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I heard of this book via William Lind, the military/politics commentator. It is a chronicle
of a great empire in decline.
At one point, Spain's territories stretched from the Philippines -- named after King Philip II of Spain -- to California,
which was named by Spanish explorers in the 16th century
and is derived from the Latin calida
("hot") and fornax ("furnace"). By the Treaty
of Utrecht of 1713, Spain's decrepit
Hapsburg dynasty could not even replicate itself, and the
country passed to the rule
of the Bourbons, which is
to say, the French royal family.
At this point, a new
French-speaking administration was
introduced, which cleared out the old government, and the country began
to revive itself although
it never again achieved greatness.
I would like to say a lot more about this book.
That is why I haven't written about it so far, although
I read it several months ago. I hope that
at least I can give a little impression, and you can go read
the book yourself.
For the most part, the book is
a standard history, which
reads like a succession of newspaper
headlines. It was first published
in 1963. It consists mostly of the comings and goings of monarchs, alliances
and changes of borders, mostly
involving warfare. Probably any history needs to start here, and, when you are talking about two and a half eventful centuries, you can fill
a whole book up without talking about much else. There is little about the economics of
the situation, which I consider
one of the primary drivers of the expansion and
contraction of empire. A government with a strong economy has the material wealth to back expansionary policies, and also has a moral superiority, for the simple reason
that it is successful and people recognize that. The beneficial rule is appreciated. A government with poor economic policies soon finds that it
no longer has the wealth to finance its military, while at the same time its existing territories begin to revolt against the hated and
oppressive rulers, and the empire contracts.
Thus, it is, I would say,
a boring book, of the sort
you were forced to read in high school, without the sort of themes I just mentioned which could tie
together these great movements of history. It serves, like many books, as a source of raw material.
One of the interesting aspects of this long period of decline was that
it was not, for the most part, characterized by the
sort of psychotic, megalomaniac
emperors that Rome had during its
decline. One of the central figures was the Count-Duke Olivares (1587-1645), who was prime minister during the time of greatest collapse. The Count-Duke, as portrayed
in the book, was by all appearances
genuinely devoted to
public service. He was energetic,
charismatic, decisive,
and intelligent. He also held
about as much power, as the prime minister and king's favorite, that any one minister could hold in any society. He immediately began a reform program of the greatest
ambition. Nevertheless, the result
was disaster.
William Lind characterizes
the government's response
to the endless crises of the day
as: "they abolished
the ruff." The ruff is that dramatic
wheel of lace that sits around the neck in old portraits.
The book is mostly a record of the frenzy of activity that consumed the government during that time. Revolts in the (Spanish-owned) Netherlands, demands from nobles, political alliances, court intrigue, the endless press of bills to pay, the struggle to build political consensus, this, that and the other policy experimented with. And yet, throughout all this activity, all of which seemed very important at the time, essential even, which goes on for page after boring page, we get the impression that nothing much of real meaning was actually accomplished, except for some sartorial changes as noted by William Lind.
Does that sound like a government you know?
To us students of economics, the most important things are only hinted at. Within chapter after chapter of the comings and goings of ministers and aristocrats, of policies and treaties and agreements, we get a few crumbs that suggest
where the crisis was ultimately stemming from.
In
1627-8 the condition of the Castilian economy suddenly deteriorated. The country found
itself faced with a startling rise in prices in vellon currency (fiat currency), and the Government was assailed with complaints about the high cost of living. It is probable that the inflation of these years was caused
primarily by bad harvests and by the scarcity of
foreign goods arising from the partial closing of the frontiers since 1624; but it was exacerbated by the recent monetary policies of the Crown, which between 1621 and 1626 alone had minted nearly
20,000,000 [silver] ducats' worth
of vellon coins. [The government
was financing itself by issuing fiat currency.] Olivares had hoped to deal with the problem of inflation by relatively
painless methods. But drastic action became essential
after the failure of an attempt at price-fixing
and of an ingenious scheme
for the withdrawal of the vellon
coins from circulation, and on 7 August 1628 the
Crown reduced the tale of vellon
by 50 per cent.
The great deflation of
1628 brought heavy losses to private individuals ,
but instant relief to the royal treasury.
Are you getting a feel of why the Netherlands and eventually
Portugal decided to separate
themselves from Spain?
In the midst of this environment of oppressive taxation and monetary chaos, in which
productive enterprise had
been snuffed out generations
previous, everyone with talent and ambition sought
to become a part of the Church or State; in other words, among those who
extracted the production of others.
Inevitably,
therefore, as grandees
and lesser aristocrats drifted to Court, they were followed by thousands who either possessed, or aspired to, a place in their service. At a time when the population Castile had fallen, that
of Madrid [the capitol] continued
to grow: from 4000 in 1530 to 37,000 in 1594, to anything between 70,000 and
100,000 in the reign of Philip IV. The Court acted as a great magnet, drawing to it from all over the country
the rootless, the dishonest,
and the ambitious. ...
Everything, then, conspired to attract the
population to the economically unproductive
occupations in society.
Too bad they didn't have "financial innovation" in those
days.
The Spanish tax system had evolved into
the most oppresive sort, which had heavy
levies on the productive middle class while exempting nobility from taxation entirely.
As the yield of the alcabala [a sort of sales tax]
declined, that of the servicios increased; and
during the course of a reign
in which prices doubled, the monetary yield of the servicio nearly quadrupled. ... [T]he effect of the change on Castilian society and the Casstilian
economy was very marked. ... The payment of the servicio
... was customarily limited to one section of society, the pecheros or taxpayers, while all those enjoying privileges of nobility were exempt. ...
The increase in the rate of the servicios
therefore had extremely important social effects,
in that it tended to widen the gulf between the exempt rich and the overburdened poor, and at the same time induced wealthy merchants and
businessmen to abandon their business and buy privileges of hidalgua [a low-level title of nobility] in order to escape
the burden of taxation.
The middle class essentially disappeared.
The contempt for commerce and manual labor, the lure of easy money from investment in censos and juros
[mortgage lending and government bonds], the universal
hunger for titles of nobility [tax exemption] and
social prestige -- all these, when
combined with the innumberable practical
obstacles in the way of profitable economic enterprise, had persuaded the bourgeoisie
to abandon its unequal
struggle, and to throw in its
lot with the unproductive
upper class of society. ...
'There are but two families
in the world,' as Sancho Panza's grandmother used to say, 'the haves and the have-nots';
and the criterion for distinguishing
between them ultimately lay not in their rank or social position,
but in whether they had anything to eat. ...
The best guarantee of a regular
supply of square meals was, by tradition, service in Iglesia,
o mar, o casa real -- Church, sea (trade), or the royal
service (at the Court or army).
By the seventeenth century
the refrain had been narrowed
down to Iglasia, o casa real. Castilians from all walks of life had come to look,
as a matter of course, to the Church, Court and bureaucracy to guarantee them the living which they disdained to earn from more menial occupations, and once despised
and unrewarding.
The reasons for the decline
of the Empire seem pretty
obvious now, don't they?
I'll end with one last
note on the monetary chaos of the time.
The currency of Castile was now
approaching the climax of its
giddy career. In the last
years of the reign of
Philip IV, the premium on silver in terms of vellon rose to
150 per cent, and the last monetary measure of the reign -- a deflationary decree in October 1664 -- failed to reduce it for more than a few passing moments. By the middle of 1665 it was up again
to 115 per cent; it reached
175 per cent by 1670 and 200 per cent by 1675. There was
a sharp rise in Castilian commodity prices during the 1670s, and by
the end of the decade a fresh
attempt at deflation became inevitable. It came on 10 February
1680, when the 'good' vellon
minted since 1660 was deflated by one half. The decree brought a violent collapse of prices,
and produced a succession of bankruptcies
from the Crown downwards.
There was widespread recourse to barter; riots occurred in Toledo and
Madrid; the royal family could
not even raise sufficient funds for its annual trip to Aranjuez;
and -- more serious -- the last remnants
of Castilian industry were destroyed.
Although, as I have said,
it is a boring book, it has a lot of interesting material, especially today when similar things are happening.
Nathan Lewis
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