if not due to the Manchu. It might be the Europeans who kick in the door a century earlier than OTL if the Ming have ossified sufficiently by then, as they'll not be as vigorous as the Qing were at that time. However, if that's the case China is likely to get back on its feet and begin modernizing much more quickly than they were able to in the 1840's IOTL since they won't have an insurmountable industrial and technological disadvantage with which to contend. I'm not clear that a Europe without Andean silver would be able to do so, however. I'm much less clear on exactly what the monetary effects on Europe were, aside from rendering the Spanish completely dependent on it.

It was less important than the sugar trade. I think the main effect on Europe that it made European silver producers weaker. But the Spanish import from China also created a bigger market for Chinese goods in Europe. China will still end up the end area for European silver, it will result in increasing silver prices, which will strengthen the European silver producers, but likely also result in a early smuggling trade with China with opium being a likely goods of this trade. I'm not sure China will be better off fighting against a Spain which have kept up than UK. In fact the result may end up much uglier, with the Spanish trying to conquer China to convert them, while everyone else trying to take a bite at the same time.

 

[John Fredrick Parker]

Then the flow of silver was cut off by the Spanish court when it cracked down on smuggling from the Philippines, just as the Chinese were implementing economic reforms to deal with the inflation.

Incidentally, what were said reforms? Would they be the changes we see TTL?

[a] It was less important than the sugar trade. ["b"] I think the main effect on Europe that it made European silver producers weaker. [c] But the Spanish import from China also created a bigger market for Chinese goods in Europe. [d] China will still end up the end area for European silver...

So you're argument is that a massive shortfall in American silver will make little actual difference to the greater Euro-Ming Trade because:

[a]the Spanish Empire still has sugar...
["b"]which it can trade for European silver, which sees higher production...
[d]which it trades in China for their goods...
[c]which they then sell back in Europe.​

Does anyone want to argue against this?

 

[Deleted member 94708]

Incidentally, what were said reforms? Would they be the changes we see TTL?

I recall the lynchpin being a reform to simplify the collection of taxes by accepting only silver in payment rather than the multiple metals or in-kind tribute which had been taken before, which also had the effect (likely fortuitous as the economic sciences were poorly developed at the time) of taking enough silver out of circulation that it began to slow inflation somewhat.

IIRC there was also an anti-corruption campaign of some effectiveness, a land survey to attempt to bring the great houses into line and force them to pay more in taxes, and a cut-back of the bureaucracy to reduce the civil payroll and save money for useful things.

In any case, it was the first of these reforms which more or less doomed the Ming state when the Japanese and Spanish stopped trading in silver as its availability went through the floor and the whole country entered a deflationary spiral in which copper (used as a local currency) bought increasingly less silver (used to pay taxes) and imperial revenues plunged even as they tried to use the army to extort taxes from the peasantry. Thus, at least three or four simultaneous revolts at the same time that the Manchu got their act together and decided to invade.

 

[Jürgen]

So you're argument is that a massive shortfall in American silver will make little actual difference to the greater Euro-Ming Trade because:

[a]the Spanish Empire still has sugar...
["b"]which it can trade for European silver, which sees higher production...
[d]which it trades in China for their goods...
[c]which they then sell back in Europe.​

Does anyone want to argue against this?

This wasn't my argument, through it's a interesting one. I think the Spanish will be better off, because they need a to develop their tax base, instead of the state just digging money out of the ground using enslaved natives. I think Chinese goods will likely pay for the silver the Spanish need to buy Chinese goods. Sugar was and will just be another factor which helps creating a strong capitalist class.

 

[Deleted member 94708]

It was less important than the sugar trade. I think the main effect on Europe that it made European silver producers weaker. But the Spanish import from China also created a bigger market for Chinese goods in Europe. China will still end up the end area for European silver, it will result in increasing silver prices, which will strengthen the European silver producers, but likely also result in a early smuggling trade with China with opium being a likely goods of this trade. I'm not sure China will be better off fighting against a Spain which have kept up than UK. In fact the result may end up much uglier, with the Spanish trying to conquer China to convert them, while everyone else trying to take a bite at the same time.

I do recall that American silver did horrible things to the Czech mines...

In any case, yes, China's production advantages over Europe and its near-monopoly on tea, certain spices, and silk mean that it will always serve as an endpoint for silver while it has little which it cares to buy. But that effect will be far less pronounced without American silver flooding the European economy.

To some extent that lack of bullion will drive the Europeans to work harder to break the Chinese monopolies on these goods as they CANNOT buy enough of them to meet demand, which might make it entirely unnecessary to kick the door in later.

 

[John Fredrick Parker]

So wondering -- how did Andean silver affect the production of gold and silver in Mexico? Did it nerf that part of their economy similar to how it did for the Czechs and other European miners?

I think Chinese goods will likely pay for the silver the Spanish need to buy Chinese goods.

In any case, yes, China's production advantages over Europe and its near-monopoly on tea, certain spices, and silk mean that it will always serve as an endpoint for silver while it has little which it cares to buy. But that effect will be far less pronounced without American silver flooding the European economy.

I suppose to start, should we necessarily assume it will be Spanish merchants trading European silver for Chinese goods? I'd think the Portuguese are in a better position, given their presence in the Indian Ocean.

My other thinking is, if Europe isn't suffering a glut of silver, but has to dig it out from the earth themselves, do they even develop as strong a taste for Chinese goods? For example, IIRC, there was some native European silk production in the 16th Century, which went under when China started flooding the European markets, due to Spain dumping silver on them. As to those things China really does exercise an effective monopoly on -- tea, for a possible example -- does Europe still develop such a strong taste for them? Actually...

To some extent that lack of bullion will drive the Europeans to work harder to break the Chinese monopolies on these goods as they CANNOT buy enough of them to meet demand, which might make it entirely unnecessary to kick the door in later.

Ah, I think we agree on that.

I think the Spanish will be better off, because they need a to develop their tax base, instead of the state just digging money out of the ground using enslaved natives.

No argument here. I also wonder if an economically healthier Spanish Empire starts acting smarter, in terms of throwing their military might around, and when that reality kicks in for them.

FWIG, Spain saw Potosi producing less sometime in the 1560's, due to the regular mining methods not being able to keep up with demand; then it started to see silver flow back in sometime in the mid 1570's, following the implementation of the (horrid) mercury method. If I have that right, then that's about when Phillip II would start realizing the limits of his power, or about 15-20 years earlier than OTL.

That means, for example, the Dutch Revolt in 1567 still happens as OTL, and may still go as it did up to the Sack of Antwerp in 1576 (which came about due to Phillip having trouble paying the troops). OTL, AIUI, the return of Potosi Silver loads meant that the Spanish were able to start reasserting their power in the Netherlands, eventually taking control of the Flemish south, while the rebels held the north, from which they proclaimed the UPN. What happens if, going into 1577 and 78, Spain is still broke, even more so than before? Well, I expect the Spanish Netherlands aren't divided; either they stay under the Spanish Crown, having asserted their rights, or they leave the Spanish Crown in union (forming a republic, or finding another monarch, what have you).

 

[Deleted member 94708]

So wondering -- how did Andean silver affect the production of gold and silver in Mexico? Did it nerf that part of their economy similar to how it did for the Czechs and other European miners?


(1) I suppose to start, should we necessarily assume it will be Spanish merchants trading European silver for Chinese goods?

(2) Does Europe still develop such a strong taste for them? Actually...

1. No, not at all. The Portuguese initially made a killing selling Japanese silver into China before the Spanish were able to undercut their costs. Without Potosi more limited Spanish output from Mexico will not cut them out entirely until (or unless as the case were) the Japanese close their ports to trade as they did IOTL. The Dutch attempted to muscle in as well IOTL with mixed success.

2. Yes, probably. The European upper classes had desired goods from China and the Far East since antiquity; as Europe became more broadly prosperous during the Age of Exploration and the Enlightenment it was not really possible that the rising middle classes would not want similar goods and luxuries. If Europe doesn't have the bullion to buy them it will endeavor to produce them or find other sources, but it's almost certainly not going to fail to develop a taste for them.

 

[Deleted member 94708]

So you're argument is that a massive shortfall in American silver will make little actual difference to the greater Euro-Ming Trade because:

[a]the Spanish Empire still has sugar...
["b"]which it can trade for European silver, which sees higher production...
[d]which it trades in China for their goods...
[c]which they then sell back in Europe.​

Does anyone want to argue against this?

Didn't see this earlier. As he said, it's not quite what he was saying, but in any case I vote strongly against it.

The simple fact of the matter is that American silver allowed for such an extreme expansion of the money supply because it was abundant and easily accessible (relatively speaking). Without it the quantity of silver mined will be far lower in this period than it would be otherwise; regardless of how the Spanish or anyone else manages to obtain silver for use in the Far East, there will be less of it.

 

[John Fredrick Parker]

Re @AmericaninBeijing

So Europe is still hungry for Chinese goods, but has far less silver to pay for them. That right?

Also love the idea of Portgual and possibly the Netherlands being the traders who supply Ming silver, which likely has an effect on how China comes to understand "the West".