Wortzel 1
In his memoirs, Christopher Columbus would write, “Riches don't make a man rich, they only make him busier” (“Christopher”). Little did this esteemed navigator know that his words would portend one of the very financial dilemmathat would plague his patron nation, the Imperial Spanish Empire, from the late fifteenth centuryto the mid sixteen hundreds. Beginning in 1469 with the consolidation of the Castilian and Aragonian principalities, the new Spanish nation commenced pursuing an aggressive policy of exploration and seizure of territory that ironically both flooded its coffers and stagnated any future progress of the state. In other words, the very empire building in the New Worldthat initially emboldened the Spanish economy during the fourteen and fifteen hundreds ultimately derailed Spanish fiscal preeminence during the following centuries. How? The answer is threefold: First, the managerial network overseeing Spanish imperialization was at best haphazard. Marauding treasure seekers were permitted to invade foreign lands, rape them of their material value, andestablish the semblance of provincial governments to oversee it all. Needless to say, brigands (a.k.a. Conquistadors) donot make the best executives, and the foreign affairs of Spain were highly mismanaged. Second, the resources required to defend such an expansive empire (which after the 1494 Treaty ofTordesillas included more than half of the New World) were far too demanding for contemporary technology, and even hundreds of galleons full of Peruvian silver could not adequately cover the extensive bills the Spanish monarchy accrued in the attempt to defend its foreign domains. Third, and perhaps the most debilitating effect of New World imerialization, was the ensuing Price Revolution that ravagedSpain’s domestic economy and debased the value ofits currency. Linked to this inflation was Spain’sunfavorable balance of trade with other European nations in which it exported mineral wealth in exchange for finished goods (contrary to mercantilist ideology). Thus, it was the composite effects of these three fiscal elements surroundingNew World imperialization that leftSpainhelplessly bobbing in the wake of the growing merchant power of other nations such as England and the Netherlands.
Perhaps the economic downspin that accompaniedSpain’s annexation of the New Worldwas most directly linked to the chronic poor management of its territorial possessions. Arguably, Spain’s managerial ineptitude may have strictly been the result of unavoidable blunders associated with all new undertakings, for Spain had never before engaged in such extensive nondomestic imperial arbitration. However, the more likely culpable cause pertains to who originally established and operated these foreign domains. The conquistadors, as they are so romantically denoted, were nothing more than what their Spanish nomenclature implies – conquerors. Perhaps brilliant tacticians or just very lucky brutes in armor unknowingly equipped with arsenals of pathogens, these men were solely trained and only successfulat amassing conquered land (Stern). Needless to say, this resume of attributes does not constitute the ideal establisher of a peaceable colony. Hernán Cortezprovides an ideal case study. Conqueror of the Aztec empire and awarded the authoritative positionMarqués del Valle de Oaxaca, Cortez came into a leadership role in the New World without any qualifications to rule. A dropout of the Universityof Salamancaand a chronic adulterer, Cortez was described by his personal secretary,Francisco López de Gómara, as “ruthless, haughty,mischievous, and quarrelsome;a source of trouble to his parents”(and this is coming from a man who had everything to lose by criticizing his patron) (“Hernán Cortés”). In several instances during his tenure in the New World, Cortez concertedly hindered the establishment of organized Spanish governanceas he refused to hand over his garrisons toSpain’s appointed magistrates and viceroys. In fact, in one select casein the mid 1520’s, Cortez even mutinously attacked and defeated another Spanish replacement force sent to unhinge his dictatorial grasp on his regions of conquest (“Hernán Cortés”). The student of history should note, however, that although Cortez may have voracious defended his right to rule, he spent little of his time actually establishing government and instead continued his raidsinto the Central American isthmus. Consequently, creating any semblance of Spanish authority in the New World was long in coming, and from the get-go, Spain’s New World possessions proved to be and exercise in frustration and a voluminous drain on the Spanish treasury. Unfortunately for Spain, subsequent commissioned conquerors, such as Francisco Pizarro, provedCortez not to be an idiosyncratic vigilante but rather a classic model of the conquistador, and it would take close to four decades before Spain could supplant these original territory breadwinners and begin extracting substantial wealth from the New World.
Yet perhaps more economically ruinous than the inept men overseeing Spain’s initial imperialization was the shear cost of defending Spain’s unprecedentedly large overseas empire. Prior to Columbus’ perusal into the New World, European nations had only engaged in “micro imperialism,” that is, they had onlysettled on the periphery of foreign nations, securing port cities to orchestrate trade. The Portuguese and the Dutch were the primary forerunners in this early form of mercantilism. Yet Spain was the first European nation to seize an entire continent an ocean away, subjugate its people, and establish sizeable coloniesabroad to extract raw material wealth. Needless to say, this expeditious endeavor was inordinately costly. In his dissertation on the economy of imperial Spain, historian John Lynch writes, “Instead of investing [Spain’s] money in productive enterprises at home, the Spanish [monarchy] lavished more and more on foreign enterprises, the price not merely of ambition but of the very existence of the Spanish empire and its defense” (“Spain”). Fleets of galleons were needed not only to transport the sheer tonnage of material extracted from the New World, but also to defend the treasure ships from privateers, such as Francis DrakeofEngland, who frequently boarded Spanish ships and absconded with their priceless cargos (McAlister). Also, the European diseases that initially devastated the indigenous population allowing for Spain’s relatively painless usurpation had their deleterious impact on Spain’s pocketbook as well. By the end of the sixteenth century, at least 80% of the Native American populous had perished, and Spain found itself strapped to find suitable numbers of laborers to operate its encomiendas and mines (“La Catastrophe”). To avert a growing labor crisis, Spain began the expensive ordeal of purchasing African slaves and shipping them to the New World. Hence, ironically, the very process of defending Spain’s profitable landholdings in the New World may have in fact been one of the leading causesin undermining Spain’s economic powerbase and preeminencein Western Europe.
Yet even considering the amount of money that went into supporting the Spanish oversees empire, modern economists have established the argument that perhaps the ultimate failure of the Spanish economy was not due to a dearth of imported silver but rather the effects of importing too much of it. The Price Revolution –a span of 150years of rapid inflation in the Western European economy – manifested during the same period that New World silver began hitting the mints of Western Europe. Although modern scholars almost unanimously contest the unilateral impact of Spain’s influx of specie onthe Price Revolution, few would deny that, at least in Spain, excess floating money and economic importunity were factor inextricably linked. The historian Earl J. Hamilton even goes so far as to suggest that the eventual economic backwardness of Spain was directly linked to the effects of this century of markedinflation (“American Treasure”). In his 1991 paper “Spain During the Price Revolution,” fellow historian John Lynch corroborates and strengthens this argument by mappingseveral Spanish towns’ geographic proximity to silver ports and the extent of inflation that occurred in each region. Fascinatingly, the closer a town was to a port receiving imported silver, the more extensive the inflation that ravaged that region. Although both of these current analyses of the Price Revolution were formulated in the modern era, and thus may not account for other subjective variable factors, such as socioeconomic influences, even contemporaries of the Price Revolution, such as the theologian and economist Matin de Azpilcueta Navarro, recognized excess specie as the inflationary source of Spain’s economic dilemma: “[…] in Spain, in times when money was scarcer, saleable goods and labour were given for very much less than after the discovery of the Indies [The New World], which flooded the country with gold and silver” (Grice-Hutchinson). By 1600, the average prices of commodities in Spain had risen to four timestheir 1501 value. The effects of this inflation were debilitating for all social strata of Spain, particularly the hidalgo, or poor provincial landholders, that composed a large percentage of Spain’s taxable citizenry (“Spain”). In essence, Spain’s economy ultimately drowned in the very money extracted from its New World possessions, a twist of fate that would incapacitate Spain as a future player in the arena for competing globalizing merchant powers.
When Columbus first set foot on the island of Hispaniola and declared the New World for Spain, little did he know that he was in fact condemning the Iberian nation to a future of economic decay. He could neither foretell that the brutishness and poor leadership of his conquistador comrades would cripple the initial profitability of the West Indies colonies, nor could he fathom that the Spanish Empire would ever grow so expansive that the very cost of its defensemight at times out way its profuse profit margin. And perhaps the ultimate irony, Columbuswould never have imagined that Spain could accrue so much imported treasure that the very value and functionality of its domestic economy would be debased. Thus, what Spain originally heralded in 1492 as the dawning of anew age of imperial greatness may have in actuality been the first foot in the grave of the eventual demise of the Spanish economy.
Works Cited & Consulted
“Christopher Columbus Quotes.” Thinkexist.com. 2006. 1 June 2009
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Grice-Hutchinson, M. The School of Salamanca: readings in Spanish Monetary theory, 1544-
1605. Oxford: 1952. p. 95.
Hamilton, E. J. “American Treasure and the Rise of Capitalism, 1500-1700.” Encomica, ix
(1929). 338-57.
“Hernán Cortés (1485-1547).” The Latin Library. 2007. 8 June 2009
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“La Catastrophe Démographique (The Demographical Catastrophe).” L'Histoire. July-August
2007: 17.
Lynch, John. “Spain During the Price Revolution.” New York State Education Department. 29
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McAlister, Lyle N. Spain and Portugal in the New World, 1492-1700. Edition 3. Univ. of
Minnesota Press: 1984.
<
Stern, Steve J. Peru's Indian Peoples and the Challenge of Spanish Conquest: Huamanga to 1640.
Univ. of Wisconsin Press: 1993. <
The Fall of the Spanish Economy – A Saga of a Nation Plagued by Ineptitude and Drowned in Prosperity
Joshua Wortzel
Period 1 AP European History
June 11, 2009