The Capital Market of Manila and the Pacific Trade, 1668-1838: Institutions and Trade during the First Globalization

Economic history has always emphasized the importance of long-distance trade in the emergence of modern financial markets, yet almost nothing is known about the Manila trade. This book offers the first reconstruction of the capital market of Manila using new archival sources that have never been used in the economic history of Pacific trade. The book explains how trade between Asia and Spanish America across the Pacific, which lasted for 250 years (1571 – 1815) was financed from the city of Manila.The book analyses the political economy and institutional structures of the Manila capital market in the context of the global silver trade, as well as addressing key similarities and differences with European trade routes and differing approaches to colonialism and commerce in Asian waters. It traces how the Manila capital market emerged in a bottom-up process with a redistributive aspect that tied the interests of citizens with the fortunes of trade, using institutions familiar to the public like legacy funds, brotherhoods and lay religious orders to pool liquidity, originate working capital, and internalise the risk of loss at sea. It challenges the notion that there is a normative model for the development of capital markets and introduces an industrial organisation analysis to the broader structure of Early Modern trade in the Spanish Empire. Sitting at the intersection of economic and financial history, global history, imperial history and political economy, this book will be a cutting-edge and valuable resource for a broad range of scholars. Acknowledgements Contents Abbreviations List of Figures List of Graphs List of Maps List of Tables 1 Introduction 1.1 Globalising Institutions 1.2 Institutions and Trade 1.3 Market Structure and Horizontal Integration 1.4 The Spanish Philippines and the Manila Trade 1.5 Sources 1.6 Structure 2 The Manila Trade 2.1 The Global Silver Trade and the Pacific 2.2 The Organisation of the Manila Trade The Asian Leg The American Leg 2.3 Transactions Map of the Manila Trade 2.4 The Consequences of the Pacific Silver Trade 3 The Capital Markets of the Manila Trade 3.1 The Emergence and Development of the Capital Markets of Manila 3.2 Organisations and Agents Legacy Funds Fund Managers: Brotherhoods, Third Orders, and the Misericordia 3.3 Instruments and Contracts Censos Correspondencias a riesgo de mar Cash Substitutes 3.4 Manila as a Stakeholder in the Transpacific Trade 4 The Business Model of the One-Galleon System 4.1 Structure of the Market and the Acapulco Fair 4.2 The One-Galleon Model 4.3 The Role of Demand in the Pacific Business Model 5 An Alternative Model of Trade Finance 5.1 Types of Risks & Mitigation Strategies Risk of Loss at Sea Market Risk Agency Risk 5.2 Horizontal Specialisation and the Capital Market of Manila 6 The Political Economy of the Manila Trade 6.1 The Institutional Structure of the Hispanic Monarchy 6.2 The Manila Trade and the Spanish Imperial Framework 6.3 The Equilibrium of Spanish Imperial Trade 6.4 The End of the Balance and the Path to a New Equilibrium 7 Manila in Financial History 7.1 The Case of Manila 7.2 Silver and Scale 7.3 Integration and “Horizontalism” 7.4 An Alternative Narrative of Global Trade Appendix A Note of Demonyms Glossary of Terms Bibliography Index