Encyclopedia of World Trade

The dust had barely settled from Spain’s wars of liberation from the Moors when the Spanish Crown began to redirect the aggressive ambitions of its restless population to explore and conquer newer worlds. The fruits of these endeavors left Spain with the largest and richest colonial empire of the 1500s and 1600s and made it a major player in the global economy of that era. This proved to be a double-edged sword, as the effects of these efforts brought lethargy to the Spanish ruling class, while simultaneously making Spain’s empire a more attractive target. The eighteenth and early nineteenth centuries saw a steady erosion of Spain’s empire, so that by 1898, when the United States virtually finished it off, there was little left compared to the glory days of previous centuries.

Beginning of Empire

Although the Portuguese were the earliest Western explorers of the modern era, the Spanish quickly caught up with them. In 1490, the Papal Line of Demarcation and the Treaty of Tordesillas divided the world into Portuguese and Spanish halves. While the Portuguese remained content primarily to establish trading posts (Brazil being a notable exception), the Spanish conquered and ruled much of the area they had been allocated. Within two generations of these agreements, Spain ruled most of the Western Hemisphere as well as several island chains in the Pacific, most notably, the Philippines, named for Phillip II, Spain’s ruler when it was conquered.

World trade in the sixteenth century consisted largely of the exchange that occurred because of the activities of the Spanish and Portuguese empires. After establishing their empire, the Spanish began to enslave the local populations and organize the production of exports. Three commodities—gold, silver, and sugarcane—comprised the bulk of exports from Spain’s empire. All were labor intensive. Spain’s harsh treatment of the enslaved population, already severely weakened by the introduction of Old World diseases and the dislocation caused by the Spanish conquest, resulted in the near extinction of the Native Americans of Central and South America. Production, however, had to continue, so the Spanish, mimicking the practices of Portuguese sugar plantations in the eastern Atlantic, began to import African slaves to be their colonial labor force. This greatly increased the volume of the global slave trade as Spain’s colonies became massive slave importers beginning in the mid-1500s. As the sixteenth century drew to a close, Spain’s empire was the envy of the world and it accounted for a large amount of world trade, both as a production source and a market.

Decline

Success proved fleeting for the Spanish empire. Other countries started siphoning off some of Spain’s colonial prosperity through piracy and market competition. Spanish galleons, laden with gold and silver, made tempting targets for pirates, many of whom were sanctioned and supported by Spain’s European rivals like England and France. Some of these rivals began to establish their own sugar-producing colonies, cutting into Spain’s share of the global sugar market. To compound these problems, much of the wealth that still managed to reach Spain was squandered in failed efforts to retain control of the Netherlands. The wealth spent equipping and paying the mercenary armies used in this effort rarely contributed to the Spanish economy. The Dutch became independent and began to compete aggressively with Spain. Even the wealth that did stay in the Spanish economy had negative consequences. The influx of gold and silver, which were the primary mediums of exchange, caused massive inflation in Spain. Worse, the price increases did not come from economic growth and job creation, so wealth in Spain became even more unevenly distributed and the economy stagnated. Those ruling Spain and whose prosperity continued saw no reason to pursue policies to promote industrialization. Spain could still draw impressive amounts of wealth from its colonies and use that to buy powerful mercenary armies, but it faced greater competition for that wealth and its largely subsistence economic structure remained unchanged, while its rivals were also growing economically and creating the basis for more complex and powerful economies.

Success proved fleeting for the Spanish empire as other countries began to siphon off some of Spain’s colonial wealth prosperity through piracy and market competition. Pictured here is a 1609 truce between the Spaniards and Dutch over trade in the East Indies. (The Art Archive/Musée du Château de Versailles/Dagli Orti)

By the end of the War of Spanish Succession in 1714, Spain’s empire was clearly in decline. The British obtained the Asiento, a monopoly on the slave trade in Spain’s empire. This meant that the Spanish no longer profited from one of the major trades occurring in their empire: the slave trade. Other trends that caused Spain’s decline continued for the rest of the eighteenth century. Sugar production in other places increased, and the Spanish continued to wage costly wars, most of which they lost. A greatly humbled and weakened Spain fell to Napoléon Bonaparte in 1808, setting the stage for the dissolution of much of its empire.

Spanish Empire

Beginning of Empire

Decline

Imperial Competition

Bibliography