Summary Financial Issues


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Summary Financial Issues

  1. 1. Aims Understand how Philip can both be attacked and defended over his financial management
  2. 2. Summary
  3. 3. Attempts to raise revenue - Bridging the gap <ul><li>Ordinary Revenue </li></ul><ul><li>Alcabala (10% sales tax) </li></ul><ul><li>Customs duties </li></ul><ul><li>Rents from crown lands </li></ul><ul><li>By 1598 ordinary revenue 3x that of 1556. </li></ul><ul><li>Extra-Ordinary Revenue </li></ul><ul><li>Servicio – one off tax requiring Cortes approval – nobility/clergy exempt </li></ul><ul><li>Hundredth Penny in Netherlands </li></ul><ul><li>Church e.g. Three Graces </li></ul><ul><li>Sales of noble titles and crown offices </li></ul><ul><li>Sale of common land and Royal jurisdictions </li></ul><ul><li>Quinto – 1/5 of value of precious metals and stones mined in Americas. </li></ul><ul><li>Theoretically revenue from parts of the Monarquia </li></ul>
  4. 4. Attempts to raise revenue - Bridging the gap <ul><li>Constantly a problem </li></ul><ul><li>Provinces were reluctant – regional differences </li></ul>
  5. 5. Loans <ul><li>Bullion from new world allowed Spain to borrow heavily </li></ul><ul><li>Richest monarch in Europe </li></ul><ul><li>However despite Philip’s efforts – Spanish economy could not sustain a large empire for long with its military and civil commitments. </li></ul>
  6. 6. Serious as efforts caused problems <ul><li>Taxation hit middle and lower orders as nobility and clergy exempt – e.g. Millones in 1590’s on food stuffs </li></ul><ul><li>Sales of crown lands short term gain – long term loss in rent revenue </li></ul><ul><li>Spain more notably Castile bore brunt of costs of maintaining Monarquia – Philip failed to persuade outlying regions to contribute e.g. Lepanto – Italian states most under threat paid 400K ducats, Castile paid 800K. Therefore constant drain on Spain/Castile. </li></ul><ul><li>Attempts at taxation caused unrest in Monarquia – e.g. 1572 Netherlands against attempts to tax via Hundredth, Twentieth and Tenth penny taxes. Ultimately backfired revenue from Netherlands dropped. </li></ul>
  7. 7. Financial ineptness of Philip <ul><li>Charles to Philip ‘ attend closely to finances and learn to understand the problems involved’. </li></ul><ul><li>Despite advice Philip never mastered the intricacies of the Royal finances </li></ul><ul><li>‘ I have never been able to get this business of loans and interest into my head’. </li></ul><ul><li>Yet he made financial decisions and too readily took advice of self-interested financiers. </li></ul><ul><li>Even embarked on grand schemes – e.g. Escorial est 5.5 M </li></ul>
  8. 8. Major problem need more finance <ul><li>Revenue did not meet expenditure - Philip resorted to borrowing on a grand scale i.e. loans . </li></ul><ul><li>Led to high interest rates and hold over Spain by Genoese financiers </li></ul><ul><li>Estimated by 1598 National Debt of 85 Million ducats interest payments 40% of annual revenue. Serious strangle hold by foreign financiers. </li></ul>
  9. 9. Bankruptcy <ul><li>Declared bankrupt 4 times 1557, 1560, 1575 and 1596. </li></ul><ul><li>Suspended repayments in attempt to break stranglehold of creditors. Did not work. </li></ul><ul><li>Serious financial collapse. </li></ul>
  10. 10. Lack of investment in Spanish economy <ul><li>Revenue from taxation & quinto spent on war e.g. Netherlands 80 m ducats 1567-1600 </li></ul><ul><li>Securing debt bonds (Juros) seemed more secure option therefore further reduction in investment. </li></ul>
  11. 11. Inflation <ul><li>Faced period of high inflation </li></ul><ul><li>400% during 16 Th Century </li></ul><ul><li>Bullion imports now not accepted as cause more likely war. </li></ul><ul><li>As war disrupted internal trade and transport, deterred investors. </li></ul>
  12. 12. Population <ul><li>Steady growth approx 8 m 1580 </li></ul><ul><li>1580 slowed – start of decline in some regions </li></ul><ul><li>Wars drained Spain of young men </li></ul><ul><li>Emigration to Americas </li></ul><ul><li>1590’s epidemics and harvests = localised mortality rates </li></ul><ul><li>Imbalance – migration from East Spain to Castile – Castile 81 % of pop compared to Aragon, Catalonia and Valencia only 13.5% </li></ul>
  13. 13. Agriculture <ul><li>Structural weaknesses could not feed it people – conditions and need for modernisation = low yields. </li></ul><ul><li>Increasing dependent on imports e.g. from Sicily and Southern Italy. </li></ul>
  14. 14. Industry <ul><li>Industry sparse in comparison to Netherlands or France . </li></ul><ul><li>Allowance of town guilds – lack of modernisation </li></ul><ul><li>1566 Philip allowed merchants to export bullion instead of goods – trade in goods declined e.g. export of wool to Netherlands 400K sacks to 25k over his reign. </li></ul><ul><li>Foreign policy – disrupted markets e.g. Netherlands and reliance on imports of weapons, shortage of skilled craftsmen </li></ul><ul><li>Lack of investment. </li></ul>
  15. 15. Trade and commerce <ul><li>Spain not economically united. </li></ul><ul><li>Poor inland transport network. </li></ul><ul><li>Became increasingly reliance on trade with her overseas possessions. </li></ul>
  16. 16. So how serious? <ul><li>Roots of later decline were laid during Philip’s reign. </li></ul><ul><li>Foreign competition, war and resulting national debt left nation with impossible burden. </li></ul><ul><li>Whatever the explanations in the final analysis Spain collapsed as a great power in the century that followed. </li></ul>