The Costs of Imperial Overstretch

The loss of the Invincible Armada in 1588 signaled the beginning of the decline of Spanish naval power across the Atlantic. Spanish monarchs had to look for new strategies to keep the channel between America and the European metropolis op­erational at precisely the moment when the struggle for hegemony between Spain and the northern powers moved into the American theater.

Thirty Years' War, piracy, smuggling, and several military setbacks in the Caribbean seriously tested the empire's foundations. Between 1625 and 1655, Great Britain, Holland, France, and Denmark began constructing their own Atlantic empires, occupying spaces that were militarily undefended by the Spanish, such as Tortuga, Saint-Domingue, Saint Kitts, Saint Croix, Saint Thomas, Barbados, Martinique, Guadeloupe, Granada, Honduras, and Jamaica, as well as territories on the north Atlantic coast. After the 1648 Peace of Westphalia, the Spanish monarchy adapted its imperial strategy to its new situation—i.e., that of a declining power, incapable of defending its vast overseas domains from military attack. In the second half of the seventeenth century, at the same time that the French and British were consolidating their colonial sugar plantation economies, Spain was forced to negotiate a series of bilateral pacts with the northern powers that ensured the end of its commercial monopoly over New World trade. Besides granting foreign nationals the right to compete with Spanish traders from Seville and Cadiz—which ceded partial control over the business of re-exportation to the Americas—the treaties of Münster with the United Provinces (1648), of the Pyrenees with France (1659), and of Madrid with England (1667) ratified the territorial losses that Spain had suffered in earlier decades. Spain also lowered custom duties for foreign trade, which gave its foreign rivals an unfair advantage vis-à-vis their Spanish competitors.

The War of Succession (1700-1713) and subsequent changes in Spain's ruling dynasty did not alter this situation. Quite the contrary: with the asientos de negros, the import of African slaves under contract, and the navio de permiso for trade goods ceded to Great Britain in the Treaty of Utrecht, privileges to foreign nationals increased. From then on, South Sea Company ships as well as merchants in the navios de permiso could trade directly with Spanish American consumers without Spanish mediation. During the reign of the first Bourbon king, Philip V (1700-1746), the new dynasty's reformist impulses were limited to measures that did not hurt international trade in the Carrera de Indias (as the Spanish-American sea route was called). Lower tax pressures on mining, as well as the guarantee of a regular supply of mercury for the silver deposits of Mexico and Peru, encouraged steady growth in silver production until the end of the century.

The interruption of regular navigation caused by the War of Jenkins' Ear (1739­1748) was particularly disruptive for Spanish trade because the monarchy could find no replacement for it, given the state's limited success in cultivating privileged trading companies. Those companies that had survived, furthermore, had not been created to facilitate the transfer of precious metals from Mexico and Peru, but rather to help develop certain peripheral enclaves—mostly those rich in tropical products, such as cacao or sugar—that Cadiz merchants' interest in silver and European manufactures only had converted into vibrant regional economies that threatened the metropole's monopoly.

21

Hussey 1934.

The Spanish Crown's emergency measures—meant to keep the transatlantic route open after the 1739 suspension of convoys—s erved to concentrate sea traffic in the so-called registros sueltos, or individual permissions allowed to ship­ping expeditions, which were used before 1523 and had never totally disappeared.

According to Etienne Francois (duc de Choiseul, French minister of the Marine and the Colonies), of the four great European powers that competed in the eight­eenth century for world leadership—France, Great Britain, Holland, and Spain— Spain benefited the least from peace. Even during the reign of Charles II (1665-1700), which was considered emblematic of Spain's imperial decadence, the country con­tinued to play an important role in the European wars and alliances that were meant to check the expansionist projects of Louis XIV. The War of Succession (1701-1714) divided peninsulares and Americans between the supporters of the Habsburgs and the supporters of the Bourbons. The victory of Philippe d'Anjou had important consequences, not least the incorporation of the former Kingdom of Aragon into a Castilian institutional framework.

With the Bourbon dynasty firmly established—and given the pacifist stance assumed by Britain, France, and the Dutch Republic—Spain became the most se­rious threat to peace in Europe. Adopting an aggressive foreign policy, backed by a rearmed navy and army, Philip V's priority was the recovery of the territory that Spain had lost to Italy in the treaty of Utrecht. The Quadruple Alliance of 1718 was able to halt this scheme, but could not keep Philip V from permanently placing his children Charles and Philip on the Italian thrones in the treaties of Vienna (1735) and Aix-la-Chapelle (1748). After the peaceful reign of Ferdinand VI, the ascension of Charles III—the Spanish Sun King—renewed Spanish belligerence. In the Third Family Pact of 1761—the last of a series of alliances between the Bourbon rulers of Spain and France—he broke Spanish neutrality in the Seven Years' War. He did so at the worst possible moment, however, disregarding the fact that the British and their allies had already defeated Louis XV's armies and navy. In the Treaty of Paris signed the following year, Charles III had to be content simply with recovering what he had lost during the brief intervention.

It is surprising therefore that Spain weathered the financial costs of half a cen­tury of warfare better than the other European powers. Between the Nine Years' War that began in 1688, up to the War of the Convention that ended in 1795, Spain was involved in numerous minor conflicts—for instance, the failed 1775 invasion of Algiers, which mobilized an army of 15,400 men, or affairs in the Malvinas or Falkland Islands (1770-1771) and Nootka Sound (1789-1790)—t hat pitted the country against Great Britain. These latter conflicts did not escalate to open warfare only because France reneged on the Family Pact of 1761, refusing to provide Spain with military support. Despite a 0.45 percent rise in constant prices since 1714, Spanish military efforts up to the 1790s did not create the same financial difficulties as those suffered by Great Britain, France, Holland, Austria, and Prussia.^[1972] It did not generate secessionist movements in the empire, nor did it force finance ministers to adopt drastic fiscal measures that could anger the privileged classes, something that could lead to the monarchy's fall. It did not force the Crown to slow down military actions. This stood in contrast to the Dutch government, which adopted a more pacifist stance after the War of the Spanish Succession, as well as Austria and Prussia after the Seven Years' War. It did not even force the state to focus more on paying off debts, internal or external. By the 1770s the Spanish navy was third in Europe after the British and the French. However, a critical point for the Spanish was that their navy, when added to either the British or French, was clearly sufficient to overpower the other^[1973]—as happened, for instance, during the American Revolution.

What was the secret, then, behind the revival of Spain's military and naval power capable of protecting the empire in the eighteenth century? Two factors allowed the Spanish Bourbons to maintain such high levels of expenditures with so few short­term costs. The first was the empire's capacity to siphon the resources of its colo­nies in order to finance the metropolis' military spending, a source of funding that the other European states did not have.^[1974] However, this colonial vector, whose con­tribution to Spanish finances remained significant through the entire eighteenth century, only became decisive after the reforms introduced in the second half of the century.^[1975] These reforms significantly increased the treasury's income without affecting the general performance of the American economies, stimulated as they were by growing internal and external demand, in particular in the empire's periph­eral regions.^[1976] Until then, the Spanish state based its capacity to carry out an aggres­sive foreign policy on institutional changes in the monarchy's finances, introduced by Philip V, a single contribution based on a massive reformation of the Spanish economy. The Seven Years' War and the definitive failure of the Castilian fiscal re­form projects ended this phase in Spain's fiscal development. These reforms had been inspired by the Marques de la Ensenada's “single contribution,” which was opposed by the elite because it was intended to tax wealth and property instead of consump­tion. Soon after, Charles III (1759-1788) asked his finance minister, the Sicilian Jose de Esquilache, to reform the imperial administration in a way that would maximize the state's ability to collect revenues from its colonies. This reformist phase yielded paradoxical results. It increased the monarchy's fiscal resources, allowing it to es­tablish a fiscal-military state like those of its European competitors. However, it also shattered the complex equilibria that had sustained the oldest of the great Atlantic empires, breaking the consensus between the American elites and the metropolitan center.

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