#Galleon cargo full#

With more valuable cargo, merchants are more able to compensate officials for the expected cost of a shipwreck. That is, they would be willing to accept a larger probability of shipwreck as long as the marginal value of each cargo is greater than the increase in the probability of shipwreck. The logic behind this result is simple: as many merchants are vying for an allocation of the total space on the galleon, ship officials can extract maximum bribes by pitting each merchant against another to bid the bribe up to the cargo’s value.Īdditionally, when the cargo value is very high, officials are induced to accept more cargo, even beyond the legal limit, and to delay departure past the deadline to load more cargo. The ship’s captain extracts the maximum amount of bribes.

It takes time to load the cargo, but if the ship leaves too late it will run into perilous waters during the monsoon season. We formally model this process: traders in Manila, who want to sell merchandise in Acapulco, bribe galleon officials in exchange for cargo space. In practice, however, corruption was widespread, and merchants could bribe ship captains to carry additional cargo.įigure 1 The route of the Manila Galleons Space on each was rationed officially, only individuals with tickets ( boleta) were allowed to load their cargo. These Manila merchants would then seek to load their cargo on galleons bound for Mexico. Merchants from mainland Asia would arrive in Manila in May, bringing with them these highly valued goods, which they exchanged with Manila-based merchants for silver. There was tremendous demand in Mexico and Spain for East Asian silks, textiles, porcelain, and lacquerware. These restrictions made space on each galleon extremely valuable. The Spanish Crown owned the ships and restricted the number of voyages to one per year between Mexico and Manila it also restricted the number of ships that could sail as part of each voyage.

Importantly, the galleon trade was a government monopoly. The Manila Galleon trade was the longest, most profitable, and most celebrated colonial-era trade route. 2020), we examine the costs of corruption in the context of the Manila Galleon trade. But little empirical work has been done on colonial trading regimes. We also have rigorous empirical studies of the costs of corruption in modern settings ranging from Indonesia (Olken and Barron 2009) and India (Niehaus and Sukhtankar 2013) to sub-Saharan Africa (Reinikka and Svensson 2004). What does the sinking of the San José tell us about the costs of colonial trading regimes and the costs of corruption or rent-seeking more generally? This is a question that goes back to Adam Smith (1776).įrom Tullock (1967) and Krueger (1974), we understand that the overall welfare costs of corruption can exceed the gains to the beneficiaries from Shleifer and Vishny (1993), we know that the industrial structure of rent-seeking matters.

#Galleon cargo full#

The San José was laden with a huge amount of silks and spices, over 197,000 works of Chinese and Japanese porcelain, 47 chests full of objects of worked gold, and hundreds of other chests containing precious stones and objects, the total value of which was recorded as 7,694,742 pesos or more than $500 million in today’s money. It was one of 788 galleons that sailed between Manila and Acapulco, Mexico, between 15 as part of the Manila Galleon trade. In 2011 underwater archaeologists discovered the remains of the San José, a galleon sunk near Lubang Island, Philippines, in July 1694.