For those of us who live today, it is all but impossible to view the world through sixteenth-century eyes. Too much has changed, and there are too many things that we either overlook or mistakenly take for granted. We can, however, learn much from accounts written by those who lived at the time, and while we cannot take these accounts at face value, they can enhance our appreciation of certain important aspects of the West’s rise to power and affluence that we might other- wise overlook.
The Rise of the West 173 Consider, for example, the judgment of the early Spanish historian, or chroni- cler, Francisco Lopez de Gomara. Writing in the middle of the sixteenth century, he described Columbus’s discovery of the New World as “the greatest event since the creation of the world, excluding [only] the incarnation and death of him who created it” (cited in Eliot, 1970: 10).
Even when we make allowance for the hyperbole in this assertion, it is clear that Lopez de Gomara, and those for whom he wrote, regarded the discovery of the New World as an event of extraordinary importance. And this is not surpris- ing. Already by the middle of the sixteenth century, when Lopez de Gomara was writing, the flood of gold and silver pouring in from the Americas had had a profound impact on Spanish society. And it was not Spain alone that was affected: Thanks to trade and commerce, and thanks also to piracy, all of western Europe felt the impact.
To appreciate the impact of this flood of precious metals, one needs to con- sider a few statistics. For example, between 1500 and 1650, 180 tons of gold and 16,000 tons of silver arrived in Spain according to the records of the Spanish government (Braudel, 1973: 355). In addition, large amounts of gold and silver entered Europe through other channels: English pirates seized substantial quantities and countless tons arrived illegally in Spain. By one account, New World production of precious metals during this period was ten times that of the rest of the world combined (Crow, 1980: 267–273). Small wonder that Lopez de Gomara and his contemporaries were awed by the consequences of the discovery of the New World! The enormous infusion of gold and silver into the economies of western Europe obviously meant a tremendous increase in the wealth of western Euro- pean societies. But, important as that was, it was not as important as the huge increase in Europe’s money supply that resulted. Between the sixteenth and eigh- teenth centuries, it is estimated, the stock of precious metals for the world as a whole increased fifteen-fold (Braudel, 1973: 350), indicating that the rate of in- crease in western Europe was far more spectacular.
This rapid growth in money supply set in motion a process of economic and political change that still continues. As more and more money came into circulation, western Europe began to conduct more and more of its business on a monetary basis. It was no longer forced to rely on the cumbersome older and much less efficient modes of exchange, such as barter and payments in kind. The vast infusion of silver was especially important in this connection, because silver met a vital need, the need for a medium of exchange appropriate to middle-range transactions—namely, coins whose value was considerably less than that of gold coins but substantially greater than that of copper ones.
Not surprisingly, the tremendous expansion of the money supply became a powerful stimulus to trade and commerce throughout much of western Europe. As the wealth and purchasing power of elites increased, so, too, did their demand for goods and services. As a result, wealth spread to other parts of the population, especially merchants, and, in time, its impact rippled through much of society. Even the lower classes benefited as opportunities for employment increased.
Inflation was another important early result of the growth in money supply. This was a natural consequence of the great increase in the money supply and the much more limited increase in the production of goods. Prices doubled, tripled, even quadrupled within a century, and as is always the case when this happens, some prospered while others were hurt. In general, those with fixed incomes, especially the landed aristocracy, were hurt, while merchants and entrepreneurs who could adjust prices in response to the declining value of money tended to benefit. This meant that far more of the economic resources of western European societies wound up in the hands of people who were oriented toward economic innovation and change—a development the importance of which is difficult to exaggerate. As R. H. Tawney (1926: 117) once wrote, the rise in prices in the sixteenth century was simultaneously a stimulant to feverish enterprise and an acid dissolving many traditional relationships.
Finally, with the increasing monetization of economic transactions, mer- chants found it easier to calculate their costs, revenues, and profits (or losses) in a precise way. Thus, business records became increasingly systematic, techniques of bookkeeping were gradually improved, and a foundation was laid for the develop- ment of modern systems of accounting. In short, the monetization of the econo- mies of western Europe and the new economic calculus it made possible provided the critical technical underpinning for a new type of economic system that Weber (1981: 86–91) would later refer to as modern rational capitalism, one of the most powerful instruments of economic growth and expansion ever devised (see also Sombart, 1967: 125–127; Schumpeter, 1950: 123).