To their north, villages in the lower Yangtze became congested hives of small silk factories, attracting workers from other parts of China and spewing out goods at frightening volume. Yuegang merchants sold this silk in Manila, making profits of 30 to 40 percent. Spanish merchants doubled, tripled, or even quadrupled the price and still sold their goods in the Americas for a third the cost of Spanish textiles. Incredibly, they sold silk from China—silk that had crossed two oceans!—in Spain for less than silk produced in Spain. So much raw silk poured into Mexico that a secondary industry sprang up, with thousands of weavers and dressmakers making clothes from Chinese silk and exporting them throughout the Americas and across the Atlantic.
Yuegang merchants initially exported silk as bolts of fabric. But as they got to know their customers, according to Quan Hansheng, the Taiwanese historian, they acquired samples of Spanish clothing and upholstery and in China made perfect knockoffs of the latest European styles. Into the galleons went stockings, skirts, and sheets; vestments for cardinals and bodices for coquettes; carpets, tapestries, and kimonos; veils, headdresses, and passementeries; silk gauze, silk taffeta, silk crepe, and silk damask. Packed alongside them were women’s combs and fans; spices and incense; gems cut and uncut and mounted into rings and pendants; and, alas, Malay slaves.
Alarmed Europeans saw their textile mills threatened—and fought a covert regulatory war against Chinese competition. They importuned the king to restrict silk imports to bolts of fabric, rather than finished clothing. They insisted that he block direct travel between Manila and any place in the world except Acapulco, so that Chinese imports could be monitored. They demanded that he set import quotas by restricting incoming silk to a given number of chests of a specified size. Chinese merchants evaded every trade barrier, often aided by Spaniards in Manila. They built special chests with false bottoms and sides to conceal pre-made clothing. They sent agents to Acapulco to facilitate smuggling on the Mexican end of the trade. They designed special presses to mash huge quantities of silk into the chests, packing them so tightly, according to Li, the Fujianese scholar, “that a single sea-chest had to be carried by six men.”
MAGIC MOUNTAIN
Commercial and political imperatives constantly collided. In 1593 the Manila governor, Gómez Pérez Dasmariñas, decided to fulfill Madrid’s long-held dream of conquering the Maluku Islands, the spice centers that Legazpi had failed to seize. The supply of European sailors in Manila being inadequate for the task, Pérez Dasmariñas abducted 250 Fujianese merchants from incoming junks to serve as galley slaves. Protests from Manila’s Chinese tradespeople led the governor to promise to release the sailors—and seize the necessary men instead from the Parián. “The next day, all their windows were closed, and the merchants closed their shops,” the historian Bartolomé Leonardo de Argensola reported a few years later. “The community was deprived of the provisions which they supplied to it.”
After more threats from Pérez Dasmariñas, the Chinese caved in, allowing him to conscript more than four hundred men. In return, he promised to treat the men well. The expedition left in October 1593. Contrary winds and currents made the passage to the Malukus difficult. Fearing the expedition would not reach its destination as fast as he wanted, the governor ordered the conscripts chained to their galley benches, where sailors whipped them to greater effort. As further motivation, he cut their elaborately braided hair. “Such an insult among the Chinese is worthy of death, for they place all their honor in their hair,” Argensola wrote. “They keep it carefully tended and gaily decked, and esteem it as highly as ladies in Europa.” In a well-planned mutiny, the enslaved Chinese in the flagship killed Pérez Dasmariñas and his crew while they slept, then rowed for Fujian.
To Spaniards, the lesson from Pérez Dasmariñas’s death was clear: the Chinese were untrustworthy and dangerous. The Manila government evicted twelve thousand of them in 1596. In a few years they were as numerous as before and the government was planning more deportations. Anti-immigration firebrands like Bishop Salazar’s successor, Miguel de Benavides, wanted to eject every Chinese person from the islands. There can be no exceptions, he told the king. Spanish businesses would take advantage of any loopholes and hire illegal immigrants. If a hundred Chinese were legally allowed in the Philippines, Benavides predicted, “ten thousand will remain.”
Into the festering situation blithely sailed three Chinese high officials. Arriving without notice in May 1603, they emerged from a Chinese warship in sedan chairs ringed by bodyguards and led by drummers and musicians; at the head of the parade marched two men who cried, “Make way for the mandarins!” If Parián residents failed to prostrate themselves, one eyewitness reported, the bodyguards flogged them. The three visitors were the chief military official in Fujian, the county magistrate for Yuegang, and a high-ranking eunuch from Beijing. They had been sent by the emperor to present a letter to Manila’s governor, Pedro Bravo de Acuña. It is hard to imagine what Acuña thought as he heard the contents of the letter. Rumors were circulating in China, it explained, of a magic mountain in Cavite, loaded with gold and silver, all free for the taking. The three visitors had been sent to ascertain whether the mountain existed.
To judge by the appalled reports in Chinese records, the expedition seems to have originated in some daffy con job that bubbled through the court bureaucracy—not the only incident of its type in the Ming dynasty. But to the Spaniards, who watched the mandarins comb the colony for gold and silver, the visitors looked like a scouting party for an invasion—a Ming-style Trojan horse. Surely these people could not be the pack of bumblers they appeared to be—they must be part of a sinister plot. While Governor Acuña debated whether to kill the officials, they apologized for the mix-up and suddenly left.
Potosí’s mines still operate, though at a low level. Scouring the mountain for its last grains of metal, poor miners hack away in lightless tunnels. Conditions are dismayingly like those in centuries past, except that the men are mining zinc and tin, rather than silver. (Photo credit 4.7)
Fearing the departure signaled an imminent invasion, Acuña ordered his forces to demolish Chinese houses that were too close to Manila’s defensive wall, register every Chinese person in the Parián—and buy or confiscate every Chinese weapon.
What happened next is difficult to sort out, because Spanish and Chinese accounts of events differ radically. In the Spanish version, angry Chinese gathered outside the city walls to protest. Acuña sent seventy soldiers, led by his nephew, to quell the protest. Unprovoked, the Chinese mob attacked the soldiers, killing all but four, and fled to the hills outside Manila. After restoring order to the Parián, the government sent a peace emissary to the rioters. The Chinese treacherously slew him and went on a rampage. Naturally, the official reports explain, the government had to protect the citizenry. It sent out more troops. The Chinese in the hills resisted. But they had few weapons and inevitably suffered heavy losses.
Eleven years after the killings, the Ming geographer Zhang Xie wrote Studies on the East and West Oceans, a summary of Chinese foreign relations. In it was an account of the incident from the point of view of Parián residents—an account that included a few details that Spanish officials had neglected to mention. Zhang agreed that the Spaniards had entered the Parián and “bought every bit of iron in Chinese hands at a hefty price,” supposedly to make cannons. But from that point his account was quite different. There was no angry mob outside the walls, no unprovoked slaughter of soldiers. Instead the government, having effectively disarmed the Chinese, announced a formal residency check, during which they divided the ghetto into groups of three hundred, placed each group in a separate courtyard—and slaughtered it. As word of the massacre leaked out, Zhang wrote, thousands of Chinese fled to the hills outside Manila. After an inconclusive clash, the Spaniards sent a peace emissary. “The Chinese worried that it was a trick to lure them out, and killed the emissary,” Zhang admitted. “The barbarians grew angry, and set up an ambush outside the city.”
When the Chinese ran out of food, they decided to take it from Manila—and walked into the Spanish ambush. Three hundred Spaniards died in the ensuing battle. So did as many as twenty-five thousand Chinese, most of them Fujianese. According to Zhang, only three hundred Chinese survived. A second wave of deaths followed, as some of the new widows in Fujian, many of whom now faced bondage to pay their husbands’ debts, killed themselves.
Incredibly, the massacre had no real consequences. Just months after wiping out the Chinese in Manila, the city fathers put down the welcome mat for new immigrants. And Spanish merchants were begging the junks to return—they wanted to buy cheap Chinese silk. “The Spaniards who had seen the Chinese as such a grave threat that their survival depended on their complete disappearance didn’t hesitate to do everything possible to ensure the massive repopulation of the Parián,” Manel Ollé Rodríguez, a Barcelona historian of Spanish-Chinese relations, observed in 2007.
In Beijing, the Wanli emperor decided that the three treasure mountain officials were responsible for the explosion in the Parián, and ordered them beheaded. Although he accused the Spaniards of “murder[ing] people without license,” he also conceded that the dead Fujianese “were base people, ungrateful to China, their native country, to their parents, and to their relatives, since so many years had passed during which they had not returned to China.” Translation: they weren’t worth the cost of a punitive expedition. Besides, the government still needed the silver.
Within two years the galleon trade and the Parián were almost back to normal. “The Chinese gradually flocked back to Manila,” reported the Ming Shi, the official history of the dynasty. “And the savages [Spaniards], who saw profit in the commerce with China, did not oppose them. The Chinese population began to grow once more.”
Because the situation had reverted to its pre-massacre state, the Spaniards in Manila were as few, dependent, and scared as ever they had been. Eventually they again tightened restrictions on the Chinese. Rebellions flowered in the Parián, followed by expulsions and massacres. The cycle repeated itself in 1639, 1662, 1686, 1709, 1755, 1763, and 1820, each time with an awful death toll.
To modern eyes, the scenario is hard to credit: why would the Chinese keep returning? It is one thing to take a onetime risk, as small-time Fujianese traders did when they made their single visits to Manila; it is another to set up an establishment that will be sacked every few years, with great loss of life. During these incidents the Parián Chinese frequently managed to kill a third or more of the Europeans in the Philippines, as they did in 1603. Yet Manila’s merchants invariably invited them back, even smuggling their potential executioners past customs. Why would they repeatedly set up a situation in which they had an excellent chance of being killed?
In Power and Plenty (2007), a history of trade in the last millennium, Ronald Findlay and Kevin O’Rourke suggest one way to think about this situation. When economics textbooks describe trade, Findlay and O’Rourke write, they describe two countries “endowed with a certain amount of the various factors of production—land, labor, capital, and so on.” The two nations have technologies that transform those factors into goods, “together with a set of preferences over those goods.” Private entities within each nation “trade with each other, or not as the case may be, and the consequences of trade are derived for consumers and producers alike.”
Typically one country (the United States, for example) can produce Good A (wheat, say) cheaply and well, while the other (Japan) can better produce Good B (consumer electronics). By exchanging Good A for Good B (that is, wheat for DVD players) people in both nations will be better off—a classic win-win situation. This is the theory of “comparative advantage,” a building block of economic theory. Vast amounts of evidence support the theory’s veracity, which is why almost all economists firmly believe it, and firmly support free trade, which maximizes the potential for all sides to benefit.
In the textbooks, government appears mainly as an outside factor that imposes tariffs, quotas, levies, and so on, influencing the outcome of private trade, often reducing the net economic benefit. But the state does this because trade has two roles: one highlighted in economics textbooks, where private markets allow both sides to gain economically, and one that rarely appears in those textbooks, in which trade is a tool of statecraft, the goal is political power, and both sides usually do not win. In this second role, the net economic benefit of trade is much less important than the political benefit to each side, and the government interventions that exasperate economists can be useful, even vital tools to achieve national preeminence.7
The greatest expansions of world trade have tended to occur when both roles are aligned and commercial ambitions can be enforced, as Findlay and O’Rourke put it, “with the barrel of a Maxim gun, the edge of a scimitar, or the ferocity of nomadic horsemen.” Today violence is less common, if only because powerful weapons are so cheap that all sides have them, and states tend to make do with tools like subsidies to industry, exchange-rate manipulation, and export and import regulations. But still today trade expands when government sees it as a way to project and increase power—witness the recent history of Japan and China.
At the same time, the two roles often conflict, and the conflict leads, as in Manila, to a considerable amount of profoundly fractured cerebration. For Spain, Manila was both a trading post and a projection of Spanish power in the Pacific. Its traders wanted to generate as much profit as possible by importing as much silk as possible; its political rulers, by contrast, wanted to seize Asian lands, convert Asians to Christianity, thwart Dutch and Portuguese ambitions—and have as much of the silver as possible come to Spain, because the state needed it to pay for wars in Europe. Considered purely as a trading entrepôt, Manila should house as few Spaniards as possible—they were expensive to send over and kept dying of disease—and let Chinese people do all the work. To serve best as an imperial outpost, though, the Spaniards needed to ensure that all vital civic functions were in loyal Spanish hands, and minimize the number and influence of the Chinese. Every step to satisfy one imperative worked against the other.
Like the Spanish court, the Ming court struggled to reconcile the divergent roles of trade. On the one hand, silver from the silk trade became a source of imperial wealth and power. American silver helped pay for huge military projects, including much of the Great Wall of China, which the Ming were revamping and extending. And it fueled an explosion of commerce within China, which led to an economic boom. On the other hand, the money that enabled business to grow also set off inflation, which had its worst impact on the poor. And silver was ever a political threat to the dynasty, because it controlled neither the trade nor the source. Alarmingly, the emperors could not restrict the flow of silver into Fujian, even if they wanted to, because of rampant smuggling. In the eyes of the court, the Fujianese merchants were people of dubious loyalty who had created in the Parián an important Chinese city that was outside imperial supervision. They were becoming wealthy and powerful in a way that was hard for the court to control. Little wonder Beijing kept a wary eye on Yuegang!
There is little evidence, though, that Beijing anticipated the worst consequences. As in Europe, so much silver flooded into China that the price eventually dropped. By about 1640 silver was worth no more in China than it was in the rest of the world. At this point the Ming government was tripped up by an error it had committed decades in the past.
When the court had ordered citizens to pay their taxes in silver, it had set up the tax rolls in terms of the weight of silver people had to pay, not its value. As with Spain, the taxes were not indexed for inflation. As with Spain, the same amount of tax was worth less money when the price of silver dropped. The Ming dynasty had a revenue shortfall. Not having paper currency, the government couldn’t print more money—deficit spending was impossible. Suddenly it couldn’t pay for national defense. It was a bad time to run out of money for the military: China was then under assault by the belligerent northern groups
now called Manchus. According to William Atwell, a historian at Hobart and William Smith Colleges, the Chinese government’s dependence on the silver trade helped push it over the edge. The takeover by the Manchus—they became the Qing dynasty—took decades and was bloody even by the tough standards of Chinese history. Nobody knows how many millions died.
Atwell’s contentions have been vigorously debated, yet there is little doubt that China’s entry had consequences of a sort rarely discussed in freshman economics textbooks. Flynn and Giráldez point out that China devoted a big fraction of its productive base to acquiring the silver needed for commerce and government. For hundreds of years, China produced silk, porcelain, and tea to acquire a commodity, silver, which was needed to replace the paper notes that the government had made valueless. It was as if to buy a newspaper for a dollar one first had to make and sell something else to get the dollar banknote. Actually, it was worse: the silver stocks had to be constantly replenished, incurring further costs, because the metal was constantly worn away as it passed from hand to hand. (Paper money wears out, too, but costs next to nothing to replace.)
Given the circumstances, acquiring the silver was entirely rational—it provided monetary stability. But it was also extremely costly. “Rather than pull silver out of their own ground (had China contained rich silver deposits, which it did not), the Chinese produced exports to buy silver that was pulled out of the ground somewhere else,” Flynn wrote in an e-mail to me. “Even scholars tend to impute mystical qualities to commodity monies like silver and gold, but we must recognize them as physical products that involve massive production costs. A significant hunk of the GDP of China—then the world’s biggest economy—was surrendered in order to secure a white metal that was produced mostly in Spanish America and Japan. Some people made enormous profits from doing this, but think about what else those resources could have been used for.”