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Source link: http://archive.mises.org/12703/mercantilism-in-spain/

Mercantilism in Spain

May 13, 2010 by

When the influx of silver and gold from the Spanish colonies in the New World dried up, little or nothing remained. But that was not all. Royal action also managed to destroy several flourishing sectors of the Spanish economy. FULL ARTICLE by Murray N. Rothbard


roy May 13, 2010 at 7:50 am

very appropiate and timely!

Shame Murray is not alive to see it happening again in the shape of the renewable energy boom and bust….

fundamentalist May 13, 2010 at 8:15 am

Interesting history! Thanks! And I think we can credit the decline of Spain and the rise of the Dutch Republic for initiating the study of economics as a separate field from ethics. The Scholastics of Salamanca saw economics as a moral issue. But people were mystified as to why Spain would grow poorer while the Dutch grew richer. Spain had good farmland, some manufacturing and tons of gold stolen from the Americas. The Dutch Repulbic had nothing but manufacturing. This mystery prompted people to study economics.

P.M.Lawrence May 13, 2010 at 11:11 pm

The Dutch had an even higher proportion of good farmland than Spain (also more per capita), and even more after reclamation efforts, just not as much in total.

Ohhh Henry May 13, 2010 at 7:15 pm

Is anyone else reminded of Obama? Substitute “auto unions” and “ACORN” for carters guild, shepherding industry, etc. and you’ll get the picture.

If this is to be the pattern then look for more and more insane protectionist interventions, defaults (plural) on debt every couple of decades, and a long series of wars as the American empire is dismantled and reorganized on more rational lines. E.g. in east Asia (Taiwan, Japan, South Korea, China), the Eurozone and of course the middle east, broadly defined as the zone of US interference from Morocco to Indonesia.

P.M.Lawrence May 14, 2010 at 1:05 am

Well, Rothbard is wrong on a few points:-

- “The seeming prosperity and glittering power of Spain in the 16th century proved a sham and an illusion in the long run. For it was fuelled almost completely by the influx of silver and gold from the Spanish colonies in the New World. In the short run, the influx of bullion provided a means by which the Spanish could purchase and enjoy the products of the rest of Europe and Asia; but in the long run, price inflation wiped out this temporary advantage.” Actually, the Spanish in large part tried to use the funds to build up their war machine and convert them to lasting gains through conquest. This failed.

- “In 1562, the Spanish king forcibly closed Antwerp to its chief import — English woolen [sic] broadcloths”. At that early date England wasn’t yet doing much of the weaving (see below), and raw wool was far more significant. (I suspect Rothbard actually wrote “woollen” and has since been edited, as the modern US mis-spelling is fairly recent.)

- “Alva also levied a heavy value-added tax of 10 per cent, the alcabala, which served to cripple the sophisticated and interrelated Netherlands economy”. It wasn’t a value added tax; wikipedia states: “Unlike a modern value added tax, the full amount was (at least in theory) charged at each transaction so, for example, the same food could be fully taxed as grain, meal, and bread”.

- “Many skilled woolen [sic] craftsmen fled to a hospitable home in England”. It was only after this that much weaving of English wool was done before it got exported. He omits the role of English mercantilism in all this.

- “Finally, the breakaway of the Dutch from Spain in the 1580s, and another Spanish royal default in 1607, led to a treaty with the Dutch two years later, which finished Antwerp by cutting off its access to the sea and to the mouth of the River Scheldt, which was confirmed to be in Dutch hands. From then on, for the remainder of the 17th century, decentralized and free-market Holland, and in particular the city of Amsterdam, replaced Flanders and Antwerp as the main commercial and financial centre in Europe.” He is wrong in calling the Dutch free market. Not only were they as mercantilist as anyone else at the time (though not simplistically so), but also that very restriction of Antwerp was a classic case of mercantilist measures.

So none of the history actually supports Rothbard’s idea that Spain suffered from being mercantilist while others were carrying out free trade, but only that others were better at being mercantilist (before secession, Holland even grew on the back of Spanish mercantilist assistance like favoured access to the carrying trade), and that Spain’s bullion couldn’t be (or at any rate wasn’t) turned into a lasting advantage.

Kakugo May 14, 2010 at 1:45 am

Lawrence, just a quick correction. Spain’s wars were mostly a desperate attempt to preserve the large holdings which came into Charles V’s hands at the death of his grandfathers. In the end that proved simply too much even with the immense resources coming from the Indies.
The Great Italian Wars were not fought not to enlarge Hapsburg dominions there but to fight off French claims on Naples and Milan which were vigorously pursued by Francis I.
The Wars in the Netherlands were really a war of independence, which escalated when Charles V abdicated in favor of his son Philip II and became a fully blown war when the Governor-General Don Juan of Austria, who pursued a politics of tolerance in return for cash, was replaced by the inflexible Duke of Alva, who was much closer to Phillip’s peculiar views on religion.
The Wars in Germany under Charles V were very peculiar in nature (arising from an admixture of claims to religious freedom and Maurice of Saxony’s ambitions) and were cut short when Maurice died and Charles was replaced by his brother Ferdinand, who pursued conciliatory politics.
The Wars against the Turks were exclusively defensive in nature, especially given the fact that both troops and money were always needed elsewhere.
The true wars of conquests were aimed to Africa but were cut short when it was discovered that America and the Philippines gave much better “bang for the buck”, requiring much smaller military forces (and in many cases not even those, the job of conquest being “contracted” to private companies) and giving off enormous returns.

P.M.Lawrence May 14, 2010 at 2:56 am

“Lawrence, just a quick correction. Spain’s wars were mostly a desperate attempt to preserve the large holdings which came into Charles V’s hands at the death of his grandfathers.”

Wrong. Spain started in with attempted conquests early in the 16th century. You have confused the wars I was talking about with quite different, later wars. Your material following that up is pursuing the same self-inflicted red herring – it is a perfectly accurate description of something quite irrelevant.

“The true wars of conquests were aimed to Africa…”.

Wrong, in that those were not the only or even main attempts at acquiring land by force. Spain was active in Italy and even invaded the South of France from there (wearing the Holy Roman Empire hat, of course).

roy May 14, 2010 at 6:46 am

you’re nitpicking Rothbard…
a lot of words… to make what point?

“So none of the history actually supports Rothbard’s idea that Spain suffered from being mercantilist while others were carrying out free trade”

…and you didn’t even see what Rothbard’s point was.

P.M.Lawrence May 14, 2010 at 6:56 pm

Do you mean, Rothbard was aiming at the right thing in his book, it’s just this article that’s wrong in making out that he was on about mercantilism in Spain? Because a quick scan of the linked material shows it really is mostly about mercantilism in Spain.

roy May 14, 2010 at 6:50 am

There’s a spanish saying “poner una pica en Flades”… roughly translated as “putting a pike in Flanders” which refers to something very expensive… meaning that foreign wars are very costly.

…that will get you closer to Rothbard’s target here. It’s imperialism that really ruins a country.

P.M.Lawrence May 14, 2010 at 7:03 pm

“It’s imperialism that really ruins a country”.

Well, that depends on a number of factors, mostly having to do with the state of the art in a number of areas (military, economic, political, bureaucratic, etc.). It doesn’t hurt a country when war can be made to feed on war, or when overstretch doesn’t happen. Certainly Turkey was a gainer that way clear up to the middle of the 16th century, and imperialism did not ruin Britain (we can see that because it was other things that did).

El Tonno May 16, 2010 at 4:38 pm

Being unnecessarily involved in a Europe-spanning war, then being greedy in repossessing the vanquished’s ex-colonies sure did.

Profecom traducciones January 19, 2011 at 12:20 pm

Bonita ilustración.

Ron Finch March 10, 2011 at 10:17 am

More facts does not make something more true. The selection and presentation of facts may illuminate or hide truth. I think that Rothbard’s selection and presentation is quite illuminating. I also think that some commentator’s comments do not help anyone or anything.

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