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Fiscal Crisis and the Decline of Spain (Castile)

  • Dennis O. Flynn (a1)


Earl J. Hamilton's multiple theses on the price revolution, the decline of Spain, and the birth of capitalism have all placed American silver (and gold) at the forefront. This essay supports Hamilton's emphasis on the impact of New World treasure on the decline of Castile, but from a different angle. Mining profits rather than the quantity of imports supported the empire. When the profits dwindled, as was inevitable, international superiority was begrudgingly surrendered to the emerging powers of the north.



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1 Hamilton, Earl J., “The Decline of Spain,” Economic History Review, 8 (11 1937), 168–70.

2 An overlapping literature on sixteenth-century price inflation reveals the same dichotomy: Hamilton's monetary view versus the so-called real explanations of others. For elimination of the chronology-related criticism of Hamilton's thesis, see Flynn, Dennis O., “A New Perspective on the Spanish Price Revolution: The Monetary Approach to the Balance of Payments,” Erplorations in Economic History, 15 (10 1978), 388406.

3 This section focuses on mine profits. The same model is used to explain the cause of the Price Revolution in Flynn, Dennis O., “Sixteenth Century Inflation from a Production Point of View,” in Inflation through the Ages: Economic, Social, Psychological and Historical Aspects (Brooklyn, forthcoming).

4 Nef, John U., “Silver Production in Central Europe,” Journal of Political Economy, 49 (08 1941), 576.

5 Perroy, Edouard (1955) as quoted in Wallerstein, Immanuel, The Modern World-System: Capitalist Agriculture and the Origins of the European World Economy in the Sixteenth Century (New York, 1974), p. 41n.

6 Vilar, Pierre, Oro y moneda en Ia historia 1450–1920, 3rd ed. (Barcelona, 1974), pp. 8587.

7 For a demonstration that the exchange value of silver money reflects the value of silver in the bullion market, see Flynn, Dennis O. and Roper, Don, “Greshans's Law and the Modern Theory of the Demand for Money,” Eastern Economic Journal (1982, forthcoming).

8 Hamilton, Earl J., American Treasure and the Price Revolution in Spain, 1501–1650 (Cambridge, Massachusetts, 1934), p. 34.

9 Jara, Alvaro, “Economía minera e historia económica hispana-americana,” in Tres ensayos sobre economia minera hispano-americana (Santiago, 1966), p. 37.

10 Iwao, Seiichi, “Japanese Gold and Silver in the World History,” in International Symposium on History of Eastern and Western Cultural Contacts (Tokyo, 1959), p. 63.

11 Nef, “Silver Production,” p. 589; Vilar, Oro y moneda, pp. 235–36;Hoszowski, Stanislaw, “Europe Centrale et Révolution des Prix,” Annales ESC, 16 (0506 1961), p. 453.

12 Vilar, Oro y moneda, p. 23. Recent evidence indicates that Spanish-American silver production did not decline, as previously thought, in the seventeenth century, although a falling percentage of government revenues flowed to Castile. TePaske, John J. and Klein, Herbert S., Past and Present, no. 90 (February 1981), pp. 116–35. Such evidence does not contradict this essay. One would not expect production to halt once super-profits were squeezed out in the New World any more than one would expect business volume to decline in Atlantic City casinos now that entry into the industry has eliminated economic profits. Profitability is the issue, not output.

13 Braudel, Fernand, The Mediterranean and the Mediterranean World in the Age of Philip II, vol. 1, trans. Reynolds, Sian (New York, 1972), p. 536.

14 Hauser, Henri, “The European Financial Crisis of 1559.” Journal of Economic and Business History, 2 (19291930), 244.

15 Parker, Geoffrey, “Spain, Her Enemies and the Revolt of the Netherlands 1559–1648,Past and Present, no. 49 (11 1970), p. 76.

16 Haring, Charles H., The Spanish Empire in America, 3rd ed. (New York, 1963), p. 278.

17 Castillo, Alvaro, “Dette flottante et dette consolidée en Espagne de 1557 à 1600,” Annales ESC (1963), p. 755.

18 Parker, “Spain, Her Enemies,” pp. 8485.

19 Ibid., p. 86.

20 Braudel, , The Mediterranean, vol. 1, p. 533.

21 Koenigsberger, Helmut G., “The Empire of Charles V in Europe,” in The New Cambridge Modern History, vol. 2 (Cambridge, 1958), pp. 275, 312.

22 Castillo, Alvaro, “Los juros de Castilla: Apogeo y fin de un instrumento de crédito,” Hispania, 23 (1963), p. 52.

23 Vilar, Oro y moneda, p. 203.

24 Parker, Geoffrey, “War and Economic Change: the Economic Costs of the Dutch Revolt,” in Spain and the Netherlands, 1559–1659: Ten Studies, ed. Parker, G. (Glasgow, 1979), p. 188.

25 Wilson, Charles H., “The Historical Study of Economic Growth and Decline in Early Modern History,” in The Cambridge Economic History of Europe, vol. 5 (Cambridge, 1977), p. 29. “It is doubtful whether any state of the day could have borne a debt equivalent to between ten and fifteenyears' full revenue…” Parker, Geoffrey, “The Emergence of Modern Finance in Europe 1500–1730,” in The Fontana Economic History of Europe, vol. 2, ed. Cipolla, C. M. (Glasgow, 1974), p. 570.

26 Kamen, Henry, “The Decline of Spain: A Historical Myth?Past and Present, no. 81 (11 1978), p. 25.

27 Ibid. Others also emphasize late seventeenth-century Castilian problems, even going so far as to state that the “decline of Spain in the early seventeenth century never happened.” Gordon, Michael D., “The Decline of Spain,” Journal of Modern History, 47 (1975), p. 98. J. I. Israel attacks Gordon and Kamen for denying that Spain declined in the early seventeenth century. Israel locates abrupt decline in industry and agriculture in the traditional period 1595–1621. “Debate: The Decline of Spain: A Historical Myth,” Past and Present, no. 91 (May 1981), pp. 170–80. Kamen reiterates his view of underlying domestic weakness throughout Spain's sixteenth century in “A Rejoinder,” Past and Present, no. 91 (May 1981), pp. 181–85. The argument of this paper is consistent with either view.

28 Elliott, John H., “The Decline of Spain,” Past and Present, no. 20 (11 1961), p. 54.

29 Ibid., p. 62. The lack of a productive base within Spain is also stressed by Carande, Ramón, Carlos V y sus banqueros, vol. 1, 2nd ed. (Madrid, 1965), p. 340.

30 Oiler, Jorge Nadal, “La revolución de los precioso Espanoles en ci siglo XVI,” Hispania, 19 (1959), pp. 523–24.

31 Kamen, “The Decline of Spain: A Historical Myth?” pp. 35, 41.

32 Ibid., p. 34.

33 Pike, Ruth, “The Genoese in Seville and the Opening of the New World,” this JOURNAL, 22 (09 1962), 356.

34 Elliott, J. H., Imperial Spain 1469–1716, Pelican, ed. (Middlesex, 1975), p. 291.

35 Parker, “War and Economic Change,” p. 188.

36 Kamen, Henry, “The Decline of Castile: the Last Crisis,” Economic History Review, 17 (08 1964), 69.

37 North, Douglass C. and Thomas, Robert P., The Rise of the Western World: A New Economic History (Cambridge, 1973), p. 129. North and Thomas base their statement on pre-Philip II figures provided by Vives, Jaime Vicens, An Economic History of Spain (Princeton, 1969), p. 382: 267,000 ducats from the Castilian alcabala tax; 350,000–400,000 from the Indies; 4 million from the Low Countries. Compare these with figures typical of the late 1500s: 6.2 million ducats Castilian taxes; 1.6 million in papal concessions collected by the Crown; 2 million in American silver. (Elliott, Imperial Spain, p. 286).

38 Parker, “Spain, Her Enemies,” pp. 85, 89, 92.

39 Koenigsberger, Helmut G., “Western Europe and the Power of Spain,” in The New Cambridge Modern History, vol. 3 (Cambridge, 1968), p. 272.

40 Parker, “Spain, Her Enemies”, p. 75.

41 Flynn, Dennis O., “Spanish American Silver and Western Trade with the Orient,” Mediterranean V Conference: Papers and Proceedings (Bar flan, Israel, 08 1980).

42 Boxer, C. R., as quoted in Parker, “War and Economic Change”, p. 189.

43 Ibid., p. 188.

44 Kamen, “The Decline of Spain: A Historical Myth?” p. 46.

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