Staying Afloat: Risk and Uncertainty in Spanish Atlantic World Trade, 1760–1820 by Jeremy Baskes

Abstract

Reviewed by: Staying Afloat: Risk and Uncertainty in Spanish Atlantic World Trade, 1760–1820 by Jeremy Baskes Richard Salvucci Jeremy Baskes, Staying Afloat: Risk and Uncertainty in Spanish Atlantic World Trade, 1760–1820. Redwood City, CA: Stanford University Press, 2013. 408 pp. 25 tables, 13 figures. ISBN: 9780804785426, $70.00 (cloth); ISBN: 9780804786355, $70.00 (E-book). This is the most economically significant study of the Spanish empire’s Atlantic trade to appear in many years, and it is determinedly revisionist. Jeremy Baskes bases his analysis on a staggering amount of “old fashioned” archival work, particularly in Spain. Moreover, the broad array of topics considered makes it simply impossible to do them equal justice in a brief review. To the contrary, its breadth and erudition make the book worthwhile. I focus here on the main message. For generations—at least since Clarence Haring’s, if not before—historians have regarded the Spanish exclusif as a mode of ensuring the profitability in limited markets. Merchants in Seville, Cádiz, Mexico City, and Lima were permitted to trade through a regulated system of convoys, fairs, and markets. The interest of the Crown, of course, was to share in their rents. Historians [End Page 469] have called the contrivance a “monopoly” or the flota system. For three centuries, and making due allowance for pirates, smugglers, and “authorized” interlopers, this was how the system worked: increased scarcity, artificially high prices. The erosion of consumer surplus at the hands of the monopolists was predictable. To oversimplify his argument, Baskes thinks we have got it backward, and have confused effect with cause. In reality, the evidence of excess profits in the trade was a result of survivors’ bias. Success was hard to come by, and one who had it was richly rewarded. That is because the Atlantic trade was conducted under almost impossibly risky conditions, or under pervasive uncertainty. The high variance in outcomes and the substantial risk of failure logically dictated that a successful venture was extraordinarily profitable, but not on a risk-adjusted basis. As much as any historian, Baskes demonstrates that trading to the Indies was a roll of the dice. As he says, “luck played an immeasurable role in the fortunes of long-distance traders” (p. 154). You could not predict much of anything because thin markets are inherently unstable, and because the information lags then operating were simply grotesque. If the world you thought you were selling to still existed when your cargo arrived—even if your erstwhile political allies were still friends, or that peace after war had not broken out—you were lucky, and only ex post, skilled. What sensible capitalist would participate in a trade plagued by too much competition and abundance, as some Mexican merchants complained after the free trade reforms in the 1790s? For the skillful, or just the lucky, there was a brass ring. For most, there was at least some semblance of stability, a higher probability of a normal return. As Baskes observes, “Regulations were probably more effective in preventing bankruptcies than in generating fortunes” (p. 58). They were about reducing excess volatility, not creating excess profits. (All this is painstakingly documented and reproduced in online appendices at http://www.sup.org/stayingafloat.) Dismissing Baskes’s argument on ideological grounds, or out of sheer sheer ignorance, as some will surely do, is simply not going to cut it. I do not think that Baskes is wrong in his revisionism. In fact, I think he is far more right than not, even if cause and effect in complex economic interactions are notoriously hard to pin down. I do think, however, that he overstates his case. For instance, Baskes concludes, “the notion that importers were in any position to collude and fix prices is baseless” (p. 58). “Baseless” is legalese, not historical analysis, and the contention rests on considering a restricted number of pricing models or by looking at traded commodities at a certain level of aggregation. Again, Baskes painstakingly and plausibly considers the number of merchants involved in various fleets and fairs. There were, [End Page 470] he avers, simply too many of them to form an effective cartel to restrain trade, and the five...