My talk would be about the role of institutions and the the role of institutions in in some aspects of global economic history,
the one the area that I know most or I've been doing research.
And that's how I title this talk.
The limits of reciprocal comparisons because in general, it is even more conventional economic history.
There is very little of that, despite the contribution of goddess or permanence of other people.
So she can run this. I'm going to go quickly through this narrative about the financial development.
And a supply for growth as a narrative, would you survive a scarcity, basically?
And that explains how institutions favour the pooling of capital, allow the diminishment that the major risk for reducing uncertainty.
They created all the sea instruments like of exchange banks, insurance companies incorporating shots, toy stocks and so on.
And I would add money swap account means specie bonds and fiduciary money.
This development is associated with the international clearing of means of payment that this sort of instruments and organisations allowed.
In other words, the arbitrage and the equity finance seems to be like the link with a subsequent development of capitalism.
So of there first, the initial outlay of capital. Particularly the scale of the problems of scale of capital require for Europeans to trade in here,
where is it safe specie and shorter the time for payoff?
And this render huge efficiency gains associated with institutions more or less close to the state,
but not uniquely, which provided liquidity financial for their financial development and and so on.
This is very, very much a European narrative, but it is a narrative of a European businesses.
Yeah. These were negotiated in many cities. Financial markets were integrated or so.
Whereas the template for that parameter is Britain, that was a more centralised.
And if you look at the literature in particular from France, this is more of an exception than Erode.
This difference is within Europe, but also across the world.
They are explained by state institutions, legal systems, natural features and foreign check price,
for instance, the capacity or the inclination to repay. And being Argentinian, I can take care of that continent.
Nothing is said or nothing. Much is said about working capital in this development.
Bills were not grown in the colonies. Neither in the British colonies and there were by the were paid back home only,
and they were not accepted in this trade outside the eastern companies or in the American trade.
When I say American, I say Spanish, American or Latino.
In the overseas grave, beyond the regulators of the companies trade in the over the Indian Ocean that is in the Atlantic and the Pacific,
the Europeans trade in both sides with silver or for silver.
So we're going to argue or going to base my talk on the the nature and the structure of the Spanish overseas trade that is like in many other regards,
the usual counterfactual counterfactual for the English development of any other region.
None of this instruments and institutions were present there. Yeah.
Even Spanish historians call this archaic institutions traditional instruments.
Yeah. This capitalism,
this breed of capitalism is identified with state run and funded a trade or economy that spoil and enjoy the spoils of that colonial relation.
In the rest of Europe, this is presented as this collusion between elites and kings,
or sovereigns for monopoly monopolistic profits, Ice Age sons a different stance vis a vis the Netherlands or England.
There were fleets over the Atlantic and a single ship over the Pacific that the Spanish freight it.
For Spanish economic unions or a sense of the period,
this is a restricted trade because this monopolist have every intent and incentive to repress demand so securely, artificially high prices.
So these two characteristics don't match and then we have a reluctant monopolist or a very inefficient one, which is the conventional story.
And this is interesting. I think that it matters because it's the usual counterfactual for the European or the English model.
Sun fact, the Spanish strain was completely private.
It was untaxed, unrecorded and unaccounted because of the low state capacity of the Spanish state and empire.
What about it was done at the expense of the state or using state infrastructure?
The case of the money, let alone the bureau it to the privilege to say, was granted to local locals in seedy imported cities.
And water was that privilege was managed by local guilds.
There wasn't any national wave or national debate why the institutions which you know,
cooperated or organised not for profit, but for sure, distinction there were, in fact, a court.
And they traded with the sovereign, with the king shooting victim for tax farming.
Because this privilege was granted to the naturals or the locals or the vecinos.
And it was a local discretion.
Naturalisation of foreigners was feasible and very frequent companies existed much later on as a very late development and didn't have much success.
Exceptions to this privileges were granted by the queen, yeah, for a fee or for money.
Not to anybody else like the French that traded in the Pacific or the Dutch in the Caribbean.
We are seeing those from the South Sea company to any Portuguese for general use that wanted to take slaves.
That was the way that furniture went to finance the slave trade.
And I liked this the story of the history of the incorporated companies and the king or
the sovereign in this country where you have a competition between girls and kings.
There was no charges. They were not negotiated whatsoever.
One of over for the difference, the trade overseas that the Spanish enjoy either deed or intermediated was that fineness,
you know, it was was financed by debt.
And that was by means of advancing capital or goods or money for that goods to be exported or sent further to America, and the sources were European,
not in Spanish necessarily and mostly in the 18th century, not in Spanish mercantile merchant houses and mercantile capital.
In the case of the Pacific,
the worse this was found private money intermediated by the church or religious institutions lent in Asia for goods back to America.
This train was not free trade, but it wasn't regulated either.
There were exchanges in fares in which this like in the way of the mediaeval fares,
the different corporations of the refunding oligopolies would trade on exchange.
And more interestingly, though, this transactions were spot sales on spot.
Yeah, the exchanges the good for were asking for for good.
What then on spot that means makes the importer of goods price takers.
Yeah. And that's what really the first qualification of the role of the mind of Spanish America.
These transactions and events were clear in full.
Yeah. And at these fairs. And there were one enough one of venture,
every transaction was a new contract and didn't stop the recurrence of this trade because there were very high mark-ups.
But there was no scaling up either in the fleet or the Atlantic or the Pacific in the Guardian basement instrument.
This commerce use is a very known instrument that has different names with it in Portugal,
in Italy or France, even in English, and there are all iterations of the same thing.
Is he say, a loan for the duration of the voyage within with a precise length of time after arrival for the clearance of the debt?
In this case, the what additional provisions for interest in the case of a particularly for the return or delays or the prospect of any war.
And the difference with the village that has the interest rate implicit. The decision until the termination of the pay off.
Which historians and economic historians justified because of the risk and has taken most
historians or economic historians to take this instrument as a mix of insurance and credit?
It is more complicated than that. For others, it's a way to avoid usury laws.
But you know that that is something that probably these guys the real importance of of this.
Interestingly, the lender is for freight in full, for the fall, for the total investment,
if the losses are in full and there is some sort of pro-rata allocation apportioning if losses are financial.
It's something that in in in Latin would be I won't be able to pronounce properly.
Brisbane would talk to you in Solidum, in which there is no way there are no agents, no commission commissioners.
Is a sort of equity loan. Yeah, but both parties are invested in the in the venture.
These were all private transactions.
We are about, you know, in the 25 notary public notaries in case about 60000 accountants or listed in the for the 18th century because I mean,
just sort of an exploration on the surface of this sample of about 30000 are available.
But as I said, so financial instruments were no negotiable and thing was this passive and active investor.
The lenders or the borrowers, if you wish.
Additionally, the ship masters located on the freighters or categories outright merchants before in most 40 houses participated of this financing.
Sometimes they trade it and more later on in the 18th century, they finance the trade directly.
And unlike the case of the joint stock companies, you have few investors.
A few providers of capital are many, many borrowers or takers or active investors that take the the goods to America or the go to America,
either from the Atlantic over the Pacific. There was no specialisation in these financial market, as both are lenders and adaptors.
And there wasn't any concentration of note because it's visible that the distribution
of this instrument of these loans shows a few very large ventures and very,
very many small ventures, including women and so on,
that participated in this movie frenzy of a fisherman with a business of exchange that the associated credit and exchange.
That includes what is called the exchange in the pricing and distribution of this trade.
The contract is priced in money of account in Spain, for instance.
But you specifically direct is to be paid off in.
X coin or money or metal? Yeah, a destination.
And there were huge differences between the money of account and the physical money.
There were differences in Europe. And that is known in the development of the of the village market and so on.
But overseas in Atlantic to Europe, there was about a 30 percent difference in the game, conceding the beauty,
the content of fine silver in one and another place and what was the standard in Spain vis-a-vis what was the actual coin in Spanish America?
And you know, if you think that the Pacific is just, you know,
what they want is an exchange rate of this coin as a demand for means of payment happens in China.
So this contract includes the exchange trade together with the interest rate.
So besides the of all the time value of money, this contract includes any alteration of the monetary standards in place.
Yeah, the basement or any other change and fluctuation in the gold silver ratios that affects the terms of trade.
Yeah. We cannot know the gain and losses from this using this instrument because the price
is implicit and the contract is the return or the pay paying back X amount of money.
But we should account for the secular demand for silver that comes from Asia throughout this period.
Why there was no scaling in this contract with very high mark-ups and so on.
It's something that most economic historians overlook and very few.
I mean, one of the early global historians of Spanish family guy Jamie Vasquez has shown this.
This trade suffers from blood, not from scarcity.
And the response to gluts for this type of organisation was rationing and that so they split the cargo in smaller ships.
They split the investment amongst many freighters. They have different rates for each flat.
They space out in the fleet. They restrict the fleet to one gallon.
That's the response to not SkyCity, but to glut.
Let markets in Spanish America is a recurring feature in both coasts, the Pacific and the Atlantic.
Nevertheless, this comment has apparently very low rate of business failure.
And the way that they dealt with it was with voluntary liquidation.
The serve up to two feet of sort of like two big waves of failure that apparently and I would guess they are related with exogenous factor.
One is the massive scam in Potosi alteration of the currency in the middle of the 17th century that was felt elsewhere.
On the other one is the impact of the French wars in the commerce over the Atlantic.
The insurance policy, and I say you should know an institution.
Everyone else for these type of trade only happens in in after the 1780s.
And the reason for that low rate of failure is because there is a propensity of these position to avoid taking recourse to legal and procedures.
This consular course works the right and the arbitrator or in the case of Manilla,
the War Chest I court of vested parties to deal with with this problem and that solve the problem of commitment.
In fact, from this mutual acceptance on systemic monitoring,
which is very much what the banking system was in England before the Bank of England became the lender of last resort.
That was a way to sort the commitment problem. So we have a very different situation when finances are available.
The initial outlay for this commerce, Israeli and the working capital not only is plenty but rising throughout.
I describe how was this stunning many land colonels, but we have a case already that by the late, you know, support of the 18th century Spanish.
How many guys are investing in Europe in this train?
Or, you know, basically they are finance the state over the Pacific.
And it's not that the Spanish or the Spanish, how many not know or not used fiduciary instruments?
They did, and they did it in their domestic trade. You know how big this was?
Again, because these are, there's no centralised record of any sort.
These are fully private business. It's been, you know, that this information comes from, you know, private archives and and and some litigation.
But the trains somehow replicate what is the trend of the production and the coinage on the export of silver out of Spanish America?
You would have to believe me or read other articles. Well, I want to look for credibility.
But well, I want to mention now is that this instrument was way more ubiquitous than we think.
He was in Europe. I mean, in the European trade with America was used by the Dutch, by the French, by the Genovese and the Irish.
It was used by the suppliers of goods to the fleet and in Asia it was equally prevalent.
Yeah, it was the means. I mean, the instrument of finance for the Guardian was the way to finance any business outside the company.
It was used in pretty much Indonesia. In 17th century Nagasaki in Portuguese.
Macao was the source of revenue for the local council and the Danish and the Swiss cheese companies use this instrument in the Asian trade.
The British themselves did it.
Yeah, and we have this interesting case that the British see similar company gives respondents to loans, but doesn't take it.
So that is a question for the big practise. The idea of best practise, right,
if this financial development that we associated with the European model was the best practise and how universally this was.
Just to prove the point, you have an excerpt from the correspondence with the council at St George's,
where precisely they explain how they use this instrument as a means to trade for metals for silver mainly or any other foreign money.
And as the great historian of the European trading can tell them, he has bonded.
It is the single way. To do with our pesos is a way to get pesos, particularly in Asia, with which to carry this trade on.
So to conclude, we know well this European model,
which is somehow what informs the literature and financial history and financial economics
that bills and all these sort of innovations and institutions that characterise Europe.
That worked for Europe because Silver was cast, there was short.
And there were institutions that could indeed determine the exchange rate that they fixed exchange rate.
That is the difference between the less conventional loans of the East India Company with anybody else.
The company fixed exchange rate at which the money will be returned and they have the capacity to do that.
And so these Bank of England and the Mint in England, elsewhere, all these sort of archaic traditional instruments can not be qualified like that.
There were still adequate.
And in fact, they were not exclusive, but supplementary bills and responding here, particularly in the trades that demanded known fiduciary money.
I am not talking here about commodity money. I am talking about silver money.
So in thinking, you know, the role of institutions and the possibility of reciprocal comparison,
I think that we have to go back to the different conditions, namely endowment and the appropriateness of the institutions for the specifics of trade
in each case to deliver scarcity or with the lack of as it was in English or Spanish for
America to think back on the necessary or sufficient conditions that we use on the explanations
and probably look back at the counterfactual of the European financial development.
Maybe I have a suggestion or an idea on trying to develop,
but only knowledge somehow to go back to the universality of the experience that if I were of the institutions that we are dealing with us today.
It's more than a minute. Finding my voice, thank you very much.
My pleasure.