Staying Afloat: Risk and Uncertainty in Spanish Atlantic World Trade, 1760-1820 (Social Science History) - Hardcover

Baskes, Jeremy

Hardcover

ISBN 10: 0804785422 ISBN 13: 9780804785426

Verlag: Stanford University Press, 2013

Inhaltsangabe

Early modern, long-distance trade was fraught with risk and uncertainty, driving merchants to seek means (that is, institutions) to reduce them. In the traditional historiography on Spanish colonial trade, the role of risk is largely ignored. Instead, the guild merchants are depicted as anti-competitive monopolists who manipulated markets and exploited colonial consumers. Jeremy Baskes argues that much of the commercial behavior interpreted by modern historians as predatory was instead designed to reduce the uncertainty and risk of Atlantic world trade.

This book discusses topics from the development and use of maritime insurance in eighteenth- century Spain to the commercial strategies of Spanish merchants; the traditionally misunderstood effects of the 1778 promulgation of "comercio libre," and the financial chaos and bankruptcies that ensued; the economic rationale for the Spanish flotillas; and the impact of war and privateering on commerce and business decisions. By elevating risk to the center of focus, this multifaceted study makes a number of revisionist contributions to the late colonial economic history of the Spanish empire.

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Über die Autorinnen und Autoren

Jeremy Baskes is Professor of History and Director of Latin American Studies at Ohio Wesleyan University. He is the author of Indians, Merchants, and Markets: A Reinterpretation of the Repartimiento and Spanish-Indian Economic Relations in Late Colonial Oaxaca, 1750-1821 (Stanford, 2000).

Jeremy Baskes is Professor of History and Director of Latin American Studies at Ohio Wesleyan University. He is the author of Indians, Merchants, and Markets: A Reinterpretation of the Repartimiento and Spanish-Indian Economic Relations in Late Colonial Oaxaca, 1750-1821 (Stanford, 2000).

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STAYING A FLOAT

Risk and Uncertainty in Spanish Atlantic World Trade, 1760–1820

By JEREMY BASKES

Stanford University Press

Copyright © 2013 Board of Trustees of the Leland Stanford Junior University
All rights reserved.

ISBN: 978-0-8047-8542-6

Contents

Figures and Tables.........................................................
ix
Acknowledgments............................................................
xiii
1. Introduction: Risk and Uncertainty......................................
1
2. Staying Informed: The Risks of Poor Information in Atlantic World 
Trade......................................................................
17
3. The Institutions of Trade and the Reduction of Market Risk: The Convoy 
System.....................................................................
43
4. Comercio Libre and the Rise of Commercial Risk..........................
69
5. The Rising Demand for Credit and the Escalation of Risk in the 
Post-1778 Era..............................................................
110
6. Trade in War and Peace..................................................
146
7. Underwriting Risk: The Structure and Organization of Insurance 
Partnerships in Late Eighteenth-Century Cadiz..............................
179
8. Insuring Against Risk: Analysis of Insurance Policies and the 
Perception of Risk in Atlantic World Trade.................................
205
9. War and Commercial Crisis: The Profitability of the Cadiz Insurance 
Industry in the 1790s......................................................
256
10. Conclusion: Staying Afloat.............................................
274
Notes......................................................................
283
Bibliography...............................................................
363
Index......................................................................
381

CHAPTER 1

Introduction: Risk and Uncertainty

Risk was pervasive in early modern, oceanic commerce. At virtually everyjuncture of a long-distance venture, merchants encountered risks thatthreatened to sink their investments and generate painful losses. Thisever-present danger was even reflected in the basic language of trade: toengage in a commercial transaction was expressed in Spanish as correr unriesgo, "to take a risk." Given the prevalence of risk, it is not surprising thatearly modern traders were deeply aware and profoundly concerned aboutthe many dangers that their business dealings might face and dedicatedconsiderable energies to reduce or accommodate them. Despite the centralityof risk in governing commercial behavior, however, historians ofthe Spanish empire have virtually ignored its role. This book seeks torectify this omission by elevating risk and uncertainty to the center ofanalysis. Not only does this approach require the exploration of new issues,but analyzing familiar topics through the lens of risk managementproduces wholly different perspectives about the activities and behaviorsof Spain's Atlantic traders.

Merchants engage in business with the goal of making profits. Riskrepresents an obstacle to the success of mercantile ventures, an event ordanger that has a potentially negative consequence on the outcome ofbusiness deals. If not for risk and uncertainty, merchants could developcommercial strategies confident that all scenarios were known and thatno surprises would arise. In classical economic theory entailing perfectcompetition, "practical omniscience on the part of every member of thecompetitive system" is assumed. Entrepreneurs operate from positions ofperfect knowledge in which "the future will be foreknown." Under suchtheoretical conditions, commerce would benefit from stability and predictability.In reality, however, business is always conducted with somedegree of risk and uncertainty. Economic actors are not omniscient.

In the early modern world, risk and uncertainty were pervasive, especiallyin long-distance, transoceanic trade. The central argument putforth in this book is that much of the commercial behavior of Spanishmerchants should be understood as their responses to the ever-presentriskiness of trade. Economic historian Peter Musgrave has argued that it isimpossible to understand the early modern commercial world withoutconsidering the centrality of risk and uncertainty. In their efforts to mitigaterisk, he argues, early modern merchants often engaged in "odd economicbehavior," adding that "without [considering] uncertainty and itsconsequences, much of the economic and social history of the pre-modernworld is, if not completely inexplicable, at least deeply mysterious." Tounderstand the behavior of Spanish imperial merchants, the historianmust take into consideration the tremendously uncertain conditions underwhich they operated.

Early modern Spanish merchants did not accept passively the businessclimates that they encountered. Instead, they sought to shape or influencecommercial environments and institutions. The Atlantic world was fraughtwith risks, any one of which could derail a merchant's plans or even devastatehis financial empire. As a consequence, merchants engaged in risk-reducingstrategies, developed risk-mitigating institutions, and soughtwhat ever means possible to reduce the uncertainty and ambiguity thatpervaded early modern trade.

Economists make an important distinction between risk and uncertainty.According to Frank H. Knight, an early twentieth-century Americaneconomist whose pioneering work emphasized their difference, riskwas "a quantity susceptible of measurement" whereas uncertainty was"unmeasurable." A risk was a phenomenon whose probability could becomputed, allowing economic actors to pass it onto others, to buy protectionagainst such a risk. The Atlantic world mercantile community, forexample, had some sense of the frequency of shipwrecks. While any individualaccident was unpredictable, the law of large numbers allowed thecomputation of the probability of a ship sinking. Knowing the probabilityof any one ship becoming lost in a shipwreck allowed shipowners to pooltheir risks so as to convert the danger into a fixed cost. Rather than bearthe entire (albeit small) risk of having one's vessel wrecked, shipownerscould eliminate the risk altogether by paying a small premium determinedby the probability of a shipwreck. As such, no shipowner would suffer atotal loss; instead, the cost of the premium would be known in advance.The consolidation (pooling) of risk is most often accomplished throughthe acquisition of insurance in which traders pass onto a company or partnershipthe risk that they prefer not to endure themselves. By purchasinginsurance, shipowners and merchants reduced significantly the riskiness oftheir ventures.

Far more problematic for economic actors, Knight argued, were unmeasurablerisks, nowadays termed in the economics literature "Knightianuncertainties." These risks occur without any predictable pattern andthus cannot be addressed through insurance or other pooling mechanisms."Business decisions," for example, "deal with situations that arefar too unique, generally speaking, for any sort of statistical tabulation tohave any value for guidance." To weather these risks and profit from hisventures, a...

Details zur Ausgabe

• Verlag: Stanford University Press
• Erscheinungsdatum: 2013
• Sprache: Englisch
• ISBN 10: 0804785422
• ISBN 13: 9780804785426
• Einband: Gebundene Ausgabe
• Anzahl der Seiten: 408
• Kontakt zum Hersteller: Mare Nostrum Group B.V.; gpsr@mare-nostrum.co.uk; ; Doelen 72; Breda; 4831 GR; Niederlande