Seven Elements That Have Changed the World (18 page)

From 1880 to the start of the First World War, the gold standard flourished. In a period of relative global peace and prosperity, the world’s reverence for gold supported global economic growth. Just as the gold coins of King Croesus and the Venetian ducat were central to the rise of two great Eurasian civilisations, so the gold standard enabled the economy of the entire world to thrive. But this was not without controversy. The US had used both gold and silver as legal tender and that created all the problems that were evident in the UK. After its civil war it went on to a mono-metallic gold standard. This constrained inflation and facilitated international trade but reduced the money supply. Advocates such as the ‘Gold Democrats’ and the mainstream Republicans talked of monetary discipline breeding prosperity while its opponents – the mainstream Democrats and the ‘Silver Republicans’ – wanted the return of silver which would inflate the money, make ‘the struggling masses’ feel more prosperous at the expense of ‘the idle holders of idle capital’,
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and benefit their local silver mining industry. All of this culminated in the great speech in 1896 of William Jennings Bryan who, arguing against monetary discipline, declaimed, ‘you shall not press down on the brow of labour this crown of thorns, you shall not crucify mankind upon a cross of gold’.
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But this great peroration was to no effect. More gold was discovered around the world and the money supply eased.

During the First World War, the gold standard was put under increasing pressure. Huge military expenditure unbalanced budgets, resulting in high inflation, with the result that many governments could no longer guarantee the conversion of currency back into gold. In both world wars, many nations took themselves off the gold standard. After the wars, large public spending for reconstruction placed similar pressures on
government finances. Many governments did not want to be restrained by the gold standard, instead preferring a monetary system that allowed them to pursue domestic political aims with freedom. British economist John Maynard Keynes was clear that participating in the gold standard limited a democracy’s ability to set its own domestic policies, such as reducing unemployment.

In spite of all of these difficulties, the desire for a gold standard would not go away. The Bretton Woods Agreement was its most successful revival. In the search for stability and unity after the Second World War, the international gold standard was reintroduced in 1944. By agreement, the value of the dollar was pegged to the value of gold. The US was able to do this since its economy was in good shape, having suffered little war damage. But no currency is as enduring as gold. In the 1960s, the previously thriving US economy began to shrink. Large domestic expenditures and the mounting costs of the Vietnam War led to an increasing imbalance of payments. Inflation and unemployment were on the rise and the US’s stock of gold was rapidly shrinking. The US could no longer guarantee convertibility of its currency into gold and the Bretton Woods Agreement became a constraint on the government’s ability to strengthen the economy.

President Nixon had two options: to implement high taxes, high interest rates and extreme budget discipline, or to abolish the dollar’s tie to the value of gold and allow it to float freely in foreign exchange markets. On Friday 13 August 1971, the President went to Camp David in secrecy with his economic advisers, where he made the decision to abolish the gold standard. In the pandemonium that followed, the price of gold kept going up. By 1980 the gold price reached what was then a record high of $859 an ounce, as investors sought refuge from inflation and placed their faith in gold. And just as the price peaked, a lucky find in the Brazilian jungle once again demonstrated the lengths to which humans would go in pursuit of this alluring element.

In 1980 near the small town of Três Barras in the south of Brazil, a farmer was working the land he had carved out of the surrounding jungle when he
noticed a gleaming gold nugget piercing the mud. He sold the nugget at a nearby town and from there the news quickly spread. Soon
10
,
000 garim-peiros
, gold diggers, had appeared on the farm in the hope of finding something themselves. Ramshackle settlements sprang up, much as they did during the Californian gold rush. Workers lived in insanitary and generally inhuman conditions. Crime was commonplace; murder and prostitution were rife. Between 1979 and 1980 gold production in Brazil had increased more than fourfold to 37 tonnes, in large part owing to output from the mine at Três Barras.
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In 1986, when the photojournalist Sebastião Salgado arrived at Três Barras, now called Serra Pelada, it was better organised. The site had been split into small sections, each dug by a small team of workers. The owner of a section paid a miner just twenty cents for each 50-kilogram sack of pay dirt he carried. When gold was struck in a section, each worker had the right to pick one of these sacks. Inside they may find fortune and freedom,’ wrote Salgado. ‘Their lives are a delirious sequence of climbs down into the vast hold and climbs out to the edge of the mine, bearing a sack of earth and the hope of gold.’
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The mine was in rough terrain and that meant that mechanised equipment could not be used. Salgado’s images captured the workers, looking like ants, as they scrambled up ladders against the treacherous mine slopes. His black and white images appear to be from a bygone age, more akin to the Spanish conquistadors’ mines of the sixteenth century than of anything from today. Gold offers the potential to support the development of an economy, but all too often its bounty falls into the hands of a powerful few. At Serra Pelada, a few rich landowners took away the great majority of the mine’s output, leaving thousands of workers destitute when the mine closed in 1992.
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Human use of gold has not changed greatly since the time of the pharaohs, or of the Colombian Muisca, or of Renaissance Venice. In all these different eras gold was both an adornment and a store of wealth, embodying both power and security. In times of prosperity, wealth was on display and coins changed hands; in times of insecurity gold was hoarded. During the growth of the international gold standard in the late nineteenth century, much of the newly mined gold was placed in
underground vaults as bullion. In 1930, Keynes reflected on the disappearance of gold: ‘[Gold] no longer passes from hand to hand, and the touch of metal has been taken away from men’s greedy palms. The little household gods, who dwell in purses and stockings and tin boxes, have been swallowed by a single golden image in each country, which lives underground and is not seen. Gold is out of sight, gone back again into the soil. But when gods are no longer seen in yellow panoply walking the earth, we begin to rationalize them; and it is not long before there is nothing left.’
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Keynes predicted that gold would lose its irrational allure. But recent history says something different. In August 2011, in the aftermath of the financial crisis that began in 2008, gold reached a record nominal high of near $1,900 an ounce, more than double its price only four years previously.

Miners have always gone to extreme lengths to get gold. I first visited the gold and copper mining pit at Bingham Canyon, in Utah, in 1986, when it was owned by BP. Bingham Canyon is 4.4 kilometres across and 1.2 kilometres deep; it is the biggest man-made hole on the face of the Earth, mined with equipment that made me feel like an ant in a land of giants. Copper was, at the time, of so little value that it was the gold that kept this mine going. The Tau Tona gold mine, four kilometres under the surface in South Africa, is the world’s deepest mining operation. Here the pay dirt contains only tiny traces of gold. Each year 500 tonnes of gold are mined in South Africa, requiring 70 million tonnes of earth to be raised and milled in the process. We seem to dig gold out of the ground at great cost, only to put it back under the ground as bullion.

Gold’s allure is timeless and we continue to treat it with an almost religious reverence. No currency is tied to it and no trade is facilitated by it but still we want more and more of it. It is still
the
global symbol of wealth and success. Elegant, sun-tanned women adorn themselves with gold jewellery in a contemporary imitation of El Dorado; Olympic champions and Nobel prize-winners still cherish the allure of gold medals; we still exchange gold rings when getting married. Our faith in gold is enduring; our relationship with it has never grown up.
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Gold does not go away, because it is incorruptible. So where is all the gold of the pharaohs and conquistadors? It was simply melted down and transformed from one form to another. The
wedding ring on your finger could be made from the gold from the output of Bingham Canyon or the Tau Tona gold mines. But there is just a chance that in it there is a little piece of the gold riches of El Dorado.

S
ILVER FIRST APPEARED IN
my life through photography. I was a child in Singapore and quite lonely because both my parents worked and left me in the care of a nanny. The fact that they both worked in the 1950s was unusual; the company of a nanny was not. To keep me amused I was given a camera and that began a lifelong affair with photography, the basis upon which silver changed my world. It gave me a source of pleasure, a way of enquiring and a way of seeing.

Long before the invention of photography, silver was used, like gold, as a store and symbol of wealth. And this is how I start silver’s story. In South America rumours of La Sierra de la Plata, the silver mountains, spread among the conquistadors just as the legend of El Dorado had done previously. Those mountains, they heard, lay across the hot and arid lowlands of the Chaco Boreal. Suffering treacherous climates and committing atrocious crimes against the natives, the Spanish conquistadors arrived in the Cordillera Real mountain range, but, unlike the expeditions that set out in search of El Dorado, their search was not in vain. Rising to a peak of almost 5,000 metres above sea level, the conical Cerro de Potosí rose up in front of them. Digging beneath the barren slopes, they found that the mountain’s heart was made of silver.
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Around the turn of the sixteenth century, decades before the arrival of the Spanish conquistadors in the Inca territories, Emperor Huayna Capac
(the father of Atahualpa who was subsequently brutally murdered by the conquistadors) saw the perfectly conical form of Cerro de Potosí and concluded, somehow, that it must be filled with precious stones and metals. He was right. Tens of millions of years before, volcanic material, rich in metallic minerals, was pushed towards the earth’s surface and forced into the rock fractures of the nascent Cerro de Potosí. Here it solidified, forming veins of silver that were both densely packed and highly enriched. Hidden beneath the mountain’s barren slopes, these veins would lie in wait, undisturbed until the time of the Incas. According to legend, the Emperor’s men had begun to dig into the hillside when a booming voice was heard to say: ‘The Lord has reserved this for others who will come after you.’
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They fled the mountain and gave it the name, Potosí, which in Quechan means ‘big thunder’.

Those ‘others’, it seems, were the Spanish conquistadors. No one knows exactly who first opened the veins of Potosí. Stories abound, such as the Indian who, while chasing an errant llama, stumbled across a silver outcrop on the mountain’s slopes. By the time the Spanish arrived in the 1540s, it is very likely that Indians were, in a small way, already mining, but large operations only began after Gonzalo Pizarro arrived in the Inca Empire. By 1545, the conquistadors were cutting deep into the mountain’s heart of silver. The small settlement of Potosí, situated in the shadow of the mountain and sharing its name, soon became the centre of Peru and one of the world’s biggest and richest cities. When the first census was ordered by the Viceroy Francisco de Toledo around twenty-five years later it had grown from a few small huts to a settlement of 120,000 people.

Situated 4,000 metres above sea level, it is a cold, dry and very windy place. Luis Capoche, a sixteenth-century silver miner and refiner, wrote of the violent gales that ‘bring with them so much dust and sand that they darken the air’.
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But in this barren place, set in the Andes, the Spanish created an opulent city in which grand colonial mansions lined the narrow streets and where merchants sold ‘felt hats from France … steel implements from Germany … and crystal glass from Venice.’
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For entertainment, they built gambling houses, dance halls and theatres. Some seven hundred professional gamblers and more than a hundred prostitutes lived in the city. Fights were a regular occurrence between the many diverse
groups that flooded into the city from all over the world and duels became a regular and permitted activity. Potosí was the South American centre of colonial debauchery. It played host to the most extravagant of festivals. In 1608, the feast of the Holy Sacrament was celebrated with six days of plays, six nights of masked balls, eight days of bullfights, three days of fiestas and two days of tournaments. One fiesta included a plaza containing a circus ‘with as many different kinds of animals as in Noah’s Ark, as well as fountains simultaneously spouting wine, water, and the native drink.’
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El Dorado’s city of gold may have been a myth, but from the hidden wealth of the Cerro de Potosí the conquistadors created their own city of silver. The lavish city life reflected the 700 per cent expansion in production between 1573 and 1585, enabled by new hydraulic mining technologies. Those needed a lot of water the year round. Vast dams and a system of thirty-two lakes containing some six million metric tonnes of water were constructed. In 1592, silver production peaked at 200 tonnes per annum before slowly declining through the seventeenth and eighteenth centuries. In two hundred years the mountain had yielded more than half the world’s production of silver, and a total of more than 30,000 tonnes.