Über die Autorin bzw. den Autor

Howard J. Erlichman (Austin, TX) has been evaluating multinational corporations, early-stage technologies and economic policies for over thirty years. He is also the author of Camino del Norte: How a Series of Watering Holes, Fords, and Dirt Trails Evolved into Interstate 35 in Texas.

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CONQUEST, TRIBUTE, AND TRADE

Prometheus Books

Contents

INTRODUCTION....................................................................9CHAPTER ONE: The Portuguese Head East...........................................19CHAPTER TWO: The Spanish Head West..............................................65CHAPTER THREE: Convergence with the House of Habsburg...........................107CHAPTER FOUR: The Great American Treasure Hunts.................................147CHAPTER FIVE: An Unlikely Bankruptcy............................................197CHAPTER SIX: Mining Revolution in Spanish America...............................235CHAPTER SEVEN: Cash Flow Squeeze in the Spanish Netherlands.....................271CHAPTER EIGHT: Convergence in the Far East......................................313CHAPTER NINE: Unimaginable Wealth and Squander..................................361CHAPTER TEN: The Dutch Advance..................................................401CHAPTER ELEVEN: Capital of the World............................................447NOTES...........................................................................463INDEX...........................................................................519

Chapter One

The seeds of the Portuguese Empire were sown by a Bavarian entrepreneur in 1367. In that year, a back-country weaver named Hans Fugger traveled down the Lech River from Graben to pursue trading opportunities in Augsburg. The ancient city had been founded in 15 BCE as Augusta Vindelicorum, along a tributary of the Danube River, and was becoming an important textile center. Few Augsburgers, including the newly arrived Hans Fugger, could have predicted in a post–Black Death year like 1367 that the river-trading town would achieve her greatest fame in association with a Central European mining boom in the late fifteenth century and that the descendants of Hans Fugger would amass the single-largest private fortune of the age.

In the meantime, the continuing ravages of the Black Death caused tremendous hardships and occasional opportunities during the second half of the fourteenth century. In bleak 1367, it was a rare opportunity in the weaving industry that induced Hans Fugger to journey north to Augsburg. He prospered by supplementing his own modest line of fustian, a coarse cotton cloth, with an array of textiles manufactured by other Augsburgers. The expanded line was marketed to the trade fairs at Nuremberg, Ulm, Donauworth, and Frankfurt. Hans's business skills were apparently superior to those of his competitors. He eventually gained possession of fifty looms, a few wagons, and three homes in Augsburg to complement the family homestead in Graben.

At his death in 1408, Hans Fugger left an estate valued at three thousand florins and had married off his son Jacob to a daughter of the master of the Augsburg Mint. While the medieval-styled marriage would prove to be fortuitous for three of Jacob Fugger's eleven children, Jacob was content with his position as a master of the Augsburg Weavers Guild. He focused all of his energies on trading local fustian for cotton, silks, textiles, and spices. Most of these items had to be imported from Venice—the commercial colossus of medieval Europe but only a ten-day journey from Augsburg. Jacob Fugger created a major textile and trading business prior to his death in 1469.

Despite a family connection to the Augsburg Mint, Jacob Fugger had declined to participate in the recovery that was taking hold in the Central European mining industry. A group of local rulers, metals-needy Venetians, and Bavarian entrepreneurs were attempting to reverse the so-called bullion famine that had spread through Europe during the Black Death century of depression (1350–1450) and had even worsened during the subsequent Ottoman onslaught. Annual production from the once-prolific silver mines of Central Europe had fallen to less than ten thousand marks (2.5 tons) in 1453 when Ottoman sultan Mehmed II conquered Constantinople, the east-west trading capital of Byzantium, and the Balkan silver mines of Serbia, Kosovo, and Bosnia. Mehmed's seizure of Novo Brdo (Kosovo) in 1455 deprived the Italian citystates of roughly nine tons of annual silver output that had flowed their way. Further dislocations caused by a series of Ottoman campaigns against Venice (by sea) and Hungary (by land) would shortly push the bullion famine to epic proportions in Western Europe. The sixty-five thousand pounds sterling minted in England in 1474 was just half of that issued in 1350. The mint output of the Netherlands was down to one-third. When currencies were tight, business activities grounded to a halt.

While the Ottoman advance was depressing to Christian Europe, the Venetians, and to a lesser extent the Florentines and Genoese, had the most to lose. The great Italian city-states had dominated Europe's east-west trade for nearly two centuries and needed a fresh supply of precious metals to maintain their cross-Mediterranean exchanges with the Mamluk spice merchants of Egypt and Syria. No matter that the Italians had helped to drain Europe of her metal supplies during this same period. The more encouraging news for the Italians, however, was that the European economy was finally on the mend. The general population had started to grow after the Black Death century had run its course, the textile industries of northwestern Europe were flourishing, and the upstart Portuguese were importing modest quantities of West African gold by sea. If the Portuguese were inevitably depriving the Italians (and Mamluks) of caravan gold that had sustained their economies for centuries, their efforts were at least making a contribution toWestern Europe's metal supply. Precious metals were essential because European trade goods were lowly regarded in the Muslim world and Christian rulers needed money to recruit armies to meet the Ottoman threat— especially after the traumatic fall of Constantinople.

As economic conditions improved, a number of Venetian merchants decided to take action. They would revisit the depleted mining districts of Saxony, Tyrolia, and Bohemia. The same Central European mines that had supported the rise of the Italian city-states in the twelfth century had not benefited from the metallurgical innovations that Saxon emigrants had applied to the more recent strikes in Hungary, Serbia, Kosovo, and Bosnia. The opportunity had been apparent to local investors as well. In 1451, the Duke of Saxony recruited teams of Saxon engineers to extend the depths of existing mines and to improve smelting and drainage processes that had remained unchanged for centuries. The duke paid special attention to the ancient cupellation technique for separating silver from copper and lead. The current separation methods were cumbersome and too expensive to process deep-seated ores economically. If Saxon emigrants could revitalize the Balkan mines in earlier centuries, a current generation of Saxon engineers could rescue mining industries closer to home.

The initiatives sponsored by the Duke of Saxony, the Venetians, and a small group of Bavarian capitalists paid off spectacularly. Ludwig Meuting of Augsburg jump-started the process in 1456 when he advanced a loan of thirty-five thousand florins to Archduke Siegmund of Tyrolia. The key point was that the loan was secured by the right to purchase a discounted share of silver from the Schwaz mines (near Innsbruck). When the loan went unpaid, as most Habsburg loans did, Meuting was in the silver mining business. By 1479, Augsburg's Imhof, Wolff, and Welser families had gained interests in the archduke's Schneeberg mines simply by following Meuting's lead. The investments paid huge dividends. Annual silver production from Schneeberg (Saxony) and Schwaz (Tyrolia) averaged around ten tons during the 1480s and allowed Tyrolia and Saxony to mint their first silver coins in over a century. The collective efforts moved Augsburg, with a population of twenty thousand, to the center of Bavarian merchant banking.

Jacob Fugger had stuck to textiles and making money. It was left to one of his sons, Jacob Junior, to make money and history. Born in Augsburg on March 6, 1459, the youngest of Jacob's eleven children was slated for a career in the Catholic Church had his father not passed away in 1469. Young Jacob was pulled into the family business. During an apprenticeship at the Fondaco dei Tedeschi, a German merchants association that had operated in Venice for nearly two hundred years, Jacob learned Venetian business practices and the art of double-entry bookkeeping. He returned to Augsburg in 1479 in time to assist his older brothers Ulrich and George diversify into a new (and very controversial) line of business— transferring papal taxes between Scandinavia and the papal treasury in Rome. The following year, Ulrich raised the family's profile still higher by securing a contract to furnish textiles and silks for the pending marriage of Maximilian, son of Holy Roman Emperor Frederick III, and the daughter (Maria) of Duke Charles of Burgundy. The textile contract was the first of the Fuggers' many dealings with the House of Habsburg, and the marriage itself would have important implications.

Backed by a relationship with the House of Habsburg and his father's access to the Augsburg Mint, Jacob Fugger finally entered the mining fray in 1487. He was so anxious to work with a sophisticated Genoese partner, Antonio de Cavalli, that he even dissolved a partnership with a small-time Nuremberg-based merchant (Hans Kramer) when a greater opportunity arose. Fugger and Cavalli arranged a twenty-four-thousand-florin loan to Archduke Siegmund that was secured by unpledged mining revenues from Schwaz. When Siegmund defaulted, true to form, the Fuggers were in the mining business as well. The perpetually cash-strapped archduke continued the process by requesting a personal advance of as much as one hundred thousand florins, many times the value of the Fuggers' net worth, secured by the right to purchase the archduke's entire silver production from Schwaz at a very low price. The default clauses on the second loan would give the Fuggers a large slice of the Tyrolian silver mining industry.

The emerging Fugger mining empire was bolstered by the transfer of Siegmund's Tyrolian domains to his cousin Maximilian I in 1490. The hapless son of Holy Roman Emperor Frederick III would soon be regarded as the most inept ruler in Habsburg history. The change in regimes was beneficial to the extent that Maximilian's regular defaults triggered the transfer of an increasingly large portion of Habsburg mining properties to the Fuggers and other Augsburg firms. These and other merchant bankers were building sizable fortunes from Habsburg mismanagement and the earlier investments in mining and metallurgy. A genuine silver boom was taking shape in Tyrolia and Saxony. Average annual silver production had soared to over forty-four thousand marks (over eleven tons) and much more was on the way.

The increasingly sophisticated Fuggers established a formal business partnership under the name of Ulrich Fugger & Brothers in 1494. Capitalized at a modest fifty-four thousand florins, the partnership was actually misnamed. It was the twenty-five-year-old Jacob Fugger who had assumed virtual control over family affairs. While Jacob's extensive business experience in Venice, Tyrolia, and Hungary had shifted the direction of the family business from textiles to mining, the junior partner did not neglect the family's traditional enterprises. He even came up with a way to circumvent the church prohibitions against lending at interest by promoting the theses of Johannes Ech—the German theologian who argued that an interest rate of 5 percent (as a starting point) was ethically acceptable. Otherwise, interest was typically embedded within the principal of a medieval loan.

Since Central Europe also contained huge deposits of copper, the Fuggers were prepared to diversify their mineral holdings. No matter that copper had always been less highly prized than silver and gold. Europe's economic recovery and Portuguese trading activities in West Africa had raised demand for the metal significantly. The Fuggers had already acquired some copper properties in Carinthia (Austria) when Jacob formed a business partnership with Johann Thurzo of Cracow. The Fugger-Thurzo partnership struck in Venice in 1494 was intended to develop underexploited copper deposits held by the Kingdom of Hungary, near Neusohl (present-day Banska Bystrica, Slovakia), as well as those controlled by Maximilian in Tyrolia. In 1496, the Fuggers managed to exchange 160,000 florins in unpaid Habsburgian debts, accumulated from the military campaigns in Italy, for a large share of Maximilian's copper deposits. By then, demand for copper, bronze, and brass was expanding on all fronts.

The copper partnership with Johann Thurzo was critical to the Fuggers' spectacular success. Thurzo was regarded as the leading mining engineer of his day, but he had insufficient funds to revise and commercialize his latest separation technique (the Saiger process) and implement some of his hydraulic (drainage-related) innovations. As early as 1469, his father Johann Thurzo the Elder had developed a rudimentary version of the Saiger process to treat the "black" (silver and lead) argentiferous copper deposits that predominated in the Carpathian Mountains of upper Hungary. The elder Thurzo learned to separate the silver component of the "black copper" by mixing in lead in specially designed hearths (Saigerhutten) and heating the copper-lead-silver mixture to a desired temperature. At a certain point, the silver separated from the copper, combined with the lead, and became extractable by the conventional cupellation method. The copper-lead alloy, in turn, was oxidized to separate a copper residual that could be resmelted into pure copper. Jacob Fugger was also intrigued by the nine ounces of silver that could be separated from every hundredweight (quintal) of ore.

Unfortunately for the Thurzos, the Saiger process was not a sure thing in 1494 and the ever-present risk of an Ottoman invasion clouded the investment climate in Hungary. Merchant bankers had been scarred by the archduke's earlier machinations in Tyrolia and refused to invest in high-risk Hungary until some of his outstanding debts had been repaid. Metal production in Hungary had peaked in the late fourteenth century, and recent discoveries in Kremnica (near Neusohl) and Baia Mare (northern Romania) were contributing no more than three tons of production in 1494. But Fugger capital, analytical skill, and access to Thurzo technology changed everything in 1495. Thurzo tested and tweaked the Saiger process at Neusohl and added a new smelting furnace and rolling mill. He also introduced an animal-powered hydraulic system to drain the deep, frequently flooded mines that were common to the region. Copper production in Hungary soared and soared further after Vasco da Gama identified a huge, untapped Indian market for copper of any kind.

Copper would be king during the first two decades of the sixteenth century. As the Fugger-Thurzo copper inventory at Antwerp rose to a hard-to-believe 34,202 quintals (worth over 200,000 florins) in 1497, Jacob Fugger schemed to build the world's first vertically integrated mining enterprise. This enterprise would generate nearly 1.4 million florins in profits during the 1494–1525 period by controlling the mining, smelting, distribution, and pricing of copper sheet and plate. The logistics were daunting. Most of the Fugger copper was sent north (via Cracow) to the family's branch offices in the Baltic Sea—Danzig, Breslau, Stettin, Copenhagen, and Lubeck— and then shipped south in Hanseatic ships to Antwerp. Some of this copper was shipped to Portugal to support the West African trade while other quantities were reserved for the bronze- and brass-making centers at Brunswig, Nuremberg, Aachen, and Milan. Neusohl was so successful that the Thurzo process was transferred shortly to the Fugger smelting works at Hohenkirchen (Thuringia), Mansfeld (Thuringia), and Fuggerau (Tyrolia). The pure copper mined at Fuggerau (near Villach) was well suited for the bronze and brassware prized in West Africa and the bronze cannon, naval equipment, and hardware prized in Europe. Antwerp's leading merchant, Erasmus Schetz, made a small fortune in copper and brass before being overwhelmed by Jacob Fugger.

The Fuggers' modest branch office in Antwerp, established in 1494, presided over an emerging copper monopoly of epic proportions. There would be much more to come. Jacob Fugger gradually redeployed his metal profits into bills of exchange; the forward-contract buying of huge quantities of metals, spices, and other commodities; foreign exchange arbitrage; and even an intelligence-gathering "news service." The House of Fugger revolutionized European commerce. The publication of the first manual on double-entry bookkeeping in 1494 had made their business practices available to anyone, but few were in a position to follow Jacob Fugger's pathway. By 1499, Maximilian had become so outraged by a copper monopoly of his own making that he realigned himself with a displaced Venetian copper cartel. The archduke was too late. He discovered painfully that he needed Fugger capital to finance his next military campaigns in Switzerland and Italy. Maximilian's promotion of Antwerp (over Bruges) even ensured that the House of Fugger would have a convenient trading center with which to serve the House of Habsburg and the Portuguese Crown—Manoel I placed a royal agent in Antwerp in 1499. Jacob Fugger was building a princely palace (Fuggerhaus) in Augsburg along the old Roman Road, but Antwerp would be his primary business headquarters.

(Continues...)

Excerpted from CONQUEST, TRIBUTE, AND TRADEby HOWARD J. ERLICHMAN Copyright © 2010 by Howard J. Erlichman. Excerpted by permission of Prometheus Books. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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