While one side of the Hamilton equation – the amount of silver entering Spain – hardly seems to stand up to the criticisms that have been levelled at it, the other side of the equation – the price movements inside Spain – has also, more recently, come under critical scrutiny. A re-working of Hamilton's figures by Dr Nadal6 would suggest that the greatest proportional increase in Spanish prices occurred in the first half rather than the second half of the sixteenth century, where Hamilton has his peak figures both for prices and for silver imports. On Dr Nadal's reckoning, there was a 2.8 per cent average annual increase in prices from 1501 to 1562, as compared with a 1.3 per cent average annual increase for 1562–1600. The rapid inflation of the first half of the century, with 1421–30 as the decade of the sharpest upward movement for the entire century, was thus followed by a slowing down of the inflationary movement in the last thirty years, after a further sharp upswing between 1561 and 1565.
The whole question of the exact origins of the price revolution is therefore once again reduced to a state of extreme uncertainty. If the sharpest price increase occurred in the first half of the century, this cannot be correlated with the maximum figures for the arrival of silver at Seville, which are to be found in the second half of the century. On the other hand, some correlation might still be found, if it were assumed – as is not unreasonable – that more of the American silver actually flowed into Spain in the first half than the second half of the century, when the share of Spanish products for the American market fell off. But even if no correlation were discovered, there can be not the slightest doubt that the influx of American silver played an important part in the raising of prices, although the exact nature of the part it played remains extremely difficult to assess. An attempt has recently been made by M. Chaunu to widen the Hamiltonian interpretation, by correlating Spanish prices not with the fluctuations in the imports of registered silver but with the fluctuations in Sevillian trade with the New World, as reflected in the figures for transatlantic shipping. This, however, is open to the objection that figures for shipping, while they can suggest much about the needs of the American market and about the general level of business confidence, cannot in themselves provide conclusive evidence about the level of production in Castile unless it is known – as it is not – what proportion of the transatlantic cargoes consisted of specifically Castilian produce. Without this information, it is difficult to see that they provide any safer clue to the quantity of silver flowing back into the Spanish economy than is provided by Hamilton's Sevillian statistics. On the other hand, the Chaunu interpretation has the great merit of widening the scope of the discussion to suggest a much more subtle interrelationship between the Castilian economy and that of Castile's transatlantic possessions than has so far been assumed.
It seems clear at least that any satisfactory analysis of the causes of the price revolution will have to take into account many points beside the influx of precious metals. Debasement of the coinage, which pushed up prices in the England of Henry VIII and the France of Francis I, did not occur in the Spain of Charles V; but the Emperor's borrowings, which he partially financed by the creation of juros, or credit bonds, are likely to have had highly inflationary consequences. Similar results could have been produced by the lavish expenditure of the Spanish aristocracy on building, clothes, and jewellery, part of which may have been financed out of de-hoarded silver. Finally, and perhaps most important of all, there was the impact of a suddenly increased demand upon an undeveloped economy.
The demand came partly from the population increase at home, and partly from the expansion of traditional markets in Flanders and Italy, together with the creation of an entirely new market in America. While Castile made great efforts to meet this demand, the effectiveness of these efforts was restricted by the primitive character of its agrarian organization and also, in some spheres, by a shortage of labour. The inability of Castilian agriculture to feed a growing population at home while simultaneously supplying its new American market, pushed up food prices to a level which made it increasingly difficult for the ordinary Castilian to buy the necessities of life, and left him with little or nothing to spend on essential manufactured articles, of which the most important were textiles. The prices of these had themselves been forced up by the inadequate output of Castilian industry, much of which was in any event being sent to the profitable American market. The sales to America in turn brought into the country a sudden influx of silver, which raised the Spanish price level above that of other European states, and eventually led to an irresistible demand for the sale of foreign goods in Castile, on the grounds that they were appreciably cheaper. As soon as the Crown acceded to this demand Castilian industry found itself gravely threatened by foreign competitors, who not only broke into its home market but also prised their way into the hitherto exclusive American market, for which both the quantity and the quality of Castilian manufactures tended to be increasingly inadequate.
An interpretation along roughly these lines suggests explanations of the initial expansion of industry in sixteenth-century Castile, and of its consequent stagnation, which differ from those advanced by Professor Hamilton. For Hamilton, the principal stimulus to industrial advance was to be found in the lag of wages behind prices: prices rose faster than wages in the early part of the century, and this gave the Castilian industrialist a greater incentive than was enjoyed by his foreign counterparts. Conversely, as soon as salaries caught up with prices the incentive disappeared, and industrial expansion petered out. But in fact there is far too little evidence about Castilian wages in the sixteenth century to support this, or any other hypothesis, about the relation of prices and wages. The sharp rise in food prices suggests that the workman was an early victim of the price revolution, and that his living standards deteriorated over a considerable part of the century; but it is arguable that the principal beneficiaries of rising prices were not industrialists (who may soon have found themselves spending more on raw materials and on paying and feeding their employees), but those landowners who were in the happy position of being able to raise their rents.
In place of the Hamiltonian explanation in terms of the interrelationship of prices and wages, it might be more advisable to set an explanation in terms of expanding market possibilities, which served as an initial stimulus to economic expansion in Castile, but then came up against a series of difficulties – insufficient agricultural and industrial output, uncompetitive prices – which the country failed to surmount. The reasons for this failure would still have to be examined and analysed in detail, but it is only reasonable to take into account the fact that Castile found itself confronted in the mid-sixteenth century with problems of unprecedented complexity, and that if it tackled them in the wrong way, this was partly because there was no fund of previous experience on which to draw.
An admission of the complexity of the problems, however, should not preclude all consideration of the calibre of the men who had to wrestle with them, and of the degree of skill and determination which they displayed. These men were, first of all, the entrepreneurs themselves. Many of the merchants and businessmen in sixteenth-century Spain were foreigners: the Genoese in particular dominated the economic life of southern Spain, where many of them had been established since the Reconquista. Yet in spite of the large contingent of foreign merchants, and of the common assumptions about the Spanish lack of aptitude for business, there is a growing volume of evidence about the importance of native Castilian businessmen in Castilian economic life, especially during the earlier part of the sixteenth century.
Although the Genoese may have been predominant in the south, there was an active class of native merchants and financiers in the towns of north Castile in the reign of Charles V. The Venetian Andreas Navagero says as much in his account of the city of Burgos, which he visited during his travels in the peninsula between 1524 and 1526: ‘The city is very populous and there are artisans of all kinds. Several gentlemen live here, and a number of nobles with fine p
alaces, like the Constable [of Castile] and the Count of Salinas. But the majority of its inhabitants are rich merchants, who travel on business not only throughout Spain but all over the world; they have very good houses and live very comfortably, and they are the most courteous people I have come across in Spain.’ Burgos was, in fact, a city of merchant dynasties, like the families of Maluenda, Salamanca, and Miranda, and they had their counterparts in other north Castilian towns, including the most famous of all – the merchant banking family of Ruiz in Medina del Campo.
Many of these families were engaged in large-scale undertakings. Having originally made their fortune in the wool trade, they had then branched out into other commercial and financial transactions, including credit transactions for Charles V; and they had their agents in the banking houses of Seville, where there were several important native bankers such as the Espinosas, probably a converso family originating in Medina de Ríoseco. There is no reason to believe that these Castilian businessmen were in any respect inferior in commerial and accounting techniques to their counterparts elsewhere in Europe. The widespread use of Castilian for business transactions in commercial centres outside Spain suggests that there was nothing parochial about the Spanish merchant, and Simón Ruiz in particular can be regarded as the prototype of the sixteenth-century businessman.
It is not clear how far these men were interested in industrial enterprises, but at least they showed no inhibitions about exploiting the commercial and financial opportunities that had come with the country's growing prosperity in the early sixteenth century. There is indeed nothing to indicate that the sixteenth-century Castilian was congenitally unsuited to a business life; and if it seems ominous that the second and third generations of merchant dynasties should have preferred the pleasures of aristocratic existence to the tedium of the counting-house, this merely emphasizes their resemblance to their counterparts everywhere else in Europe. All the signs therefore seem to indicate that in the early sixteenth century there were very fair prospects for the development of a dynamic ‘capitalist' element in Castile, which - like its equivalent in England or Holland - might gradually have imposed some of its ideals and values on the rest of society. The fact that these prospects were not realized would suggest that at some point adverse circumstances proved too strong, and that the enterprise of the north Castilian bourgeoisie failed to withstand a serious change for the worse in the country's economic and social climate.
It is clear that much of the responsibility for Castile's economic failure needs to be sought at a higher level than that of the entrepreneur – with the Government rather than with the businessman. Many of the Government's deficiencies are, in fact, to be found in the failings of the Council of Finance. Its members, almost all of whom had no personal experience of commercial and financial affairs, made no attempt to develop any coherent economic programme, or to think out the implications for the Castilian economy of the acquisition of an American empire. References are frequently made to the ‘mercantilist’ policies of sixteenth-century Spain, but it could be cogently argued that it was precisely because of the lack of any consistently pursued mercantilist policies (other than the Sevillian monopoly) that the country ran into such serious economic difficulties. There was no attempt at systematic exploitation of the resources of the New World other than those of the mines, and almost nothing was done to develop in the New World an economy which might complement that of Castile. It is true that the Government ordered the destruction of newly planted Peruvian vineyards and olive groves, for fear of their competing with the wine and oil exports of Andalusia; but colonial industries, on the other hand, were allowed to develop unchecked, and Charles V gave specific encouragements to the silk industry of New Spain, although this was an obvious competitor to the silk industry of Granada. The development of colonial industries was presumably allowed because of the inability of Castilian industry to supply all the needs of the American market, but it seems to have escaped the notice of the Government that a more logical method of dealing with the problem would have been to foster the growth of industry at home. Similarly, nothing was done to tackle the problem of the acute shortage of ships, which were urgently needed if an effective Spanish monopoly of trade with the New World were to be preserved. But the most serious failure of all was the failure to devise any scheme for using the supply of American silver for the benefit of the Castilian economy. While the responsibility for this failure lay immediately with the Council of Finance, it was ultimately bound up with the much wider question of the means employed by Charles V to finance his Imperial policies.
4. THE PROBLEMS OF IMPERIAL FINANCB
From the moment of his Imperial election Charles V found himself saddled with enormous commitments. The struggle with France in the 1520s, the offensive and defensive operations against the Turks in the 1530s, and then, in the 1540s and 1550s, the hopeless task of quelling heresy and revolt in Germany, imposed a constant strain on the Imperial finances. Always desperately short of funds, Charles would turn from one of his dominions to another in the search for more money, and would negotiate on unfavourable terms with his German and Genoese bankers for loans to carry him over the moments of acute penury, at the expense of mortgaging more and more of his present and future sources of revenue. This hand-to-mouth existence had prompted, in the very first years of the reign, gloomy prophecies about the certainty of financial shipwreck, but, in fact, it was not until 1557, when Philip II had succeeded his father, that the expected bankruptcy materialized. Until then, Charles's appeals to the generosity of his subjects and his constant recourse to loans from the bankers somehow managed to stave off the moment of disaster; but the price paid was a renunciation of any attempt to organize the Imperial finances on a rational basis and to plan a coherent economic programme for the various territories of the Empire.
The main cost of financing Charles's imperialism was borne by different territories at different times, depending on their presumed fiscal capacity and on the facility with which money could be extracted from them. The territories concerned were primarily European, for the part played by the new American possessions in financing Habsburg policies during the first half of the sixteenth century was relatively very small. Until the 1550s the Crown's revenues from America averaged only some 200,000–300,000 ducats a year, as compared with the 2,000,000 ducats a year of the later years of the reign of Philip II. This meant that the real entry of the New World into the Habsburg empire was delayed until the decade 1550–60, and that Charles V's imperialism, unlike that of his son, was essentially a European-based imperialism.
Among the European territories of Charles it was the Netherlands and Italy which bore the brunt of the Imperial expenditure during the first half of the reign. But as each in turn began to be squeezed dry Charles was compelled to look elsewhere for further sources of revenue, and by 1540 he was writing to his brother Ferdinand: ‘I cannot be sustained except by my kingdoms of Spain.’ Henceforth, the financial contributions of Spain – which meant essentially Castile – assumed a constantly increasing importance in relation to those of the Low Countries.
Within Spain there were several potential sources of revenue, both secular and ecclesiastical. The financial contribution of the Spanish Church to Habsburg imperialism in the sixteenth and seventeenth centuries still awaits an adequate study, but its importance would be difficult to overestimate. If the Lutheran princes of Europe were to gain great benefits from breaking with Rome and despoiling the Churches in their territories, the kings of Spain were to show that despoiling the Church was equally possible without going to the lengths of rupture with the Papacy, and that the long-term advantages of this method were at least as great, and probably greater. It was difficult for the Papacy to refuse new financial concessions when the, Faith was everywhere being endangered by the spread of heresy; and the Spanish Crown, by placing no restrictions on mortmain, could further the accumulation of property in the hands of the Church, where it was more readily available for taxati
on.
The direct revenues payable by the Spanish Church to the Crown in the reign of Charles V consisted of the tercias reales, or one-third of all the tithes collected by the Church in Castile, and the subsidio, a tax on clerical rents and incomes in all the Spanish kingdoms, fixed at a rate agreed between the Crown and the Papacy, but nominally dependent on regular votes by the clergy. To these would be added in 1567 the excusado, a new tax to help pay for the war in Flanders, consisting of the entire tithe of the most valuable piece of property in every parish. Besides these regular taxes, the Crown also enjoyed the revenues of vacant sees, and, most important of all, the lands and revenues of the Military Orders, which were permanently vested in it by Charles V's former tutor, Pope Adrian VI, in 1523, and were shortly afterwards assigned to the bankers as security for their loans. Finally, the kings of Spain received one very valuable tax which was granted them by papal concession and was payable by the laity as well as the clergy: the cruzada. This had originally been conceded as an emergency tax to help them in their struggle against the Moors, but became a regular source of royal revenue in the reign of Charles V, payable every three years by every man, woman and child anxious for a bull of indulgence. At a minimum rate of 2 reales a bull, this tax yielded during the Emperor's reign an average of some 150,000 ducats a year – not a great deal less than the Crown's income from America.
Imperial Spain 1469-1716 Page 23