a CHAPTER 2 The Galleon Trade The Manila Galleon was ... the frst medium to reduce the world to village, —Nick Joaquin (1990) the galleon trade lasted for two and a half centuries after Legazpi’s "Tonsinentin Cab inm 8815 epersa ntc aad falling approximately between Lepanto and Waterloo. It was the longest shipping line inhistory. One hundred and eight galleons were used, and of this number thity were lost by shipwreck (ten of them in the turbulent waters of the San Bernardino Straits, also known as the Embocadero) or capture (four by the British. In the context of late-sixteenth-century East Asian commerce, the Philippines-Mexico trade was the one completely new and important cre- ation, stimulating a greatly increased trafficbetween China and the Philip- Pines even while the rest of the traditional framework of Asian trade remained largely the same? ‘A, From the point of view of regional geography, the galleon trade made Manila the first primate city in Southeast Asia by the early sev- enteenth century, as much as two centuries ahead of other regional centers, which attained this status only in the nineteenth century. In ‘THE Gatteon Trape population, prosperity, and social complexity, it far outstripped the :ountry’s second- and third-ranked settlements combined * From a broad economic point of view, the Philippines through ‘he era of the galleon trade became part of what has been called the irst-world economy of modern times, namely, that based on Seville ind the Atlantic. The Pacific trade moved in phase with economic ac. ty in the Atlantic. If mercantilist strictures had been correct in iming that the drain of silver into East Asia was the cause of eco. tomic depression in Mexico and Spain, a negative correlation would lave emerged between Atlantic and Pacific activity, each one being sutonomous and with its own dynamic; prosperity in one (the Pacific) vould have meant depression in the other (the Atlantic). But in fact fhere was a positive correlation; the cycles in both areas were similar 'n timing, The galleon trade was more the result than the cause of the tps and downs in the economy of the Spanish Empire General View The Philippines, whose geographical positioi as an outlier of the ‘butheast Asian island are had made it in pre-Hispanic times among ‘last to receive some of the major cultura influences ofthe region, xow found itself in a position to gather together trade flows from any directions. A capsule summary of the galleon trade is that it ae tacted silks from the north, spices from the south, and cottons and ‘ory from the west, exchanging them for silver and friars from the Sew World. This sweeping generalization, however, hides a wealth of detail > which even lengthy accounts can hardly do justice. General catego- +5 of exports to Mexico were textiles (silk and cotton), porcelain, ‘ory (especially carved religious images) furniture (including inlaid ind lacquered items), metalwork (from grils to delicate fligrees), and ‘wious foods and plants of Philippine or other Asian provenance fice, tea, mangoes, and orchids and other flowering plant) Despite cial restrictions, slaves were sometimes carried. Domestic Philip. ‘ine exports were gold dust, wax, cordage, and various kinds of teeting and textiles from Manila, Ilocos, Cebu, and Lubang, these mounted to no more than about 10 percent of the value of the hipments. ‘Contemporary accounts are more specific and mention (to name sly some commodities) carpets from Persia, jewels fom India, ich hang. 3Arter THE GaLLeoys ings and bed coverings from Bengal, cinnamon from Ceylon, pepper from Java and Sumatra, spices from the Moluccas, balsam and ivory from Cambodia, camphor from Borneo, civet from the Ryukyus, silver- ware and lacquer from Japan, and silks of all kinds from China, Refer- tence is also found to trade with Macassar, Siam, and Cochin China Mercury from China was at times carried for use in the Mexican mining industry. Certain items for public use carried by the galleons have en- Aside fromthe explicit subsidy of operating costs, there was a fur- ther implicit subsidy in what might be called the capital costo the trade, namely, the constriction of the galleons. Although one glleon was made in Siam and another in Japan, and in emergencies some vessels were pur- chased from other countries, the great majority were built in the Ph pines—at Cavite, Bagataoin Sorsogon Bay, Albay, Masbate, Mindoro, and Pangasinan, They were made of Philippine hardwoods, which were al ‘ost impervious to contemporary cannonballs, and the few that were taken surrendered because their upper works had been raked with grape shot or because sharpshooters perched on masts had picked off individual officers and silos. Also thet size and wide beam made them hard to maneuver. For cordage, abaca was used, while the sails were manufac. tured in locos. Metal itings were imported from China, Macao, Japan, and even India and were worked by Chinese laborers. Hardships for the Filipinos “The hardest work, the cutting of timber inthe interior and getting it to the coast as wel as the ough workin the shipyards, was performed by Filipinos. They were pressed int service by the reprtimiento or the pol, a kind of corvée system also in effect in Spain under which able-bodied ‘males between certain ages had to contribute their labor fora certain mum ber of days (usually forty) a year. Although there wore provisions in the Laws ofthe Indies designed to prevent exploitation, there were many 2 Tu GALLEON Trave. abuses, which in 1660 provoked a revolt among the Pampangos, who were usualy the most loyal and valiant ofthe Spanish auxiliaries. By then, the Dutch wars were over, and with the reduction ofthat threat the urgency to construct galleons diminished. It was estimated a onetime that a galleon had cost the king, 60,000 pesos but the Filipinos 15,000 pesos. With the interplay of the various premiums both implicit and ex- plicit it would be difficult to calculate a rate of net profit on the trade, although it must have been high ina trade ife with shady practices. The Manilans admitted to a ludicrously low 5 or 10 percent, their enemies al- leged 500 percent, andthe central government allowed an arbitrary 83 per ‘ent. Scholars estimate that net profits ran between 100 and 300 percent. ‘The venerable obras pas, pious foundations supported with money ‘bequeathed by wealthy persons and entrusted to lay brotherhoods afi ated with religious orders or chapters, came in for thei share of criticism for thei role in financing the trade. Toward the end ofthe galleon era the terms of the bequests usually provided that the original endowment be divided into three parts: one-third for the Acapulco trade, one-third for ventures to China and India, and one-third to be retained as a reserve fund. The funds lent for commercial purposes had the character of both bank loans and marine insurance. The premiums charged probably re- fected the perceived differences in risk between the various branches of trade and economic activity inthe following rate structure. Forthe Acapulco trade 20t0 50 percent(27 to 45 percent in 1810) For ventures to Madras, Calcutta, and Batavi 161022 percent FortheChina trade 121018 percent For mortgages 5 percent (legal imit) Sometimes interest-free loans were made to the government in times of need, as when the situado failed to arrive or when foreign invasion threatened. But they were censured for being too influential, diverting, funds from agriculture and industry to the Acapulco trade, and swallow- ing up the profits from foreign trade. Fr. Martinez de Zéiga in the early 1800s estimated that a doubling of the procurement price would stil fall shortof covering wuts an that regular sales would have to be made at 300 percent above the purchase price, but by then the trade was on the wane. 8Arren 1H GaLteons Borrowers from the obras pia also engaged in questionable prac- tices Often tvie as much was borrowed as was needed, so that intrest and premiums could be paid in case payment of the principal had to be postponed. Since the obras pias assumed sea risks only in cases of total los, salvageable wrecks were in some cases left to deteriorate so thatthe mer- chants could pass the risk onto them. There were als instances of borrow cs renewing their loans by paying the yearly interest until the loss of a galleon freed them from the obligation to repay the principal. There were many such losses during the 50 years ofthe galleon ‘rade, with four ships captured by the English, more than thirty wrecked ‘or lost at se, thousands of people lost, and property losses calculated at ‘more than 60 million pesos. From a cold-blooded actuarial point of view, ‘one modern commentator opines that, against the total numbers in volved—about 108 ships—total losses were comparatively few and the percentages of missing and captured crewmen would have caused no {reat concern to modem underwriters. Comyn estimated that in the ap- proximately 250 years from the conquest to his day, 400 milion pesos en- tered the Philippines. Chaunu calculated the flow of silver to the Far East, tobe between four and five thousand tons over two centuries and roughly ‘one-third of the American output if one includes both direct (Pacific ship- ‘ments) and indirect (reexport from Europe) flows ‘The income ofthe obras pias therefore reached very respectable pro- portions. From 1599 to 1650, the Hermandad de la Misericordia (founded in 1596) spent 540,446 pesos on works of charity (an annual average of 10,809 pesos) In good times, this confraternty disbursed up to 70.00 pe- 0s a year. Between 1734 and 1766, it loaned 3,319,787 pesos to galleon traders, an annual average of more than 100,000 pesos * Filipinos in the Galleon Trade Filipinos made up from 50 to 80 percent of the crews of the galleons and were paid less than Spanish sailors, who, if they were common sea- ‘men, received 100 pesos for a round trip while the Filipinos received 48 to 60 plus a rice ration. At the end of the voyage, the sailors also received a ‘sum of money, 330 pesos in the case of the Filipinos, and enjoyed some profit from the sale of goods they were permitted to carry. In the early days, there were complaints of lack of skill, partly perhaps because the need for crewmen led to the hiring of men without seafaring experience {from the interior of Luzon. But by the mid-eighteenth century the liberal ‘Viana was paying Filipinos high tribute, saying in effect that there were no a“ Tue GatLion Rape bette sailors inthe word, that they could teach many of the Spanish sail ‘or in those seas, and that they fought bravely.” They sufered from the unaccustomed cold ofthe high latitudes; from fraud or delays in getting their wages, which were often paid in treasury warrants discounted by those who cashed them; and from bad treatment aboard. Butthey were not lacking in advocates like Governors Vera, Coreuera, and Manrique de Lara and the colony’s agent, Hernando de los Rios Coronel A law of 1633 ‘aimed to protect them from the predations of Acapulco officals. ‘Those who put little trust inlaws had other, more informal rem- ecies. They could profit from selling the goods that they were allowed to cary as crewmen, and they could and did jump ship in Acapulco, There ‘were several long-term results ofthis. One i that thousands of Filipinos settled in Mexico (as did thousands of Mexicans in the Philippines) and in the costa chica and costa grande ofthe state of Guerrero especially in Espinalillo, one ca see marked Malay features in much ofthe population 4s well as Philippine words, family names, and customs such asthe man- ner of cooking rice2® Another result stems from the 1618 desertion from the Espiritu Santo of seventy-four (out of seventy-five) Filipino seamen, who had been hired by Mexican Indians to teach them how to make palm wine, called tuba in the Philippines Both the drink and the word have re- mained in Mexico, and one can see on the outskirts of Acapulco roadside stands selling, "ub esc.” Ths beverage was so appreciated by Mexicans that imports of Spanish brandy and wine fll and the king was petitioned to send the Filipinos back to their homeland as punishment for interfering with Spanish trade"—an ironic footnote demonstrating how nameless common people practicing a humble trade could disrupt imperial policy. Some Mexicans also aver that their ceviche (marinated raw fish) sof Asian origin (based on Philippine knilzw). The Spanish spoken in the Phlip- pines became sprinkled with Mexican words such as mecae (rope), petate ‘Trade with India While debates raged over the workings of the restrictive system, a ‘change was coming that involved the feeder trade for the galleons. India was growing in importance. The East Asian trade had declined owing to the Dutch wars, the closing of Japan to foreign commerce in 1639, the rup- tum of relations with Portuguese Macao, and the disruption of the junk trade following the collapse of the Ming dynasty in 1644.” Trade with ‘mainland Southeast Asia was reported to have begun with Cambodia 45Arrer rit GaLLeons 1594, Cochin China in 1596, and Siam in 1599, and a ship from Malacca was reported in 1397, bu this trade was never very large or regular, ThePortuguese connection dirng the period when theSpanish nd Portuguese Crowns were united (1580-1640) was more important In years when few Chinese junks came to Manila, ether because of expule sions from Marila othe Dutch wats, Macio was an important supp for he gallons special inthe years afer 19. Atabout the ae tne ‘were some ships from India. Bt withthe regaining of independence by Portugal in 10 tade with Macao and Indindecineds However, new players appeared onthe scene. The Bish East India Company, ike every other European trading entity, needed sver for its ‘operations in China. Marla was logical source, but the Spanish govern. ‘mentnever ave the company perme ote here However vanis were permitted to venfure out on their own, and they and the English "ee merchants (nated with the company) scout fo the bulk ofthe “country trade” asthe intra-Asian trade between East AE rica and China was known). Trade with Manila began in 1644 Dut ws frequent and sporadic for some decades. In the meantime some Spar traders, disregarding theit own governments strictures begat mak. ing voyages to the Malabar coast. Alter 1674, ships from Madras and other Indian ports vayaged to Manila under Asian {including Indo- Fortes) gs since European versls were are Tre ou ese ships were owned by Elihu Yale, These county ships of up to five hundred tons were larger than sampans and took ten months fra round-trip voyage. ‘Theealy phase, which continued with ony bre nterruptions unt 1708, was dominated by company servants. Though theater phase (1708- 62) a cared on mostly by the fee merchant, the company's share rose sradually. “7 The cargoes to Manila consisted of sil, blue cloth, painted fabrics Ge, batts), iton anchors, and various othe textiles, including calcoes Some ofthese items (uch as ron forthe construction of alleons) were for Philippine consumption but large quantities of calico and chine were loaded onthe glleons. In the 1740s, the annual value of Madeas exports 0 Marila was nearly 30000 pesos, Fr the return cargo, the ma item was silver ofcourse; itis estimated that 25 o 30 percent ofthe annual amount ‘fiver shipped to Madras came frm the Manila rade. Pilppine prod. ucts consisted of sugar, spon wood, brimstone, copper, tobacco, was deet nerves cowie ver and gold wares, and leather. Later, horses and 46 ‘Ti GALLEON TRADE ‘There was some competition from French traders based in thei In- dian possessions, but the loudest complaints were lodged against the Ar- ‘menians. European wars caused interruptions in trade, and English naval captains were not above stopping Armenian vessels to extort money. After the British occupation of Manila in 1762-64, a resident agent was ap- pointed to act on damage claims and pave the way for the resumption of the country trade. By 1787, customs duties (almojarifazgo) paid on Indian {goods in Manila were almost 90 percent of those paid on Chinese goods. By 1810, the value of imports from India and China was equal. Fine cot- tons from India were held in as much esteem as Chinese silk. ‘The Last Years of the Trade tthe same time, in Manila, professional merchants were assuming «greater portion ofthe trade. In 1586, there had been 194 shippers sending, ‘argo on the annual galleon. Two centuries later, there were only 28. BY then, there were notorious inequalities of fortune among Manila’ citizens. (Of the original 150 members of the consulado, only 25 were active mer- chants, while 56, including eight women, traded on a commission basis through the merchants. The rest had other occupations or were idlers. “The last half-century of the galleon trade was a period in which Spain introduced new economic initiatives (as will be seen later). But Spain was also embroiled in a series of wars, and there is some haziness about trends at that time. Cyclical analysis discerns five distinct periods: ‘expansion in 1580-1620, a severe contraction to 1670, recovery t0 1720, a mild recession to 1750, and a resumption of expansion until the end of the cighteenth century. At this time, the galleons called at ports in California, which was ordered by the Council of the Indies on June 22, 1773. Although the galleon captains preferred to bypass the Californian capital at Monterey in their eagerness to sell their cargoes at Acapulco, visits were recorded in 1779, 1780, 1784, 1795 (two galleons),and 1797. In 1781, the Sam Carlos put in unexpectedly at San Diego with supplies for the Califor ‘missions. Its postulated that it was only in the last phase of the trade that the peak of prosperity reached in the initial expansion was once again at- tained But the data peter out about 1790, and the postulate sits uneasily beside reports of the decline of the galleon trade, although it has some support in that duties in Manila reached a record level in 1787 and the galleon of 1784 carried a return cargo to Manila of 2.791,632 pesos. one of the highest on record.* These however, may have been monetary illusions a‘Arran THE GALLEONS ‘becuse the entrance of the Dutch, English, French and other nationalities into the Chinese market raised prices ther. Prices had also risen in India, and indeed throughout the world, as was tated by the Manila corslado in 211772 representation aimed at securing an increase in the perso to ac- commodate these increases. Price comparisons between specific commodities between 1734 and 1770 have led to estimates indicating that prices for Chinese goods had risen on average 147 percent, while those for Indian goods had risen 165 percent (although rates of increase varied widely among individual com- ‘moditis). The temporary increase ofthe permiso by 250,000 pesos in 1776 ‘was granted in response to the representation. But the frst galleon that carried te increased quota was lost without a trace in 1782, and it was not until 1786 that another galleon carried the increased permis, only to find at ‘Acapulco that a feria could not be held because the trade Iiberalization scheme of 1778 (which willbe looked at again) had allowed ter suppli- ‘ersto ring in Asian goods and these had accumulated in large amounts in Mexico.® The last phase of expansion therefore may have reflected infla- tionary trends rather than awa increase in the volume of trade Inany event, by the 1790s the galleon trade had fallen on hard times. New efforts to promote trade liberalization and economic development had been made under Charles II. Viceroy Revilla Gigedo in 1794 wrote that the decline of the trade was a natural consequence of industrial progress in Europe increased demand for English and European cottons, and decreased esteem for Asian silks and cottons. Only Asian muslins maintained a part of their market, and even this was being eroded by Eu- ropean muslins, especially those from Catalonia. He also reported that in the years 1790-92 the Royal Philippine Company (established in 1785)had landed 450,000 pesos worth of East Indian goods at the gulf port of Veracruz, cutting further into the market fr the Acapulco ships. As acon- sequence, paying customers had become scarce at the Mexican port and the last two galleons had not been able to hold fairs. A decade later, the “Manila consulado reported that three ships had lain in Acapulco harbor ‘without being able to dispose of their merchandise for between one and three years. English and American ships traded more frequently on the Pacific coast of Spanish America. The Mexican War of Independence broke out in 1810, and in 1813 the Mexican patriot Morelos took and held ‘Acapulco for a few months; during this occupation, the Manila galleon ‘was prevented from unloading and had to retire to San Blas up the coast” Inthe meantime, with Napoleon's invasion of Spain and the capture of King Ferdinand Vii, the Spanish resistance convened the Cortes of 48 Tut GALLEON TRADE Cédiz in 1810 with representatives fom throughout the empire, with the aim of establishing a constitutional monarchy. One ofthe Philippine depu- ties the Manila merchant Ventura de los Reyes, assumed his seat in 1611 an early in 1813 proposed discontinuing the galleon trade, a solution that hha already been visualized in 1811. In the ensuing debate, there was a strong current of opinion in favor of opening up more Spanish American ports to Philippine trade, with some, however, wishing tolimit such iber- lization to Philippine goods. Finally a conservative postion was taken in ‘a decree of September 14, 1813: the glleon trade was tobe discontinued, but ints place private Philippine ships could trade at Acapuleo (and San Blas, with Sonsonate in today’s E1Salvador as an alternative port) in Chi- nese and other Asian goods carried on privately owned national ships but within the limits of the basi permiso of 500,000 pesos outgoing and 1 mil lion pesos forthe return voyage. In adopting this hybrid arrangement, the Cortes may have been trying o strike a balance between two branches of commerce approved by the Crown, namely, the Royal Philippine Company's operations and trading by ships of Philippine registry. The decree was received in Mexico on July 14, 1814, but it was not put into effec because by then Ferdinand VII had been reinstated as absolute mon- arch and the Cortes dissolved. However, de los Reyes persuaded the king to ratify the decree on April 2, 1815, and gave further proof of his politcal agility by securing a royal order on January 18,1819, allowing him to bring up to 10,000 pesos’ worth of Chinese and other Asian goods to both New Spain and Guatemala through authorized Pacific ports.” A Brief Appraisal ‘A full evaluation of the galleon trade lies beyond the scope of the present work, but some points can be made briefly. The restrictive system ‘would not pass muster in a court of economic inquiry, although it would have to be recognized that it was a political compromise for which there ‘were few realistic alternatives. Contemporary and later writers, both Spanish and non-Spanish, deplored the formation of an indolent, un- imaginative, monopolistic, and numerically small merchant class; the fail~ ture to realize Manila’s full potential as an entrepot; the tolerance or ‘encouragement of widespread official corruption and evasion of the law land the neglect of the country’s agricultural and industrial development. But the social concomitant of the last point was avoidance of the horrors of ‘8 colonial plantation system and mitigation of the abuses of the early tencomenderos, And, despite the charge of industrial neglect, the galleons to 9Arrer He Gatteons the end carried Philippine textiles, which could not be said of subsequent phases ofthe trae. Already noted has been the creation of a new current in East Asian trade andthe beginning of large-scale Chinese immigration, Which could be regarded as both a boon (for the goods and the skills that the Chinese brought) and a bane (fr the difculies created by a large- scale external demographic presence and the persistence of long-term immigration problems). Alsonoted have been the establishment of Manila as the first primate city in Southeast Asia and the incorporation of the Philip- Pines int the frst modem world economy based on Seville and the Atanti. enabled Spain to hold the Philippines and maintain an admin- istrative and cultural unity that would lead to the formation ofa Filipino ‘ational consciousness. It meant the advent of Christianity and Roman [Law and a trans-Pacifc cultural interaction that saw a mixing of Filipino, ‘Chinese, Mexican, and Spanish elements. It meant the transfer of techno ‘ogy from both the West and China and the transport of useful plants that ‘ver the long term enriched the diet of the common man and helped to diversity the economy. The obras pis, which financed and profited from the trade, undertook a multitude of good works. One such endowment resulted in Manila’ frst waterworks, Schurz has writen that “no ship ever played the patina city’s life ‘Which the galleon did in that of Manila’—and by extension the rest ofthe ‘country. The modern Filipino author Nick Joaquin has observed: “It was ‘on the Manila Galleon that we began to become the Philipines." The galleon trade was assaulted by the world’s mightiest navies and undermined by the misdeeds of the knaves and fools who clutter is an- nals. But despite loss and adversity the ships sailed on year after year, for the trade was not merely a commercial or economic institution but a mul- tifaceted historical phenomenon that surmounted its handicaps and had pervasive and enduring effects. When the last galleon, named the ‘Magallanes after the explorer who frst claimed the Philippines for Spain, left Mexico in 1815 it sailed west, terally into the sunset 50 i> CHAPTER 3 Eighteenth-Century ‘Trade Diversification and Economic Development The 18th century is one of the least known areas of or history. — Juin Maris (1963) he dawn ofthe eighteenth century saw the end ofthe Habsburg dynasty in Spain and the beginning of Bourbon rule. The count try had been in economic and polltial decline fara cantury, from about the death of Philip 1 in1598, owing tothe drain of foreign wears andl domestic misgovernment. The nat was reached with the Tast Habsburg, Charles I, who was not only inept but demented and could nether govern personally nor choose and maintain ca pable ministers ‘The ist Spanish Bourbon found that substantia inroads had been made inthe clonal trade by Dutch and Hamburg merchant, and the warfare attending thei acesion was disastrous for what rade remained ‘Aithough nly moderate abil these Kings benefited from bilint a ‘ise supplied by the French monarchy in their efits to revive the conor I was French influence that facitated the entrance ofthe En Tightersment ito Spain, The mmuhse provide by he sew dynasty we felt eatin nthe work of thors, The grentet Spanish merci ofthe new regime, 51