A rather interesting event in European history is the fall of the Spanish Empire.
When Philip II died in 1598, the tendrils of Spain reached across almost the entirety of Central and South America, north and south Italy, and the Benelux area. Gold and silver from her massive American empire fueled Spanish dreams to wrest control of Italy and the Netherlands from France, and to spread Catholicism all across the world.
And yet, 300 years later, the Treaty of Paris ended the Spanish-American War, and with it, the Spanish colonial empire died. Cuba was lost, as was the Philippines, Puerto Rico, and Guam. In an attempt to salvage whatever could be saved, Spain sold her remaining Pacific colonies to the newest European power, Germany.
To quote Regina Grafe: “Contemporaries and historians alike considered Spanish shipping resources basically inadequate from at least the later sixteenth century onwards. Yet, this just deepens one of the big puzzles of Spanish imperial history. If Spain was so deficient in the naval arts, how did it hold together the largest western empire for three centuries?” – The Strange tale of the decline of Spanish shipping, p. 81
But this, the sheer amount of territory spread throughout the world, was part of Spain’s problem. The easiest way to reach her Italian possessions was via the Mediterranean. The easiest, and by far the least dangerous way to supply her Benelux strongholds was to use the Spanish Road (a supply route from Barcelona to the Benelux via Lombardy and Burgundy). The only way to reach her American colonies was across the Atlantic Sea, an ocean that became increasingly difficult to navigate safely, as the (then) upstart English, French, and later Dutch navies also began sailing to the New World, often in direct competition with Spain.
The Thirty Years’ War, which began almost as an local conflict in the Germanies, soon spread and expanded. The Dutch rebellion against the Spain and the Franco-Austrian skirmishes in northern Italy are just two conflicts that, while they had nothing to do with religion or the Germanies, became intertwined with the general warfare between the northern and southern Germanies.
Spain, in particular, was involved in numerous conflicts throughout the Thirty Years’ War: she held territory in Italy and the Benelux which came (or already was) under fire, and there were trouble brewing internally as well. Though Spain saw early successes, she was eventually curbed and began losing vital positions and battles. In 1637 the Dutch captured the mighty fortress of Breda, in 1638 Bernhard of Weimar took Beisach, effectively cutting the Spanish Road in half. This loss was incredibly hurtful, as it now forced Spain to sail all supplies to the Netherlands via the English Channel, rather than splitting up the supply chain between the Channel and the Spanish Road. This, of course, relied on England being friendly and allowing Spain to move through the Channel. In 1639, a large Spanish fleet manned by Antonio de Oquendo was destroyed by the Dutch at the Battle of the Downs, a fleet which was partly tasked to relieve the situation in the Netherlands.
Jackson J. Spielvogel writes “Philip II went bankrupt in 1596 from excessive expenditures on war, and his successor, Philip III, did the same in 1607 by spending a fortune on his court. The armed forces were out-of-date, the government was inefficient…” and later he writes that during the reign of Philip III “many of Spain’s weaknesses became apparent. Interested only in court luxury or miracle-working relics, Philip III allowed his first minister, the greedy duke of Lerma, to run the country”. – Western Civilization, p. 516
It strikes one as odd that a country that could practically bathe in precious metals from her overseas colonies, managed to go bankrupt twice within 11 years. But what happened to all that wealth?One theory suggests that – because the Spanish had so much gold, they could easily buy commodities from other countries without producing them itself. Because consumer goods could easily be bought, there was little incentive to produce goods and undertake the necessary investment and develop the technology to produce goods. Therefore, it is argued this ‘easy wealth’ was a factor in limiting economic development.
In macro terms, we could see 16th century Spain as a country with a very large trade deficit – financed by capital inflows (gold, silver, and other precious metals). But, this is an unbalanced economy – consumption enables high current living standards, but when the gold dried up, Spanish business and industry had been left behind other European nations. Nations without a windfall of gold had a much greater drive to create wealth rather than just consume it.
Great Britain, by contrast, arguably, gained just about the right amount of gold. Great Britain never gained enough of the Latin American gold to become just a nation of consumers. The prospect of gold actually motivated a rapid expansion in naval technology. It was around this time, that Britain’s navy and ship building capacity increased rapidly. This sowed the seeds of Britain’s future Empire. But, it was an Empire which was at least partly based on industry and production. The English may have exploited natural resources in countries like India, but they also had the incentive to manufacture goods – and this motivation contributed to the industrial revolution.
But let us turn our attention back to Philip II, and let us look at the magnificent work of J. H Elliot (one of, if the not the most respected historian in the field of Spanish history). He found that the 1590s was one of the worst decades for Spain, but I’ll let him tell the tale:
“During the 1590s there were numerous signs that the Castilian economy was beginning to crack under the relentless strain of Philip II’s imperial adventures. The apparently inexhaustible stream of silver from the Indies had tempted the King to embark on vast enterprises which swallowed up his revenues and added to his mountain of debts: the Invincible Armada alone is said to have cost him 10,000,000 ducats, and in the mid-1590s he was probably spending over 12,000,000 ducats a year. How long he could continue to spend on this scale would ultimately be determined by the revenue yielding capacity of his dominions both at home and overseas, and there is good reason to believe that by the 1590s this capacity was reaching its limits. Less than a quarter of the King’s annual revenues came from remittances of American silver; the rest was borrowed, or was paid for by taxes raised primarily by Castile.” – Imperial Spain: 1469–1716, p. 190
Later, he speaks about the bankruptcy of 1596, which seemed to be the answer to the question “For how long could Spain bear the economical cost of imperial delusions?”, and says, that “as in all operations of this sort, there were inevitable casualties, and the most important victims of the bankruptcy proved to be the fairs of Medina del Campo. The fairs, which had recovered from the royal bankruptcy of 1575, and had functioned with considerable regularity since reforms in 1578 and 1583, were now once more interrupted; and when they started operations again in 1598 it soon became clear that their great days were past. The financial capital of Spain was to shift definitively in the early seventeenth century from Medina to Madrid, and such payments as were made in Medina del Campo during the course of that century were no more than sad reminders of a departed age. The towns of north Castile were fading into history, their streets still walked by the ghosts of Simón Ruiz and his friends – figures from a time when Spain basked in the largueza that came from abundance of silver, and when Castile could still provide financiers of its own.” – Imperial Spain: 1469–1716, p. 191
Castile, arguably the most important part of Spain, took the main hit of the economic demands of the wars Spain waged in the 16th and 17th centuries. By the time the Thirty Years’ War and the Franco-Spanish Wars began to escalate, Castile was increasingly weary and tired, so denuded of men that the levies were a pitiful affair, effectively making it more and more impossible to keep the armies up to strength. The economic position by now was also exceptionally grave, Spain’s last source of economic strength was the trading system between Seville and the America, and it was failing.
Effectively, the merchants lost confidence, as the Sevillian shipping was in decay, and by 1640, Spain’s supply of silver abruptly ended when there were no silver fleets. The whole system of credit and confidence by which Seville had for long shored up the Spanish Monarchy was gradually crumbling. This might not sound huge, until one considers that Seville was effectively Spain’s center of Silver trade, as it was called the “Sevillian Commercial System”, and provided Spain with its silver and credits. Therefore, when it began to crumble due to the result of the decaying trade with America and the interference of Spanish officials, the fall of the Sevillian silver trade meant a crumbling of the Spanish economy which was built upon it. Nothing was made better by the fact that Spain was in a state of unending war and abuse prior to the 1640s, and so many wars eventually pay a toll on even an empire as grand as the Spanish Empire.
By 1640, the Spanish army was spent and tired, the funding of the war effort was rather poor, and the constant defeats in its recent wars meant Spain was losing means of funding its wars. The loss of the connectivity of the Spanish Road particularly secluded its European possessions in Italy and the Netherlands, increasing the costs needed to supply and support them, all the while making it harder for them to send back their wealth to Spain. Spains acute lack of good leaders in the 17th century compounded its problems further.
Therefore, with Spain slowly but surely losing its wars with France, and its economy slowly crumbling, the Spanish did one last thing to ill the public. The Spanish decided that there was still a chance of victory through a prolonged stalemate with France, where an induced exhaustion of France would bring her to terms. This would require unrelenting pressure on the French, which would require all of Spain to help and contribute towards, as Castile was worn out and mostly a spent force. This meant for example, that Catalonia would have to be prepared to dedicate troops to Italy and a renewed offensive across the Flanders border.
Throughout February and March of 1640, troops clashed with the civilians, and the counts and dukes proved unable to retain order. In the ensuing rebellions, the Catalans were repeatedly alienated by Castile, since they meant to use Catalonia to fund the wars and bear the burden of Spain’s problems at the time.
One could almost compare the decline of Spain with the decline of (Western) Rome. The massive wealth procured from America allowed the Spanish monarchs and minister to throw money at every problem that arose, but it gave the country no incentive to evolve its own internal economy.
In the case of Rome, Rome’s greatness had come from conquests that provided the Romans with the means to expand still further, until there were not enough Romans to conquer and govern any more peoples and territory. When pressure from outsiders grew, the Romans lacked the resources to advance and defeat the enemy as in the past. Still, the tenacity and success of their resistance were remarkable. Without new conquests to provide the immense wealth needed to defend and maintain internal prosperity, the Romans finally yielded to unprecedented onslaughts by fierce and numerous attackers. Rome prospered because of her conquests, because of the minerals she could mine in France and Spain and when they proved insufficient and there was no longer any chance of pushing forward to conquer new mines, the Roman economy faltered. Rome would have needed an economic revolution similar in strength to the industrialization in order to survive and that was impossible.
And this seems very similar to what happened to Spain. While the other European powers, who could not survive only on gold and silver, began expanding their economy and eventually undergo massive industrialization, Spain was left behind.
Further, France, for example, focused on strengthening her borders, and sow chaos and dissent among her neighbors. England consolidated her command of the British Isles and made her navy a priority of utmost importance, as did the Dutch. The French territory was all connected with each other, and the English colonies were easily protected by her massive, strong navy. Spain simply had too many fronts, all requiring focus at the same time.
When the other European powers caught up to Spain, they had modernized and many of them were self-sustaining and what they could not make themselves they had the means to procure either via economical or military means, abilities that Spain lacked.