How China played a part in the birth of globalisation in the 16th century

Globalisation is nothing new, say Peter Gordon and Juan José Morales in a book, The Silver Way, an excerpt from which reveals how a Pacific route to and from Spanish America made China an economic powerhouse 400 years ago

Peter Gordon and Juan José Morales Published:Jan, 2017


Jodocus Hondius’ 17th-century map of China. From the collection of Juan José Morales.

Long before the greenback there was the Spanish “dollar” and long before New York and London, there was Mexico City. The discovery of a route across the Pacific in the 16th century was a catalyst for the integration of the planet. In a new book, The Silver Way: China, Spanish America and the Birth of Globalisation, 1565-1815 (Penguin Random House North Asia), Hong Kong International Literary Festival founder Peter Gordon and Juan José Morales, a former president of the Spanish Chamber of Commerce in the city, show how the Ruta de la Plata connected China with Spanish America, furthering economic and cultural exchange and building the foundations for the first global currency and the first “world city”.

What follows is an excerpt from the book.

EACH OF THE ELEMENTS THAT characterise globali­sation – global trade networks, shipping lines, integrated financial markets, flows of cultures and peoples – can be found in the late 16th and early 17th centuries. A global currency based on the Spanish “dollar” predated the US dollar’s similar role by two centuries. The attributes of today’s world cities typified Mexico 400 years ago.

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Globalisation itself, therefore, evidently predates every­thing that conventional (Anglo-American) wisdom holds neces­sary for it: the Enlightenment, steam, free trade, laissez-faire capitalism, liberal political systems and the more recent, Western-initiated institutions such as the World Bank and the International Monetary Fund. Whatever it is that sustains globalisation cannot be linked to this narrative, for the basic structures of globalisa­tion existed at least two centuries before any of these dev­elop­­ments took root.

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Globalisation is a matter of degree, not a binary. But it was during the decidedly Spanish-dominated decades straddling the turn of the 16th century that humanity’s activities first reached a global scale.
This was when the first trade networks united Asia, Europe, the Americas, as well as, it should be added, Africa, with uninterrupted commercial shipping. It was also the period when the world’s financial markets first became linked, through the medium of silver.

An artist’s depiction of the Spanish galleon Samuel. 

A century or so later, but well within the Manila galleon period [when trading ships brought the silver from the Americas, through the Philippines, that underpinned China’s money supply], the world’s first global currency emerged in the form of the milled Spanish silver dollar that in turn begat currencies in countries from the United States to China and Japan.

These networks and interactions were not nearly as sophis­­ticated or integrated as those of today, nor were they as fast. After all, the news that Portugal had succeeded in regain­ing independence from the Spanish crown in December 1640 didn’t reach Macau until May 31, 1642 – much slower than the internet even on a very bad day. But from 1565 on, what happened in China no longer just stayed in China.

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Before 1565, the discovery of a mountain of silver affected China only once the metal had travelled through the markets of Europe, the Levant, India and elsewhere. After 1565 [when the Manila galleons began sailing], ingots and coins could be placed in a ship and reach China within months, with mini­mal inter­mediaries and mark-ups. It was not quite a tele­graphic transfer but neither was it a process of slow diffusion via indirect trade.

Nor were these early-modern networks the result, as today’s are, of deliberate government policy. Indeed, many if not most of the Chinese and Spanish traders were operating contrary to laws and regulations promulgated by their respect­ive emperors: globalisation took root in spite of concerted official efforts to prevent it.

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Globalisation, had anyone stopped to think about it, was hardly a foregone conclusion, however inevitable it looks today. Historian Manel Ollé makes the point that Sino-Spanish interactions in the 16th century were an ambivalent process, intensively commercial but socially and institution­ally unstable.

Despite the uncertainty, however, globalisation had the effects one might have expected. In China, overseas demand drove manufacturing and economic growth, which in turn supported the population growth made possible by the inno­vation in new crops. Financial integration created arbitrage opportunities, which led to more efficient allo­cation of finan­cial resources; this integration in turn allowed contagion from one economy to another, such as the economic shocks of ship sinkings – a single sink­ing would knock out a year’s trade.

A battle scene featuring Captain George Anson's ship HMS Centurion fighting a Spanish Manila galleon off the coast of South America, circa 1739-40. Picture: Alamy

The Manila galleons sailed for two-and-a-half centuries, until 1815 and the dawn of a new era of independence for most of Spanish America. The world was during this period a very different place from the one it would later become.

China had the largest, most productive and most dynamic economy in the world. Even a couple of centuries later, Adam Smith would still write in The Wealth of Nations: “China is a much richer country than any part of Europe, and the differ­ence between the price of subsistence in China and in Europe is very great. Rice in China is much cheaper than wheat is anywhere in Europe.”

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China was and still is the factory to the world. During the Manila galleon trade, however, Chinese products were competing not just on price but also on their unsurpassed quality. Consumer-product innovation was mostly an East Asian and largely Chinese monopoly: it was manufacturers in the West – Mexico and then Europe – that copied Asian silks, porcelain, screens, fans and furniture – not the other way around.

The China of the 16th century looked to the West not for development or investment, but rather for the silver needed for the Chinese money supply.

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China was not just the most economically developed country in the world, it was also the most powerful.

Unlike the 1840s, when British ships could force their way up the Pearl River and require China to buy opium, gunboat commerce was not a practical option for the early-modern Europeans in the region. Combining force with commerce was successful only in the Southeast Asian periphery, where, for example, it was Dutch East India Company policy – according to the company’s governor-general in 1614 – that “trade cannot be maintained without war”.

But none of Spain, Portugal or Holland was able to project much force against large, long-standing nations in East Asia. They managed at best only politically insignificant foot­holds on the coasts of China and Japan, from which they were always in danger of being expelled.

China was able to require that trade take place on its terms, restricted to certain ports.

In Japan, after decades of religious conflict, the Tokugawa rulers decided to expel the Portuguese and closed their borders, except to the Dutch, whom they restricted to the small man-made island of Dejima in 1640, a situation that lasted for more than two centuries, until [the American] Commodore Perry appeared with his black ships in 1853.

More than a century into this period, in 1661, the Chinese rebel leader and Ming loyalist Koxinga ejected the Dutch from Formosa, now Taiwan, and even threatened Manila before he died suddenly the next year.

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ASIA’S INTEGRATION INTO GLOBAL MARKETS was, of course, not limited to the Manila galleon trade. In yet another manifestation of globalisation in this early period, Europeans – notably the Portuguese and then the Dutch – soon came to play a major role in Asia’s regional and trans­continental trade. European third-parties transported goods within Asia and also acted as intermediaries in the Chinese-Japanese silver trade.

While this commercial footprint was not itself an indi­ca­tion of military or political power, it probably comes as no surprise that some on the ground harboured such delu­sions. In 1576, the governor of the Philippines, Francisco de Sande, wrote to Philip II of Spain proposing an inva­sion of China, which he said “would be very easy”, requiring just a few thousand men:

“The equipments necessary for this expe­di­­tion are four or six thousand men, armed with lances and arquebuses, and the ships, artillery, and necessary muni­tions. With two or three thousand men one can take whatever province he pleases, and through its ports and fleet render himself the most powerful on the sea. This will be very easy. In con­quer­ing one province, the con­quest of all is made. The people would revolt immediately [...] In all the islands a great many corsairs live, from whom also we could obtain help for this expedition, as also from the Japanese, who are the mortal enemies of the Chinese. All would gladly take part in it.”

Portrait of Philip II of Spain by Sofonisba Anguissola.

Philip was having none of it. There is a note in the margin of the report: “Reply as to the receipt of this; and that, in what relates to the conquest of China, it is not fitting at the present time to discuss that matter. On the contrary, he must strive for the maintenance of friendship with the Chinese, and must not make any alliance with the pirates hostile to the Chinese, nor give that nation any just cause for indignation against us.”

De Sande tried again in another letter, in 1579, as did his successor, Diego Ronquillo, a few years later. But the suggestions seem to have fallen on entirely deaf ears. And once the Manila galleons got going, these proposals seem never to have come up again.

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Globalisation was considerably more balanced – eco­nomic­ally and politically – between East and West in this first chapter than it was to be in the story’s second. That is not to say, Philip II’s stated intentions notwith­stand­ing, that relations were friendly, or that there was not any protracted shoving. The oppor­tunities for trade and access to raw materials did indeed occasion mili­tary action and territorial expansion, but it was the Philippines and the rest of Southeast Asia, rather than the much more powerful China and Japan, that bore the brunt of this.

China was larger in terri­tory, economy and population at the end of this period than at the beginning. The 21st cen­tury is not the West’s first encounter with a rising China. Nor is this the first time the West has tried unsuccess­fully to fit the entire world into a single overarching con­ceptual frame­work. Just as the advance of Western-led globalisation pro­vides the vali­dation for demo­cracy and freedom, these values also become the philosophical justification for globalisation.

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Sixteenth- and 17th-century global­isa­tion was a conse­quence rather than an explicit objective of Spanish policy and commerce. But Spanish policy nevertheless had a con­ceptual framework of its own: Catholicism. To the modern eye, attempts at reli­gious conversion can seem tangential and even detrimental to geopolitical advance and commer­cial gain. But without questioning the sincere beliefs of the adherents, there was a good deal of realpolitik in advancing Catholicism. Actions, however one-sided, could be present­ed as being in the interests of the other party. There was a feeling that shared beliefs made it easier to do business.

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Converts also undermined existing hierarchies, loyalties and structures in both occu­pied territories and other coun­tries. The resulting activities were often considered less than innocent by the governments of China and Japan. Com­plaints about “interference in internal affairs” are not a uniquely modern pheno­menon. The linking of ideology and policy could be a two-edged sword: just as demo­crats today question realpolitik alliances, Spanish clerics were among the most vociferous opponents of forced labour in colonial mines and agricultural estates.

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Manila galleon-era Spain had a histor­ical narrative of its own: it had been pro­gres­sively expanding and unifying for cen­turies – first the reconquista of the Iberian peninsula and then the conquest of an entire new world. Catholicism went hand-in-glove with this terri­torial and – once the wealth of the Americas came on stream – financial expansion, a success which both validated Catholicism and was in turn justified by it.

Ultimately, the Spanish narrative, not unlike today’s Anglo-American narrative, ran up against the reality that is China. The Sino-Spanish story, and the Silver Way, went into abeyance for 200 years. It is only in the past decade that the stirrings of a possible rebirth can be witnessed.

The Silver Way (Penguin Random House North Asia) is now available now in the Asia-Pacific region and will be in global Amazon stores from June.

COMMENTS

Peter Gordon
Peter Gordon is editor of the Asian Review of Books. A publisher and entrepreneur, he has been active in technology, culture and international trade and investment. He is the co-author of “The Silver Way: China, Spanish America and the Birth of Globalisation, 1565–1815”. He has been a resident of Hong Kong since 1985.