COMMERCE, SMUGGLING, AND PIRACY 93
der that the name Drake became a word of fear to
the inhabitants of colonial coastal towns.
But piracy began to decline after the signing of
the Treaty of Madrid in 1670 between England and
Spain, by which the British government agreed to
aid in the suppression of the corsairs in return for
Spanish recognition of its sovereignty over the Brit-
ish West Indian islands. French buccaneers, how-
ever, continued to be active until the signing of the
Treaty of Ryswick in 1697, by which Spain formally
recognized French possession of St. Domingue.
The injury infl icted on Spanish prosperity and
prestige by pirates and privateers, great as it was,
was dwarfed by the losses caused by the less spec-
tacular operations of foreign smugglers. Contra-
band trade steadily increased in the course of the
sixteenth and seventeenth centuries. European
establishments in Jamaica, St. Domingue, and the
Lesser Antilles became bases for contraband trade
with the Spanish colonies. Buenos Aires was an-
other funnel through which Dutch and other for-
eign traders poured immense quantities of goods
that reached markets as distant as Peru. By the end
of the seventeenth century, French companies, op-
erating behind the façades of Spanish merchant
houses in Seville and Cádiz, dominated even the le-
gal trade with the Indies.
John Campbell, a shrewd Englishman, iden-
tifi ed the major source of Spain’s misfortunes: its
economic weakness. The Spaniards, he remarked,
were said to be stewards for the rest of Europe:
Their galleons bring the silver into Spain, but
neither wisdom nor power can keep it there;
it runs out as fast as it comes in, nay, and
faster.... At fi rst sight this seems to be strange
and incredible; but when we come to examine
it, the mystery is by no means impenetrable.
The silver and rich commodities which come
from the Indies come not for nothing (the
king’s duties excepted) and very little of the
goods or manufactures for which they come,
belong to the subjects of the crown of Spain. It
is evident, therefore, that the Spanish mer-
chants are but factors, and that the greatest
part of the returns from the West Indies belong
to those foreigners for whom they negotiate.Spanish economists of the seventeenth century
understood the causes of Spain’s plight. Their writ-
ings offered sound criticisms of the existing state
of affairs and constructive proposals for reform.
But their arguments were powerless to change the
course of Spanish policy, dictated by small mercan-
tile and aristocratic cliques whose special interests
and privileges were wholly incompatible with the
cause of reform.THE FRAMEWORK OF THE COLONIAL ECONOMY
Was the colonial economy capitalist, feudal, or
something in between? Scholars have hotly de-
bated this issue. Some, who believe that production
for the market is the defi ning feature of capitalism,
argue that Latin America has been capitalist since1492.^5 Others deny the relevance of the concepts
offeudalism and capitalism, taken from a European
context, to a unique colonial reality. Most students,
however, will admit the presence of capitalist, feu-
dal, and even more archaic elements, such as the
pre-Columbian indigenous communities based on
communal land tenure, in the colonial economy.
Spain tried, though not consistently, to preserve
and protect that ancient corporate landowning
system because it gave the crown direct control
over native labor and tribute, which it could then
allocate to the colonial elite in accord with its own
policies and interests. That collective landowning
system suffered severe erosion in the course of the
colonial period due to the expansion of the Span-
ish agricultural sector, but at its close, it still main-
tained a large presence in many areas.
The feudal or semifeudal elements in the
colonial economy included labor systems based
in varying degrees on servitude and coercion,
the nonmonetary character of many economic
(^5) A leading exponent of the “Latin America-has-been-
capitalist-all-along” view is André Gunder Frank; see
Frank’sCapitalism and Underdevelopment in Latin America
(1969). That view has come under heavy fi re from scholars
who defi ne capitalism, fi rst and foremost, as a mode of pro-
duction based on wage labor that has lost its own means of
production. See, for example, Colin Mooers, The Making of
Bourgeois Europe (1991), pp. 5–17.