History - Spain - Philip, 1556-98: The Economy

Warfare did not bring the economic benefits it should have as Spanish industry was backwards - e.g. 80% of firearms used to supress the Morsico Revolt were foreign

. Hungarian copper, English lead and tin, Italian gun power, German and Dutch cannons and armour were vital for Spain's war effort

. In 1576, Philip tried to overcome armed shortages by banning exports and bringing munitions industry under control

. Output doubled but there were still shortages, e.g. For the 1588 Armada, none of the 2,400 pieces of bronze artillery were made from Spanish copper or tin and most of the gun powder and every cannon ball was imported

. Ship building was handicapped by a shortage of craftsman and engineers - despite encouraging 25 Italian engineers to work in Spain, major tax breaks and laons for owners over 200 tonnes, there were still problems with Spanish ship building by 1598

. Philip's demand for soldiers removed men from the land and created labour shortages

. War in the Mediterranean disrupted trade and pirates raided coasts and Spanish ships - Philips's ship building (by 1598 Armada del Mar Oceano had 67 galleys and galleons in the Atlantic) came too late to save Atlantic commercial prosperity

. Much of the New World bullion used to pay foreign mercenaries soldiers overseas so their spending benefited foreign economies - Furthermore, the high costs warfare and spending contributed to inflationary pressures

. Raids by the English on Cadiz in 1587 and 1596 cost an estimated 20 million ducats in damage

. A lack of capital investment in Spanish industry and crippling taxation led to 'industrial stagnation' (Lotherington)

. Woodward argues that the economic potential in 1556 was great - e.g. the north-west (Galicia/Basque) traded with northern Europe and got food in return for Castilian wool and Biscayan iron and fish

. Northern Castilian towns traded wool with Flanders, Atlantic trade with southern towns and the Mediterranean coast traded with Italy - In the 1570s there were 22 commercial fairs operating in New Castile alone

. Spanish industry was weak but there are examples of strength - Huge quantities of iron were mined in the North, a strong woollen industry of in towns such as Segovia, fuelled by the Mesta herds

. Alum, mercury and salt were important export products - Valencia and Granada had prosperous leather and silk industries in the 1560s (then ruined by state policy towards Moriscos)

. However in 1556 - Spain was not a unified economic unit, poor inland transport networks and endemic banditry meant little trade between regions

. Tolls on rivers, roads and bridges made this worse e.g. 39 customs posts on borders of Castile with Navarre, Aragon and Valencia

. From the 1560s, Flemish demand for raw wool fell due to changing fashion, foreign competition and the Dutch Revolt - In 1567, yearly imports of wool went down from 40,000 to 25,000 sacks of wool, whcih harmed the likes of Burgos and Medina del Campo

. Spain did not build enough ships to trade - e.g. much of the important trade between Spain and the Baltics were carried in Dutch vessels

. Industry was sparse compared to France/Netherlands and suffered under Philip due to a lack of investment and the contiinued strength of the guild system that hampered growth in all but the new industries such as printing and armaments - In Barcelona by 1600 there were 64 self-interested guilds

. The Spanish aristocracy and nobility had enough wealth to stimulate industry but wealthies groups in Spain lacked business acumen and preferred to export foreign goods and invest in juros for porfits rather than risk iinvestment in industry - 'an act of betrayayl' (Fernand Braudel)

. Spain lacked a large and expanding middle class so that its banking, insurance and manufacturing lagged behind other European powers

. The 'rentier class' (Elliott) mentality led to successful merchants looking to buy noble status and land with the resultant tax exemption and to invest in juros

. The peasantry were crippled by the tax burden and thereforte were unable to improve their osition through investments of their own

. A crucial problem was the wool merhcants preference for exporting 'raw', unfinished wool - As early as 1557, the Venetian ambassador noted that Spanish merchants sold too much wool abroad 'and then come to fetch these countries cloth to wear and tapestries'

. The potential for investment from increasing bullion imports did not occur as much as it ought - Much of the bullion by-passed Spain making its way into the hands of foreign financiers

. In effect, Seville became a European port, serving the general European economy, and dominated by foreing merchants rauther than Spaniards

. Seville boomed economicaly but mainly because of the activities of foreign merchants so it was false prosperity relying on external investment, creating a temporary illusion of economic activity with no solid base for long term growth

. Spanish merchants simply imported foreign goods for re-export to the Indies such as arms, tools, manufactured goods and luxurt items - Often available from Spanish producers but the imports were cheaper and better quality

. It was all encouraged by the 1566 government decision to allow Spanish merchants to export silver - and so Spanish merchants used the New World profits to buy goods abroad rather than source them from Spain and this decision coincided with the outbreak of the Dutch Revolt and the collapse of Antwerp

. The total tonnage leaving Seville was 3,000 in 1555 to 30,000 in 1585, but Spain viewed America more as a source of bullion and exotic products rather than as a market for Spanish goods

. In 1566, there was a decision to allow foreign merchants to export silver, which meant that in 1570-71 over 7 million ducats of silver left Seville - In the 1580s at least 1 million ducats/year left to the Far East in Portuguese ships

. Woodward stresses regional variations, as more than 80% of the populatiomn in the 1590s lived in Castile (as opposed to 75% in 1530)

. He also noted that moving the capital to Madrid harmed the population and prosperity of nearby Valladolid, and Toledo began to fall from 1560

. Madrid's population more than doubled though, but drained nearby towns of argicultural wealth

. There was also a steady demographic drift to Andalusia and by 1591 20% of Castilians were there - Aragon and Catalonia had poor economies and lost many men to fight wars and in an epidemic from 1589-92

. Inflation remained a serious problem - By looking at real wages, Hamilton calculated that from 1530-1600 Spaniards could buy 20% less goods, suggesting Spaniards were left worse off by the impact of New World trade ('price revolution')

. In 1567, Barcelona raised the wages of its employees, complaining that 'every article of human need is incomparably more expensive than it has ever been'

. Modern historians agree that there was a 400% inflation rate over the 16th century but Nadal Oller has shown that the annual rate was 2.8% from 1501-62 and 1.3% from 1562-1600

. Vilar argues that jruos and credit culture lef to inflation, where as Kamen sees smuggling and legal exports of bullion as key

. Inflation was added to by New World bullion, thus it can be argued that the inflationary pressure was seriously added to by Philip's approach to finances

. By the 1590s, the combination of icnreased taxation at times of war, coupled with poor harvests, contributed to a collapse of the Castilian economy in the final decade

. The Cortes of Castile in 1594 states that 'the kingdom is wasted and destroyed, for there is hardly a man in it that enjoys any fortune or credit'

. There was the collapse of Spain as a Great Power in the century after Philip - Vagrancy and brigandage increased in the kingdoms as a result

. Population increase also contributed to inflation

. The costs of warfare had an inflationary effect on Spain - The Spanish crown had to buy weapons form overseas because there was insufficient domestic production, e.g. 80% of the weapons used to suppress the Morisco Revolt from 1568-70 had to be imported

. There was steady growth peaking at 8 million in 1580

. The most rapid expansion was mid-century - New Castile rose by 78% in the 70 years to 1591

. Woodward estimates there were 6.5 million people in Spain in 1556, growth peaked to the 1580s then about 7-8 million in the 1590s

. Seville, Cadiz and Madrid grew under Philip for obvious reasons - but growth slowed from 1580s as Spain's wars drained thousands of men from Spain, perhaps 200,000 left to the Americas in the 16th century

. A series of epidemics and harvest failures led to dreadful mortality crises, especially in the 1590s - From 1598-99 12/28,000 in Segovia died

. There were serious plagues in Andalusia in 1582, Catalonia from 1589-92 and the whole of Spain from 1596-1602

. The last plague estimated to have taken 600,000 lives proving grain production insufficient to meet the normal demands of the people - Castile had to rely on foreign grain from Sicily and Naples thus raising prices

. A long term structural weaknesses meant that Spain could not feed its population even in a good year

. Over 1/6 of Spain is over the 1,000 metre level and the mountain slopes were only suitable for pasture and woodland

. Much of the Mediterranean coast was left untilled for fear fo piracy and large areas in the centre of Spain arid - Woodward reckons that only a third of the country was cultivable

. Critics say that even as much as two-thirds of Andalucia was untilled wasteland

. Yields were already amongst the lowest in Western Europe and began to fall dramatically from the 1570s

. There was little experimentation of crops - e.g. rice was not introduced until the 17th century

. The situation got worse in the 1590s with the so-called 'little ice age' which highlighted existing structural weaknesses - a mix of high taxes and rents, under-investment and poor climatic conditions drove farmers into poverty and ultimately off the land

. Harvest failures occurred - By the 1590s, the state had to ban the practice of seizing peasants' ploughs or crops in lieu of debts due to food shortages being so acute

. Andalusia was the most prosperous province - In a good year, Old Castile could be self-sufficient but many regions like Valencia and the Basque lands regularly imported wheat from as far as the Baltics and Canaries, as well as North Africa and Sicily

. By the 1580s, the whole of Spain was importing wheat and making do with bread substitutes

. The wool market was saturated in Antwerp in the 1550s and led farmers to turn pasture into arable land

. In 1563, the Crown tried to protect the Mesta with tax breaks but the 1566 decision to allow foreign traders to export silver coins rather than wool, damaged the Mesta massively

. Kamen suggests that in the mid-16th century until about 1580, Spain's economy was doing well but after that date it clearly was not

. He argues that population increase drove demand for food and services, and although New World silver affed to the inflation, it also increased profits and boosted trade and production in this earlier period

. His evidence is that far more land was made fit for agriculture - In rural areas around Segovia, a population increase of 24% from 1531-91 pushed up production levels as common lands were changed into arable land and hill slopes were de-forested

. In Bureba valley output increased by 26% in wheat, 51% in rye and 54% in wine from 1560-80

. Industry expanded in the same period- e.g. wool in Segovia, Toledo and Cuenca; American and Castilian money was invested in this

. In 1580, Segovia had 600 looms producing 13,000 pieces of cloth/year

. The Granda silk indrustry was doing well initially under Philip

. Burgos traded with Flanders, Italy and France through the trade fair at Medina del Campo

. 60% of wool went to the Low Countrie, and the Netherlands also supplied Spain with Baltic wheat, textiles and naval supplies - a clear economic motive to keep the Low Countries

. But 'the boom in Castile was a temporary phenomenon' - Food output only increased as more land was put under the plough and not because of agricultural innovation

. After mid-century, the demand from America fell off and demographic crises in Spain stopped population growth:

. 1565-66 in Zaragoza - 16,000 deaths

. 1580 in the western regions - 35,000 deaths

. 1590 epidemic in Catalonia caused 12,000 deaths in Barcelona

. In Bureba, the 1565-66 plague saw some villages losing half of their population and in the decade afer 1586, the whole area lost 20% of its people

. Kamen argues that three main developments led to a decline in the power of Spain's merchants and capitalists (that were never massively strong anyway):

. The enormous expansion of New World trade led to Castilian merchants player a smaller role

. Spain's imperial commitments (wars) meant a need for credit that Spanish financiers could not meet, allowing German/Italian bankers to control part of the economy

. The 1566 decision to allow foreign financiers to export silver from Spain, encouraged them not to invest in Spain but to use it as one to extract metallic wealth from

. 'Our senseless subjection to foreigners in giving them control of all the most important things in the country. The best properties are their; the biggest estates, the bulk of the kingdom, are in their hands'. - Mercado in 1568

. The most obvious example of foreign control was Seville - population boomed; 35,000 in the 1480s, 50,000 in 1533 to 120,000 in the 1590s

. From 1562-1608, the number of vessels on the Indies route increased by 176% and volume of tonnage by 238% - but Italian, Burgundian and French merchants dominated this trade

. Seville' trade flourished but most was in foreign goods that went to alien merchants

. Thus 'superficial prosperity' (Kamen) in Castile, which had few rooots in its own resources