Tuesday, November 4, 2014

Desired Items and Tax Revenue





            Marcy Norton describes how tobacco and chocolate were used by Mesoamericans for religious and social purposes.  These two substances were commonly used across different political groups speaking different languages.  When Spaniards colonized these people they became aware of the many social meanings attached to tobacco and chocolate.  Norton insists that by observing and increasingly interacting with Amerindians, Spaniards came to appreciate the social aspects of using tobacco and chocolate: their ability to enhance goodwill and cooperation; the honor and respect for others that offering chocolate conferred; the use of chocolate as a prized gift and to further romantic pursuits; and the comradery that smoking with others could produce.  Spaniards recognized that both items had religious meanings for Mesoamericans and in time they also attached significance to tobacco and chocolate beyond mere ingestible goods.  Norton insists that Spaniards, creoles, and mestizos learned to like the taste of chocolate and the physical experience of smoking and snorting tobacco by experiencing them with native peoples, and they copied many of the rituals associated with ingesting these subjects.  Norton emphasizes that the ways tobacco and chocolate were enjoyed and consumed were learned from Amerindians.
            People who had travelled and lived in Spanish America took tobacco and chocolate back to Spain when they returned.  By the last two decades of the sixteenth century, Atlantic traders recognized that there was a base of consumers living in Spain that would eagerly purchase imported tobacco and chocolate.  Chocolate had been a traded commodity in Spanish America for over thousands of years.  Members of the Church and other notables were eager to continue consuming chocolate they had learned to value in New Spain.  Adding chocolate to ships’ cargo returning to Spain with New World goods was a simple step to take at the end of the sixteenth century.  Tobacco was grown throughout the Caribbean region.  Because it was so common it had not developed a significant trade network.  The demand of the international community of mariners in the Caribbean first turned tobacco into a trade commodity.  Spanish settlers living along the Caribbean coast learned they could trade the tobacco they grew for European imports from Dutch, English, and French ships although they knew this was illegal trade.  To stop rampant export violations the Crown banned tobacco farming in Spanish colonies.  At this point indigenous people sold tobacco directly to European sailors in exchange for weapons and metal items, and some Spanish colonials continued to sell tobacco despite the ban.
            In chapter nine of Sacred Gifts, Profane Pleasures, Norton describes the creation of the state-sanctioned tobacco monopoly in the seventeenth century.  The imperial goals of the Spanish state required large amounts of revenue.  Philip II defaulted on loans provided by Genoese bankers four times in the second half of the sixteenth century.  In 1590 the Cortes of Castile agreed to a tax commonly called the millones that was to be in effect for six years only.  After its initial term the millones was permanently extended.  This tax was applied against basic foods: wine, meat, olive oil, and vinegar.  It was very unpopular, and many thought it unfairly jeopardized the poorest members of society.  It also taxed the clergy and the nobles who vehemently complained about this injustice.  Philip IV’s prime minister repealed the millones in 1631 hoping that he could achieve the same fiscal effect with an increase in the price of salt.  This state revenue scheme failed from the standpoint of inadequate receipts and because of strong public displeasure.  The millones was reinstated in 1632, but this time the items to be taxed were tobacco, chocolate, sugar, conserves, paper, and fish.  The state argued that these items would not unfairly hurt the poor.  Tobacco and chocolate were viewed as luxuries or non-essential goods.  To further the impact of the revenue enhancing program the state declared a monopoly on tobacco, and the procurement, distribution, and sale of tobacco was to be auctioned off by the state to a concessionaire.  The concessionaire acted as a tax farmer who paid the Crown an agreed upon amount twice a year.  The tax farmer estimated the profit he could make beyond the agreed remittance to the state and bid accordingly.  The monopoly associated with tobacco provided a variety of opportunities for the concessionaire to earn profits.  The tobacco monopoly was a vast organizational structure involving collection of imports, distribution throughout Castile, supplying approved retail outlets, and factories that processed the tobacco, added scents to snuff, produced cigars, and maintained all the financial records of the organization as well as making twice-yearly payments to the Crown.  Norton declares this was an industry in a pre-industrial age.
            The individuals who dominated this concession from 1637 to 1701 were predominantly members of the Portuguese crypto-Jewish or New Christian community.  When Jews were forced to leave Spain in 1492 many went to Portugal where they were accepted.  Eventually the king of Portugal bowed to Spanish pressure in 1497, but his approach was to require that all Jews convert to Christianity after which they could live peacefully in Portugal.  Many conversions occurred for outward appearances while in private individuals practiced their traditional faith.  Norton is clear that this community was diverse and probably included some sincere converts and families including both Jewish and Christian members.  In the popular imagination the tobacco monopoly was controlled by Portuguese Jews.  They were able to protect their community and further their financial activities as long-distance traders, bankers to the Crown, and tax farmers acting in the capacity of state administrators.  Norton acknowledges that tax farming was a common European practice during this period.  She states that the communities and individuals who aided the state in collecting tax revenues derived benefits and privileges from doing so.  Certainly the Portuguese New Christians were able to maintain their community in a setting that was profoundly hostile to them although the Inquisition never stopped pursuing them.  Norton links this Jewish community, the imperial state, and tobacco in a web that resulted in a more modern and intrusive state.  She also claims that by authorizing a state monopoly on tobacco the state legitimated a substance they had defined as a vice.  At the same time the tobacco monopoly placed the state in the position of being an accessory to a vice.
            I think Norton is missing one important point.  The Spanish state in the seventeenth century was weak.  It farmed out tax collection, as did France, because it could not afford to maintain the administration to collect the taxes it needed.  States that have underdeveloped and poor economies collect tax revenue from import duties and sales taxes.  Developed economies collect the majority of their tax revenues from income taxes.  In the seventeenth century most countries were underdeveloped and unable to collect the revenues they needed to conduct their affairs, and certainly they were not able to provide security or many useful facilities for their citizens.  As Norton admits, the state authorized tobacco monopoly was inefficient and led to continual attempts to circumvent it, many of them successful.  The people who implemented the monopoly broke the rules about buying exclusively from Spanish sources.  Possibly the state would never have gotten the promised and much needed tax revenues had the authorized monopoly not bought and sold tobacco coming to Europe on Dutch, French, and English ships or tobacco that originated in Virginia.  This doesn’t seem to me to be a state with impressive power, quite the contrary.  The monopoly best served the monopolists.  Nor do I think consumers worried over much about whether or not the state thought tobacco was a vice.

         

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