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 the other hand, the legacy of Philip II at the turn of the 17th century was more visibly sombre. Castile now had for the first time a stable capital in Madrid, facilitating central government. The Council of State, dominated by grandees, and deliberating on major issues of policy, was more than counterbalanced by the enhanced importance of the royal secretariat, whose diligent jurist-functionaries provided the desk-bound monarch with the bureaucratic tools of rule most congenial to him. Administrative unification of the dynastic patrimonies, however, was not pursued with any consistency. Absolutist reforms were pressed in the Netherlands, where they led to a debacle, and in Italy, where they secured a modest measure of success. In the Iberian peninsula itself, by contrast, no progress in the same direction was even seriously attempted. Portuguese constitutional and legal autonomy was scrupulously respected; no Castilian interference ruffled the traditional order of this Western acquisition. In the Eastern provinces, Aragonese particularism gave truculent provocation to the King by shielding his fugitive secretary Antonio Perez from royal justice with armed riots: an invasion force in 1591 subdued this blatant sedition, but Philip abstained from any permanent occupation of Aragon, or major modification of its constitution.23 The chance of a centralist solution was deliberately foregone. Meanwhile, the economic situation of both monarchy and country was deteriorating ominously by the end of the century. Silver shipments ran at record levels from 1590 to 1600: but war-costs had by now grown so much that a new consumption tax levied essentially on food – the millones – was imposed in Castile, which henceforward became a further heavy burden on the labouring poor in the countryside and the towns. Philip II’s total revenues had more than quadrupled by the end of his reign:24 even so, official bankruptcy overtook him in 1596. Three years later, the worst plague of the epoch descended on Spain, decimating the population of the peninsula.
The accession of Philip III was followed by peace with England (1604), a further bankruptcy (1607), and then by the reluctant signature of a truce with Holland (1609). The new regime was dominated by the Valencian aristocrat Lerma, a frivolous and venal privado who had established his personal ascendancy over the King. Peace brought with it lavish court display, and multiplication of honours; political influence deserted the old secretariat, while the Castilian nobility congregated again towards the now softened centre of the State. Lerma’s only two governmental decisions of note were the systematic use of devaluations to extricate royal finances, by flooding the country with the debased copper vellón, and the mass expulsion of the moriscos from Spain, which merely weakened the Aragonese and Valencian rural economy: price inflation and labour shortages were the inevitable result. Much graver in the long-run, however, was the silent shift that was now occurring in the whole commercial relationship between Spain and America. From about 1600 onwards, the American colonies were becoming increasingly self-sufficient in the primary commodities they had traditionally imported from Spain – grain, oil and wine; coarse cloth was also now starting to be locally produced; ship-building developed rapidly, and inter-colonial trade boomed. These changes coincided with the growth of a Creole aristocracy in the colonies, whose wealth was derived from agriculture rather than mining.25 The mines themselves were subject to a deepening crisis from the second decade of the 17th century onwards. Partly