Book IV, Chapter VII, 2

So long as all, or most, of the gold brought to Europe by the first adventurers was obtained by the easy means of robbing defenseless natives, even this heavy tax may not have been very hard to pay. Once the natives had been stripped of everything they possessed—as happened completely in St. Domingo and the other countries Columbus discovered within six or eight years—and finding more gold required digging in mines, it became impossible to pay. Strict enforcement of the tax is said to have caused the complete abandonment of the mines of St. Domingo, which have never been worked since. It was soon lowered to a third, then a fifth, afterward a tenth, and finally a twentieth of the gross output of the gold mines. The tax on silver long remained a fifth of gross output and was reduced to a tenth only in the present century. The first adventurers, however, seem to have had little interest in silver. Nothing less precious than gold seemed worth their attention.

The same motive appears to have driven all the Spaniards' other ventures in the New World after Columbus. A sacred thirst for gold carried Ovieda, Nicuessa, and Vasco Nugnes de Balboa to the Isthmus of Darien; Cortes to Mexico; and Almagro and Pizarro to Chili and Peru. When these adventurers reached an unknown coast, their first question was always whether gold could be found there. What they heard on this point determined whether they stayed or left.

Of all the costly and uncertain ventures that bankrupt most of those who undertake them, perhaps none is so thoroughly ruinous as the search for new silver and gold mines. It may be the world's worst lottery, the one where the winnings of those drawing prizes are smallest in proportion to the losses of those drawing blanks. Though the prizes are few and the blanks many, the usual ticket price is the entire fortune of a very rich man. Mining ventures, rather than restoring the capital invested together with the ordinary profits of stock, commonly swallow both capital and profit. Of all enterprises, then, these are the ones a prudent lawgiver seeking to increase the nation's capital would be least inclined to encourage specially or to direct toward them any more of that capital than would flow there on its own. Indeed, nearly everyone has such absurd faith in personal good fortune that wherever success is even faintly possible, too much capital is likely to flow there without encouragement.

Yet while sober reason and experience have always judged these projects most unfavorably, human greed has usually judged them otherwise. The passion that inspired so many people with the absurd notion of a philosopher's stone inspired others with the equally absurd notion of immensely rich gold and silver mines. They overlooked the fact that these metals have been valuable in every age and country chiefly because they are scarce. Their scarcity arises from the tiny quantities nature has deposited in any one place, from the hard, resistant materials she has almost everywhere packed around those quantities, and therefore from the labor and expense everywhere required to reach them. They imagined veins of precious metal could be found in many places as large and plentiful as veins of lead, copper, tin, or iron. Sir Waiter Raleigh's dream of the golden city and country of El Dorado shows that even wise men are not always immune to such extraordinary delusions. More than a hundred years after his death, the Jesuit Gumila still believed in that marvelous country. With great warmth and, I dare say, great sincerity, he declared how happy he would be to bring the light of the gospel to a people so well able to reward their missionary's pious labors.

In the countries first discovered by the Spaniards, no gold or silver mines are now known that are thought worth working. Reports of the quantities of these metals found by the first adventurers were probably greatly exaggerated, as was the fertility of the mines worked immediately after the discovery. What the adventurers were said to have found, however, was enough to inflame the appetite of all their countrymen. Every Spaniard who sailed to America expected to discover an El Dorado. And Fortune did something she has done on very few other occasions: she fulfilled her devotees' extravagant hopes to some degree. With the discovery and conquest of Mexico and Peru—the first about thirty years, the second about forty years, after Columbus's first expedition—she gave them something not unlike the abundance of precious metals they sought.

A plan for trade with the East Indies thus led to the first discovery of the West. A plan of conquest led to all the Spanish settlements in the newly discovered lands. What spurred the conquest was a scheme for finding gold and silver mines; and a succession of accidents beyond the foresight of human wisdom made that scheme far more successful than its promoters had any reasonable grounds to expect.

The first adventurers from all the other European nations attempting to settle in America were inspired by similar fantasies, but were less successful. More than a hundred years passed after the first settlement of the Brazils before mines of silver, gold, or diamonds were discovered there. None have yet been found in the English, French, Dutch, or Danish colonies—or at least none now thought worth working. The first English settlers in North America nevertheless offered the king a fifth of all gold and silver discovered there to induce him to grant their patents. Accordingly, the patents of Sir Waiter Raleigh, of the London and Plymouth companies, of the council of Plymouth, etc. reserved this fifth for the crown. Alongside their hopes of finding gold and silver mines, these first settlers hoped to discover a north-west passage to the East Indies. So far, both hopes have been disappointed.

Part II. Causes of the Prosperity of New Colonies.

When the colony of a civilized nation takes possession of unoccupied land, or of land so thinly inhabited that the natives easily give way to the newcomers, it grows rich and powerful faster than any other human society.

The colonists bring knowledge of agriculture and other useful arts superior to anything that could arise spontaneously over many centuries among peoples they regard as savage and barbarous. They bring, too, the habit of accepting authority, some idea of the orderly government of their homeland, of the legal system supporting it, and of a regular administration of justice; naturally they establish something similar in their new settlement. Among peoples considered savage and barbarous, however, laws and government develop naturally even more slowly than useful arts develop once laws and government have been established far enough to protect them. Every colonist acquires more land than he can possibly cultivate. He pays no rent and hardly any taxes. No landlord claims a share of its produce, and the sovereign's share is ordinarily trifling. He has every reason to make the harvest, almost entirely his own, as great as possible. But his land is usually so extensive that even with all his own efforts and all the help he can employ, he can seldom make it yield a tenth of its potential. He therefore eagerly seeks laborers everywhere and offers the most generous wages. Yet those wages, together with plentiful, cheap land, soon lead the laborers to leave him and become landowners themselves, offering equally generous wages to other laborers, who soon leave in their turn for the same reason. Generous pay encourages marriage. Children are well fed and properly cared for in infancy; when they grow up, their labor is worth much more than their upkeep. As adults, high wages and low land prices enable them to establish themselves just as their fathers did.

Elsewhere, rent and profit consume wages and the two upper orders oppress the lower. In new colonies, however, the interests of the upper orders compel them to treat the lower more generously and humanely, at least where that lower order is not enslaved. Fertile, unoccupied land can be obtained for next to nothing. The additional revenue the owner, who is always the entrepreneur, expects from improving it is his profit, ordinarily very large in these circumstances. But he cannot obtain that profit without employing others to clear and cultivate the land. The vast amount of land relative to the small population typical of new colonies makes such workers hard to find. He does not haggle over wages but is willing to employ labor at any price. High wages encourage population growth. Cheap and plentiful good land encourages improvement and enables the owner to pay those high wages. Nearly the entire price of the land consists of those wages; high as wages for labor, they are low as the price of something so valuable. What promotes population growth and improvement also promotes real wealth and power.

Accordingly, many ancient Greek colonies seem to have grown rich and powerful very quickly. Within a century or two, several appear to have rivaled or even surpassed their mother cities. Syracuse and Agrigentum in Sicily, Tarentum and Locri in Italy, and Ephesus and Miletus in Lesser Asia were, by all accounts, at least equal to any cities in ancient Greece. Though founded later, they seem to have developed all the refined arts, philosophy, poetry, and eloquence, as early and to as high a degree as anywhere in the mother country. Remarkably, the schools of the two oldest Greek philosophers, Thales and Pythagoras, were founded not in ancient Greece but one in an Asiatic colony and the other in an Italian one. All these colonies were established in lands inhabited by peoples they considered savage and barbarous, who easily gave way to the new settlers. Good land was abundant, and complete independence from the mother city left them free to manage their affairs as they thought best served their interests.

The history of the Roman colonies is far less brilliant. Some, such as Florence, eventually became considerable states, but only after many ages and the fall of the mother city. None appears ever to have advanced very quickly. All were founded in conquered provinces, usually already fully populated. Each colonist was seldom allotted much land; and since the colony was not independent, its people could not always manage their affairs in the way they judged best for themselves.

In their abundance of good land, the European colonies founded in America and the West Indies resemble, and far surpass, those of ancient Greece. In their dependence on a mother state, they resemble those of ancient Rome. But their great distance from Europe has lessened the effects of that dependence to some extent in every case. They have been less visible to their mother countries and less subject to their power. As the colonists pursued their interests in their own way, their conduct was often overlooked because it was unknown or misunderstood in Europe. Sometimes it was openly tolerated and accepted because the distance made restraint difficult. Even Spain's violent and arbitrary government has often had to withdraw or soften orders concerning its colonies for fear of a general uprising. Accordingly, all the European colonies have made great progress in wealth, population, and improvement.

While the first adventurers got all, or most, of the gold they brought to Europe by simply robbing people unable to defend themselves, even this heavy tax may not have been too hard to pay. But the inhabitants of St. Domingo and every other land Columbus discovered were completely stripped of their possessions in six or eight years. To find more gold, the adventurers had to dig in mines. Then paying the tax became impossible. Strict collection of the tax is said to have caused the mines of St. Domingo to be abandoned entirely at first. They have never been worked since. The tax was soon cut to a third, then a fifth, later a tenth, and finally a twentieth of the total output of the gold mines. The tax on silver stayed at a fifth of total output for a long time. Only during the present century was it reduced to a tenth. But the first adventurers seem to have cared little about silver. Nothing less valuable than gold seemed worth their notice.

The same motive seems to have driven every later Spanish venture in the New World. A supposedly sacred thirst for gold brought Ovieda, Nicuessa, and Vasco Nugnes de Balboa to the Isthmus of Darien; Cortes to Mexico; and Almagro and Pizarro to Chili and Peru. On reaching an unfamiliar coast, these adventurers always first asked whether gold could be found there. They decided whether to leave or settle the land based on the answer.

Many costly, uncertain ventures bankrupt most of the people who undertake them. Searching for new gold and silver mines may be the most ruinous of all. It may be the worst lottery in the world: the few people who win gain least in comparison with the losses suffered by the many who lose. The prizes are few, the losing tickets many, and the usual price of a ticket is a very rich person's entire fortune. Mining ventures commonly consume both the capital invested and the ordinary profit that stock should earn, instead of returning either. A sensible lawmaker seeking to increase the nation's capital would therefore be especially unwilling to give mining special encouragement or direct more capital to it than would go there on its own. In fact, nearly everyone has such unreasonable confidence in personal good luck that, wherever there is even a slight chance of success, too much capital tends to go into mining without any encouragement.

Sound judgment based on reason and experience has always been very unfavorable to such schemes, but greed usually judges them quite differently. The same passion that gave many people the ridiculous idea of a philosopher's stone gave others the equally ridiculous idea of immensely rich gold and silver mines. They forgot that these metals have always been valuable, in every nation, mainly because they are scarce. They are scarce because nature has placed very little of them together in any one spot and has almost everywhere enclosed those small amounts in hard, stubborn material. Reaching them therefore requires labor and expense everywhere. Yet people imagined that in many places gold and silver veins might be as large and rich as veins of lead, copper, tin, or iron commonly are. Sir Waiter Raleigh's dream of the golden city and land of El Dorado shows that even wise men can fall for such strange illusions. More than a hundred years after his death, the Jesuit Gumila still believed that marvelous country was real. He spoke warmly—and, I am sure, sincerely—about how happy he would be to bring the gospel to people who could so generously reward their missionary's devoted work.

Today no known gold or silver mines in the lands first discovered by the Spaniards are considered worth working. Reports probably greatly exaggerated both the gold and silver the first adventurers found there and the richness of the mines worked just after the discovery. Yet the reported finds were enough to stir the greed of their fellow Spaniards. Every Spaniard who sailed to America expected an El Dorado. This time, as on very few others, fortune partly fulfilled the extravagant hopes of those who trusted it. The discovery and conquest of Mexico and Peru, about thirty and forty years respectively after Columbus's first voyage, brought them something fairly close to the abundance of precious metals they sought.

A plan to trade with the East Indies thus led to the first discovery of the West Indies. A plan for conquest then led to all the Spanish settlements in those newly discovered lands. The conquerors were driven by the prospect of gold and silver mines. A chain of events no one could have foreseen made their plan much more successful than they had any reasonable grounds to expect.

The first settlers from Europe's other nations who tried to establish themselves in America were inspired by similarly fanciful hopes, but were less successful. More than a hundred years passed after the first settlement of the Brazils before any silver, gold, or diamond mines were discovered there. None have yet been found in the English, French, Dutch, or Danish colonies, or at least none now thought worth working. Even so, the first English settlers in North America offered the king a fifth of any gold and silver found there to persuade him to grant their patents. The patents of Sir Waiter Raleigh, the London and Plymouth companies, the council of Plymouth, etc. accordingly reserved that fifth for the crown. These first settlers also hoped to discover a north-west passage to the East Indies as well as gold and silver mines. So far, neither hope has been fulfilled.

Part II. Causes of the Prosperity of New Colonies.

When a colony from a civilized nation takes over land lying unused, or land so sparsely inhabited that the native people easily make way for new settlers, it grows rich and powerful faster than any other human society.

Colonists bring knowledge of farming and other useful skills. That knowledge is greater than what could develop on its own in many centuries among peoples they regard as savage and barbarous. They also bring habits of following authority and some understanding of the organized government, laws, and administration of justice in their home country. They naturally set up something similar in their new settlement. Among peoples without these institutions, law and government develop on their own even more slowly than useful skills do once law and government are sufficiently established to protect those skills. Each colonist gets more land than he could possibly cultivate. He pays no rent and hardly any taxes. No landlord takes a share of his harvest, and the ruler's share is generally tiny. He has every reason to produce as much as possible, since nearly all the output will be his. But his land is usually so extensive that, even with all his own work and all the workers he can hire, he can seldom produce a tenth of what the land could yield. He therefore looks everywhere for laborers and offers them very generous wages. Those high wages, along with abundant cheap land, soon enable the workers to leave him and become landowners themselves. They in turn pay equally generous wages to other workers, who soon leave for the same reason. Good pay encourages marriage. Children are properly fed and cared for when young. Once they grow up, the value of their work far exceeds what it cost to raise them. At maturity, high wages and cheap land let them establish themselves as their fathers did.

In other countries, rent and profit reduce what is available for wages. Landowners and those who earn profits—the two higher groups—oppress workers, the lower group. In new colonies, those two higher groups have an interest in treating workers more generously and humanely, at least when the workers are not enslaved. Very fertile land that has not been cultivated can be bought for almost nothing. Its owner, who is also the person developing it, expects to raise its output and so increase his revenue. The resulting profit is usually very large in these circumstances. But he cannot earn it without other people's labor to clear and cultivate the land. New colonies generally have a great deal of land and very few people, making workers hard to find. The owner therefore does not bargain over wages and is willing to hire workers at any price. High wages encourage population growth. Cheap, plentiful good land encourages improvement and lets owners pay those high wages. Wages make up nearly the whole cost of acquiring and developing the land. They are high as wages, but low as the price paid for something so valuable. Anything that encourages population growth and improvement also encourages real wealth and power.

Many ancient Greek colonies accordingly seem to have become rich and powerful quite quickly. Within a century or two, several apparently matched or even surpassed their mother cities. By all accounts, Syracuse and Agrigentum in Sicily, Tarentum and Locri in Italy, and Ephesus and Miletus in Lesser Asia were at least the equal of any city in ancient Greece. Though founded later, they developed the refined arts, philosophy, poetry, and public speaking just as early and to just as high a level as anywhere in the mother country. Remarkably, the schools of the two earliest Greek philosophers, Thales and Pythagoras, arose not in ancient Greece itself but in colonies—one in Asia, the other in Italy. All these colonies settled in lands inhabited by peoples the Greeks considered savage and barbarous, who easily made way for the settlers. They had plenty of good land. And because they were completely independent of their mother cities, they could run their affairs as they judged best for themselves.

The record of Roman colonies is nowhere near as impressive. Some, including Florence, became important states many centuries later, after their mother city fell. But none seem ever to have developed especially fast. They were all founded in conquered provinces, most of which were already fully populated. Colonists rarely received very much land. Because the colonies were not independent, their inhabitants could not always run their affairs as they thought best.

In their supply of good land, Europe's colonies in America and the West Indies resemble—and far surpass—the colonies of ancient Greece. Their dependence on their mother countries resembles that of Roman colonies. But their great distance from Europe has reduced the effects of that dependence to some degree everywhere. It makes them less visible to and less subject to the power of their mother countries. Often their attempts to pursue their own interests have gone unnoticed because Europeans knew nothing about them or did not understand them. At other times Europeans simply allowed them, because the distance made interference difficult. Even Spain's harsh, arbitrary government has often had to withdraw or soften orders for its colonies for fear of a general uprising. As a result, all the European colonies have made great advances in wealth, population, and improvement.