The Great Divergence by Pomeranz Kenneth

Author:Pomeranz, Kenneth
Language: eng
Format: epub, pdf
Publisher: Princeton University Press
Published: 2012-04-05T04:00:00+00:00

The Importance of the Obvious: Luxury Demand, Capitalism, and New World Colonization

Where European luxury demand, consumerism, and a capitalist political economy obviously did matter is in stimulating the growth of New World economies and the African slave trade. But even here it was a combination of European political economy and demand from both Europe and Asia—especially China—that drove New World settlement.

Despite some religiously and politically motivated colonists, it is hard to believe that Europe’s New World colonies would have grown much had the colonists not found goods that they could sell in either Europe or Asia. Most colonization was privately financed by people seeking profits. Many settlers may have sought a piece of land on which they could live relatively self-sufficiently, rather than a place from which they could participate in a fluctuating export economy;93 but less than a third even of white settlers before 1800 financed their own passage, and those who did pay for migration were interested in using the immigrants’ labor to create exports, not in helping them realize dreams of self-sufficient security. 94

Furthermore, the cost of emigration, already high relative to the savings of the poor, would have been far higher had the Americas not exported so much tobacco, sugar, etc.: shippers of these products, faced with near-empty ships on their return voyage, competed aggressively to carry emigrants.95 Indeed, exports were so important that some economic histories of colonial North America make falling ocean shipping costs—which allowed settlers to move further inland and still sell to the European market—the principal motor of the growth in the white population and the territory it controlled.96 And above all, the flow of Africans to the circum-Caribbean region (including southern North America and Brazil)—which until 1800 was a much larger flow than that of whites—was clearly driven by the expansion of European luxury demand.

The mechanism was a bit more complicated for the Spanish empire. There, by far the most important export was silver—and the most important demand came not from Europe, but China, where the world’s largest economy was converting to a primarily silver-based system after a series of ultimately unsuccessful experiments with paper money and very debased copper coins. (Indian demand for monetary silver was also growing, though not as much. It had a smaller population, was less thoroughly monetized, and used an even wider variety of monetary media—including gold—than did China.) In the late 1300s, when China began drawing in huge amounts of Japanese silver, its gold-to-silver ratio was between 1:4 and 1:5. When New World silver began to arrive, China’s ratio was still only 1:6, versus 1:11 or 1:12 in Europe, 1:10 in Persia, and 1:8 in India.97 With arbitrage so lucrative, somewhere between one-third and one-half of all New World silver wound up in China. Dennis Flynn and Arturo Giraldez have shown it was this enormous Chinese demand that allowed Spanish kings to levy heavy mining royalties without pricing most of the New World’s silver production out of the market. Indeed the huge European inflation of

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