Silver, the Slave Trade and the Government of Empire
A Mountain of Silver
In 1545 an Indigenous prospector called Diego Huallpa, traditionally credited with the discovery, found a vein of silver running through the cone-shaped mountain known as Cerro Rico — ‘rich hill’ — in the high Andes, in what is now Bolivia. The town that grew at its base, Potosi, would become for a century the most productive silver deposit in the world. A second strike followed in 1546 at Zacatecas in northern Mexico. Together they transformed the Spanish empire from a land of conquistadors and encomiendas into the financial superpower of Europe. Potosi alone is estimated to have produced about 60% of the world’s silver in the second half of the 16th century. By 1611, with around 160,000 inhabitants, the town high in the Andes was as populous as London or Paris.
Silver was discovered at Potosi (modern Bolivia) in 1545 and at Zacatecas (Mexico) in 1546. Potosi alone produced roughly 60% of the world’s silver in the second half of the 16th century.
La Paz and the Silver Road
Potosi’s silver had to reach Spain. In 1548 the Spanish founded the city of La Paz as a stopover on the silver road from the high Andes down to the Pacific coast and onward by treasure fleet to Seville. The road from Potosi over the high passes to Lima and the port of Arica was lined with mule trains carrying silver bars and food in the other direction. The town of La Paz became one of the wealthiest of the new colonial cities, in spite of the altitude and thin air at over 3,500 metres. The infrastructure of the silver economy — mule routes, mountain passes, port towns — reorganised Andean geography around extraction.
The Mita and the Cost of Silver
Mining at altitude in the 16th century was lethal work. Indigenous workers under the encomienda dug, hauled and refined the ore using mercury (also mined locally at Huancavelica from 1564), which poisoned them slowly. From 1573, under a later viceroy, the labour system was formalised as the mita — one in seven adult Andean men served four months a year in the mines, on rotation. The mita inherited a pre-Columbian Inca rota of the same name; the Spanish kept the form but turned it to their own purposes. Mortality rates were appalling. The mita is the deepest scar of the silver economy on Andean society: not the silver itself, but the bodies broken and the communities hollowed out to extract it.
How Spain Spent the Silver
By the 1550s, treasure fleets called flotas sailed from Cartagena and Havana to Seville under armed escort. The Spanish crown took a 20% tax called the quinto real — the royal fifth — on every ounce mined. The quinto became the biggest single source of revenue in Charles V’s European empire. But almost as fast as the silver arrived in Seville, it left again. Charles V was simultaneously Holy Roman Emperor and King of Spain. He was at war on multiple fronts — against France in Italy, against the Ottoman Turks in the Mediterranean, against Lutheran princes in Germany. The Dutch revolt came later, under his son Philip II. He owed enormous debts to a German banking dynasty, the Fuggers, who had financed his 1519 election as emperor. Spanish silver flowed to German bankers to service Habsburg war debt. The empire was a great-power machine, not a national prosperity machine.
Mostly, no — not in the way students assume. The crown was rich on paper and a narrow elite of conquistadors, encomenderos and merchants did very well. But silver flooding into Europe drove a century of inflation — the ‘price revolution’ described by the 16th-century Spanish economists called arbitristas and the modern historian J.H. Elliott. Spanish goods became expensive and uncompetitive. Spanish manufacturing hollowed out. The crown went bankrupt repeatedly under Philip II. Top-band judgement answers note this paradox: the empire was Europe’s first lesson in how extraction can hollow out the extractor. Spain became powerful and dependent at the same time.
The Atlantic Slave Trade
Indigenous labour was not the only labour the empire used. From 1518, under licences called asientos, Spanish authorities allowed private contractors to ship enslaved Africans to the Americas. The numbers in the period 1518–55 were small relative to the later transatlantic slave trade — perhaps tens of thousands of enslaved Africans — but the legal structure, the Atlantic shipping routes and the asiento contracts that would underwrite three centuries of the trade were now in place. Enslaved Africans worked in the silver mines alongside Indigenous workers, on the early Caribbean sugar plantations, and as urban servants. The Caribbean shift towards African labour had begun on Hispaniola in the 1510s as the Taino population collapsed. The slow industrialisation of the trade in this period laid the foundation for what came later. The reform movement that produced the New Laws of 1542 banned the enslavement of Indigenous peoples but did not extend the same protection to enslaved Africans — a moral inconsistency Las Casas himself, in his old age, came to regret.
From 1518, the Spanish crown licensed the shipping of enslaved Africans to the Americas under the asiento system. Numbers in this period were modest, but the legal framework that would underwrite three centuries of the transatlantic slave trade was now in place.
Silver was not the only American product reshaping Spain. Sugar from the Caribbean plantations and tobacco from the mainland reached Seville in growing quantities and changed European diets. Cochineal — a brilliant red dye produced from an insect cultivated by Indigenous farmers in Mexico — became one of Spain’s most valuable American exports after silver. Crops travelled the other way too: maize, the potato, the tomato, the chilli pepper and cocoa would slowly transform European agriculture and cuisine over the next century. The Atlantic was becoming a single economic system, with Spain and its Seville monopoly at the centre of it. The historian J.H. Elliott has traced how Spain reoriented itself away from Mediterranean trade and towards a new ocean-crossing empire.
The Government of Empire
By 1555 the Spanish empire had a working architecture. At the top sat the king. Underneath him sat the Council of the Indies, founded in 1524 as the supreme governing body for the Americas. The Council issued laws, appointed viceroys and audiencia judges, heard appeals and supervised colonial finances. In Seville sat the Casa de Contratacion — the House of Trade, founded in 1503 — which regulated all shipping, trade, taxation, navigation and migration between Spain and the Americas. Every ship and every passenger was supposed to pass through Seville. Every quinto of silver was supposed to be recorded there.
Below these Spanish institutions sat the colonial layer: viceroys (New Spain from 1535, Peru from 1542), audiencias under the viceroys, governors and corregidores under the audiencias, and finally encomenderos, missions and mita rotas on the ground. The system was the most centralised European colonial bureaucracy of its century. It was also slow, paper-heavy and corrupt — orders from Spain took months to reach Lima, and viceroys often complained that they could not carry them out. But the architecture endured. Latin American government and law would still be running on Spanish institutional templates two and a half centuries later.
An Empire at the End of the Period
By Charles V’s abdication in 1556, the Spanish Empire stretched from Mexico City to La Paz, from Havana out to the Philippines — claimed on Magellan’s 1519–22 voyage, although Spain did not settle them until the 1560s. It was held together by the silver fleet, the asiento, the Council of the Indies and the Casa de Contratacion. It was the first global empire in human history. It was also dependent on extraction it could not control: silver to pay its wars, Indigenous and African forced labour to mine the silver, German bankers to lend against future fleets. The economic foundations of the next century were already visible in 1555, and so were the cracks. The conquest of the ‘New World’ had made Spain the dominant power of 16th-century Europe and prepared the long structural decline that would define its 17th century.