A history of commerce

by Clive Day

Deeper-lying causes were at work, however. The damage from any single event could have been repaired if there had been wholesome vigor in the Spanish political organization, as there was and as there is still among the Spaniards as a people. It was the fortune of Spain, at this critical period of her history, to have the control of affairs vested in the hands of rulers who were negligent of her condition, by the distraction of their interests or by natural incompetence, and who wasted her resources. The framework of government offered no chance for good councils to reach the monarch’s ears. Men of business sense were excluded from office even in the towns, so far as possible, and were a rarity in the national parliament; power lay in the hands of lay and ecclesiastical lords who had inherited feudal ideas, the reverse of business-like, from the earlier period of the crusade against the Moors, and who had no understanding of the measures needed for industrial development. There can be little doubt that the prime evil from which Spain suffered was (as it still is) bad government.

201. The burden of taxes.—The chief political abuse appeared in the form of taxes so burdensome in their amount and in the method of collection that industry was stifled. Taxes increased so rapidly in the sixteenth century that in 1594 it was asserted that they amounted to 30 per cent on a man’s property, and that farmers could not exist no matter how small a rent they paid; they left Spain or went to prison. The “alcabala,” a tax supposed to be 10 per cent on a ware every time it was bought and sold, was raised until it absorbed most of the profits of trade and was a leading factor in the decline of industry. A Spanish author of the eighteenth century (Ulloa) shows that a man engaged in the manufacture of a certain stuff would have had to pay in taxes actually more than he earned; “hence it follows that he would have gained more by making nothing, and in Spain it is profitable not to work.” Some industries, more fortunate, paid 60 per cent or 40 per cent of the value of the goods as a tax to the government.

202. Customs duties, on the frontier and inside the country.—The same ruinous excesses marked the policy in customs duties. The government established rates which were for the time enormously high, or absolute prohibitions with the death penalty for infraction. Commerce would have ceased almost altogether if it had not been for the absolute need of foreign wares in Spain after the destruction of home manufactures. The wares were procured partly by smugglers through the corruption of the customs guards, partly by the connivance of the government, which allowed foreigners such favors in measurement and valuation that often not over a quarter of the nominal duty was paid. This allowed wares to enter, but it killed the remnants of active Spanish commerce with Europe, for the favors granted to foreigners were refused to natives. Other measures almost as monstrous were attempted, and failed only because the government lacked power to enforce them. Spanish shipping declined until it practically ceased to exist outside the protected colonial traffic.

Finally, to complete this picture of the difficulties under which commerce labored in Spain, duties existed not only on the frontiers but in the interior of the country, hindering the free passage of goods and the development of resources. Spanish kings made attempts to abolish the internal customs frontiers, which failed through the opposition of interested persons and the royal need for money. It was not until 1717 that the internal duties were done away with, and even then the remedy was insufficient, and Andalusia kept its internal tariff barriers.

203. Examples of bad policy; the Mesta.—An excellent example of the evils of the government’s economic policy is furnished by the history of the Mesta, an association of stock raisers largely devoted to the production of merino wool. The flocks grazed in summer on the highlands of Leon, and descended in winter to Estremadura. The Mesta got such privileges that it killed the agriculture within its reach. Where the sheep had once fed the land could never be alienated for another purpose; no one could bid against the Mesta for the lease of pastures; proprietors along the route of the sheep must sit passive and see the crops destroyed by them. Estremadura, once one of the richest provinces of Spain, became one of the poorest, and parts of it now are nearly desert. The policy of favoring one interest, by sacrificing to it other interests more important, was characteristic of the diseased political condition of Spain; and the wasting of national resources shown in the case of the Mesta was but one of many examples of neglect. The canals and aqueducts of the irrigation system, on which the Moors had lavished their care, were allowed to deteriorate and go out of use; and the forests were cut down to the permanent detriment of the soil and water supply.

204. Failure to develop colonial trade.—In the foregoing sketch we find sufficient explanation of the decline of the domestic industry and commerce of Spain; we have still left to consider the question why the evils of the home system were not repaired by the chances for commercial development which the discovery of America and of the sea route to eastern possessions opened. Before the attention of Spanish rulers was absorbed by the attempt to suppress the Protestant movement in Europe and to subject the Netherlands, the crown had won an immense area outside of Europe; even to-day the extent of the Spanish possessions at this period is attested by the hold which the Spanish language still has on the world. Of all the European countries Spain was the one which appeared in the sixteenth century to have the best chance to build up a great commercial empire based on world-wide possessions. Why was not this chance accepted?

205. Spanish colonial policy. Taxes.—It was a misfortune for the Spaniards that they quickly discovered precious metals in America, and in seeking to increase their supply were diverted from a more substantial basis of prosperity. But the final blame for failure lies again not with the people nor with the nature of the colonies, but with the government. The explanation is to be sought in the colonial policy of the Spanish kings. At first the trade to America was comparatively unrestricted. Before, however, merchants could establish the trade relations which would have enabled them to develop the resources both of Spain and the transmarine possessions, the government laid its heavy hand on the trade and held it down so tightly that it never acquired vigor. Heavy taxes were levied on trade, and, as in the case of taxes at home, these often were framed in such a short-sighted way that they brought far more loss to commerce than gain to the treasury. The “palmeo,” for instance, was an export duty levied in the eighteenth century on wares merely according to their bulk, without regard to their value; its effect was to encourage the export of foreign manufactures, which had great value in a small bulk so that they could afford to pay the duty, while the coarser Spanish exports were taxed out of existence.

206. Restriction of trade to appointed fleets.—Ships could not sail to America as might suit the convenience of merchants, but had to sail from a given port (Seville or Cadiz), at a given time, to a given port in America (Porto Bello near the modern Colon, or Vera Cruz). The government by this restriction made it easier to protect the ships at sea, and to collect taxes from their cargoes, but it bound the arms of merchants so fast with its official red tape that they were weak and helpless. In theory two fleets left Spain each year, one for Central America and one for South America; in fact there were years together, especially in the eighteenth century, when fleets did not sail, and when the colonial possessions might have been entirely non-existent so far as regarded benefit to the mother-country.

207. Restriction of the market by the discouragement of emigration.—On arrival in America a cargo was sold sometimes for a tremendous advance over cost. Sometimes, however, and more and more frequently as time went on, a fleet would find on arrival that there was no market for its goods, and they would be sacrificed or brought back to Spain unsold. A special reason for this will appear later, when we refer to the growth of smuggling. One general cause, however, for the weakness of Spanish colonial commerce must be noticed in this place. In contrast to the English, who stimulated emigration and so built up a market for their wares in the colonies, the Spanish kings kept emigration under a system of regulation which was almost inconceivably strict. Colonists were discouraged from settling in the New World not only by the difficulty of getting permission to go out, but also by the poor chances for making a living when they arrived. They were strictly forbidden to engage in any industry which could threaten to compete with a Spanish industry; they were tied down to residence in some particular province; and they were prevented from developing the resources about them by restrictions which applied not only to trade with the mother-country but also to intercolonial trade. Trade with the Philippines, for instance, was closely restricted or even prohibited. Districts in the southern part of South America were subject to similar burdensome restrictions. A settler on the La Plata might have to get his European wares by a trip across the Continent to Lima, then up the west coast, and across the isthmus to Porto Bello. When the privilege of receiving two ships a year was granted to Buenos Ayres a customs frontier was established in the interior to prevent goods from reaching Peru by this route.

208. Supply of the market by smugglers.—Spanish colonists increased but slowly, therefore, in numbers and riches, and furnished a poor market for Spanish exports. The Indians were even worse customers. Natives who went barefoot and had no beards were forced, it is said, to buy razors and silk stockings at exorbitant prices, but of course they had no natural desire for those or other European wares, and took only an inconsiderable amount. As the home manufactures declined in vigor, exports to the colonies came to consist almost entirely of the wares from other European countries, and even these were obtained mainly through smugglers. The government could maintain its regulations against Spaniards, but not against foreigners, who absorbed the most profitable parts of the trade, and spoiled the market for merchants who obeyed the restrictions. The English and Dutch islands became the stations for an illicit trade which flourished as the regular trade declined. After 1713 England had the right, by treaty, to the monopoly of the African slave trade with the Spanish possessions, and was privileged to send out nearly five thousand negroes a year. The English had moreover the right to send out one trading ship of 500 tons; they secretly enlarged the capacity of the ship and used accompanying transports to carry still more cargo.