Commerce has its two forms, the extensive and the intensive; one that considers the world at large, and one that seeks to confine itself to the interests of a nation. The latter, before the nineteenth century, was everywhere the type of colonial commerce. The nations held their colonies in leading strings; cramped and crowded them in their natural growth, and so checked their development that they lost the benefit that they might have gained from a more liberal policy. Of all the nations, Spain pursued this short-sighted policy most rigidly. Not only in commerce, but in everything else, she cramped her colonies. Foreign trade was so sternly prohibited that, in her period of supremacy, she put to death any alien merchant that ventured into one of her ports. Her colonies were her cows; no one could milk them but herself; but she milked them so dry as to starve them of their natural yield.

Spain never learned the lesson that the other nations were taking to heart. In the nineteenth century her policy with her colonies was as illiberal as in the eighteenth. As a result, rebellions everywhere broke out; one by one the colonies became free, and the country whose possessions covered more than a continent at the beginning of the century, held, at the end, but a shred of her once-splendid dominion. Spain’s treatment of the Philippine Islands in their commercial interests, forms a marked example of what I have previously said, and an extended account of this remarkable method of trade cannot fail to be of interest.

The Philippines, at first, in 1569, were too far away to be dealt with directly, and were made an appanage of the intermediate colony of Mexico, through which they were reached and controlled. The method was curious. The natives were no sooner subdued and put under Spanish governors than they were required to pay roundly in taxes and tribute to the royal treasury. All this belonged to the crown, but some of it had to be devoted to the government of the colony; and the Spanish grandees that exiled themselves to that far land, took good care to pay themselves well for the penance.

For many years the taxes were paid to the treasury wholly in colonial produce, and for many more years, partly so. This material was exchanged for Chinese wares, junks from the Celestial kingdom visiting the islands each spring, and bartering silks and diverse goods of China for the rice, hemp, and other produce of the islands, which had been collecting during the year in the royal stores at Manila.

The method of dealing with the goods thus received was, to say the least, peculiar. They were done up each year in bales, always just fifteen hundred in number, and of exactly the same size and shape, for shipment to Mexico. From the first year after the formation of the colony until the year 1811, a fixed process was maintained. Every year a State-galleon left Manila for Mexico, bearing the baled Chinese goods, which represented the Philippine tribute. Every year the ship returned with a portion of the proceeds to the starting-point, this being known as the Mexican subsidy. One galleon and no more. For two centuries, and longer, this rigid system was kept up, the commerce of the islands being limited to this conveyance of tribute across the seas. Navidad was at first the Mexican port of call. Then Acapulco was chosen, and for more than two hundred years the State-galleon, Naos de Acapulco, yearly came and went across the Pacific, carrying tribute for Spain. The ships employed were very different from modern commercial craft. Short of length, wide of beam, and light of draught, with high elevation in bow and stern, above water they presented something of the outline of a crescent moon. They were of about 1,500 tons burden, had four decks, and were provided with guns; for, the waters they crossed were not secure from hostile craft, and Spain not infrequently had the loss of one of her rich galleons to mourn.

Thus it continued, until the rebellion in Mexico put an end to the traffic, the last of the treasure-galleons leaving for Mexico in 1811. The last for Manila set sail in 1815. There were other reasons than the war to put an end to the old traffic. The expense had become too great and the profit too small. Spain’s finances had fallen into a lamentable state, and the Naos de Acapulco was, perforce, withdrawn. Needy politicians, who knew little about seamanship, but much about perquisites, had forced themselves into the galleon, whose commander received an annual salary of $40,000, the chief executive officer $25,000, and the quartermaster nine per cent. of the cargo, the total of which was no small sum.

It was an odd idea to restrict the commerce of a group of the richest islands of the tropic seas, to a single vessel carrying the annual tribute of the island. In fact, it was not quite so restricted. The tribute-cargo did not fill the ship. There was some space left, and the use of this was given to a few favored merchants, the Consulado, as they were called, a trading ring, each member of which must have resided a certain number of years in the Philippines, and have a fortune of at least $8,000. This surplus freight was regulated by the issue of boletas,—documents that long did duty as paper money, passing from hand to hand. The demand for space much exceeded the supply, and the right to ship on the annual galleon often went to favored hands, merchants being set aside by churchmen, officials, and others with grasping palms.

It may be that the idea of adding to the island-trade by supplying more ships, never penetrated the thick official cuticle of Spain. At all events, the single galleon sailed back and forth year after year, until the years lengthened into centuries, and while other nations were sending their deeply-freighted craft to all the ports of the earth. It was odd and lamentable to see this pitiful travesty of commercial enterprise kept up until after the dawn of the busy nineteenth century.

The yearly value of the official cargo sent from Manila was at first limited to $250,000. But such was the demand for the goods in Mexico, that one hundred per cent. was usually realized on the sales. The return-trade was not permitted to exceed the value of the proceeds,—$500,000, in coin or stores. In this way Mexican dollars, the recognized coin of the colony, made their way thither in large quantities. They were largely absorbed by China, where they were highly welcome. A certain sum was necessary to maintain the colony. This—the royal subsidy (Real Situado)—was fixed by decree from time to time, coming out of the proceeds of the annual tribute.

In saying that the annual galleon conveyed all the commerce of the Philippines, I should have confined this statement to Western trade. There was some commerce with the East. Indian and Persian goods reached Manila in considerable quantities. The same was the case, as I have stated, with Chinese wares. But the absurd restrictions of Spain hampered this trade. No Spaniard was permitted to go to China to buy his own goods. He must wait for the Chinese junks, and content himself with what they chose to bring.

The sailing of the annual galleon took place usually in July; and the voyage occupied about five months. The route to be followed was strictly laid down, and even the vagaries of the winds were scarcely an excuse for deviating from it. As has been said, all was carefully arranged as to size and number of bales and weight of cargo. For a century and a half there was practically no competition in this trade, and everything could be officially regulated, even to the selling-price of the goods in the Mexican market. The departure and arrival of the galleon at Manila formed the great events of the year. At these single dates the bars of exclusion were thrown down,—goods left, and wealth returned to, the colony; new faces appeared, and rejoicing was general. Te Deums were chanted in the churches, musicians paraded the streets, filling the air with melody, and bunting by day and illumination by night testified to the public joy.

Life was an easy affair with the merchants of Manila. Business was never a distressing occupation. One or two days in each week were Saint’s days—to be strictly kept. While the galleon was away, there was little to do except to await the Chinese junks and prepare the bales for shipment. There was no rise or fall of market-price, no need of smartness, tact, or enterprise, and only three months in the year when active labor was needed. During the remaining nine months the merchants were cut off from the world, and enjoyed life in their quiet way, with little regard to the doings of mankind.

Now and then, however, a change came over the spirit of their dreams. The seas are notoriously uncertain, and ship-captains appointed by favor are not overmuch to be trusted. Disasters came. Galleons went to sea and never came to port; shattered bones lay on some inhospitable coast or found a grave on the bottom of the ocean. And as time went on, hostile ships visited the Pacific and made prizes of the rich galleons of Spain. Now the remittance from the Philippines failed to reach Mexico. Now the scores of broad dollars sent back, vanished on the seas.

The loss of the invincible Armada in 1588 put an end to Spain’s naval supremacy, and the richly-freighted American galleons often became the prey of British buccaneers. The colony of the Philippines had then just been formed, and was not disturbed until the series of Anglo-Spanish wars before 1760, when its treasure-laden galleons were frequently swept away. This was notably the case after 1743, when Admiral Anson’s fleet infested the coast and became the terror of the Spanish islanders. His exploits filled Manila with consternation, and councils were held to devise some method of getting rid of him; but he set all their efforts at naught. The captured galleon Pinar put a million and a half of dollars into his treasure-chest: the Covadouga yielded him immense wealth. Spies upon high promontories watched the seas for the dreaded British ships; the people of Manila were held ready to defend the city from assault; every one was on the alert.

For each lost galleon another was sent, and in some instances several galleons had to be despatched in a single year. Yet there were three or four occasions in which no galleon reached the Philippines for two or three years; while, after the capture of the Covadouga six years passed without a ship reaching the islands. The effect was disastrous: coin grew scarce, misery prevailed, the Chinese traders broke into open rebellion. There were other sources of revenue besides the Mexican subsidy, but the officials felt their incomes seriously straitened in these periods of want.

Spain lost not only through war, but through peace. Her inelastic commerce invited competition, and British, Dutch, and other merchants began to cut down the great profits of the Philippine trade. These nations sent their ships to Canton, established factories, and bought goods for themselves, cutting off the Spanish monopoly of the traffic with the East. In 1731 foreign ships expended over $3,000,000 of Mexican coin in China for goods. These were smuggled into New Spain, not without help from Spaniards on shore. This proved a serious competition. The old hundred-per-cent. profit was no longer to be had. Acapulco was so beset with smugglers, whose merchandise found its way clandestinely to the city of Mexico, that, at times, buyers could not be found for the galleon-goods except at much reduced rates.

Fraud now stepped in. Goods of inferior quality were sent and offered at old prices. Government inspectors were appointed at Manila to examine goods; but they filled their own pockets at the expense of the public service, and the frauds went on. Contraband goods were taken on the State-galleon itself, concealed in water-jars. The misfortunes that came to the Manila merchants in consequence, were due largely to their own fault: they had “sown the wind and reaped the whirlwind.”

There were certain public funds in Manila that offered themselves to speculative uses. These—known as the Obras Pias—were legacies left by pious persons whose interest was to be used to pay for masses for their souls. Two-thirds were to be lent at interest to traders, the remainder being held to cover losses. The Casa Misericordia was another pious fund that was lent at 40 per cent., sinking to 20 per cent. as trade grew less profitable. In the end, speculative ventures made way with much of this accumulated cash; sorely, it may be, to the misery of the poor souls in Purgatory, waiting to be prayed into Paradise.

A new competition with Philippine commerce came into play at the beginning of the eighteenth century,—that of the merchants of CÁdiz, who had grown jealous of the shipments from Manila to Mexico, which they claimed were injurious to the home-trade. Petitions were therefore sent to the King, who, in response, put a new curb on the scanty island-commerce, prohibiting trade with China in woven goods, skins, silk, and clothing, except fine linen. The imports from China were limited to fine linen, porcelain, wax, pepper, cinnamon, and cloves. Six months’ grace was given, after which all stocks of prohibited goods in Manila were to be burned, and all sent to Mexico to be confiscated. There was nothing strange in this decree. England was at that time practising the same restriction toward her American colonies, though she did not order any goods to be burned.

Decree followed decree during the ensuing years, all pointing to the same end. In 1720 it was decreed that in future two galleons might annually be sent to Mexico, but these were to be of only 500 tons, and their cargoes to be valued at $300,000, made up of non-prohibited goods. Ecclesiastics and foreigners were forbidden to have anything to do with trade. In 1726 the prohibition on silks was removed, but only one galleon was permitted to cross. A protest arose from Spain against the Philippine trade in woven goods, which was declared to be ruinous to the Spanish weaving industries, particularly as the galleons took back Mexican coin instead of Spanish goods. As a result, the 1720 decree was restored in 1731, to the dismay of the Philippine merchants and the people of Mexico. For they had to pay higher prices for Spanish goods, while their coffers were drained to meet the Philippine deficit.

Other Royal decrees were issued from time to time, favoring or injuring trade, and all with the general effect sure to arise from interference with the natural course of commerce. Among these were enactments intended to prevent Mexican capital from being invested in the Philippines. All was done that could be to keep the islands in a state of poverty and decadence.

To mention one further example of Spanish blindness—the priests. Their meddling proved worse than that of the King. Through their influence the non-Christian Chinese were expelled from the islands in 1755, and with them went an industry that caused a deficit of $30,000 a year in the taxes. Trade grew stagnant in consequence of the loss of these active shopkeepers, and the Philippines experienced what Spain had experienced when Philip II. banished the Moorish agriculturists and artisans. In both cases this concession to bigotry threw the country into a deplorable state, and years passed before prosperity returned.