THE COLONIAL ECONOMY 89
fi cials a fairly accurate measure of silver production,
by using the smelting process, the mine owner could
cut his costs and also evade payment of all or a part
of the quinto, the alcabala (sales tax), and other
taxes, to the detriment of the royal treasury. Great
quantities of such untaxed, illegal silver circulated at
home or went to Europe or Asia to pay for smuggled
goods. The loss of royal control over the quality and
destination of a large part of silver production ag-
gravated the chronic colonial problem of coin short-
age and unreliability,^4 causing increased resorts to
barter and substitute money on the local level and
adding to the diffi culty of long-distance trade.
The transformation of the silver mining indus-
try in the seventeenth century had other conse-
quences. One was the disruption of the commercial
and agricultural networks that had arisen to pro-
vide the great mining centers with grain, hides,
tallow, and work animals. The resulting contrac-
tion of commercial agriculture and stock raising
gave rise in some areas, like northern New Spain,
to a characteristic institution of the period, the self-
suffi cient great hacienda that housed an extended,
elite family and was led by a patriarch—monarch
of all he surveyed, ruling his own little world with
its work force, church, jail, workshops, store-
houses, and private army.
Scholars continue to debate whether the seven-
teenth century was a time of crisis and depression
for colonial Spanish America—the dominant view
a few decades ago—or one of growing colonial au-
tonomy, both economic and political—a view now
favored by many students. An argument cited by
the supporters of the thesis of a colonial economic
crisis was the spectacular decline in silver remit-
tances to Spain after 1630. Recent studies of the
accounts of colonial treasuries, however, suggest
that much of this decline was caused by the deci-
sion of Spanish offi cials to retain large quantities of
(^4) By way of example, in the mid-seventeenth century the
alcalde provincial of Potosí, in collusion with offi cials and
technicians of the Potosí mint, adulterated with copper
the silver coins that went into circulation. The fraud, says
Peruvian historian Luis Millones, had “enormous reper-
cussions,” causing a loss of 200,000 ducats to the royal
treasury and an immediate steep rise in prices.
silver in America to cover local administrative and
defense needs. Another cause of the decline was a
growing colonial self-suffi ciency that, combined
with a vast increase in smuggled goods, sharply
reduced the demand for higher-priced Spanish
goods. By the opening of the seventeenth century,
Mexico, Peru, and Chile had become self-suffi cient
in grains and partly so in wine, olive oil, ironware,
and furniture. The moribund state of Spanish in-
dustry in the seventeenth century contributed to
its loss of American markets.
Then, in 1985, a French scholar, Michel Mo-
rineau, published a book that radically changed
the terms of the debate on the colonial “economic
crisis.” Based on Dutch commercial journals that
recorded the arrival of colonial precious metals
and merchandise in European ports, he showed
that the decline in remittances of precious metals
to Spanish ports was offset by contraband ship-
ments of colonial silver and gold in the same period
to northern European ports. If the sum of contra-
band shipments is added to that of the legal remit-
tances to Spain, it becomes clear that there was no
decline in the volume of colonial precious metals
shipped to Europe in the seventeenth century, and
the thesis of a colonial “economic crisis” based on
that assumption falls of its own weight.
The debate continues, but the evidence regard-
ing colonial economic trends is at best mixed and
contradictory, making it diffi cult to determine how
real the assumed seventeenth-century “depression”
was. In New Spain, for example, proceeds from the
alcabala, or sales tax, a signifi cant indicator of the
state of the economy, increased until 1638 and
declined only slightly thereafter. If a seventeenth-
century depression did occur, its impact was un-
even, with some regions and sectors of the economy
rising and others falling. Thus, after the cacao in-
dustry of Central America collapsed, together with
its native population, there arose a brisk trade in
cacao between Venezuela and Mexico. In short, no
evidence of a decline in overall levels of production
and domestic trade exists. As regards foreign trade,
Morineau’s fi ndings suggest the contrary is true.
The Spaniards had found a fl ourishing handi-
crafts industry in the advanced culture areas of
Mexico, Central America, and Peru. Throughout