This book is a very welcome addition to the growing literature on risk management, trust, reputation, uncertainty and trade networks during the eighteenth-century Spanish Atlantic trade. These were times when ‘long-distance trade entailed a notable element of gambling’ (p. 3), so focusing on risk management is an effective way of analysing this particular branch of commerce. The book complements previous works, in particular Xabier Lamikiz's Trade and Trust in the Eighteenth-Century Atlantic World (Boydell Press for the Royal Historical Society, 2010).
The greatest merit of the book is its focus on risk management as a key factor in traders' commercial behaviour. Baskes shows how Spanish traders habitually engaged in risk-reducing strategies to such an extent that managing risk, according to the author, was their principal concern. Thus, the author puts risk management centre stage. Baskes is right to insist that this is an important but under-researched topic in the historiography of the Spanish Empire. The primary source of information used is the Fondos de Consulados, located at the Archivo General de Indias (Seville, Spain).
The book is divided into ten chapters. Chapter 1 is an introduction. Chapter 2 is about the risks associated with poor information, at a time when ‘merchants were forced to transact without adequate access to good and reliable information’ (p. 17) and when lengthy communications delays also increased risks. The next chapter deals with the institutions created to reduce market risks and uncertainty. Here it is argued that the convoy system was one such institution. Against prevailing views, Baskes argues that ‘the rigid commercial regulations that governed colonial trade … helped to overcome market imperfections’ (p. 44). Baskes further maintains that to describe the fleet system as monopolistic is inaccurate: ‘there were simply too many merchants engaged in the fleet trade to collude’ (p. 53), while there was considerable competition between them, making it very difficult to earn excessive profits. Chapter 4 maintains that the introduction of comercio libre increased commercial risks by augmenting uncertainty once imperial trade regulations were reformed. Here Baskes shows how the end of the regulated commerce between Spain and her colonies led to increased risk, and thus to increasing commercial failures: ‘unregulated commerce yielded unfettered market risk’ (p. 277).
The following chapter deals with the importance of credit in the marketing chain of Atlantic trade, as well as with the risks inherent to the provision of credit. Chapter 6 is about the impact of war on Atlantic trade after 1793 (for example, privateering and price divergence), how merchants responded to these elements (for example, viewing war in terms of substantially increasing potential profits or as a situation of rising risk) and how traders protected themselves against the risk of war. Chapters 7 to 9 deal with the Cadiz marine insurance industry. These chapters contain new work, and make the greatest contribution to our understanding of the subject. Despite the huge importance of marine insurance in mitigating the risks encountered by long-distance traders, the Spanish marine insurance market that developed in Cadiz in the late eighteenth century has been largely neglected. This is of consequence because without this industry Spanish merchants would not have been able to transfer so many risks to underwriters, thus preventing them from engaging as widely as they did in Atlantic commerce. The last chapter draws conclusions from the main findings of the book.
There are a few minor issues with this fine monograph. In the first chapters there is too much repetition of ideas, which at times may distract the reader, while chapters 4 and 5 are too descriptive, containing lengthy (occasionally tedious) examples to illustrate the points being made. Furthermore, several of the main ideas of these early chapters are contained in the work of Lamikiz (such as the impact of information asymmetries and the importance of trust and reputation). Regarding the chapters on the Cadiz insurance industry, it is argued that the decline of sea loans (which combined commercial credit and marine insurance) coincided with the flourishing of Cadiz's insurance industry, so that merchants obtained credit elsewhere (sea loans were replaced by marine insurance). This is fine, but I missed a deeper understanding of the new credit alternatives for these merchants who previously borrowed via sea loans. Indeed, it is likely that a financial market developed alongside the insurance industry, or perhaps credit from London or other financial centres was readily available, and on better terms. Baskes also argues that obtaining marine insurance in Cadiz was more convenient for Spanish merchants, but no evidence is given to sustain this assertion. It was probably easier, but I doubt Cadiz's premiums were lower than they were in London or elsewhere. Baskes does not compare premium rates in Cadiz with those available on other markets, not even market shares. To what extent did Spanish merchants continue to use London's insurance facilities? We are left in the dark with regard to this important question. Yes, Cadiz marine insurance flourished, but so did insurance industries elsewhere in Europe. There was an important deepening of the internationalisation of the marine insurance industry during this period, which Baskes fails to notice.
Finally, despite the rich bibliography contained in the book, there are some notable omissions. For instance, the work of Adrian Pearce is never cited, not even when the author discusses the participation of British merchants in American trade, a topic Pearce covers masterfully. Likewise, important works on the East India Company (such as Huw Bowen's) are not mentioned when Baskes compares the chartered trading companies (pp. 60–1) to the fleet system. Finally, the author fails to engage with the general literature on the history of the insurance industry: the contributions of authors such as Robin Pearson are omitted, and there is no mention of Peter Borscheid and Niels Viggo Haueter's World Insurance (Oxford University Press, 2012), although this book was published just prior to Baskes' work. Thus, the Cadiz-based insurance industry is analysed in isolation to the rest of the European insurance industry.
Nevertheless, this is a fine book, a must-read for anyone interested in eighteenth-century Atlantic trade, and in long-distance trade before the transport and communications revolutions that transformed the nature of trade from the second half of the nineteenth century onwards. Indeed, I was struck by the fact that many of the problems faced by long-distance merchants during the eighteenth century, nicely described in this book, are the same as those encountered by British merchants trading with South America between c. 1810 and 1850. Finally, I also welcomed the fact that the author applies sound economic theory to sustain strong arguments (for example, the distinction made between risk and uncertainty).
