Aims

Understand how Philip can both be attacked and defended over his financial management

a2historyphilip.blogspot.com

Summary

Attempts to raise revenue - Bridging the gap

Ordinary Revenue Alcabala (10% sales tax) Customs duties Rents from crown lands

By 1598 ordinary revenue 3x that of 1556.

Extra-Ordinary Revenue Servicio – one off tax

requiring Cortes approval – nobility/clergy exempt

Hundredth Penny in Netherlands

Church e.g. Three Graces Sales of noble titles and

crown offices Sale of common land and

Royal jurisdictions Quinto – 1/5 of value of

precious metals and stones mined in Americas.

Theoretically revenue from parts of the Monarquia

Attempts to raise revenue - Bridging the gap Constantly a problem Provinces were reluctant – regional

differences

Loans

Bullion from new world allowed Spain to borrow heavily

Richest monarch in Europe However despite Philip’s efforts –

Spanish economy could not sustain a large empire for long with its military and civil commitments.

Serious as efforts caused problems

Taxation hit middle and lower orders as nobility and clergy exempt – e.g. Millones in 1590’s on food stuffs

Sales of crown lands short term gain – long term loss in rent revenue

Spain more notably Castile bore brunt of costs of maintaining Monarquia – Philip failed to persuade outlying regions to contribute e.g. Lepanto – Italian states most under threat paid 400K ducats, Castile paid 800K. Therefore constant drain on Spain/Castile.

Attempts at taxation caused unrest in Monarquia – e.g. 1572 Netherlands against attempts to tax via Hundredth, Twentieth and Tenth penny taxes. Ultimately backfired revenue from Netherlands dropped.

Financial ineptness of Philip Charles to Philip ‘ attend closely to finances

and learn to understand the problems involved’.

Despite advice Philip never mastered the intricacies of the Royal finances

‘I have never been able to get this business of loans and interest into my head’.

Yet he made financial decisions and too readily took advice of self-interested financiers.

Even embarked on grand schemes – e.g. Escorial est 5.5 M

Major problem need more finance Revenue did not meet expenditure -

Philip resorted to borrowing on a grand scale i.e. loans.

Led to high interest rates and hold over Spain by Genoese financiers

Estimated by 1598 National Debt of 85 Million ducats interest payments 40% of annual revenue. Serious strangle hold by foreign financiers.

Bankruptcy

Declared bankrupt 4 times 1557, 1560, 1575 and 1596.

Suspended repayments in attempt to break stranglehold of creditors. Did not work.

Serious financial collapse.

Lack of investment in Spanish economy Revenue from taxation & quinto

spent on war e.g. Netherlands 80 m ducats 1567-1600

Securing debt bonds (Juros) seemed more secure option therefore further reduction in investment.

Inflation

Faced period of high inflation 400% during 16Th Century Bullion imports now not accepted as

cause more likely war. As war disrupted internal trade and

transport, deterred investors.

Population

Steady growth approx 8 m 1580 1580 slowed – start of decline in some

regions Wars drained Spain of young men Emigration to Americas 1590’s epidemics and harvests = localised

mortality rates Imbalance – migration from East Spain to

Castile – Castile 81 % of pop compared to Aragon, Catalonia and Valencia only 13.5%

Agriculture

Structural weaknesses could not feed it people – conditions and need for modernisation = low yields.

Increasing dependent on imports e.g. from Sicily and Southern Italy.

Industry

Industry sparse in comparison to Netherlands or France .

Allowance of town guilds – lack of modernisation

1566 Philip allowed merchants to export bullion instead of goods – trade in goods declined e.g. export of wool to Netherlands 400K sacks to 25k over his reign.

Foreign policy – disrupted markets e.g. Netherlands and reliance on imports of weapons, shortage of skilled craftsmen

Lack of investment.

Trade and commerce

Spain not economically united. Poor inland transport network. Became increasingly reliance on

trade with her overseas possessions.

So how serious?

Roots of later decline were laid during Philip’s reign.

Foreign competition, war and resulting national debt left nation with impossible burden.

Whatever the explanations in the final analysis Spain collapsed as a great power in the century that followed.