As Spain’s footprint in the New World grew, so did the value of transatlantic trade. Establishing a bureaucratic and military presence became a matter of urgency. One of the most important concerns was to protect the ships; laden with precious metals and valuable commodities, they were tempting targets for privateers. Armed galleons began to escort the ships while crossing the Atlantic. Protection was financed out of the avería. The escorts increased in frequency and size, eventually evolving into a system of treasure fleets. From 1565 on, these sailed twice a year between Seville and the colonies (Hamilton 1929). The armed convoys also ensured that ships on the return voyage docked in Seville, where their cargo could be assayed and taxed. Smuggling was nonetheless substantial. Captains were willing to accept bribes in order to carry undeclared treasure, which was off-loaded during the nighttime at the mouth of the Guadalquivir River, just before the last leg of the journey to the Casa de la Contratación.43
Government also advanced inexorably in the New World, but it did so in what Regina Grafe and María Alejandra Irigoín (2006) call the importation of “an eclectic mixture of institutional precedents from various parts of the Spanish monarchy.” Explorers and conquerors soon gave way to career bureaucrats. The governorships created during the conquest were grouped into the viceroyalties of New Spain and Peru.44 Courts were established to settle disputes, and colonial cajas collected taxes. In 1524 the Council of the Indies—a royal institution residing in the court in Spain—was created to oversee the government of the New World. In practice, colonial units retained a large degree of autonomy. The “tyranny of distance” made direct rule impossible. Letters from Peru to Spain took several months to arrive, if sent at the optimal time given sailing schedules. An answer would take at least a year, and often much longer.
Growing economic clout added to the power of colonial officials. As the colonial period progressed, the local administrations developed a network of taxes and fiscal transfers that operated with only nominal reference to the central government in Spain. Nevertheless, the New World generated substantial surpluses for Castile. Salaries—the largest expenditure in the colonial administration—accounted for only 3 percent of New Spain’s revenues, and 12 percent of New Granada’s and Peru’s during the sixteenth century.45 Castile also collected taxes on trade and treasure on landing in Seville. Hence, the relative burden of administrative cost was even lower and the net gains from the American colonies were even greater. The overall costs of running the colonies were low compared with the benefits that Castile reaped from them.46
The Philippines were Castile’s second important colonial outpost. First surveyed by Ferdinand Magellan in 1521, they became a permanent base for the Spaniards in 1565. Manila was founded in 1571. It mainly served as a trading port to satisfy the enormous Chinese appetite for silver from Seville (and later on, directly from Acapulco). Gold and various luxury items made the return trip to Spain, and from there some went on to the colonies. Governing the archipelago, however, was to prove very different from managing the American viceroyalties. The local populations were militarily more advanced and the geography was more complex, leading to constant skirmishes, raids, and massacres. As a result of the high security costs and lack of a resource-based economy, the colony struggled to break even. Its economic benefit to the empire came in the form of closing the “circle of silver,” facilitating an arbitrage that yielded enormous profits for Spanish merchants and the Castilian Crown.47
PORTUGAL
In 1578 the young King Sebastian of Portugal, unmarried and childless, died in the Battle of Alcacer Quibir. His death sparked a succession crisis. The prize was nothing less than the largest merchant empire in the world. Sebastian was succeeded by his great uncle, Henry “the Chaste,” who, as a cardinal of the church, had no legitimate heirs of his own. His death two years later ushered in several competing claims to the throne.
The Portuguese succession illustrates the complicated dynastic scheming and inbreeding prevalent in European royal households. The regnant families of Castile and Portugal had intermarried several times during the last three generations. Maria of Aragon, daughter of the Catholic Kings, married Manuel I of Portugal. Their son, King John III of Portugal, married Catherine of Austria, a daughter of Joanna the Mad and Philip the Handsome, and hence John III’s first cousin. Their son, John Manuel, married Joan of Austria, the daughter of Charles V and Isabel of Portugal (who was in turn the daughter of Manuel I and Maria of Aragon). John Manuel died before becoming king, with the throne ultimately passing to Sebastian. Philip II, who claimed the crown, was himself Sebastian’s uncle. At Sebastian’s death, the dynastically stronger claims to succeed him were those of the House of Braganza, because its members, Catherine of Braganza and Ranuccio Farnese, descended from King Manuel I via a male line.48 Philip II was a descendant of Manuel I through his mother, Isabel, thereby making his claim weaker. Another claimant, the Prior of Crato, was a direct grandson of King Manuel I, but he had been born out of wedlock.49
The crisis resulted from a split in the nobility, which reflected a deep discontent with more than a decade of weak and corrupt administration, rising taxes, and a flagging economy. A nationalist faction that wished to keep the crown on a Portuguese head sided with the Prior of Crato, but he lacked popular support. The merchant aristocracy fled to Spain and threw its support behind Philip, seeking to import what it saw as the superior model of Castilian administration. Ignoring the weakness of his dynastic claims, Philip recalled the Duke of Alba from retirement and placed him at the head of an invasion army. Alba easily defeated the poorly trained forces of the Prior of Crato at the Battle of Alcantara, and the Cortes de Tomar swore Philip in as the king of Portugal in late 1580. In exchange for the nobility’s support, Philip promised to respect the independence of Portugal in terms of language, coinage, noble privileges, and financial management. The merchant empire would continue to be run by Portuguese nationals; as Portuguese king, Philip could not confer privileges on Spaniards, nor could he appoint any Spaniard (save for members of the royal household) to positions of power. The crowns remained strictly segregated for the remainder of Philip’s reign, with no direct transfers between the treasuries or other major interference in Portuguese financial management.
Portugal did bear a major cost from the Iberian Union: the loss of an independent foreign policy. It now had to provide military support to Philip—an obligation that became burdensome at the time of the Armada. Bazán assembled the fleet in Portuguese ports using local resources and naval expertise. Portugal supplied a fifth of the ships sailing in the Armada, staffed by forty-five hundred sailors and soldiers (Boyajian 1993). Portuguese merchants also became the target of English privateers. Raids on smaller ports and the occasional threat to Lisbon continued until the end of the Anglo-Spanish War.
A second effect of the Iberian Union on the Portuguese economy was the decline of the Asian trade. Eventually, Portugal was replaced by the Netherlands as the dominant merchant empire in the East. Castile organized its colonial expansion on the basis of free enterprise; individual explorers, chartered by the Crown, assumed all the risk and received the largest share of the profits. The Portuguese Empire, on the other hand, was built and administered directly by the Crown (Rei 2011). When the Spaniards took over the Portuguese Empire, they were ill equipped to deal with its business model; Asian trade languished as a result.
Portugal’s elites would ultimately become unhappy with their country’s marriage to Castile in the seventeenth century. Yet Philip II—known in Portugal as Philip I—respected his end of the bargain, keeping the two crowns strictly separate (Serrão 1982). Portugal contributed enough on the military front, and the combined Iberian trading empires, while starting to face challenges in Asia, still had no rival in either the East or West. The Iberian Union was a highly cost-effective expansion of Philip’s empire. It came at the expense of a single, limited military operation even as it added a world of trade, power, and naval might to the king’s persona
l holdings, and a welcome helping hand to Castile’s military campaigns.
THE LOGIC OF EMPIRE
MILITARY CHOICES
Philip II’s financial troubles have been frequently blamed on his imperial ambitions. Spain’s path from hegemonic superpower in the sixteenth century to a mere prize to be fought over by France, England, and the Netherlands at the dawn of the eighteenth century has also been attributed to imperial overstretch. The argument is simple: at the height of its power, Spain failed to reform as well as centralize its fiscal and administrative structures along the lines pioneered by other European powers. Depending on the account, this failure was caused either by a combination of complacency, incompetence, and superstition, or a sense that after expending so many lives and resources, changing course was not an option. In John H. Elliott’s (1963a) words, at the critical junctures where the imperial enterprise could have been scaled back, Castile appeared to find itself “in a position where it seemed that readjustment to the new economic realities could be achieved only at the price of sacrificing its most cherished ideals.”50 Caught in the logic of past choices, Spain suffered and finally crumbled under the weight of an unattainable ambition from which it didn’t have the strength or will to back away.
A more recent literature instead sees the empire as a multinational enterprise, headquartered in Castile, and composed of fairly autonomous “business units.”51 Decisions on where to push the boundaries were dictated by a combination of opportunity and expected gains. This was a necessary feature, since most of the imperial ventures were supported, financed, and carried out by third parties, which had to tie their fortunes to those of Spain. Henry Kamen (2003) points out that the Spanish Empire was built by German, Genoese, and Neapolitan financiers, Flemish, Dutch, and Portuguese shipbuilders, traders from all corners of Europe and Asia, and soldiers of every nationality, including indigenous peoples in the Americas and mercenaries from Spain’s own enemies. Each of them, in their own way, risked life and fortune on ventures that seemed promising at the time. When a Genoese banker delivered a large loan to the paymaster of the Army of Flanders, he knew full well what the funds would be used for and had a reasonably good idea of which portions of the empire the repayment would come from. Military commanders planned and fought for victory. Even in the most iconic defeat, that of the Armada, the consensus of military historians is that its objectives—establishing a beachhead in Kent and forcing England into a negotiated peace—were feasible and could have been attained with high probability.
Military historians have also examined the pattern of confrontations that Philip II entered into. Parker proposes a “domino theory.”52 The European portions of the empire, though geographically disperse, had no slack built into them. Given that the Low Countries and northern Italy were rich possessions that had to be defended, the “Spanish Road” linking them was essential. This created a sense of encirclement for French rulers, contributing to an almost-permanent state of conflict between the two powers. If the Netherlands were to be pacified, then there was little choice about confronting England as well. Similarly, when the Ottomans pushed westward into the Mediterranean, the dominant option from both a military and economic point of view was to fight back. It is true that Philip refused to give up any territory because he considered it part of his inheritance, ultimately bestowed on him by God. It is also true, however, that he couldn’t have surrendered any part of his empire without jeopardizing the rest.
While the Spanish Empire today evokes visions of overstretch and decline, it is worth remembering that few harbingers of its protracted dismemberment were evident during Philip II’s long reign. Castile continued its expansion in the seventeenth century, even pushing deep into the Netherlands during the reign of Philip IV. Nor did Castile have to win every single confrontation into which it entered. Some negative outcomes would not doom the enterprise, and loss-making ventures were acceptable if they contributed to the integrity of the whole.
BACK TO CASTILE
The Spanish Empire’s day-to-day operations were often remarkably decentralized. As a general rule, territories were expected to raise their own revenues, pay for most of their own expenses—including defense—and support the monarch when asked to do so (Rodríguez-Salgado 1988).53 The execution of imperial military and geopolitical strategy, though, frequently required large transfers of resources between territories. Those transfers were decided at the highest level of government and handled directly by the central treasury in Castile. The Castilian Crown also underwrote the loans and exchange operations necessary to make those transfers happen. Payment for those loans came almost exclusively from Castilian taxes, levied on Castile’s colonial remittances, domestic production and consumption, and growing international trade as well as directly on its subjects. Castile therefore was both the central clearinghouse and paymaster of last resort.54 To keep the wheels of empire turning required a well-oiled fiscal and financial machinery in Castile. It is to that machinery that we turn our attention in the remainder of the book.
1 Ferdinand’s voyage and his wedding to Isabella are reconstructed in Rubin 2004. Although our scene at the inn is fictional, all the other details are historically accurate.
2 Isabella had actually refused to marry Ferdinand until a papal dispensation bull was obtained. The papal envoy, Antonio Veneris, provided an extrasacramental dispensation, which was falsely presented as a legitimate bull during the ceremony. A proper dispensation bull was finally issued in 1471 by Pope Sixtus IV.
3 For a discussion of the origin and interpretation of Castile’s sovereignty over newly conquered territories, see García Gallo 1950.
4 For a discussion of the reforma de mercedes, see Haliczer 1975.
5 The privileges of hidalguía, or petty nobility, would return with vigor in the second half of the sixteenth century, when they were used (and abused) in several struggles for local political control (Drelichman 2007).
6 See, for example, Parker 1972.
7 On the Santa Hermandad, see Lunenfeld 1970.
8 See, for example, Rawlings 2006; Pérez 2003; Kamen 1999. In a literature as vast as that on the Inquisition, the view that its role was primarily that of a channel to project royal power is not uncontested. The main opposition to it sees the Inquisition as a fundamentally cultural phenomenon (see, for example, Netanyahu 2001).
9 This point has been most recently articulated in Grafe 2012.
10 In this discussion we follow Alvarez Nogal and Prados de la Escosura (2007), who provide a thorough reconstruction of the population, urbanization rates, sectoral output, and aggregate growth for all Spanish regions.
11 Population estimates vary widely in the literature. We use the consensus figures in Alvarez Nogal and Prados de la Escosura 2007. See also Nicolau 2005; Carreras 2003; Nadal i Oller 1984. Paul Bairoch, Jean Batou, and Pierre Chèvre (1988) provide much higher figures—about 7.5 million in 1530—but their numbers are no longer considered reliable.
12 For alternative urbanization figures between the eighth and the fifteenth centuries based on the Bairoch, Batou, and Chèvre data, see Buringh and Van Zanden 2009.
13 Daron Acemoglu, Simon Johnson, and James Robinson (2005) show how the combination of access to the Atlantic and participatory institutions was a key factor in Europe’s rise to dominance.
14 For the standard reference on the Spanish wool industry, see Phillips and Phillips 1997. See also Ruiz Martín and García Sanz 1998; Grafe 2001; Munro 2005; Drelichman 2009.
15 Data from the southern ports are not available, and hence the magnitude of exports through them is merely an educated guess.
16 Drelichman (2005) documents the loss of comparative advantage in traditional Spanish exports. Flynn and Giráldez (2004) explore the nature of the global trading networks in Spanish silver.
17 Henry Cohn (2001) argues that the bribes paid to the electors did not influence the outcome, with military and political considerations carrying more weight.
18 In general, it
was expected that the all territories under the same ruler would come to his aid in times of crisis (Rodríguez-Salgado 1988). The German princes effectively solved the collective action problem, which allowed them to present a united front and extricate themselves from this position, thereby increasing the burden on Charles’s other domains.
19 See Pérez 1970; Haliczer 1981. This interpretation stands in contrast with the one handed down by Marxist historiography, which viewed the comunidades as an uprising of oppressed masses against royal power and a foreshadower of the Communist revolutions of the twentieth century (Maravall 1963).
20 The reign of Charles V has been studied exhaustively from a variety of angles. For just a few recent English-language general treatments, see Tracy 2002; Blockmans 2001; Blockmans and Mout 2005. For a comprehensive bibliography, see Biblioteca Cervantes Virtual, http://bib.cervantesvirtual.com/historia/CarlosV/fuentes_y_biblio.shtml. Manuel Fernández Alvarez (1979) has transcribed and edited an impressive amount of documentation related to Charles’s reign in his Corpus Documental de Carlos V.
21 M. J. Rodríguez-Salgado (1988) writes that Ferdinand the Catholic had warned Charles, in his youth, to resist the urge to engage in a protracted war with France. Charles did not heed this advice; his pyrrhic victories came at the price of forfeiting his dream of vanquishing the enemies of Catholicism.
Lending to the Borrower from Hell: Debt, Taxes, and Default in the Age of Philip II (The Princeton Economic History of the Western World) Page 10
