Bourbon Imperialism: Fiscal Transfers and Contraband Trade in Alta California, 1769 to 1809 Marie Christine Duggan1 Abstract: La historiografía dibuja a Hispanoamérica como una unidad fiscal interdependiente que se disolvió en 1810 (Irigoin y Grafe 2007). Se analizará mediante los terminos de la balanza de pagos el impacto de esta ruptura en la Alta California. Se calculará la dependencia 1769-1809 de las transferencias de la Nueva España en comparación con los ingresos por exportaciones. Se considerará el peso relativo de los ingresos tributarios y donaciones piadosas en las transferencias, así como la competencia entre los anglo-americanos e hispanos como compradores de las exportaciones de California. Aclara la relación económica de California con la Nueva España y también la relación evolutiva entre la iglesia, el estado y el sector privado en la estructura imperial Borbónica. The historiography depicts Spanish America as an interdependent fiscal unit which dissolved in 1810 (Irigoin and Grafe 2007). Bourbon financing for California and its cessation will be analyzed here through the balance of payments. The relative dependence on fiscal transfers from New Spain, compared to the export trade, will be estimated for 1769 to 1809. Furthermore, the relative weight of tax revenues compared to pious donations will be explored in the fiscal transfer. The competition between Anglo-American and Spanish American merchants for California’s exports will also be considered. The analysis clarifies the economic tie between Caifornia and New Spain, and also the evolving relationship between church, state, and private sector in the imperial structure of Bourbon Spain. Keyword: Spanish California, Bourbon reform, fiscal expenditures, Pacific trade JEL Codes: N16 Macroeconomic history of Latin America, N91 US Economic History pre-1913, F43 Open economy macroeconomics 1 Professor of Economics, Keene State College, 229 Main Street, Mailstop 3400, Keene, NH 03435, [email protected], (603)831-4386 272 Introduction In 1769 market forces were emerging in Europe as a serious alternative to government and religious fiat as a new organizing principle for society (Smith 1776, Montesquieu, Jovellanos 1794). In Spain, Carlos III liberated grain markets in 1765, and took a step toward redistributing property when he expelled the Jesuit Order in 1767. Yet in New Spain, Bourbon policies implemented by José de Galvez seemed antithetical to market growth. Galvez’ efficient tax collection at ports angered business interests, and the expulsion of the Jesuits in 1767 upended rural Indian societies, weakened credit circuits, and also decimated the system of university education. How could the policies implemented by Bourbon Spain in Spanish America foment growth? Alta California was a peculiarly Bourbon colony set into motion by Galvez in 1768. Exploring California’s financing gives some insight into the methods and tensions of Bourbon expansion. California is then a case study for exploring the changing relationship between church, state, and private sector of the late 18th century in Spanish America. The level of Spain’s government support for the colony will be assessed in part one below. Though 18th century California is known today as “mission California,” it will quickly emerge that pious donations were but a small percentage of the colony’s funding, and that eighty percent of the government funds went to military defense of Pacific ports from British and Russian rivals. In part two, the level of quasi-legal commerce by Spanish-American merchants in California and contraband trade with Anglo-Americans will be estimated. Actual quantities of contraband are impossible to obtain, but quantitative references from various years permit a sense of the levels in the 1780s, the increases between 1785 and 1806, and the decline from 1806 to 1810. With a best guess of contraband in hand, the balance of payments identity will be used to explore California’s dependence on government support for the 1785 to 1810 period in part three. It is reasonable to assume that contraband and informal trade typically involved in-kind transfers. Thus the persistent trade deficit that showed up in California’s official accounts was cancelled by capital inflows whose magnitude and source will be explained. Government financing for California rarely arrived after 1809 (once the King of Spain was imprisoned by France). Knowing the sources of California’s pre-1809 financing hints at both the magnitude of institutional change that must have occurred, and also suggests that the way California survived was by shifting toward increased integration into Pacific Rim markets. 273 Review of the Literature and Historical Context There are two literatures which connect with the research into Bourbon California’s financing: fiscal flows of late 18th century New Spain, and contraband trade in the Pacific. The fiscal interdependence of different parts of Spanish America has been explored based on TePaske and Klein’s path-breaking work … Marichal and Souto…Irigoin and Grafe…Marichal. The California research confirms that New Spain was financing California, primarily out of tax revenues from the states of Guadalajara and Rosario. The second literature concerns trade in the Pacific Rim. Carmen Yuste 1984 describes that connections between Manila and Mexico City merchants that financed trade on the Manila Galleon which stopped at Monterey, California most years between 1770 and 1785. Dení Trejo analyzed in 2006 the business community centered in the Port of San Blas and Guadalajara in the Bourbon period. She also uncovered archival evidence of Spain-based ships authorized to trade between Cadiz and California in the 1790s. Guadelupe Pinzon… Mariano Bonialian (2012). shows that trade between Lima and San Blas moved in and out of legality during the last years of the 18th century. The 1760s began with Britain’s temporary and humiliating occupation of Spain’s commercial entrepots of Havana and Manila in 1762. The occupations galvanized Spain to increase tax revenues and to spend them on a revitalized military (Marichal 2007, Kuethe 1978). The subtext of Spanish defense of the Pacific Rim was to prevent subjects of the Spanish empire from engaging in commerce with Britain. Indeed, the British were able to occupy Manila in part because the Chinese colony of businessmen cooperated with the invader. The interconnection of military defense with trade concerns meant that the naval ships departing from San Blas for the Pacific Northwest not only sought to identify British (and Russian) outposts, but also to suggest ways the Spanish could supplant them in the fur trade. Improved defense of the Pacific included founding three presidios in Alta California in the decade following the occupation of Manila. The organization of commerce in the Spanish Empire relied on consulados which were associations of noble families to which the King had granted the right to monopoly profits on a particular leg of Spain’s mercantile system. Consulado de Mexico held the monopoly on reselling imports from Spain and Manila whole-sale to retail merchants of New Spain’s regions (Yuste, Bonialian, Del Valle). By the 18th century, there was a sense in Spain that Spanish sellers were getting a low markup on lots sold to Consulado de Mexico merchants (Bonialian 2012). What 274 gave the Mexico City merchants extra strength to hold out for low prices in negotiations with Spanish businessmen was their access to an alternate source of supply of goods from Asia via the Manila galleon which docked at Acapulco. That shipping route is relevant because the galleon (and any ship from Manila) would dock at Monterey to obtain water and fresh food. California was founded during a period when the battle between Britain and Spain over Pacific Trade had caused serious losses to Mexico-City merchants--meaning in practice that Pacific trade was less profitable, and hence on the decline (Yuste). Bourbon Spain was hoping to reconstruct Manila- Spain trade by bypassing Mexico City merchants, and to that end founded a Consulado de Manila in 1769 and the Spain-based Philippine Company in 1785 (Bonialian). As will become clear, merchants in Mexico City had not given up, and kept an ear out for economic opportunities in California. The port of San Blas had been established north of Acapulco as a government naval base for expanding into California. San Blas was granted permission to trade with… and later with … In 1794, Miguel Costansó the 1790s, individual merchants received permission to trade in otter skins from California… One such merchant was Pedro de Gonzalez Noriega. He is described as… His sister’s son, Jose de la Guerra y Noriega, came from Spain to apprentice with him, and two years after Gonzalez de Noriega received permission to engage in the Pacific Rim otter trade, his nephew appears as the business manager (habilitado) for the California military. By 1800, Jose de la Guerra y Noriega was commander of the Presidio of Santa Barbara, and the unofficial seat of his Pacific mercantile business was Rancho Refugio on a smuggler’s cove, which had ostensibly been granted to his retired Sergeant Ortega. This chain of events suggests that the Presidio commander’s involvement in Pacific Rim trade was not a sideline to his military role, but rather that his military occupation was secondary to his position in the Noriega family trading network. The method below is to calculate first official balance of payments atatistics without considering contraband trade