In the 16th century, the Lucayan Indians of The Bahamas played a pivotal role in the development of early Monetary Theory in Spain. These models would come to underpin the modern economic theory that we know today.
Through the enslavement of the Lucayans, the products of their forced labour contributed to the creation of a wealth that The Bahamas’s initial colonial rulers, the Spanish, had not previously encountered.
Spain’s acquisition of wealth from the Americas (the “New World”) following Columbus’s voyages in 1492 represented one of history’s most significant transfers of resources and dramatically transformed both Spain and global economics.
Spain’s economy grew through the sudden injection of new wealth from gold and especially silver extracted from mines in Hispaniola. Spain also imported new crops like tobacco, cacao, potatoes, tomatoes, and maize, which became valuable commodities in Europe. All of it was supported by the encomienda system which granted Spanish colonists control over indigenous populations, providing free labor for mining and agriculture —in other words —slavery.
Spain’s new wealth euphoria was short lived however as it suddenly found itself becoming poorer as it became suddenly richer.
“The reason why there is no money, gold or silver in Spain is that there is too much, and Spain is poor because she is rich.”
The challenges associated with this newfound wealth sparked profound economic, monetary, and political thought. This foundational economic and monetary theory, which has endured through the centuries, has become the cornerstone of contemporary economic theory.
The Lucayans and Christopher Columbus
On October 12, 1492, when Christopher Columbus landed on San Salvador, encountering the Lucayans, this event marked the Bahamas’s significant place in world history.
What has been largely overlooked was the Lucayans’ significant contribution to Spanish wealth accumulation. The Lucayan people, indigenous inhabitants of the Bahamas (which they called Guanahani), became one of the first Indigenous peoples of the Americas to face the full devastating impact of European colonization.
When Columbus first landed in the Bahamas in 1492, he encountered the peaceful Lucayan society. Within approximately 25 years, after being forcibly taken from The Bahamas to Hispaniola as slave labourers, the entire Lucayan population—estimated at approximately 40,000 people—was effectively wiped out, primarily through:
1. Gold mining: Many Lucayans were forced to work in gold mines on Hispaniola under brutal conditions.
2. Enslavement for pearl diving: Spanish colonizers forcibly relocated thousands of Lucayans to Hispaniola and Cuba, and eventually to the pearl fisheries off Cubagua (near Venezuela), where harsh diving conditions led to extremely high mortality rates.
The Los Angeles Times Wednesday 27th
February 1980
The wealth extraction was significant:
• The pearls extracted through Lucayan diving labor became a major source of Spanish wealth in the early colonial period
• Lucayans forced labor in gold mines contributed directly to Spanish royal coffers.
• Lucayans expertise as sailors and fishermen was exploited by Spanish colonisers.
This systematic exploitation of the Lucayans represents an early template for colonial wealth extraction that would later be expanded through the transatlantic slave trade and other forms of colonial labor exploitation throughout the Americas.
Introduction of Negro Slaves came soon after as a way of encouraging Spanish settlement to the New World island of Hispaniola
The School of Salamanca, Spain, 16th Century, Monetary Theory developed because of an influx of new wealth into Spain from slavery
The Lucayan case in the 16th century, represents one of the earliest examples of how Indigenous labor and resources were forcibly appropriated to create wealth that would flow into the Old World of Europe, in this case, Spain. Lucayan forced labour financed Spain’s empire, contributing to the influx of precious resources that prompted Salamancan scholars to develop their monetary theories.
The chief exponents of this early monetary theory, were a group of theologians, Domingo de Soto and Martín de Azpilcueta Navarro.
Domingo de Soto (1494 – 15 November 1560) was a Spanish Dominican and Scholastic theologian and naturalist born in Segovia, Spain died in Salamanca, Spain at the age of 66. He is best known as one of the founders of international law, and of the Spanish Thomistic philosophical and theological movement known as the School of Salamanca
Martín de Azpilcueta (13 December 1492 – 1 June 1586), or Doctor Navarrus, was a Navarrese canonist, theologian and economist. Renowned in his time, he was the first to formulate the quantity theory of money 1556 and was with Francisco de Vitoria and Domingo de Soto one of the main thinkers of the School of Salamanca in relation to law and economics.
The School of Salamanca made significant contributions to early monetary theory, and there is a direct historical connection between New World slavery wealth and the development of these economic ideas.
The idea that price is a function of the supply of money was first proposed in the middle of the 16th century by a group of theologians known as the School of Salamanca. The chief exponents of the idea, Domingo de Soto and Martín de Azpileueta Navarro, were particularly interested in what we might now call problems of the morality of capitalism.
“While studying business methods they noticed a connection hetween the flow of gold and silver from the New World and the inflation of prices in Spain. “In Spain,” observed Navarro, “in times when money was scarcer, saleable goods and labour were given for very much less than after the discovery of the Indies, which flooded the country with gold and silver. The reason for this is that money is worth more where and when it is scarce than where and when it is abundant.” The usual explanations were that value was a purely mental construct, reflecting the irrationally different esteem the market applied to intrinsically equivalent products in different times and places.”
From the book: Ideas That Changed The World, Felipe Fernández Armesto, 2004 p.242
“The reason why there is no money, gold or silver in Spain is that there is too much, and Spain is poor because she is rich.”
“A by-product of the theory was to show that money is like other commodities and can be traded for, as Navarro put it, a moderate profit – without dishonour. “All merchandise,” wrote Navarro, “becomes dearer when it is in great demand and short supply, and… money… is merchandise, and therefore also becomes dearer when it is in great demand and short supply.”
From the book: Ideas That Changed The World, Felipe Fernández Armesto, 2004 p.242
The influx of precious metals from the Spanish colonies in the Americas, which were largely extracted through the labor of enslaved indigenous peoples and later enslaved Africans, created unprecedented economic conditions that prompted Salamancan scholars to develop new economic theories.
Several key connections stand out:
1. Price Revolution and Quantity Theory of Money: The massive influx of American silver and gold (extracted largely through enslaved labor) caused significant inflation in Spain and Europe. Scholars like Martín de Azpilcueta and Tomás de Mercado observed that prices rose as precious metals became more abundant. This led them to formulate early versions of the quantity theory of money, recognizing the relationship between money supply and price levels.
2. Theory of Value: The School of Salamanca developed sophisticated theories about the subjective nature of value, partly in response to questions about how to price New World goods and the moral implications of colonial trade, including the slave trade.
3. Just Price Theory: Salamancan scholars like Luis de Molina and Domingo de Soto wrestled with determining fair prices for goods in a context where colonial wealth was distorting markets. This included discussions about the morality of profiting from slavery.
4. Exchange Rate Theory: The constant flow of New World silver created complex international exchange situations, prompting scholars like Azpilcueta to develop early theories of exchange rates and currency arbitrage.
5. Direct Observation: Several key Salamancan scholars, including Tomás de Mercado, spent time in the New World and wrote specifically about the economic impacts of colonial trade, including the transatlantic slave trade.
The School of Salamanca essentially developed monetary theory in response to the unprecedented economic changes triggered by colonial exploitation and the extraction of wealth through enslaved labor. Their observations about inflation, value, and exchange rates were direct responses to economic conditions created by the colonial economy, which was fundamentally built upon various forms of forced labor.
The School of Salamanca’s observations and subsequent economic and monetary theories all began as a result of Christopher Columbus finding the Lucayans of The Bahamas and the wealth that their enslavement brought to the Old World.