Potosi, a desolate plateau 12,000 feet above sea level, now in Bolivia, was the site of a virtual “silver mountain,” discovered in the 16th century. As a flood of silver poured into Europe, in England and Spain the word “Potosi” became synonymous with “wealth”; in France, the word “Peru” symbolized wealth, because that area of Latin America was then called Peru. In the aftermath of Columbus’s discovery of America, until 1530, Europe imported substantial quantities of readily accessible gold from the New World, but silver was not significantly in evidence. After 1530, silver production in the New World reached significant levels, but still
was dwarfed by the gold imports following Pizarro’s conquest of the Incas between 1531 and 1541.
Europeans discovered the silver mountain of Potosi in 1545, a time when silver was still a highly favored metal in the Middle and Far East; a unit weight of silver exchanged for twice as much gold in the Eastern world as in Europe. Also, existing silver deposits were playing out, putting silver in strong demand. The base of the silver mountain measured six miles in circumference. The windy, dusty plateau of Potosi nourished a few fields of potatoes amid an otherwise agricultural wasteland. From an uninhabited, desolate plateau, Potosi grew to
a sizable city, boasting a population of 55,000 by 1555, and climbing to a peak of 160,000 by 1610. Everything to meet the needs of this population had to be brought in, and a journey to Lima, the capital of Peru, took two and a half months.
Even high wages could not compensate for the prohibitive cost of living and arduous living conditions that the new immigrants faced at Potosi. To supplement a voluntary labor force, the mita system of forced labor required Indian villages within a certain radius of Potosi to send a quota of conscripted or drafted young men to work in the mines. The work was harsh, and labor in the silver mines came down through history as a
symbol of Spanish oppression of the Indians. One eyewitness tells the following account of the plight of the Indian miners:
The only relief they have from their labors is to be told they are dogs, and be beaten on the pretext of having brought up too little metal, or taken too long, or that what they have brought is earth, or that they have stolen some metal. And less than four months ago, a mine-owner tried to chastise an Indian in this fashion, and theleader, fearful of the club with which the man wished to beat him, fled to hide in the mine, and so frightened was he that he fell and broke into a hundred thousand pieces. (Vilar, 1969, 127)
In 1563, rich mercury deposits were discovered at Huancavelica, located between Potosi and Lima, Peru. Convenient accessibility to mercury enabled the Spanish to employ the mercury amalgam process of silver extraction, substantially increasing the productivity of low-quality silver ore left after the richest veins were mined.
Much of the silver found its way to the East to cover Europe’s balance of trade deficit, and some of the silver was shipped directly from the New World to China. China enjoyed an economic boom until silver shipments fell off in the 1640s, plunging China into a depression. In Europe, the infusion of silver fueled the price revolution, the centurylong wave of inflation that engulfed Europe from 1540 until 1640.
Spain came to view the flood of silver less as a blessing from heaven and more as the curse of the devil. In the 17th century, Spain entered into a phase of monetary disorder that could rival any of the modern periods of inflation. Spain squandered its newfound wealth on costly wars, royal extravagance, and the growth
of churches, convents, and ecclesiastics. By the second half of the 17th century, Spain had reverted to the Bronze Age, its coinage minted from copper.
See also: Great Bullion Famine, Price Revolution in Late Renaissance Europe, Silver
Davies, Glyn. 1994. A History of Money.
Flynn, Dennis O. 1996. World Silver and Monetary History in the 16th and 17th Centuries.
Vilar, Pierre. 1969. A History of Gold and Money, 1450–1920.