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              Conspiracy Nation -- Vol. 1  Num. 23
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                    ("Quid coniuratio est?")


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SPAIN: OUR NEIGHBOR TO THE PAST

This is not dealing with conspiracy *per se*. But it is 
tangentially related.

In *The Great Reckoning*, authors James Dale Davidson and Lord 
William Rees-Mogg show how world economic dominance has moved 
from Spain, to Holland, to Great Britain, and finally to the 
United States. Speaking of the glory days of old Spain (approx. 
1525 to 1625 A.D.), they write:

    There is no better example of a nation that underwent an 
    imperial crisis of costs and spent itself into oblivion 
    than Spain, the great power of the early modern period. 
    Leadership of the Spanish government was totally 
    dominated by tax-consuming interests: the military, the 
    bureaucracy, the church, and the nobility. Long after it 
    became obvious that the Spanish economy was in trouble, 
    Spain's leaders resisted every effort to cut costs. Like 
    American politicians today, they could not believe that 
    the money would ever run out. Each new setback to the 
    economy was treated as an occasion to launch a grand new 
    program. Taxes were tripled between 1556 and 1577. 
    Spending went up even faster... By 1600, interest on the 
    national debt took 40 percent of the budget. Spain 
    descended into bankruptcy and never recovered.


This period of Spain's economic dominance is known as the "Siglo 
de oro," the "Century of gold." One result of its exploration and 
colonization of the New World was that Spain began to import a 
*lot* of gold. What follows will give you more details on Spain, 
our neighbor to the past.

 +  +  +  +  +  +  +  +  +  +  +  +  +  +  +  +  +  +  +  +  +  +

[From *La civilizacion espanola* by Diego Marin. Edicion 
revisada. New York: Holt, Rinehart and Winston, 1969. Translation 
by Brian Francis Redman, Editor-in-chief, Conspiracy Nation.]

The Economic Crisis
-------------------

One of the most significant paradoxes of the Spanish empire 
during the *siglo de oro* is the chronic state of economic crisis 
in which it lived, beneath its grandiose splendor. In spite of 
the gold and the silver coming in from the Indies, the Exchequer 
was always in debt to foreign bankers and the national economy 
became less and less productive. The military obligations of the 
empire brought with them an increase of expenses in excess of 
revenues, so that the preoccupation of the government became that 
of obtaining money at whatever cost, using urgent means that in 
the long run ruined commerce and industry -- all the while never 
comprehending that the true cure of economic woes lies in 
increasing national production. That was the price paid by Spain 
upon converting itself into an imperial monarchy and keeping its 
own material interests subordinated to interests not always 
national.

The financial difficulties had begun already under the reign of 
Carlos V and they kept increasing during subsequent reigns, up 
until the point where Felipe II declared bankruptcy three times. 
The economic protectionism that had been initiated with so much 
success by the Catholic kings had to be abandoned in order to 
satisfy foreign capitalists that had approved loans to the 
Emperor, who gave them as security for the loans the collection 
of future taxes, the privilege of buying raw goods (such as wool, 
iron, etc.), and of selling their manufactured products in Spain. 
With this foreign competition, the development of local commerce 
and industry was diminished, as it was also in other European 
countries.

The other factor that contributed the most to the weakening of 
the Spanish economy was precisely the gold and the silver so 
providentially discovered in the Indies during the formation of 
the empire, but which served only to pay back the foreigners that 
had loaned money to the Crown or that sold manufactured goods to 
the Spaniards. The sudden arrival of those precious metals 
produced an inflation that revolutionized prices in all of Europe 
by increasing the amount of money in circulation in greater 
proportion than the amount of disposable goods. But the rise in 
prices began first and rose most in Spain which had converted 
itself into a country with the unfavorable balance of importing 
more than it exported (because they had the money to pay well), 
but where the prices were too high for them to be able to export 
their own products. This slowed down even more the development of 
the nascent Spanish industry. (The salaries in Spain were double 
those in France and England. Thus, products produced in foreign 
lands could be sold more cheaply than products produced in Spain. 
Thereby, industrial development in these foreign lands was 
favored -- at a cost to industrial development in Spain.) Even 
the commerce from the Indies, the main source of income for the 
Spanish, was diminishing since the second half of the 16th 
century and was passing into foreign hands, either legally or as 
contraband, until the supposed Spanish monopoly of colonial 
commerce represented only 5 percent of the commerce of the Indies 
at the end of the 17th century. For its own part, the greater 
portion of the American treasure never even made it to Spain, 
decreasing in little more than half a century from 35 million 
pesos to 3 million pesos.

In the 17th century, faced with the failure of previous financial 
remedies, other means were sought. Instead of new loans that only 
increased the national debt and which were, at any rate, harder 
and harder to obtain due to falling confidence in the state... 
instead of imposing new taxes on a population already taxed to 
the limit... Spain resorted to the expedient of devaluing the 
money, giving to its copper coins the value that, of old, was 
given to its silver coins. The treasury increased more than 100% 
by this operation, but the gold and the silver disappeared from 
circulation and the economy suffered from renewed inflation that 
increased the cost of production. And when, to halt the 
inflation, the nominal value of the money was lowered, that only 
served to increase the economic disorder. The insecurity felt by 
such fluctuations in the value of the money tended to paralyze 
the economy even more, until around 1680 there was a complete 
collapse of prices and a depression that left businesses with 
neither merchandise nor money and the royal family without the 
financial resources to take its summer vacation. In the end the 
government could do nothing, which resulted in being the best 
possible policy because at least it wasn't disturbing the 
economic life.

Finally, we ought not to forget that the Spanish mentality of the 
time contributed to this economic decadence. As a Florentine 
ambassador observed at the beginning of the 16th century, the 
Spanish "do not dedicate themselves to commerce, considering it 
to be beneath them, because all of them have in their heads 
certain airs of nobility." This prejudice against mercantile and 
industrial labor was not just limited to the nobility, as in 
other nations, but was spread to the other classes. The bourgeois 
saw in the noble his social ideal and tried to obtain royal 
titles for his children (not only for vanity, but for the 
extension of taxes and other privileges.) As a proverbial phrase 
from those times indicates -- *Iglesia, mar o casa real* (Church, 
sea or royal house) -- the Spaniard aspired to be either priest, 
conqueror or bureaucrat, not businessman or factory owner. That 
is to say, he preferred to gain riches and honors by the effort 
of his sword, or to live by a salary that, although modest, gave 
prestige. At the end of the 17th century, the government, alarmed 
by the decrease in industry, tried to rehabilitate the social 
concept of work, declaring that the making of fabrics was not 
incompatible with nobility; but such a revolutionary idea did not 
begin to produce effects until a century later under the new 
Bourbon regime.

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Aperi os tuum muto, et causis omnium filiorum qui pertranseunt.
Aperi os tuum, decerne quod justum est, et judica inopem et 
  pauperem.                    -- Liber Proverbiorum  XXXI: 8-9