The Spanish state had been created by the marriage of Ferdinand of Aragon to Isabella of Castile in 1469. Although future monarchs of Spain ruled both Aragon and Castile, little was done to unify the administration or legal systems of the two. Indeed, Aragon itself was divided into Aragon proper, Valencia, and Catalonia - each with its own institutions, customs, and identity. During the later sixteenth century Spain acquired a massive overseas empire, chiefly in the Americas, but also in the Far East (the Philippines were named for Philip II). Both the Spanish and the Portuguese established trading posts on the coasts of Africa and Asia that maintained a degree of independence from local rulers.   Spain also controlled large parts of Italy (including Naples, Sicily, Sardinia and Milan), and much of the southern Netherlands (Flanders) as well as Franche Comté (bordering east central France). In 1580, Philip II successfully invaded Portugal, claiming to have inherited it along with its possessions in the East Indies and Brazil. This vast array of possessions was administered by viceroys, governors, the Council of the Indies, and various other officials created piecemeal as each territory was acquired.     The empire had considerable resources but it was often difficult to exploit them, not least because local interests were reluctant to pay for the costs of other territories.   The basic Castilian tax was the alcabala - a sales tax of 10% - but many towns had agreed to a fixed sum which fell far below the theoretical 10% as a result of inflation. Moreover, in many places the receipts went to local nobles not the crown. As its yield fell, the Cortes of Castile agreed to the servicios ordinario y extraordinarios (which also fell in value) and from late in the sixteenth century to the millones (a tax on basic foodstuffs, including meat and wine) became more important. The crown was also able to obtain some income from the church.   Imports declined still further during the later seventeenth century. Remittances of silver from the Lima (Peru) treasury, for example, fell gradually from 14.8 million pesos in 1631-40 to 1.2 million in 1681-90.   The Spanish tax burden was very unevenly distributed: it fell more on the poor than the rich, heavily on the agricultural sector, and on Castile far more than Aragon or the Basque country. But the Spanish government's expenditure continued to climb: - in the first twelve years of Philip III's reign,

the councils became the sinecures of wealthy aristocrats (despite various attempt at reform. Margaret of Austria. The government forced its employees and creditors to accept this token currency." "unable to escape his own mediocrity". painfully slow.but people were not overly keen to buy these new juros since they were none too confident that the interest would be paid. The only beneficiaries from the weakness of Spanish government finances were Spanish noblemen. and fond of food and hunting. 1641.   Another extreme expedient was the issue of "vellón" coins .vellón was worthless copper. sometimes with a tiny amount of silver added.   The first valido. By 1644 the crown's income was pledged to 1648. the idle Philip III and the self-indulgent Philip IV left control to their Councils of State. Duke of Lerma. Lacking any real money the government periodically had to pay the interest owed on the juros by issuing more juros . a misfortune such as Piet Heyn's seizure of the Spanish treasure fleet in 1628 became a disaster.   By 1607 the government had a debt of almost 23 million ducats and had assigned away all its revenue for four years ahead. and totally reliant on the king for its efficient functioning.5 grams. . was Gómez de Sandoval y Rojas. Pious. and 1654 each made about five million ducats profit for the crown. appointed by Philip III.he spent over 40 million ducats on the Low Countries' wars alone (a ducat is a small gold coin weighing about 3. Philip III fathered eight children in 12 years before his wife. and the issues of 1636. the Spanish government both borrowed money . died in childbirth in 1611.)   The historian John Lynch described Philip III as "the laziest king in Spanish history. generous. but it was also a reflection of the difficulties of a monarch ruling directly over so complex and extensive a system of government.)   To cover the shortfall. Philip II spent his whole life processing the paperwork. from whom the crown borrowed so heavily that they held an effective stranglehold on the monarchy. The system was highly centralized. But the debased coins simply produced inflation and confusion in the economy. and by 1664 the crown owed more than 21 million ducats.     The role of validos (or chief ministers) of the kings of Spain was created partly because of the idleness of Philip III. With Spanish finances in so parlous a state. Under the mediocre Charles the issue of juros (interest-bearing state bonds) . Philip placed him in charge as soon as he acceded in 1598.and assigned the revenues from future years to the bankers if they would pay the defense contracts for the present year.

In voting taxation they favored their own interests over those of the population as a whole. not because he had much experience in government.   The Castilian Cortes represented only eighteen of the towns.there were perhaps 100.     The Spanish aristocracy: Grandees Titulos . the Cortes included nobles and high clerics. Others spent long years in college education . Lerma was appointed because Philip liked him. The peasantry were typically tenants on estates who had to give a large proportion of their output to the landowners.   Political commentators. Hidalgos   .21 new universities were founded during the sixteenth century. but could do little to change such a widespread social attitude. All those with Jewish or Moorish blood tended to be suspected . "arbitristas".this emphasis on limpieza de sangre (purity of blood) had a pernicious influence on Spanish society. as well as representatives of towns. He used his position to enrich himself and his relatives. This increased the proportion of Spaniards in economically unproductive activities. bemoaned the inverse correlation between productive work and high status.   The prevalent contempt for retail trading was reinforced by its associations with Spain's ethnic minority groups .dukes. and only the social elite of those towns at that. as the rewards went to the landlord not the peasant.000 clergy in the 1620s and 150.   The exactions of noble landlords and the high levels of taxation drove the Spanish peasantry into poverty. particularly as many of their members were corrupted by government kick-backs.)   Many Spaniards were highly suspicious of how genuine the "conversion" of Moriscos had been.and left Lerma there until 1618. They feared that the Moriscos were secretly in favor of Islamic reconquest. Elsewhere.Marranos (Jewish converts to Christianity) and Moriscos (Muslim converts to Christianity. marquises. This discouraged hard work and innovation in agricultural methods. The Spanish Inquisition was established in order to ascertain whether converts or their children were backsliding.000 or more in the later seventeenth century. counts & viscounts Caballeros     Large numbers of Spaniards entered the church: .

The English and Dutch began to sell the new draperies .only 159 in 1691.     . Another reason for the decline of agriculture was the sheep. Unfortunately. and from it was made expensive.sheep-farming was less labor intensive than arable production.lighter cheaper textiles that soon cut into the demand for Spanish products. Spain's merino sheep produced some of the highest quality wool in the world. and this meant more men were available for the Spanish army. The grandees dominated the Mesta .an organization representing sheep-owners. They were able to obtain special privileges from the crown: . the profits from wool and cloth production were easily taxed by the government. 600 textile looms were operating in Segovia in 1580 . Another group of migrants to the New World consisted of the younger sons of noble families . luxury cloth. Furthermore. during the seventeenth century these profits began to fall.primogeniture commonly gave all the real estate to the eldest son.Rural poverty provoked migration to Spain's cities and to the New World.

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