Financing the largest crossing in the Age of Sail: The Capital Market of Manila, 1668-1815
For 250 years between 1571 and 1815, the continents of Asia and America were directly linked through the intermediation of the city of Manila in a trade route crossing the Pacific, the only one of the Early Modern era to consistently do so. This trade, based on the exchange of Asian manufactures and commodities for Spanish American silver specie, transported a volume of silver comparable, if not larger, than the English and Dutch East India companies’ transfers from Europe to Asia through the Cape of Good Hope. However, compared to the amount of research dedicated to the financial and business innovations resulting from Europe’s direct trade with Asia (i.e. joint-stock companies, transferable company shares), almost nothing has been written regarding the financing of Manila’s Pacific trade.
This paper aims to fill this vacuum and explore the financial model of Manila. Manileños devised a model based on the use of endowment funds and urban brotherhoods to pool liquidity and originate working capital for trade, capable of mitigating agency problems and distributing the risk of loss at sea in the longest crossing without watering stops of the Age of Sail. The paper examines these funds (known as obras pías), their management, and the instruments they used, within the broader economic context of the silver trade between Asia and Spanish America.
Juan Jose Rivas Moreno is the Economic History Society Power Fellow 2023/2024 at University College London.
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This page was last updated on 30 June 2024
