Pieces of eight - Silver coins Bolivia

The First Global Economy (1450 - 1600 AD)

Pieces of eight (minted between 1573 and 1598). Silver coins from Bolivia

Money, advertisers assure us, will let us buy our dreams. But some money - and especially coins - are already the stuff of dreams, with names that ring to the magic of history and legend . . . ducats and florins, groats, guineas, sovereigns. But none of them can compare with the most famous coins of all time. Familiar in books and films, from 'Treasure Island' to the 'Pirates of the Caribbean', they carry with them a freight of associations . . .

"Pirates, Captain Flint, pirates!" . . . "Pieces of eight, pieces of eight!" (from 'Treasure Island', by Robert Louis Stevenson)

. . . but it's not just thanks to Long John Silver's parrot that pieces of eight are the supreme celebrities among world currencies, for the 'peso de ocho reales', the Spanish piece of eight, was the first truly global money. It was produced in huge quantities and, within 25 years of its first minting in the 1570s, it had spread across Asia, Europe, Africa and the Americas - establishing a global dominance that it was to maintain well into the nineteenth century.

"Before the discovery of the vast deposits of silver in the new world, there really was very little silver and gold to use as a medium of exchange." (William Bernstein)

"The silver was not allowed to the Indians. A big part of the silver was sent to Spain, and from Spain went to many parts of Europe." (Tuti Prado)

This week's objects have allowed us to look at the consequences of European expansion from the fifteenth to the seventeenth centuries, as new trade links were forged around the world from West Africa to Japan. Today I've got some of the stuff that helped fuel that trade.

I'm holding some pieces of eight now, clinking them to hear the noise they make. By modern standards, a piece of eight is a large coin, it's about two inches (50 mm) across and it's got a good weight - roughly the same as three one pound coins. It's dullish silver in colour, thanks to surface corrosion, but when it was freshly minted it would glitter and shine. Around 1600, this piece of eight that I'm holding would probably have bought me, in modern terms, something like fifty pounds worth of goods, and I could have spent this piece of eight practically anywhere in the world.

The Spanish had been drawn to America by the lure of gold, but what made them rich there was silver. They quickly found and exploited silver mines in Aztec Mexico, but it was in Peru, in the 1540s, at the southern end of the Inca Empire, that the Spanish really hit the silver jackpot - at a mountainous place called Potosí, now in Bolivia, which quickly became known as the "Silver Mountain". Within a few years of discovering the Potosí mines, silver from Spanish America began to pour across the Atlantic, growing from a modest 148 kilos a year in the 1520s to nearly three million kilos a year in the 1590s. In the economic history of the world, nothing on this scale had ever happened before.

The isolated hill of Potosí sits 12,000 feet (3,700m) above sea level, on a high, arid and very cold plateau in the Andes. It's one of the most inaccessible parts of South America. But the silver mines required so much labour that, by 1610, the population of this village had grown to 150,000 inhabitants, making it a major city by European standards of the day, and an unimaginably rich one. In 1640, a Spanish priest rhapsodised about the mine and what it was producing:

"The abundance of silver ores is so great that, if there were no other silver mines in the world, they alone would suffice to fill it with wealth. In their midst is the hill of Potosí, never sufficiently praised and admired, the treasures whereof have been distributed in generous measure to all the nations of the world."

Without Potosí, the history of sixteenth-century Europe would have been very different. It was American silver that made the Spanish kings Europe's most powerful rulers, and paid for their armies and armadas. It was American silver that allowed the Spanish monarchy to fight the French and the Dutch, the English and the Turks, establishing a pattern of expenditure that was ultimately to prove ruinous. Yet for decades the flow of silver provided rock-solid credit for Spain. It was assumed that next year there would always be another treasure fleet. And there always was. "In silver lies the security and strength of my monarchy", said King Philip IV.

The production of this wealth came at a huge cost in human life. At Potosí, young Native-American men were conscripted, and forced to labour in the mines. Conditions were brutal, indeed lethal. In 1585 an eye-witness reported:

"The only relief they have from their labours is to be told they are dogs, and to 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 the leader, 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."

In the freezing high altitude of the mountains, pneumonia was a constant danger, while mercury poisoning frequently killed those involved in the refining process. From about 1600, as the death rate soared among the local Indian communities, tens of thousands of African slaves were brought to Potosí to replace them. They proved more resilient than the local population, but they too died in large numbers. Forced labour in the silver mines of Potosí remains even today the historic symbol of Spanish colonial oppression.

The sound of the Potosí silver mine can still be heard today. Disturbingly, and to the dismay of many Bolivians, it is still a tough and unhealthy place to work. Here's the Bolivian former head of a Potosí UNESCO project, Tuti Prado:

"Potosí, for today's population, is one of the poorest places in the country. Of course, the technology is different but the poorness, the unhealthiness, is as bad as four hundred years ago. We have a lot of children working in the mines. Many of the miners don't live more than 40 to 45 years - by the silicosis in the lungs and by the dust."

The Potosí mines produced the raw material which made Spain rich, but it was the Potosí mint, fashioning the silver pieces of eight, that laid the foundations of a global currency. From Potosí, the coins were loaded on to llamas, for the two-month trek over the Andes to Lima and the Pacific coast. There, Spanish treasure fleets took the silver from Peru up to Panama, where it was carried by land over the isthmus and then across the Atlantic in convoys.

But this silver trade was not centred only on Europe. Spain also had an Asian empire, based in Manila, in the Philippines, and pieces of eight were soon crossing the Pacific in huge numbers. In Manila, pieces of eight were exchanged, usually with Chinese merchants, for silk and spices, ivory, lacquer and, above all, porcelain. The arrival of this Spanish-American silver destabilised the East Asian economies, and caused chaos in Ming China. Indeed, there was hardly any part of the world that remained unaffected by these ubiquitous coins.

I've got in front of me at the moment a tray of pieces of eight made in the Spanish American mints. They give the unmistakeable ring of very high quality silver. But the range of the coins here gives a wonderfully clear idea of their global role. I've got one which was counter-stamped by a local sultan in Indonesia. Other coins here have been inscribed with Chinese merchants' stamps. And here is a coin from Potosí, found at Tobermoray on the Scottish coast. It comes from a ship that was once part of the Spanish Armada, wrecked in 1588. Pieces of eight even got to Australia in the nineteenth century - when the British authorities ran out of currency there, they bought Spanish. They cut out the Spanish king's face, and they re-engraved the pieces of eight to read "FIVE SHILLINGS, NEW SOUTH WALES". What this tray shows, these coins - from the Hebrides to New South Wales - show, [is] that both as a commodity and a coin, pieces of eight engendered a fundamental shift in world commerce, as the financial historian William Bernstein describes:

"This was a godsend, this Peruvian and Mexican silver, and very quickly hundreds of millions, and perhaps even billions, of these coins got minted, and they became the global monetary system. They were the Visa and the MasterCard and the American Express of the sixteenth through nineteenth centuries. They are pervasive enough that when, for example, you read about the tea trade in the eighteenth and nineteenth centuries in China, which was a vast trade, you see prices and count amounts accounted for in dollars, with dollar signs, and of course what they were talking about were Spanish dollars, these pieces of eight."

Right across Europe, Spanish American treasure inaugurated an age of silver, "the wealth which walketh about all the countries of Europe". But the very abundance of silver brought with it a new set of problems. It increased the money supply - much like governments "printing" money, in modern terms. Inflation was the consequence. In Spain, there was bemusement, as the wealth of empire, in both political and economic terms, often seemed more apparent than real. Ironically, silver coin became a rarity within Spain itself, as it haemorrhaged out to pay for foreign goods, while local economic activity declined. As gold and silver vanished from Spain, its intellectuals grappled with the gulf between the illusion and the reality of wealth, and the moral consequences of the country's unexpected economic troubles. One writer in 1600 describes it like this:

"The cause of the ruin of Spain is that riches ride on the wind, and have always so ridden in the form of contract deeds, of bills of exchange, of silver and gold, instead of goods that bear fruit and which, because of their greater worth, attract to themselves riches from foreign parts. And so our inhabitants are ruined. We therefore see that the reason for the lack of gold and silver money in Spain is that there is too much of it, and Spain is poor because she is rich."

And here we are, over three centuries later, still struggling to understand world financial markets and to control inflation. Potosí, even now, remains proverbial for its wealth. Even today, when Spaniards want to say that something is worth a fortune, the say, "vale un Potosí", and the Spanish piece of eight lives on as a romantic prop in fantasy pirate stories. But it was one of the foundation stones of the modern world, underpinning the first world empire. It prefigured, and made possible, the modern global economy.

Next week, I'll be turning from economics to faith, and I shall be with objects that tell of religious tolerance and intolerance in that early globalised world . . . I begin with a great ritual object, from Shi'a Iran