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Staying AfloatRisk and Uncertainty in Spanish Atlantic World Trade, 1760-1820$
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Jeremy Baskes

Print publication date: 2013

Print ISBN-13: 9780804785426

Published to Stanford Scholarship Online: January 2014

DOI: 10.11126/stanford/9780804785426.001.0001

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The Institutions of Trade and the Reduction of Market Risk: The Convoy System

The Institutions of Trade and the Reduction of Market Risk: The Convoy System

(p.43) Chapter 3 The Institutions of Trade and the Reduction of Market Risk: The Convoy System
Staying Afloat

Jeremy Baskes

Stanford University Press

This chapter presents a revisionist explanation for the Spanish flota (carrera de indias) universally depicted by historians as a monopolistic trade system that generated excessive profits to the privileged traders of the merchant guilds (consulados). Challenging the notion that Spanish traders exercised commercial monopolies, this chapter shows that within the carrera de indias, traders faced considerable competition from one another, mitigating their ability to garner monopoly profits. Introducing the concept of market risk, the risks associated with commodity price volatility, the chapter argues that the appeal of the convoy system was its capacity to regularize commodity flows, to balance supply with demand. It was an institution that reduced the risks and uncertainties caused by poor information and the inability of merchants to react rapidly to changes in supply in transatlantic markets.

Keywords:   convoy system, monopoly, market risk, price volatility, chartered trading company, carrera de indias, economic institution, uncertainty, consulado, trade fair

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