IV Trade and Commerce: The Period of Restrictions
Hardly had wealth been created by the commerce of the first years after the conquest, when the policy of restriction found its strong supporters in the merchants of Cadiz and Seville, who, accustomed to monopolize the trade with America, looked with jealous eyes upon the rapidly growing prosperity of Manila, the new center of trade. The cotton and silk cloths from China were underselling in Mexico those coming from Spain and Peru, and a good deal of the silver was going, not to Spain, but to the East; hence, the long drawn-out rivalry between Manila, on the one hand, and Cadiz, and Seville, on the other, with America as a third party, also working for her own interest. This commercial activity was the phenomenon which dominated the Philippines for over two centuries, and had such marked influence upon its whole economic development.
Before giving the various decrees passed from time to time to regulate this commerce, it is advisable to discuss the arguments advanced by the two sides. The Spanish merchants contended that the competition of goods coming from the East would destroy the manufactures on the Peninsula; and, further, that the sending of silver to the Orient, would drain the supply available for Spain, and, therefore, in accordance with the mercantilist doctrine, should be prevented. Manila answered by saying that the goods that she exported to New Spain were different from those coming from Spain; therefore, there was really no competition between them. In other words, the demand for either kind of goods was separate from, and independent of, the demand for the other.1 Other arguments were advanced to prove that Manila should be treated with consideration; the driving out of the Dutch from the Moluccas by the Philippine government,2 the preservation of the missionary conquests in the Far East,3 and the maintenance of the prestige of the Spanish crown,4 all of these would result from the maintenance of the Philippines, by making it possible for her to support herself with the galleon trade. These, added to the fact that the trade with New Spain was not so profitable as commonly reported5 on account of the many perils involved in it, entitled Manila to a more liberal treatment.
Restrictions
The continued protests of the Spanish merchants finally led to the prohibition of the shipment from New Spain to Perú or Tierra-Firme of Chinese cloths brought from the Philippines.6 “And in order that what was prohibited in one way might not be obtained in another, decrees were despatched on February 6 and December 18, 1591, ordering the total cessation of commerce between the islands and Perú. That was later extended to Tierra-Firme and Guatimala, by decrees of January 12, 1593, and July 5, 1595, forbidding the trade of China and its merchandise to all the Indias, except to Nueva España, which was left open to the Philippines.”7 In 1593 a decree absolutely limited the trade between Mexico and the Philippines to 250,000 pesos annually for the exports to Mexico, and to 500,000 pesos for the imports from Mexico,8 to be carried in two ships not to exceed three hundred tons burden.9 It was also decreed that “no person trade or traffic in the kingdom or in any part of China, and that no goods be shipped from that kingdom to the Philippine Islands, on the account of the merchants of those islands. The Chinese themselves shall convey their goods at their own account and risk, and sell them there by wholesale.”10 Further, it was ordered that “the Chinese merchandise and articles which have been and shall be shipped from Filipinas to Nueva España, can and shall be consumed there only, or shipped to these kingdoms after paying the duties. They can not be taken to Perú, Tierra-Firme, or any other part of the Indias, under penalty of confiscation....”11
“Fortunately,” says Azcarraga,12 “that tyrannical provision, meeting with the opposition of the private interests, which it so greatly injured, and among which were included those of the authorities and officials who were called upon to enforce it—was prevented from being carried in force, and thus, in reality, the Acapulco trade continued unlimited until the year 1604, when, by another decree the enforcement of previous laws was ordered.”13 However, evasion of the law was a common practice, and the galleons usually carried very much more cargo than was allowed. The abuses became so apparent that in 1635, at the instigation of the merchants of Cadiz and Seville, a special commissioner was sent to Manila,14 who strictly enforced the law. And, in order to prevent all evasions of the law, it was decreed in 1636 to the viceroys of Perú and New Spain “to prohibit and suppress, without fail, this commerce and trade between both kingdoms, by all the ways and means possible.”15
The rest of the seventeenth century found Manila still engaged in a great commercial controversy with the merchants of Spain; the endless number of petitions sent from the Philippines to the king bears ample testimony to the magnitude of the problem.16
Further petition from Manila resulted in the decreeing in 1702 that in the Philippine Islands two ships should be built, each of 500 toneladas burden, which should transport the goods permitted to that trade; that the citizens should be authorized to convey in these to Nueva España the amount of 300,000 pesos in their products and other commodities, and on the return to the Philippines to carry 600,000 pesos in silver, allowing 100 per cent gain minus the duties and expenses.17 It was further provided in the decree that in the enumeration of the traders should be included the Spaniards in the country, and the military men stationed in the port of Cavite, excluding, however, ecclessiatical ministers, whether secular or regular, and foreigners.18 And he who had no goods to lade was not allowed to give up his right in favor of a third person, but a new distribution was made.19
Induced by protests by Cadiz and Seville based on the ground that the galleons carried more cargo than allowed, and that the great abundance of silk in America had caused the decrease of the textile industry, thus causing the decline of factories in Toledo, Valencia, Seville, and Granada, a royal decree of January 8, 1718, prohibited the carrying in the galleon of silk, woven or raw, from China.20 The only trade which could be carried on was in linen goods, porcelain, wax, cinnamon, cloves, and other goods which were not brought from Spain.21
More petitions came from Manila, and, finally, a royal decree of June 17, 1724, repealed that of 1720, and allowed once more the importation of Chinese silk.22 An attempt on the part of the Viceroy of Mexico to put a stop to the importation of Chinese silk resulted in the royal decree of April 8, 1734, which, besides allowing trade in silk, increased the amount of the trade permitted to Manila to 500,000 pesos of investment and 1,000,000 of returns.23
The galleon trade continued during the rest of the eighteenth century, until 1811 when the last galleon sailed from Manila, and 1815, when the final return voyage was made. The next period in the history of Philippine commerce is characterized by the opening of the country to foreign influence.
Before, however, going into the next period let us see who were entitled to participate in the galleon trade. The right to ship was known as boleta or ticket, and there were as many boletas as divisions in the ship. On the average there were 1,500 such divisions, each worth from 200 to 225 pesos, a good portion of which were given to the governor-general, the religious corporations, the regidores, the favorites and privileged, and the widows of retired Spaniards. Those who had no capital to invest in merchandise sold their boletas to the merchants, and in spite of prohibition, this practice continued with impunity. The cargo consisted chiefly of Chinese and Indian silk and cotton cloths, and gold ornaments, and were sold at one hundred per cent profit in New Spain.24 Almost all the merchants secured loans from the “Obras Pias,”25 which were funds donated for pious purposes, and two-thirds of which loaned at the following rate of interest: for Acapulco, fifty per cent; for China, twenty-five per cent; for India, thirty-five per cent; the rest of the funds formed the reserve. Besides the merchandise and silver the galleons transported the official correspondence, arms, troops, missionaries, and public officials. The officers of the galleon were highly paid. The commander, who had the title of general, made 40,000 pesos per voyage, the pilot about 20,000,26 and the mates, 9,000 each. Most of the crew were natives.27
Effects of the Galleon Trade
What were the effects of the Manila-Acapulco trade upon the economic growth of the Philippines? There are two answers to this question. On the one hand, those who believe that the policy of restriction was necessary in order to protect the industries of Spain, of course, say that such policy was beneficial. Furthermore, it is alleged that no other economic activity could have been possible during the early part of Spanish domination because, at the time, there were no products of the country which would serve as the basis of a rich and flourishing commerce; there was no capital sufficient to exploit the natural resources of the Philippines. And to show that Manila was benefited by acting as a distributing point of Oriental goods, the prosperity of Singapore and Hongkong is cited; what prosperity would these cities enjoy if it were not for the fact that they act as entrepots of the East?28 The very retention of the Philippines depended upon its ability to support itself in part, and the profits from the trade as a whole made that possible.
On the other hand, the galleon trade absorbed too much of the attention of the Spaniards,29 and caused the neglect of Philippine extractive industries, especially agriculture.30 It attracted the Spaniards into Manila, and, thus, left the rest of the country without the benefit of whatever good they could have done; and in Cebu, the point was reached when, at one time, there was not a sufficient number of persons to fill the offices of alcalde and regidores, and it was necessary to assign to the city a few boletas from Manila.31 Lastly, it enriched only the few,32 and the resulting economic depression checked the growth of population.33
Not everything, however, is to be attributed to the influence of the galleon trade; a good deal of the neglect of the country’s natural resources was due to Spanish dislike of industrial activity. Azcarraga explains that characteristic by saying that the eight centuries of continuous struggle to drive out the Moors from Spain created a chivalrous spirit and a love of risky undertakings; the discovery of the New World furnished a wide sphere of action to that adventurous spirit, and the resulting emigration to the newly discovered lands depopulated the Peninsula to such an extent that labor could be had neither for the factories nor for agriculture. “The current of precious metals flowing into Spain from the mines of Mexico and Perú fascinated the Spaniards; created easy-going and indolent habits; held them off the mechanical arts, formerly called servile, and all desired to gird the word and enjoy the spoils of conquest.”34 This was the real cause of the decadence of Spanish industries, and not, as alleged by the monopolists of Spain, the competition of the Manila-Acapulco trade. With such causes operating to check development, it is no wonder that Philippine industries were in a primitive state down to the last years of Spanish domination.
Notes
1 “Number 96. Distinctions in products from the islands, and their qualities with respect to those of España.
“All these products that are trafficked from the islands are divided into six (sic) classes. The first is of silk, in skeins, thread, and trama. The second, the silk textiles. The third, the cotton textiles. The fourth, the products of the islands. The fifth, other small wares and articles that are brought. Of these, the last class amounts to but little, and is not harmful to the commerce of España, as it is composed of rarities and foreign products. The fourth class, namely, that of the products of the islands, by that very fact ought to be exported—a claim that is founded on justice; since it is not usual to prohibit to any province its own trade, and the exportation of its products wherever they may have a sale, even though foreign commerce be denied to it. Besides, this sort has the characteristic of the third, namely, that these wares are so cheap that their like cannot be supplied from España, as has been said, on account of the great difference of their prices. (In the margin: “In number 95.”) Hence, the wares of these kingdoms would not be used any more, even did those of the islands fail; nor less, even if there were an over-supply. For the Indians and negroes care only for the linens of China and Filipinas, and, if they do not have them, they get along without them; for they have no wealth to give eight reals for what costs them one and one-half reals. One thousand bales of linen which is shipped from Sevilla in each trading fleet always finds a sale, and no more can be carried (to Nueva España)—because that would create a lack in España, and it would, moreover, be too advantageous to the foreigners, to whom almost all this commodity belongs. Two thousand bales of cotton textiles exported from Manila are also consumed (there); and the fact that there is less or more does not cause any considerable loss in the linen made from flax and hemp, nor does it involve much money; for the two thousand bales of cotton are worth one hundred and fifty thousand pesos, while one thousand of fine linen are worth more than one million.” (Informatory Memorial addressed to the King, Juan Grau y Monfalcon, Procurator General; Madrid, 1637.—Bl. and Rb., Vol. 27, pp. 200–201.)
2 Ibid., pp. 98–104.
3 Ibid., pp. 115–116.
4 Ibid., pp. 120.
5 Ibid., pp. 186–197.
6 Ibid., p. 158.
7 Ibid.
8 Recopilación de Leyes, Lib. IX, Tit. XXXV, Ley VI. In Bl. and Rb., Vol. 17, pp. 30–31. Jan. 11, 1593.
9 Ibid., Ley XV.—Bl. and Rb., Vol. 17, pp. 31–32. Jan. 11, 1593.
10 Ibid., Ley XXXIV.—Bl.and Rb., Vol. 17, p. 32. Jan. 11, 1593.
11 Ibid., Ley LXVIII.—Bl. and Rb., Vol. 17, p. 33. Jan. 11, 1593.
12 La Libertad de Comercio, p. 49.
13 Recopilación, Lib IX, Tit. XXXV, Leyes LXXIV, LXXV, and LXXVI.—Bl. and Rb., Vol. 17, pp. 42–44.
14 Pedro Quiroga.
15 Recopilación, ibid., Ley LXXVIII.—Bl. and Rb., Vol. 17, pp. 44–45.
16 As to the effect of these restrictions Azcarraga says: “* * * thus, at the end of that century, there was nothing but poverty and discontent in the city; the white population had hardly increased; commerce, confined within the narrow sphere of periodic voyages to Acapulco, was languishing, without attempting to engage in any other kind of traffic; and poverty was reflected even in the very troops stationed in the city, who did duty unshod and without uniform (camisa), frequently committing robberies at the Chinese stores. * * *” (La Libertad, p. 54.)
17 Extracto Historial, Antonio Alvarez de Abreu.—Bl. and Rb., Vol. 44, p. 231.
18 Ibid., p. 236.
19 Ibid., p. 232.
20 Ibid., pp. 256–258.
Also Azcarraga, La Libertad, pp. 58–59.
21 Royal decree of October 27, 1720, enforcing that of 1718, provides further that: “The values of the lading which the said ships are to carry from the Philippines to the port of Acapulco may be up to the amount of 300,000 pesos, which must come invested strictly and solely in the following kinds of merchandise: gold, cinnamon, elephants, wax, porcelain, cloves, pepper, cambayas, and linens woven with colors (lienzos pintados), chitas, chintzes, gauzes, lampotes, Hilocos blankets, silk floss and raw silk spun, cordage, and other commodities which are not silks.” These ships are prohibited from carrying silken fabrics, “satins, pitiflores, velvets, damasks, Pekin silks (Pequines), sayasayas, brocades, plain satins, grograms, taffetas; silver and gold brocades; embroidered pieces of silk stuff for (covers of) beds, the (hangings for) drawing-rooms (estrados), and women’s petticoats; silken gauzes flowered with gold and silver; pattern pieces for petticoats, figured or embroidered; dressing-gowns, chimones, or made-up garments; hose, ribbons, or handkerchiefs; or any fabric which contains silk.” (Commerce in the Philippines with Nueva España, 1640–1736, by Antonio Alvarez de Abreu; Madrid, 1736. (From Extracto Historial.—Bl. and Rb., Vol. 44, pp. 266–268.)
22 Ibid., p. 306.
23 Extracto Historial, Antonio Alvarez de Abreu.—Bl. and Rb., Vol. 45, pp. 57–59.
24 For a detailed list of the goods sent to Mexico, and as to what was done with them there, see Informatory Memorial addressed to the King, Juan Grau y Monfalcon, 1637.—Bl. and Rb., Vol. 27, pp. 198–200.
“Number 95. Trade of the islands necessary in Nueva España, because of their goods.
“In regard to the first part, which pertain to the merchandise, the trade of the Filipinas is so necessary today in Nueva España, that the latter country finds it as difficult as do the islands to get along without that trade; and its lack cannot be supplied with merchandise from these kingdoms. The wares taken to Acapulco are plain and figured velvets, satins, and damasks; grograms, taffetas, and picotes; headdresses and stockings; silk, loose and twisted, in skeins, that reeled on spindles, and woven; thread; tramas, plushes, and other silk stuffs and textiles. Of cotton, there are sinavafas, fine glazed buckrams (bocacies), glazed linen (olandilla), fine muslins (canequies), and semianas; and of cotton and silk, beds, curtains, coverlets, quilts, and other pieces. (They also carry) civet, musk, and amber; gold and pearls; crockery-ware, cabinets, and articles made of wood and other things; and the products of the islands themselves, of which mention has been made (in the margin: “In number 15”). But the bulk of the commerce is reduced to the silk and cotton textiles; for there is but little else that is rare or elegant, or that has much export. From the skeined silk, and the silk thread, and trama are manufactured in Nueva España velvets, veils, headdresses, passementeries, and many taffetas, which were taken to Perú when there were ships that went to Callao, and to other parts of the Indias—where the black, brown, and silver-colored goods that are sent from Sevilla do not arrive in good shape, because the sea rots them. It is known that the skein silk of China is more even and elegant for delicate and smooth fabrics than is the Misteca which is produced in that kingdom; besides that, there is less of the latter kind than is necessary in the country. By this trade and manufacture, more than fourteen thousand persons support themselves in Mexico, La Puebla, and Antequera, by their looms, the whole thing being approved by royal decrees. Of the cotton textiles, linens (lienzos) are used in Nueva España more than any other stuff, as they are so cheap that they sell for one and one-half or two reals per vara. Therefore, they are desired by the Indians and negroes; and when these are lacking, even though there should be an over-supply of the linens of Europa, they do not want them or use them, as those are dear and not so much used by them; and they get along with their own cloths from Campeche or La Guasteca, and others that they weave.”
25 “The basis of it was, and is, the funds called “Obras Pías” (Pious Works). These are funds under various denominations, whose origin was the piety of well-meaning Spaniards, who dying rich have bequeathed large sums for the purpose of lending to deserving traders to commerce or continue their career with. The administration of these is confided to various religious and charitable institutions, or to civil associations—the trustees forming a board, at which the sums to be lent, etc., are determined. Their statutes differ in many unessential points; but their general tenor is the same, viz., that sums not exceeding two-thirds of the fund shall be lent on respondentia at certain rates of interest, which are fixed according to the risk of the voyages; and these, when repaid, shall be added, principal and interest, to the original fund. The interests are 25 per cent. to Acapulco, 15 to Bengal, and so in proportion. The total of the capitals of these establishments (there are 12 or 14 of them), amounted to about three millions and a half of dollars in 1820, of which about two millions are due to the funds on various risks, principally those of New Spain: of this the major part is considered as lost by those best qualified to judge of the subject.
“The principal employ of these funds has been in the commerce to Acapulco; and from the facility with which capital was procured, the excessive gambling spirit which this introduced, as well as the system of mutual accommodations from the trustees of different funds, and the utter absence of the wholesome restraint of public examinations of their accounts, it has resulted that more harm than good has been done by these establishments. The original intentions are entirely perverted, a few small sums being lent to young adventurers (when they have powerful friends), but far the greatest part is employed by the trustees themselves under the name of a relation or friend.” (Remarks on the Philippine Islands, and their capital Manila, 1819–1822, by an Englishman.—Bl. and Rb., Vol. 51, pp. 148–149.)
26 Zuñiga, Estadismo de las Islas Filipinas.
Historia General de Filipinas, José Montero y Vidal, Chapter XXVIII.
27 It is represented that the seamen are allowed to carry each 30 pesos’ worth of goods as a private investment, in order to encourage Spaniards to enter the marine service; but this ought to be increased to 300 pesos (the allowance made to the men on the fleets that go to the Indias), for more Spaniards are needed on the Acapulco trade-route—hardly one-third of the men on the galleon being of Spanish birth, the rest being Indians—and on the rivera of Cavite.” Extracto Historial, Antonio Alvarez Abreu, 1736.—Bl. and Rb., Vol. 44, Pp. 307–308.
28 Azcarraga, La Libertad, pp. 81–95.
29 “This trade and commerce is so great and profitable, and easy to control—for it only lasts three months in the year, from the time of the arrival of the ships with their merchandise, until those vessels that go to Nueva España take that merchandise—that the Spaniards do not apply themselves to, or engage in, any other industry. Consequently, there is no husbandry or field-labor worthy of consideration. Neither do the Spaniards work the gold mines or placers, which are numerous. They do not engage in many other industries that they could turn to with great profit, if the Chinese trade should fail them. That trade has been very hurtful and prejudicial in this respect, as well as for the occupations and farm industries in which the natives used to engage. Now the latter are abandoning and forgetting those labors. Besides, there is the great harm and loss resulting from the immense amount of silver that passes annually by this way (of the trade), into the possession of infidels, which can never, by any way, return into the possession of the Spaniards.” (Morga’s Sucesos.—Bl. and Rb. Vol. 16, p. 187).
“When, without risking any capital of his own, the merchant might thus share the enormous profits of this trade, with no more exertion than signing the invoices and letters (they were written by Indian clerks), and receiving the treasure on the return of the vessel, it is not surprising that for nearly two centuries they neglected all the other commercial advantages which surrounded them, or that such a commerce produced such merchants; the history of it and of them for that period may be confined to a few words:—they were agents of the merchants of Madras and Bengal, receiving and shipping their goods, and returning their proceeds, while their profits were confined to a large commission on them.” (Remarks on the Philippine Islands and on their capital Manila, 1819–1822, by an Englishman.—Bl. and Rb., Vol. 51, p. 150.)
30 ”... This I say, then, Sire, that it is a most pitiable thing that there is not a man in all these Philippine Islands—Spaniard, or of any other nation—saving some religious, who make their principal aim and intent the conversion of these heathen, or the increase of the Christian faith; but they are only moved by their own interests and seek to enrich themselves, and if it happened that the welfare of the natives was an obstacle to this they would not hesitate, if they could, to kill them all in exchange for their temporal profit. And since this is so, what can your Majesty expect will happen if this continues? From this inordinate greed arises the violation of your Majesty’s decrees and mandates, as everyone is a merchant and trader—and none more so than the governor, who has this year brought ruin upon the country. There comes each year from Nueva España a million in money, contrary to the mandate of your Majesty, all of which passes on to the heathen of China. From here, in violation of your Majesty’s decrees, cargoes are loaded for the Peruvians and the merchants of Mexico, without leaving room for those of this country—especially the poor, who are unable to secure any interest therein except for a wretched bundle which is allowed them as a cargo. If I were to go into the multitude of evils which are connected with this, I should have to proceed ad infinitum.” (Letters from the archbishop of Manila to Felipe II; Ignacio de Santibañez; Manila, June 24 and 26, (1598);—Bl and Rb. Vol 10, p. 145.)
31 Azcarraga: La Libertad, p. 68.
32 “By this system for two centuries the South American market for manufactures was reserved exclusively for Spain, but the protection did not prevent Spanish industry from decay and did retard the well-being and progress of South America. Between Mexico and the Philippines a limited trade was allowed, the profits of which were the perquisites of the Spaniards living in the Philippines and contributed to the religious endowments. But this monopoly was of no permanent advantage to the Spanish residents. It was too much like stock-jobbing, and sapped all spirit of industry. Zúñiga says that the commerce made a few rich in a short time and with little labor, but they were very few; that there were hardly five Spaniards in Manila worth $100,000, nor a hundred worth $40,000, the rest either lived on the King’s pay or in poverty. ‘Every morning one could see on the streets of Manila, in greatest poverty and asking alms, the sons of men who had made a fine show and left much money, which their sons had squandered because they had not been well trained in youth.’ The great possibilities of Manila as an entrepôt of the Asiatic trade were unrealized; for although the city enjoyed open trade with the Chinese, Japanese, and other orientals, it was denied to Europeans and the growth of that conducted by the Chinese and others was always obstructed by the lack of return cargoes owing to the limitations placed upon the trade with America and to the disinclination of the Filipinos to work to produce more than was enough to insure them a comfortable living and pay their tributes. That the system was detrimental to the economic progress of the islands was always obvious and its evils were repeatedly demonstrated by Spanish officials. Further it was not only detrimental to the prosperity of the islands but it obstructed the development of Mexico.” (Historical Introduction, by Edward Gaylord Bourne.—Bl. and Rb., Vol. 1, pp. 67–68.)
33 “Trade between America and the Far East all passed for a time through the port of Manila. This commerce was greatly desired by the Spanish colonists of Mexico, Perú, and Chile, but the selfish and rapacious merchants of Spain so influenced the policy of the mother country as to throttle this trading and prevent for more than two hundred years the legitimate development of the islands. From the early part of the seventeenth century until 1837 the Philippines were in the grasp of a protective monopoly, which not only prevented the productive development of the soil, but kept the Filipinos down to those necessarily restricted numbers which attend a population that raises nothing in excess of its daily needs. If there is one thing to be learned from this and every other study of increase of population in a fertile and tropical country it is that population increases in exact proportion to the agricultural production and export.” (Dr. D. P. Barrows, in Philippine Census, 1903, Vol. 1, p. 247.)
34 ”* * * All thrifty activity was regarded as despicable. No trader had a seat in the Cortes of Aragon. As late as 1781 the Academy of Madrid was obliged to offer as the subject for a prize essay the proposition that there was nothing derogatory in the useful arts. Every tradesman and manufacturer sought only to make enough money to enable him to live on the interest of it or to establish a trust fund for his family. If he was successful he either entered a cloister or went to another province in order to pass for a noble. In Cervantes we find the maxim: ‘Whoever wishes to make his fortune seeks the church, the sea (i. e., service in America), or the king’s house.’ The highest ambition of the nation in its golden age was to be to Europe just what the nobility, the clergy, and the army were to single nations. Consequently there was an enormous preponderance of personal service in the industrial organism, and much of this was purely for ostentation. Nowhere in the world were there so many nobles, so many officers, civil and military, so many lawyers and clerks, priests and monks, so many students and school-boys, with their servants. But as truly, nowhere in the world were there so many beggars and vagabonds.” (The Spanish Colonial System, by Wilhelm Roscher, pp. 3–4.)