Decline of Spain
In the economy, it was reflected in chronic fiscal problems, monetary alterations, inflation, hyperinflation, the decline of industry, and a steep drop-off in precious metal remittances from the Americas.
The decline was also reflected politically and territorially, with the initiation of the twelve years' truce and the maneuvers of the Duke of Lerma, the court favourite, spectacularly manifested in the so-called crisis of 1640, after attempts to restore the reputation of the monarchy with the aggressive policy of the Count-Duke of Olivares.
It was resolved after the death of Charles II of Spain with the Europe-wide War of the Spanish Succession (1701-1714), ending in the Treaty of Utrecht (1713), which divided this vast inheritance between the Habsburgs and the Bourbons, with substantial benefits for England.
Specifically, the Spanish Baroque (the culteranismo or the churrigueresque) has been interpreted as an art of appearance, scenographic, which hides under an external tinsel a weakness of structure or a poverty of content.
On many occasions it has been attributed to the clichés characterizing a Spanish national stereotype linked to the black legend present in the anti-Spanish propaganda circulating throughout Europe since the early 1500s.
Among these harmful stereotypes included pride in the old Christian caste; an obsession with an indolent nobility highly hostile to entrepreneurialism and industry and prone to violence in the defense of an archaic concept of honor; the uncritical submission, by superstition or fear rather than faith, to despotic power both political and religious; fanatical adherence to the most intolerant, cramped version of Catholicism, which led to quixotic adventures in Europe against the Protestants; and the cruel rule of the conquistadors forced upon the American Indians, which included mass forced conversions.
In spite of the implausibility of such a conspiracy theory, it gives a decisive role to the Jews and to the secret societies that are imagined to be ancestors of Freemasonry, in addition to linking these crypto-powers to foreign Protestants and Muslims.
[7] From objective points of view backed up by ample contemporaneous documentary evidence, current historiography considers the central role of the authoritarian monarchy of the Habsburgs in undermining long-term Spanish economic power, especially an unhealthy and destabilizing overreliance on imports of New World silver.
Such long-term economic instability, in turn, constantly sapped Spain's ability to build up large armed forces, and thus to project consistent diplomatic and military power throughout Europe.
The Bourbon absolute monarchy relied less on unpredictable imports of silver and more on intensive taxation of the vast and productive French agricultural sector, by far the largest in Europe at the time.
These predictable and ample tax revenues led to an enviable stability for the French government's budget and expenditures, which translated to a bigger army and navy and thus a greater projection of diplomatic and military power throughout the 1600s, eventually eclipsing that of Spain herself.
[9] Nevertheless, the clear and definite divergences of the socio-economic models associated with Catholicism and Protestantism in different parts of Europe from the early 1500s to the late 1700s, as analyzed in the sociology of Max Weber (The Protestant Ethic and the Spirit of Capitalism, 1905), continue to be considered.
When the Spanish monarchy depended on certain deliveries of silver to arrive in Seville, and these were lost or very late, it then defaulted on those debts to its creditors, usually large German and Italian banking houses.
The Spanish crown under the Habsburgs had none of this—even if it wanted to take out bonds for long-term investment in the armed forces and infrastructure, the lack of a good tax system meant that it would always default on them, just like it had with the loans it owed to German and Italian banks.
This foreign policy centered around isolating and surrounding France, Europe's hegemonic power at the end of the Middle Ages, and defense of the Holy Roman Empire and its larger possessions, which included the Netherlands, Austria, Bohemia and Hungary.
Spain and its possessions thus had to face France, Pope Clement VII, the Republic of Venice, England, the Duchy of Milan, and Florence, nations which formed the League of Cognac, to defend the Aragonese lands in Italy.
Spain and its possessions also had face other war fronts with the rebellious German principalities, the Ottoman Turkish threat to the Mediterranean and Hungary, and the growth of Protestantism in Europe.
These rebellions were sparked when the middle nobility of Aragon and Castile revolted against the fiscal exactions suddenly and rudely imposed on them by foreign rulers from Flanders, who had come to Spain with Charles I's court entourage.
At the head of this class of new Flemish rulers was the regent Adriano de Utrecht, who ignored, besmirched and belittled both the Castilian and Aragonese Cortes and the customary rights of the native nobility.
This put an end to the peaceful coexistence of Jews, Muslims and Christians that had enriched the peninsular Moorish economy throughout the Middle Ages, making Spain one of the wealthier European regions before 1492.
These revenues from Spanish exports and New World silver and gold shipments proved insufficient or did not arrive to the Flemish port of Antwerp due to piracy.
Thus, his son Philip II had to declare bankruptcy three times during his reign, in 1557, 1575 and 1597, as his economic policies were insufficiently productive to provide the revenues necessary to pay these enormous loans.
During his reign, Philip II managed, not without difficulty, to definitively remove France from any claims on Italian lands through the Peace of Cateau-Cambrésis, settled in 1559, and to stop the advance of the Ottomans into the western Mediterranean at the Battle of Lepanto in 1571.
This governmental incompetence made its mark from 1618 onward, as Spain became deeply embroiled in the Thirty Years' War, supporting the junior Austrian branch of the Hapsburgs in their fight against the Protestant polities within the Holy Roman Empire.
A member of a minor branch of an important noble family, the Duke of Olivares increased his personal income and possessions, though to a lesser extent than his predecessors.
Its objective was to ensure that the monarchy effectively unified all the economic, human and military resources of its various kingdoms under one administrative roof, as exemplified by the Union of Arms of 1626.
Thus new and ample military resources were expended in the wars in which the Spanish crown was then engaged: with Holland and England for colonial domination in South America, the Caribbean and the East Indies, and with various European states, like Cardinal Richelieu's France, to defend Hapsburg supremacy on the continent.
The Duke's reform program disrupted the political and administrative balance that constituted the very essence of the Spanish crown founded by the Catholic Monarchs over 110 years earlier.
This rebellion almost separated Catalonia from the Spanish crown, paving the way for eventual incorporation into France, which did manage to permanently annex the trans-Pyrenean counties of Roussillon and Cerdanya.
The administration and finance reform projects, proposed by the arbitrists and applied, in part, by the new valides, would be the prelude to the important changes introduced in the 18th century by the enlightened ministers of the Bourbon dynasty.
