Economy and Society

Economy and Society: From the First American Peso to the First Steam Engine

In 1497, Christopher Columbus took a new excursion to the Indies, bringing with him the instruments and techniques to issue excellent command within the monetary economy, but there was insufficient raw material. In the first minting intended for America, it is important to include the first dated coins from Seville, 1504, worth four copper Maravedi. The Catholic monarchy encouraged the proposal of cross-Atlantic commerce and in 1505 the first gold and silver coins were produced by La Española, “that hewed a currency half silver and half Villon.”

By David Sánchez Sánchez

BA in History from the University of Oviedo, official university title Level 3, Master MECES, equivalent to a BA and an MA. Academic Director of the Humanities Department, UPAEP

When we use the currency term “peso” today, we must remember the Royal Writ published by the Catholic monarchy in March 1503 and sent to the governor of La Española in which the term “peso” appears for the first time. In this instructive letter to Friar Nicholas de Ovando in response to his earlier inquiry (AGI, General Indifference, 418, Book 1) the term is mentioned on three occasions: “indicated for each one hundred and fifty gold pesos... ensure payment date with respect to seventy gold pesos... each clergy member will receive a yearly salary of one hundred gold pesos.” Checking the numbers in a general way, we can establish that one gold peso would have been equal to eight silver reales, 271 maravedi, or about 4,352 euros or a little over $100,000 Mexican pesos today. The term “peso” had just been introduced into daily life in society and

was economically equivalent to eight silver reales or real eight. Vazquez Pando affirms that the reason for the introduction seemed to be more a need for monetary flow than a mandate. Later, the terms are cited in a report letter from the Justice and Regiment of the Rica Villa de la Vera Cruz to the monarchs on July 10th, 1519. They seemingly indicate that the term was already widely used in American society. While the myth of the “theft” of gold began to develop, there were no national states. The metal that was primarily taken was American silver. The black legend of course ignored the reinvestment of 33% of these funds into the territories in the 16th century and up to 80% in the 17th century. What funds were used to create commercial routes and roads, city and cathedrals; monuments that today we universally care for and boast about? The legend also ignores bankruptcies that occurred in 1557, 1575 and 1597, or the investigations that provide evidence starting from the time of Phillip IV that shows income from the Indies was only 10% of the crown’s worth. Even in the 16th century there was a so-called Price Revolution (Hamilton, 1934) where the Iberian Peninsula had to quadruple its prices with up to 11% increase in the cost of food because of the arrival of silver from the mines in Potosi and Zacatecas. This shipment brought an estimated 181 tons of gold and 16,886 tons of silver that, once registered by the House of Trade in Seville, caused society to write marvelous words like those of Lope de Vega: “They come from Sanlucar (Seville) breaking the water with towers of gold and ships of silver.” Or as expressed by Diego Torres Villarroel “half an hour from this century is worth more than two thousand from the past or future; the lawyer, the rapporteur, the barber when did they have a carriage if not now?.. this century turns even iron to gold.” With all this, the fiscal pressure on New Spain would increase from the benevolent conditions set by Hernan Cortez, all the way up to the 19th century. When they touch our purses the “powerful horseman is Mr. Money” wrote Francisco Gomez de Quevedo y Villegas. Great myths of mass incorporation of gold from the American continent into the Spanish Empire are backed by phrases like Eduardo Galeano’s “only a small measure of American silver was incorporated into the Spanish economy [when] the sickened Spanish economy could not resist the brusque impact of increased demand for food and merchandise.” However, more recent data reflects just the opposite. This silver was the primary metal exported in alliance with the great houses of commerce like the Fugger, the mercury mines in Almaden (Spain) and Huancavelica (Viceroyalty of Peru). We cannot forget that the economy and society adapted to a modern age despite the continued productive structure from the lower middle ages, when a growing bank and middle class began to emerge. The guilds did not substitute the agrarian base that would become the physiocracy of Quesnay; they added to the development and boosted the manufacture of the tall furnaces and forges that led to social transformation where mass produced goods fresh from the mills, oil presses, wine presses and bakeries were consumed. Taking a leap through history, it would be the first Industrial Revolution (1789-1840) when, overcoming what was “for Karl Marx, an Industrial Revolution that generally consisted of capitalists exploiting the workers” (Ludwig von Mises, 1986) and in conjunction with the Demographic, Agrarian and Thought Revolutions (among others) there became a clearly marked before and after. In the agrarian aspects of physiocracy’s essential doctrine (Tableau economique by Quesnay, 1758) it become clear that even today we still do not truly understand that if a country forgets about its fields, even its technically advanced fields, it is condemned to disappear. This is why Arthur Young, author of “The Annals of Agriculture” wrote: “God sleeps in the minerals, awakes in the plants, walks with the animals and thinks with mankind.” But what can we sublimely highlight from those years? James Watt (1769) invented the steam engine thanks to support from Matthew Boulton, and from there came Richard Trevithick’s first locomotive (1802)--that was worth its weight in gold. From then on, the economy and society has been forever changed.

Bibliography Instructive letter to Friar Nicholas de Ovando in response to his earlier inquiry (AGI, General Indifference, 418, Book 1). GALEANO, W. (1971) The Open Veins of Latin America. HAMILTON, EARL J. (1934) American Treasure and the Price Revolution in Spain 1501-1650. QUESNAY, FRANCOIS (1758) Tableu Economique. VÁZQUEZ PANDO, FERNANDO ALEJANDRO (1992) Observations on Monetary Rights in New Spain. 10th Congress of the International Institute for the History of Indian Rights. VON MISES, L. (1986) Human Action. Economic Treaty. (899-908) Madrid: Union Editorial.