The Money Mountain (III)

The Roman system of coinage outlived the Roman Empire itself. Prices were still being quoted in terms of silver denarii in the time of Charlemagne, king of the Franks from 768 to 814. The difficulty was that by the time Charlemagne was crowned Imperator Augustus in 800, there was a chronic shortage of silver in Western Europe. Demand for money was greater in the much more developed commercial centres of the Islamic Empire that dominated the southern Mediterranean and the Near East, so that precious metal tended to drain away from backward Europe. So rare was the denarius in Charlemagne's time that twenty-four of them sufficed to buy a Carolingian cow. In some parts of Europe, peppers and squirrel skins served as substitutes for currency; in others pecunia came to mean land rather than money. This was a problem that Europeans sought to overcome in one of two ways. They could export labour and goods, exchanging slaves and timber for silver in Baghdad or for African gold in Cordoba and Cairo. Or they could plunder precious metal by making war on the Muslim world. The Crusades, like the conquests that followed, were as much about overcoming Europe's monetary shortage as about converting heathens to Christianity.

Crusading was an expensive affair and the net returns were modest. To compound their monetary difficulties, medieval and early modern governments failed to find a solution to what economists have called the big problem of small change: the difficulty of establishing stable relationships between coins made of different kinds of metal, which meant that smaller denomination coins were subject to recurrent shortages, yet also to
depreciations and debasements. At Potosi, and the other places in the New World where they found plentiful silver (notably Zacatecas in Mexico), the Spanish conquistadors therefore appeared to have broken a centuries-old constraint. The initial beneficiary was, of course, the Castilian monarchy that had sponsored
the conquests. The convoys of ships - up to a hundred at a time - which transported 170 tons of silver a year across the Atlantic, docked at Seville. A fifth of all that was produced was reserved to the crown, accounting for 44 per cent of total royal expenditure at the peak in the late sixteenth century. But the way the money was spent ensured that Spain's newfound wealth provided the entire continent with a monetary stimulus. The Spanish 'piece of eight', which was based on the German thaler (hence, later, the 'dollar'), became the world's first truly global currency, financing not only the protracted wars Spain fought in Europe, but also the rapidly expanding trade of Europe with Asia.

The Money Mountain (II)

To work the mines, the Spaniards at first relied on paying wages to the inhabitants of nearby villages. But conditions were so harsh that from the late sixteenth century a system of forced labour (la mita) had to be introduced, whereby men aged between 18 and 50 from the sixteen highland provinces were conscripted for seventeen weeks a year.1 1 Mortality among the miners was horrendous, not least because of constant exposure to the mercury fumes generated by the patio process of refinement, whereby ground-up silver ore was trampled into an amalgam with mercury, washed and then heated to burn off the mercury. The air
down the mineshafts was (and remains) noxious and miners had to descend seven-hundred-foot shafts on the most primitive of steps, clambering back up after long hours of digging with sacks of ore tied to their backs. Rock falls killed and maimed hundreds. The new silver-rush city of Potosi was, declared Domingo de Santo Tomâs, 'a mouth of hell, into which a great mass of people enter every year and are sacrificed by the greed of the Spaniards to their "god".' Rodrigo de Loaisa called the mines 'infernal pits', noting that 'if twenty healthy Indians enter on Monday, half may emerge crippled on Saturday'. In the words of the Augustinian
monk Fray Antonio de la Calancha, writing in 1638: 'Every peso coin minted in Potosi has cost the life of ten Indians who have died in the depths of the mines.' As the indigenous workforce was depleted, thousands of African slaves were imported to take their places as 'human mules'. Even today there is still something hellish about the stifling shafts and tunnels of the Cerro Rico.

The Money Mountain (I)

More sophisticated societies than the Nukak have functioned without money, it is true. Five hundred years ago, the most sophisticated society in South America, the Inca Empire, was also moneyless. The Incas appreciated the aesthetic qualities of rare metals. Gold was the 'sweat of the sun', silver the 'tears of the moon'. Labour was the unit of value in the Inca Empire, just as it was later supposed to be in a Communist society. And, as under Communism, the economy depended on often harsh central planning and forced labour. In 1532 , however, the Inca Empire was brought low by a man who, like Christopher Columbus, had come to the New World expressly to search for and monetize precious metal.*

(NB * The conquistadors came looking for both gold and silver. Columbus's first settlement, La Isabela in Hispaniola (now the Dominican Republic), was established to exploit local deposits of gold. He also believed he had found silver, but the only traces have subsequently been shown to have been in the sample ores Columbus and his men had brought from Spain.)