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Through most of human history, agriculture was the primary economic foundation and source of wealth. Here Spain was at a disadvantage to much of the rest of Europe. Large areas of Spain are arid and not very productive in contrast to France with its rich, well swattered farm lands. Few counties were as productive as France, but almost all were more productive than Spain. But this was not all of Spain's problems. Spain engaged in large numbers of wars with various countries requiting very expensive professional armies. Rather than making good use of the American gold and silver by founding new industries Europe entered the modern age, Spain purchased luxury goods made abroad. Also in 1492, Spain expelled it Jews and thus lost some of its most productive citizens. The Inquisition established earlier was used to track down Jews who persisted in their faith as well as free thinking Christians. Shortly afterwards the Protestant Reformation began to reshape Europe, especially northern Europe. Spain became the major force leading the counter Reformation and unlike England and northern Europe did not benefit from the new ideas swirling in Europe and changing society. Spain was also adversely affected by clinging to medieval economic structures while other countries were adopting more efficient economic and financial systems. Spanish economic policies such as they were seem aimed primarily at maintaining the privileges of the aristocracy and existing social structure. There is absolutely no indication that the Monarchy understood the importance of promoting or even maintaining the the economy or the relationship between the economy and a powerful military, both land forces and a navy. The list is legendary. The Monarchy took step after step which adversely affected the economic underpinnings of the Spanish military.
Through most of human history, agriculture was the primary economic foundation and source of wealth. Here Spain was at a disadvantage to much of the rest of Europe. Large areas of Spain are arid and not very productive in contrast to France wish its rich, well watered farm lands. Few counties were as productive as France, but almost all were more productive than Spain. Unlike France, there were no canals and irrigation projects to increase productivity. But this was not all of Spain's problems.
Spain began building a colonial empire even before completing the Recoquista or unification (1492). The first overseas possession was the Canary Islands (beginning 1402) and it served as a template for the country's future imperial expansion. Spain was formed primarily by the fusion of Castille and Aragon after the marriage of Isabella and Ferdinand who ruled as joint sovereigns. Castille had no maritime tradition, but Aragon did along with a Mediterranean empire. Efforts to establish North African colonies was met with determined resistance by the Islamicized population. Efforts in the Indies beginning with Columbus' voyage (1492) met with far greater success. The fact that a Genoan navigator led the expedition attests to the limited maritime tradition of Castille. The Spanish proceeded to build one of the great world empires, the first truly global empire. Previous empires had been either regional or like the Mongol Empire a purely terrestrial territorial expansion. Spain established colonies on all continents except the Arctic and Antarctica. Great wealth from the Americas flowed into Spain, but it did not succeed in building a great world power. After a century of empire building and efforts to destroy the Reformation, Spain began along slow decline. This culminated in a bloody military campaign against French occupation and loss of most of its empire (early-19th century). The Spanish Empire (Imperio Español) comprised territories and colonies around the globe administered directly by the Spanish Crown. Spanish Cconquistadores, navigators,and priests founded colonies in the Americas, Africa, Asia and Oceania. This resulted from the Age of Discovery launched by the Portuguese. After Ferdinand and Isabella, Under the Spanish Hapsburgs, Spain with the wealth flowing in from the new Empire became the superpower of the age with vast, political, military, and economic power. The Spanish overseas expansion began at roughly the same time as the Reformation (1517). Much of the strength of the empire was devoted to a costly and ultimately unsuccessful effort to stamp out Protestantism. The bullion flowing into Spain had massive economic consequences throughout Europe. The Spanish and Portuguese Empires were established at about the same time with at first little competition from their European rivals. This ushered in the modern global era (globalization in modern parlance) and the rise of Western dominance in global affairs. The Spanish empire Spain's territorial reach beyond Europe spanned five centuries, although it was sharply reduced with the American wars of independence (early-19th century). Spain's major possessions were lost as a result of the Spanish-American War (1898-99). The last African colonies were given independence (1975).
Americans tend to thinks of Spain as primarily fighting England. In fact, Spain engaged in large numbers of wars with various countries. There were so many of them that only historians can keep track of them. And these were wars that required very expensive professional armies. Few activities are more expensive than wars and mainlining large professional armies. Wars have been lost because countries waged two-front wars. Spain fought on four fronts. Spain inherited the Hapsburg possessions in Italy and had to fight to mountain them. In Italy they had to contend with France and the Ottoman Empire. The war with the Ottomans was a hugely expensive undertaking. The Battle of Lepanto (1571) ultimately determined the outcome, but there were important actions before and after. War with the Ottomans given their expansion westward was surely unavoidable and the cost shared with the papacy and Italian possessions and sometimes Venice. (Venice was not always an ally because they were not interested in Atlantic sea routes to Asia.) Other wars such as with the Dutch and English were wars largely of choice driven by theological zeal, although the English Sea Dogs were undeniably provocative. The result was the long running and draining Dutch War of Independence (1568-1648) and the loss of an especially rich province. The war in the Netherlands was especially costly because of its duration, the terrain, and fortifications. According to a Spanish councilor at the time, "The War in the Netherlands has been the total ruin of this monarchy." The cost of the war was considerably more than the Crown' receipts from the America. [Parker, pp. 185, 188.] One historian asks, "Was it really worthwhile to keep attempting to control a couple million recalcitrant Netherlanders at the far end an extensive line of communication at such horrendous cost?" [Kennedy, p.51.] The wars with England were much less expensive, but not to be trifled with. The Great Armada was especially costly (1588). Then there was the Portuguese War of independence (1640-68). War was the most severe test of 16th century nations, [Thompson, p.i.] And expense was the primary factor.
Castile like many medieval kingdoms had a parliament, in Castile's case it was the Cortes. The monarchy had considerable influence on the Cortes, dominated by the aristocracy. The Cortes generally rubber stamped requested tax incenses and new taxes, largely because the aristocracy was exempt. Of course because much of Spain's wealth was in their hands, taxes fell very heavily in the productive segments of the population, just the segments that Spain should be promoting. The history of Spanish taxation policies is case study in how a country through taxes can inhibit economic growth. The primary taxes included the alcabala (a 10 percent sales tax) and customs duties. Other important taxes includes servicios (Cortes grants), millones (foodstuffs), and church allocations. Notice that these taxes were all carefully designed to hit at trade and commerce, not the landed wreath of the aristocracy. One historian points out that Spanish taxes fell most heavily on the poor, 'thus spreading impoverishment and discontent, and contributing to depopulation, primary by emigration. [Lynch, p. 53ff.] Notably, many of the Conquistadores came from the economically deprived areas of Spain like Extremadura.
Spanish economic policies such as they were seem aimed primarily at maintaining the privileges of the aristocracy and existing social structure. There is absolutely no indication that the Monarchy understood the importance of promoting or even maintaining the the economy or the relationship between the economy and a powerful military, both land forces and a navy. The list is legendary. The Monarchy took step after step which adversely affected the economic underpinnings of the Spanish military. We discuss the taxation policy above. If they had not the Dutch and English, much smaller population, would have had little change in thwarting Spanish power. The Spanish expelled the Jews. Jews were a small part of the population, but not an unimportant part of the educated population. The Monarchy cut off contacts with foreign universities. They ordered the Biscayan shipyards to concentrate on large warships rather than smaller trading vessels. They sold monopolies which had the impact of harming productive trade. The most famous such monopoly sold by the Crown was the Asiento or Asiento de Negroes, the right to sell
slaves to Spanish colonies. Enslaved Amer-Indians began dying in large numbers throughout the Spanish Main. Spanish colonists needed workers. Spain was not heavily involved in the slave trade, but large numbers of captive Africans were purchased to work in Spanish colonies. The Monarchy heavily taxed wool exports, essentially crippling a productive industry. The made no effort to remove the customs barriers between the many still existing Spanish kingdoms which prevented a large single market from developing that would have promoted commerce and reduced prices. [Kennedy, p. 55.] Rather than making good use of the American gold and silver to found new industries as Europe entered the modern age, Spain tended to purchase luxury goods made abroad. Of course ,Spain did not exist in a vacuum. Other countries adopted some of these policies. But no other major power so consistently adopted policies adversely impacting the country' economy.
Spain expelled the Jews and thus lost some of its most productive citizens (1492). It was the work of the Inquisition. It should be noted that the persecution of the Jews was not unusual in Western Europe, but Spain had been an exception. It was an element of strength that had been inherited from Al Andalus and thus with expulsion, the economy was harmed. Many Jews were killed in the process. The Inquisition established earlier was used to track down Jews who persisted in their faith as well as free thinking Christians. Losing talented individuals was only part of the impact. The Inquisition had the impact of chilling free thought at the very time that such free thought was changing Europe, politically, economically, culturally, and technologically.
Spain remained fully mired in the medieval era. Spain was also adversely affected by clinging to medieval economic structures while other countries were adopting more efficient economic and financial systems. Spanish officials argued that the the many wars it fought were unavoidable. But this was in part because the Church and its Inquisition was so central in forming the Spanish policies and a medieval mindset. The costly Dutch War of Independence was eminently avoidable except for the emphasis the Crown placed om crushing the Reformation.
The Protestant Reformation began to reshape Europe, especially northern Europe. Spain became the major force leading the Catholic Counter Reformation (16th-17th centuries). The Spanish Tercios were in many ways the real biting force of the Counter Reformation. This involved massive Spanish spending. Unlike the Conquistadors in the Americas, these were not private armies and they required massive funding from the Crown. And unlike England and northern Europe did not benefit from the new ideas swirling in Europe and changing society.
The Crown's fiscal irresponsibility was a contnuous drag on the economy. The Army of Flanders (never less than 65,000 men) for decades was a huge drain on the Royal Treasury. This alone accounted for a quarter of Royal expenditure. The Dutch War of independence was not a short war and lasted eight decades. So rather than befitting from his rich province, it was a huge drain on the Crown's stretched resources. While War was the major fault, the Crown fiscal failings have to be considered. Few kingdoms at the time were as fiscally responsible as the Dutch Republic and Elizabethan England. Spain stands out, however, for its fiscal failings and failure to mobilize its resources.
The failure of Spain to finance its military adventures were not entirely the result of incompetence and religious conviction. The Crown faced very real constitutional constraints. The Spanish crown was created by the Catholic monarchs, Ferdinand of Aragon and Isabella of Castile. They married (1469). The creation of a unified Spain is often dated to the marriage. Spain was thus formed as a dynastic union of two crowns and not by any means a unitary state. The historic kingdoms of Spain with their laws and medieval institutions creating constitutional barriers to centralized rule. continued to exist. Most notably, the lands of the Spanish overseas empire became dependencies of the Crown of Castile and Castile had an outsized influence in the empire. [Lockhart and Schwartz, p. 19.] This meant that revenue from the Empire including the gold and silver bullion accrued primarily to the Spanish Crown. But it also meant that the Crown's access to revenue was very limited outside of Castile. The monarchy's domestic revenue came primarily from royal properties. Outside of Castile revenue was limited. There are countless examples. Philip IV sent troops to defend the Spanish border (1640). The area in question was the Catalan border with France. He wanted Catalonia to help pay for its defense. The result of trying to obtain the needed funds was a Catalan revolt. Portugal was seized by Spain (1589), but during Spanish occupation, Portugal was entirely autonomous in fiscal matters from the Spanish Crown. Thus the Spanish monarchy had to rely primarily on Castile to finance its many wars (16th-17th centuries).
Of all the factors that undermined the Spanish Empire and the Latin American republics that grew out of it was the concept of wealth. In the Spanish mind wealth was a finite substance to be dug out of the earth like gold and silver. In Mexico and Peru the gold and silver was produced by Amer-Indian campesinos under horrific conditions as virtual slaves. An even greater source of wealth was agriculture which produced crops. In both Spain and the Spanish colonies a small group of landed families who owned almost all of the land. The land was worked by land-less peasantry who eked out a basically subsistence existence. In Spain it was the basically feudal peasantry. In the Empire it was the landless Amer-Indian peasantry. The merchant class was much less important than in England. And there was no real concept that the population was Spain;s greatest resource and to develop and nurture that population was the real way of generating wealth. This would be a concept that began to develop in Protestant society, basically because one of the basic tenants of Protestantism was to study the Bible which of course required the ability to read. This set the Protestant countries of Northern Europe as well as the English colonies in North America on the path to educating the population, creating societies that could generate wealth as never before. Spanish sources wax eloquently about the glories of Spanish Spanish authors, artists, scientists, and architects. And their were real achievements. Only there were so few literate people in Spain and Spanish colonies that only a very narrow segment of the population was exposed to those achievements--about 5 percent, less in the colonies. Literacy was low in Europe, but especially low in Spain. Beginning with the Protestant Reformation, literacy began to increasing in Norther Europe and did so exponentially. This meant that not only was more and more of the population able to appreciate a country's cultural achievements, but more and more of the population could help create such cultural accomplishments as well as to generate technological and economic advances. A country with a literate population were much more capable developing both culture and wealth--the two are highly correlated.
We were surprised to discover that some Spaniards attribute the collapse of Spanish power to England and not really of Spain's own doing. While discussing the failure of Latin America to fully reach Western levels of development, a Spanish source objected to our contention that it was in part related to the Spanish colonial heritage. He also insisted that Spain's demise was largely due to the England. But it seems to us patently credulous. As one historian points out, "Compared to the far greater populations of France and Spain, the three to four million inhabitants of England and Wales did not seem like much. The country's financial institutions and commercial infrastructure were crude, compared with those in Italy, southern Germany, and the Low Countries, although considerable industrial growth was to occur in the course of the 'Tudor Century'. At the military level, the gap was much wider." [Kennedy, p. 59.] To assess these critics we had to look at 16th century Spain in some depth so as to why Spain, a major power in the 16th and 17th centuries, declined into a European backwater which did not participate fully in the major movements that made modern Europe: The Renaissance, Reformation, and most notably the Enlightenment.
Kennedy, Paul. The Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500 to 2000 (New York: Random House, 1987), 677p.
Lockhart, James and Stuart Schwartz. Early Latin America (New York: Cambridge University Press, 1983).
Lynch, J. Spain Under the Hapsburg Vol., I (Oxford: 1964).
Parker, G. Spain and the Netherlands, 1559-1648 (London: 1979). According to the author, Spain furnished a minimum of 218 million ducats to the military establishment in the Netherlands (1566-1654). Receipts from the Indies were only 121 million ducats during that same period.
Thompson, I.A.A. War and Government in Hapsburg Spain, 1560-1620 (London, 1976).
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