military campaigns abroad virtually alone: behind it, precisely, lay the mines of the Indies. The total incidence of American tribute in the Spanish imperial budgets was, of course, much less than was often popularly supposed at the time: at the height of the treasure-fleets, colonial bullion directly accounted for only 20–25 per cent of its revenues.14 The bulk of the rest of Philip II’s income was furnished by domestic Castilian charges: the traditional sales tax or alcabala, the special servicios levied on the poor, the cruzada collected with the sanction of the church from clergy and laity, and the public bonds or juros sold to the propertied. American metals, however, played their part in sustaining the metropolitan tax-base of the Habsburg State: the extremely high fiscal levels of successive reigns were indirectly supported by the private transfers of bullion to Castile, whose volume averaged well over twice that of public inflows;15 the notable success of the juros as a funding device – the first widespread use of such bonds by an Absolute monarchy in Europe – is, no doubt, partly explicable by its capacity to tap this new monetary wealth. Furthermore, the colonial increment to royal revenues was in its own right quite decisive for the conduct of Spanish foreign policy, and for the nature of the Spanish State. For it arrived in the form of liquid specie which could be used to finance troop movements or diplomatic manoeuvres directly, all across Europe; and it afforded exceptional credit opportunities to the Habsburg monarchs, who could raise sums in the international money market to which no other princes could aspire.16 The huge military and naval operations of Philip II, from the Channel to the Aegean, and Tunis to Antwerp, were possible only because of the extraordinary financial flexibility provided by the American surplus.
At the same time, however, the impact of American metals on the Spanish economy, as distinct from the Castilian State, was no less critical, if in another way. For the first half of the 16th century, the moderate level of shipments (with a higher gold component) provided a stimulus to Castilian exports, which quickly responded to the price inflation that followed the advent of colonial treasure. Since the 60–70 per cent of this bullion which did not go straight into the royal coffers had to be bought as a commodity like any other from the local entrepreneurs in the Americas, a thriving trade with the colonies developed, mainly in textiles, oil and wine. Monopoly control of this captive market initially benefited Castilian producers, who could sell at inflationary prices in it, although domestic consumers were soon complaining bitterly of the cost of living at home.17 However, there were two fatal twists in this process for the Castilian economy as a whole. Firstly, increased colonial demand led to further conversion of land away from cereal production, to wine and olives. This reinforced the already disastrous trend encouraged by the monarchy towards a contraction of wheat output at the expense of wool: for the Spanish wool industry, unlike the English, was not sedentary but transhumant. and therefore extremely destructive of arable farming. The combined result of these pressures was to make Spain a major grain-importing country for the first time by the 1570’s. The structure of Castilian rural society was now already unlike anything else in Western Europe.
Dependent tenants and peasant small-holders were a minority in the countryside. In the 16th century, more than half the rural population of New Castile – perhaps as much as 60–70 per cent – were agricultural labourers or jornaleros;18 and the proportion was probably even higher in Andalusia. There was widespread unemployment in the villages, and heavy feudal rents on seigneurial lands. Most striking of all, the Spanish censuses of 1571 and 1586 revealed a society in which a mere one-third of the male population was engaged in agriculture at all; while no less than two-fifths were outside any direct economic production – a premature and bloated ‘tertiary sector’ of Absolutist Spain, which prefigured secular stagnation to come.19 But the ultimate damage caused by the colonial nexus was not limited to agriculture, the dominant branch of domestic production at the time. For the influx of bullion from the New World also produced a parasitism that increasingly sapped and halted domestic manufactures. Accelerating inflation drove up the costs of production of the textile industry, which operated within very rigid technical limits, to a point where Castilian cloths were eventually being priced out of both colonial and metropolitan markets. Dutch and English interlopers started to cream off the American demand, while cheaper foreign wares invaded Castile itself. Castilian textiles were thus by the end of the century the victim of Bolivian silver. The cry now went up – España son las Indias del extranjero: Spain has become the Americas of Europe, a colonial dumping-ground for foreign goods. Thus both the agrarian and urban economies were ultimately stricken by the blaze from the American treasure, as numerous contemporaries lamented.20 The productive potential of Castile was being undermined by the same Empire which was pumping resources into the military apparatus of the State for unprecedented adventures abroad.
Yet there was a close link between the two effects. For, if the American Empire was the undoing of the Spanish economy, it was its European Empire which was the ruin of the Habsburg State, and the one rendered the extended struggle for the other financially possible. Without the bullion shipments to Seville, the colossal war effort of Philip II would have been unthinkable. However, it was just this effort which was to bring the original structure of Spanish Absolutism down. The long reign of the Prudent King, covering nearly the whole of the latter half of the 16th century, was not itself a uniform record of foreign failures, despite the immense expense and punishing setbacks which it incurred in the international arena. Its basic pattern was, in fact, not dissimilar to that of Charles V: success in the South, defeat in the North. In the Mediterranean, Turkish naval expansion was definitively checked at Lepanto in 1571, a victory which effectively confined Ottoman fleets henceforward to home waters. Portugal was incorporated smoothly into the Habsburg bloc by dynastic diplomacy and timely invasion: its absorption added the numerous Lusitanian possessions in Asia, Africa and America to the Hispanic colonies in the Indies. The Spanish overseas empire itself was augmented by the conquest of the Philippines in the Pacific – logistically and culturally the most daring colonization of the century. The military apparatus of the Spanish State was honed to a steadily greater degree of skill and efficacy, its organization and supply system becoming the most advanced in Europe. The traditional willingness of Castilian hidalgos to serve in the tercios stiffened its infantry regiments,21 while the Italian and Walloon provinces proved a reliable reservoir of soldiers, if not of taxes, for Habsburg international policies; significantly, the multi-national contingents of Habsburg armies all fought better on foreign than on native soil, their very diversity permitting a relatively lesser degree of reliance on external mercenaries. For the first time in modern Europe, a large standing army was successfully maintained at a great distance from the imperial homeland, for decades on end. From Alva’s arrival onwards, the Army of Flanders averaged some 65,000 troops over the rest of the entire Eighty Years’ War with the Dutch – a feat without precedent.22 On the other hand, the permanent disposition of these troops in the Low Countries told its own story. The Netherlands, already rumbling with discontent at Charles V’s fiscal exactions and religious persecution, had exploded into what was to become the first bourgeois revolution in history, under the pressure of Philip II’s Tridentine centralism. The Revolt of the Netherlands posed a direct threat to vital Spanish interests, for the two economies – closely linked since the Middle Ages – were largely complementary: Spain exported wool and bullion to the Low Countries, and imported textiles, hardware, grain and naval stores. Flanders, moreover, ensured the strategic encirclement of France and was thus a lynchpin of Habsburg international ascendancy. Yet despite immense exertions, Spanish military power was unable to break the resistance of the United Provinces. Moreover, Philip II’s armed intervention in the Religious Wars in France and his naval attack on England – two fatal extensions of the original theatre of war in Flanders – were both repulsed: the scattering of the Armada and the accession of Henri IV marked the double defeat of his forward policy in the North. Yet the international balance-sheet at the end of his reign was still an apparently formidable one – dangerously so for his successors, to whom he bequeathed an undiminished sense of continental stature. The Southern Netherlands had been regained and fortified. The Luso-Hispanic fleets were rapidly reconstituted after 1588 and successfully checked English assaults on the Atlantic bullion routes. The French monarchy was, in the last resort, denied to Protestantism.
At home, on
