This is the most economically significant study of the Spanish empire’s Atlantic trade to appear in many years, and it is determinedly revisionist. Jeremy Baskes bases his analysis on a staggering amount of “old fashioned” archival work, particularly in Spain. Moreover, the broad array of topics considered makes it simply impossible to do them equal justice in a brief review. To the contrary, its breadth and erudition make the book worthwhile.

I focus here on the main message. For generations—at least since Clarence Haring’s, if not before—historians have regarded the Spanish exclusif as a mode of ensuring the profitability in limited markets. Merchants in Seville, Cádiz, Mexico City, and Lima were permitted to trade through a regulated system of convoys, fairs, and markets. The interest of the Crown, of course, was to share in their rents. Historians have called the contrivance a “monopoly” or the flota system. For three centuries, and making due allowance for pirates, smugglers, and “authorized” interlopers, this was how the system worked: increased scarcity, artificially high prices. The erosion of consumer surplus at the hands of the monopolists was predictable.

To oversimplify his argument, Baskes thinks we have got it backward, and have confused effect with cause. In reality, the evidence of excess profits in the trade was a result of survivors’ bias. Success was hard to come by, and one who had it was richly rewarded. That is because the Atlantic trade was conducted under almost impossibly risky conditions, or under pervasive uncertainty. The high variance in outcomes and the substantial risk of failure logically dictated that a successful venture was extraordinarily profitable, but not on a risk-adjusted basis. As much as any historian, Baskes demonstrates that trading to the Indies was a roll of the dice. As he says, “luck played an immeasurable role in the fortunes of long-distance traders” (p. 154). You could not predict much of anything because thin markets are inherently unstable, and because the information lags then operating were simply grotesque. If the world you thought you were selling to still existed when your cargo arrived—even if your erstwhile political allies were still friends, or that peace after war had not broken out—you were lucky, and only ex post, skilled. What sensible capitalist would participate in a trade plagued by too much competition and abundance, as some Mexican merchants complained after the free trade reforms in the 1790s? For the skillful, or just the lucky, there was a brass ring. For most, there was at least some semblance of stability, a higher probability of a normal return. As Baskes observes, “Regulations were probably more effective in preventing bankruptcies than in generating fortunes” (p. 58). They were about reducing excess volatility, not creating excess profits. (All this is painstakingly documented and reproduced in online appendices at www.sup.org/stayingafloat.) Dismissing Baskes’s argument on ideological grounds, or out of sheer sheer ignorance, as some will surely do, is simply not going to cut it.

I do not think that Baskes is wrong in his revisionism. In fact, I think he is far more right than not, even if cause and effect in complex economic interactions are notoriously hard to pin down. I do think, however, that he overstates his case. For instance, Baskes concludes, “the notion that importers were in any position to collude and fix prices is baseless” (p. 58). “Baseless” is legalese, not historical analysis, and the contention rests on considering a restricted number of pricing models or by looking at traded commodities at a certain level of aggregation. Again, Baskes painstakingly and plausibly considers the number of merchants involved in various fleets and fairs. There were, he avers, simply too many of them to form an effective cartel to restrain trade, and the five-firm concentration ratio of merchants never exceeded 25 percent. This really isn’t much.

These seem conclusive arguments against price-making behavior among merchants, yet the market for luxury goods that was so important to the flotas was highly segmented. At one point in the eighteenth century, four of the top ten merchant houses in Cádiz were French. Presumably, they sold mostly French goods, wares oriented toward the high end of the market. Arguably, this is the market they controlled: It may have been no more than a quarter of the total market, but it was surely a larger share of the market for French merchandise. Who would know better the demand for these wares than French merchants? Wouldn’t other “Spanish” firms simply have been better off following their lead? Could Castilians really undercut the French in selling their own goods? How much price competition was there really? Besides, the Veracruz merchants I know anything about—whom Baskes captures perfectly, in fact—did not sell generic “cloth,” for instance, but dozens of varieties of textiles in which product differentiation (and imperfect competition) was the rule. On the other hand, when the import-export merchant Antonio de Bassoco complained that he wanted to go back to the flota system in Mexico in the 1790s, it was in the context of excess supply and the “novelty” of too much competition. Those were the fruits of “free trade,” Bourbon style.

Perhaps the strongest support for Baskes’s argument comes less from his account of the flota system than from his pioneering explanation of the emergence of the Cádiz marine insurance industry after 1780. Historically, financing and insuring the trade had been done through instruments known as premios a riesgo, or sea loans in which the insurer, usually a merchant, both financed the cargo and underwrote the voyage, collecting the premium and principal only if voyage were successfully completed. Marine insurance, however, underwrote the voyage alone: The merchants’ ability or willingness to finance the trade suddenly disappeared as the flota system wound down. Although Baskes dismisses any single cause for the demise of sea loans and the rise of marine insurance, some coincidences are simply too striking. Either the risks of financing an increasingly oversupplied and volatile market had become too large with “free trade” after 1778, or the eruption of the American Revolution (1776–1783) and the Napoleonic Wars (1794–1815) added too much risk at the margin for any single insurer to bear, or both. As Baskes notes, “[T]he political situation affected insurance premiums more than any other factor” (p. 217). This portion of the volume, about a third of it in total, is quite remarkable. Although someone might quibble with Baskes’ regression specification, which misses the opportunity to explicitly capture the effect of wars and weather on insurance premiums (p. 245), this is a minor matter. Baskes’s work here is of the same order of Frank Spooner’s work on risk and insurance (Risks at Sea, 1983) and needs to be recognized as such.

Monographs on Latin America that come out of Stanford University Press’s Social Science History series are almost uniformly excellent. I have read most of them, and this is certainly one of the best. This is a powerfully nuanced account of the rise and decline of Spain’s Atlantic empire, and of the economic and institutional framework that undergirded it.