In theory, the millones was a much more equitable tax than the servicios, from which anyone boasting a privilege of nobility was exempted; but in practice it was a good deal less egalitarian than it appeared, since landowners could supply themselves with most of the dutiable articles from their own estates. Once again, therefore, it was the poor who suffered. Inevitably a tax of this nature pushed up the cost of living in Castile. A tax-reformer in the 1620s calculated that, in a poor man's expenditure of 30 maravedís a day, 4 maravedís went in the alcabala and the millones alone, but the accuracy of the calculation was contested by his opponents, and at present it remains impossible to assess statistically the impact of taxation on individual Castilians or on the Castilian economy as a whole. What cannot be doubted, however, is the heaviness of Castile's fiscal contributions to the Crown in relation to those of other parts of the Monrchy. The Crown's principal sources of revenue in the late sixteenth century (excluding taxes raised in such territories as Naples and Milan, all of which were by now spent locally) were constituted as follows:
(1) Taxes paid by Castile
Ducats p.a.
Alcabala 2,800,000
Millones 3,000,000
Servicios voted by Cortes 400,000
6,200,000
(2) Dues collected in the Spanish Monarchy by papal concession
Cruzada 912,000
Subsidio 420,000
Excusado 271,000
1,603,000
(3) American silver 2,000,000
Could Castile continue to bear a burden of this nature without being overtaken by economic disaster? Could America continue to supply this quantity of silver? And, in any event, were even these large sums from the New World and the Old sufficient to pay for Philip II's imperial adventures? These were the questions that pressed themselves with increasing urgency on the Spanish Crown and its bankers during the 1590s.
The last question was the first to be answered – and answered – in the most brutal manner. On 29 November 1596 Philip followed his procedure of 1575 and suspended all payments to the bankers. The Crown had gone bankrupt again. On this, as on previous occasions a compromise was finally reached with the bankers: by the so-called medio general of 1597, it was agreed that outstanding debts would be repaid in the form of juros, which meant in effect the transformation of a floating into a consolidated debt. But, 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.
But the bankruptcy of 1596 meant more than the end of northern Castil's financial pre-eminence: it meant also the end of Philip Il's imperial dreams. For some time it had been apparent that Spain was losing its battle against the forces of international Protestantism. The first, and most crushing, blow was the defeat of the Invincible Armada in 1588. The enterprise of England had come to mean everything both to Philip and to Spain since the Marquis of Santa Cruz first submitted to the King his proposals for the great design in 1583. To Philip it seemed that an invasion of England, which Santa Cruz believed could be successfully undertaken for the cost of little more than 3,500,000 ducats, offered the best, and perhaps the only, hope of bringing the Dutch to their knees. While the King pored over his plans day after day in the Escorial, and the elaborate preparations moved slowly to their climax, the priests from their pulpits whipped up the nation to a frenzy of patriotic and religious fervour, as they denounced the iniquities of the heretical Queen of England and vividly evoked the glories of Spain's crusading past. ‘I consider this enterprise the most important undertaken by God's Church for many hundreds of years’, wrote the Jesuit Ribadeneyra, the author of a moving exhortation to the soldiers and captains engaged in the expedition. ‘Every conceivable pretext for a just and holy war is to be found in this campaign…. This is a defensive, not an offensive, war: one in which we are defending our sacred religion and our most holy Roman Catholic faith [fe católica romana]; one in which we are defending the high reputation of our King and lord, and of our nation; defending, too, the land and property of all the kingdoms of Spain, and simultaneously our peace, tranquility and repose.1
Only a few months later Ribadeneyra was writing a mournful letter to ‘a favourite of His Majesty' (probably Don Juan de Idiáquez), attempting to explain the apparently inexplicable: why God had turned a deaf ear to the prayers and supplications of His pious servants. While Ribadeneyra found sufficient explanation in Spain's sins of omission and commission, and full consolation in the very trials sent by the Almighty to test His chosen people, the psychological consequences of the disaster were shattering for Castile. For a moment the shock was too great to absorb, and it took time for the nation to realize its full implications. But the unthinking optimism generated by the fantastic achievements of the preceding hundred years seems to have vanished almost overnight. If any one year marks the division between the triumphant Spain of the first two Habsburgs and the defeatist, disillusioned Spain of their successors, that year is 1588.
The material effects of the defeat of the Armada were, however, much less striking. Out of an original total of 130 ships, as many as two-thirds managed to limp home. Moreover, the Spanish fleet not only made up its losses with remarkable speed, but actually became a more formidable fighting force than it had been before. In a letter addressed to Sir Francis Walsingham just after the news of the defeat of the Armada had arrived, the Huguenot commander Francois de La Noue wrote that Philip II's power was founded on his possession of the Indies, and this in turn depended on his control of the sea. ‘Spain wanted to take Flanders by way of England, but you will be able to take Spain by way of the Indies. It is there that it must be undermined…’2 But it soon became clear that this was not easily achieved. Hawkins, Drake, and the Earl of Cumberland made daring attacks on Spain's overseas possessions and on its transatlantic shipping; a costly expedition was sent to Lisbon in 1589; but the Spanish coasts could not be effectively blockaded, and year after year the silver fleets – too well defended for a successful frontal attack – came safely home to port. Not only this, but Philip himself was soon strong enough to resume the offensive, and, goaded by the attack of Essex on Cadiz in 1596, sent another Armada against England in the following year, only to see it dispersed by the storms.
Yet, if the contest on the high seas remained undecided, the defeat of the Armada had in other ways tilted the balance of power against Spain. La Noue had said in his letter to Walsingham: ‘In saving yourselves you will save the rest of us.’ His prophecy proved correct. Spain's great crusade against the Protestant powers of the north had ended in failure. The news of the defeat of the Armada gave Henry III of France the courage to shake off his humiliting dependence on the Roman Catholic fanatics of the Ligue, and to organize the assassination of the powerful Duke of Guise. This event, and the succession to the French throne of the Protestant Henry of Navarre after Henry III's own assassination seven months later, compelled Alexander Farnese to turn his attention from the Netherlands to France. When he died in December 1592 he left the Dutch still unconquered, and his two French campaigns of 1590 and 1591 had brought Spain no compensating success.
The conversion of Henry of Navarre to Rome in 1593 effectively destroyed any prospect of a successful Spanish candidacy to the thro
ne of France. It was true that France itself had not gone Protestant, but otherwise Philip's northern policy had failed. The bankruptcy of 1596 set the seal on this failure, and made a return to peace imperative. Painfully aware that his days were numbered and that his inexperienced son would succeed to an empty treasury, Philip set about reducing Spain's enormous commitments. The first step towards the liquidation of the costly imperialism of the 1580s and early 1590s was the dispatch of the Archduke Albert to the Netherlands. His arrival in 1596 marked the beginning of a new policy towards the Low Countries, which were formally handed over in May 1598 to Albert and to the Infanta Isabella Clara Eugenia, who became his wife. It was true that Albert and Isabella, although nominally sovereign princes, were still closely tied to Spain, and that the Low Countries would revert to Spain after their death, if their marriage proved to be childless. But at least the ties between Spain and the Netherlands had been loosened, and it would consequently be easier for Spain to call a halt to the war in Flanders without excessive loss of prestige.
The old King could not bring himself to make peace with England: this would come only in 1604. But on 2 May 1598 he concluded with Henry IV the treaty of Vervins, which brought the Franco-Spanish war to an end. At the time when he signed the treaty, Philip was reported to be so ‘withered and feeble’ that it was thought impossible for him to live much longer; and he died on 13 September 1598, after months of excruciating illness which he bore with his accustomed fortitude.
Philip's death, after forty years as King of Spain, changed everything and yet changed nothing. As the policies of his last years had shown, even the will of the King of Spain had to bend before the harsh realitties of an empty treasury and an exhausted nation. His successors, however, had still to learn this lesson for themselves. The new régime of Philip III ordered a fresh military effort to be made in Flanders at the start of the new century and sent a half-hearted expedition to Ireland in 1601, but war could not be fought without resources, and the resources were draining away. In 1607 – a mere ten years after the decree of suspension of payments of 1596 – the Spanish Crown was forced to repudiate its debts once again, and two years later Spain signed its twelve-year truce with the Dutch. The new rulers of Spain had belatedly discovered, as Philip II had himself discovered, that there were certain forces beyond their control, and that a withdrawal from the aggressive imperialism of the later sixteenth century had become both necessary and inevitable.
The circumstances which compelled Spain's phased withdrawal from its imperial adventures during the last decade of the sixteenth century and the first decade of the seventeenth were both global and national. The national, Castilian, crisis was the one which forcefully attracted contemporary attention. Behind this, however, was a less obvious crisis of still wider dimensions, which inevitably reacted upon the fortunes of Castile. This was a crisis brought about by a gradual but profound change in the character of the economic relationship between Spain and its overseas empire.
The imperialism of Philip II's reign had been based on a Spanish-Atlantic economy, in that it was financed out of the resources of America and of a Castile which itself received regular injections of silver from the silver-mines of the New World. During the last decade of the sixteenth century American silver was still reaching Spain in very large quantities, and the port of Seville had an undeniable air of prosperity; but the comforting appearances masked the beginning of a radical change in the structure of the entire Spanish-Atlantic system.
This change was, in part, a direct result of Spain's war with the Protestant powers of the north. In the first two decades after the outbreak of the Netherlands revolt, the Dutch had continued to trade with the Iberian peninsula. Spain was dependent on northern and eastern Europe for its supplies of grain, timber, and naval stores, a large proportion of which were transported in Dutch vessels. Irked by Spain's continuing dependence on the Dutch, and anxious to strike a blow at the Dutch economy, Philip II placed an embargo on Dutch ships in Spanish and Portuguese ports in 1585, and again in 1595. The Dutch appreciated as well as Philip II that any interference with their peninsular trade threatened them with disaster. They needed Spanish silver and colonial produce, just as they also needed the salt of Setúbal for their herring industry. Faced with embargoes on their peninsular trade, they therefore reacted in the only possible way, by going direct to the producing areas for the goods they needed – to the Caribbean and Spanish America. From 1594 they were making regular voyages to the Caribbean; in 1599 they seized the salt island of Araya. This intrusion of the Dutch into the Caribbean disrupted the pearl fisheries of Santa Margarita and dislocated the system of maritime communications between Spain's colonial possessions. For the first time, Spain found itself heavily on the defensive in the western hemisphere, its overseas monopoly threatened by increasingly audacious Dutch and English attacks.
The presence of northern interlopers in the American seas was a serious danger to the Spanish commercial system; but potentially even more serious was the simultaneous transformation in the character of the American economy. During the 1590s the boom conditions of the preceding decades came to an end. The principal reason for the change of economic climate is to be found in a demographic catastrophe. While the white and the mixed population of the New World had continued to grow, the Indian population of Mexico, scourged by terrible epidemics in 1545–6 and again in 1576–9, had shrunk from some 11,000,000 at the time of the conquest in 1519 to little more than 2,000,000 by the end of the century; and it is probable that a similar fate overtook the native population of Peru. The labour force on which the settlers depended was therefore dramatically reduced. In the absence of any significant technological advance, a contracting labour force meant a contracting economy. The great building projects were abruptly halted; it became increasingly difficult to find labour for the mines, especially as the negroes imported to replace the Indians proved to be vulnerable to the same diseases as those which had wiped out the native population; and the problem of feeding the cities could only be met by a drastic agrarian reorganization, which entailed the creation of vast latifundios where Indian labour could be more effectively exploited than in the dwindling Indian villages.
The century that followed the great Indian epidemic of 1576–9 has been called ‘New Spain's century of depression’ – a century of economic contraction, during the course of which the NewWorld closed in on itself. During this century it had less to offer Europe: less silver, as it became increasingly expensive to work the mines, and fewer opportunities for the emigrants – the 800 or more men and women who were still arriving in the 1590s in each flota from Seville. At the same time, it also came to require less of Europe – or at least of Spain. European luxury products found themselves competing with the products of the Far East carried to America in the Manila galleon. But much more serious from the point of view of Spain was the establishment in its American possessions of an economy dangerously similar to its own. Mexico had developed a coarse cloth industry, and Peru was now producing grain, wine, and oil. These were exactly the products which had bulked so large in the cargoes from Seville during the preceding decades. In fact, the staple Spanish exports to America were ceasing to be indispensable to the settlers, and in 1597 Spanish merchants found it impossible to dispose of all their goods: the American market, the source of Andalusia's prosperity, was for the first time overstocked.
From the 1590s, therefore, the economies of Spain and of its American possessions began to move apart, while Dutch and English interlopers were squeezing themselves into a widening gap. It was true that Seville still retained its official monopoly of New World trade, and that Sevillan commerce with America reached an all-time record in 1608, to be followed by a further twelve years in which trade figures, while fluctuating, remained at a high level. But, as an index to national prosperity, the figures are deprived of much of their significance by the fact that the cargoes were increasingly of foreign provenance. The goods which Spain produced were not wanted
by America; and the goods that America wanted were not produced by Spain.
The changing demands of the American market presented the Castilian economy with problems of readjustment which it was ill equipped to tackle; for, during the preceding decades, there had been a signal failure to reverse the economic trends apparent during the later years of the reign of Charles V, and neither industry nor agriculture was in any state to meet the challenge of changing demand and of increasing foreign competition. Indeed, Castile's economy was showing every sign of stagnation, and even, in some areas, of actual regression, as contemporaries themselves became increasingly aware during the closing years of the century.
The first point to strike contemporary observers was the depopulation of Castile and the decay of agriculture. To some extent, their observations were misleading. What passed for depopulation in Castile during the second half of the sixteenth century may often have been a redistribution of population as a result of internal migrations. Of thirty-one towns in Castile, twenty, in fact, showed an increase of population between 1530 and 1594, and only eleven a decrease:
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