Since Elcano completed the first circumnavigation of the globe, initiated by Magellan in 1519, an insoluble problem had confronted the Spanish crown. Even though the Pacific Ocean was navigable towards the west, there was no apparent way back towards the east. For three decades, the Spanish Monarchy launched expedition after expedition to find a practical way to get from America to the Philippines and back to no avail until a remarkable character entered the story.
According to Spanish history, Andres de Urdaneta is not a celebrated figure. Nevertheless, in the hidden history of globalization, he is one of its most prominent heroes. A cosmographer and navigator with unparalleled experience on the Pacific routes, he had given up mundane glory to become a reclusive monk in Mexico. Only under the stubborn insistence of King Phillip II, who desired a seaway between New Spain and Asia that would elude the Portuguese, did Urdaneta reluctantly abandon the monastery to take to the seas for the last time.
According to Luis Francisco Martinez Montes, a Spanish Diplomat, it was a momentous decision. Starting his trip in 1565 from the Philippines, Urdaneta defied conventional wisdom from the beginning. Instead of sailing across the trodden path, he decided to head north towards Japan. He then proceeded east towards California and Acapulco. Four months later he had completed the first round trip between the Philippines and America. More of a mystic than a man of the world, he had opened the first systematic transoceanic route in human history.
Shortly after the discovery of the “tornaviaje”, Phillip II gave instructions to establish a permanent bi-oceanic route between Seville and the Philippines via New Spain. This was accomplished via Mexico City, and through to Manila, where the exchange of silver for silk, porcelain and other oriental, mainly Chinese luxuries took place. Finally, the galleons would return across the Pacific following Urdaneta’s route.
Apart from constituting the longest maritime trading enterprise known in pre-industrial times, the Manila Galleon was also the most long living. It operated for more than two and a half centuries, from 1565 to 1815. This resilience was due to two basic facts. First, it was profitable for all sides involved. Second, despite frequent wreckages provoked by rough seas and unchartered coasts, it was quite secure by the standards of the times.
Luis Francisco Martinez Montes stated that contrary to the alleged success of the English and Dutch sea-dogs in plundering the Spanish fleets, the historic truth is that throughout the 250 years of its existence, only four Manila Galleons were captured by the enemy. The first was the “Santa Ana” in 1587 and the last was the “Santisima Trinidad” in 1762. He further noted that this is a very meagre rate of capture by any measure. Actually, as those figures show, the alleged domination of the oceans by the omnipotent British Royal Navy remained nothing more than a well publicized myth until the 19th century.
The galleons were formidable ships, sometimes reaching over 1,500 tones of cargo capacity. The size, frequency and overall reliability of the Manila Galleon explain why in the 17th century, when Spain was already supposed to be in irremediable decline, the Hispanic world exchanged with China more silver than the combined trade conducted by the British, the Dutch and the Portuguese.
The economic success of the Manila Galleon can also be analyzed in terms of orthodox economic theory. Spanish settlers in New Spain were complaining about the cost of silk products manufactured in America. Giacomo Mendes Garcia, a Spanish historian, stated that since the Leyes de Indias forbade the enslavement of native Indians, they had to provide them with a salary. Minimum as this remuneration might be, it was enough to make silk production in America uncompetitive.
So, contrary to received wisdom, the moral qualms of the Spanish Monarchy over the treatment of the Indians were one of the factors behind the Trans-Pacific trade. Since Chinese silk was cheaper, it made sense to buy it in exchange for lower-cost American products. American silver was available in more than sufficient quantities, so the terms of the trade were clear from the beginning. The Manila Galleon did all the rest.
Giacomo Mendes Garcia noted that, for the Chinese, the Manila Galleon presented two obvious advantages. First, it provided a regular channel, financed and defended by foreigners, through which it could export part of its excess production to a wider market without incurring the cost of running an overseas empire.
Second, the Galleon was a source of much needed money in times of financial distress. The Spanish-American silver was so much in demand that even after Spain had lost control of America in the 19th century, Spanish colonial dollars were widely used among merchant communities in coastal China. Luis Francisco Martínez Montes stated that Pillar dollars with the effigy of Charles IV, of Goya fame, were called the “fatty Budas”.
For the Hispanic Empire, the Chinese way represented the main way to turn a profit from the Philippines, thus helping to secure a permanent presence for Spain in Asia. The trade route was also vital for lubricating the commercial wheels of the vibrant vice Royalty of New Spain, as Mexico was then known. Many trading communities there were dependent on the timely arrival of the Manila ships with their cargo.
Furthermore, like the German traveler Alexander von Humboldt witnessed in his travels through Spanish America around 1803, Far Eastern spices and textiles became part of Indian and mestizo populations’ daily life thus contributing to a quintessentially Hispanic mixing of habits and customs. According to Luis Francisco Martínez Montes, more luxurious goods were purchased by the Spanish American elite, or found their way to Spanish and European markets via Seville.
For the global economy, the unsung Manila Galleons were the link between two of the largest geopolitical entities until the beginning of the 19th century: the Chinese Empire and the Hispanic Monarchy. Thanks to their respective roles, it was possible to create and sustain the first global economic network encompassing more or less the same actors, the Americas, Asia and Europe, that constitute the three main pillars of the current wave of globalization.
American Silver and China’s Money Supply In The Early Globalization