The Financial and Human Networksof Philip II's Spain

“The main achievement of Philip II’s government was to mobilize large financial resources by turning theapparent weakness of the kingdom’s fragmented political and economical institutions into a strength.”

(Debt policy under constraints: Phillip II, the Cortes, and Genoese bankers)

1

Theo Soulages - Spring 2015New York University, Department of History

Professor Jean-Frédéric Schaub(KJC Chair in Spanish Culture and Civilization)

2

In order to limit the scope of this paper, which could amply fill an entire doctoral thesis - we will focus on the reign of Philip the IInd, considered by most historians to be the height of Spanish Imperial power, while also proving to be a very interesting period, from a fiscal and financial standpoint. His reign saw both an increase in tax base, government spending (primarily linked to warfare), fiscal consolidation - and several incidents of fiscal insolvency.

A. Fiscal instruments under Philip II

In order to understand the relationships that bound sovereign and

bankers together in 16th and 17th century Spain, first we must

try and understand the two main fiscal instruments available to

the Spanish Monarchy; the juros and the asientos.

i. juros

The core of the fiscal system of Castile was its long term

debt. The juros were introduced in the 12th century as pensions

awarded to people who had served the King during the Reconquista.

Their market value increased over the centuries to come; by the

late sixteenth century, their value varied but the return rate

was usually situated around 7-8%, although their face value

sometimes fluctuated. Interest rates on the juros were not

necessarily fixed.

3

1

The juros were “administered by the cities, but they were

legal contracts between holders and the crown, rather than

contracts between holders and cities”2 They were backed by

ordinary revenue streams, which were stable and predictable (like

fixed contributions, or the alcabalas sales tax or other regular

taxes, like salt or wool excises). Servicios and alcabalas were

particularly adapted because they both required renegotiation

with the Cortes (or city assemblies of Castile, of which there

were 18) in order to be increased (which was complex and costly);

so the amount of juros that could be issued each year was limited

by the stable revenue of the crown. While juros were technically

1 Drelichman, Mauricio & Voth, Hans-Joachim. The Sustainable Debts of Philip II: A Reconstruction of Spain's Fiscal Position, 1560-1598, 72 Alvarez-Nogal, Carlos & Chamley, Christophe. Debt policy under constraints: Philip II, the Cortes, and Genoese Bankers, 196

4

all equal, they did not always trade for face value on markets.

For instance, juros supplied by the Casa de la Contraction (which

managed silver revenues) were seriously discounted on markets,

since the supply of silver was by no means stable or constant.3

There existed two kinds of juros: the juros al quitar and juros de

por vida, both of which had a fixed faced value and could be

reimbursed at any time, allowing the government to refinance its

debt when the revenues were better than expected, and lower the

interest rate of its long term debt. Refinancing of the loan was

accomplished by a "reduction of the coupon while keeping the face

value of the loan unchanged."4 Which meant that in order to keep

a juro, a lender had to provide the sum necessary to make the

adjustment. This practice was known as a credimento; the investor

could either being reimbursed in full, or pay the difference

between the previous juro and the new one.5

When the juros did not suffice to fund the Kings needs, then

his officials were forced to turn to short term debt contracts

(short stop) to supplement them. It is important to note that

3 Drelichman, Mauricio & Voth, Hand-Joachim, 9-114 Alvarez-Nogal, Carlos & Chamley, Christophe, 1965 Ibid

5

there were no defaults on the juros, during the 16th or the 17th

century (except for partial defaults on the ones used as

insurance on some asientos loans).6

ii. asientos

The asientos were a short term funding mechanism, contracted

between the Crown and an external party, with very precise

funding terms. The asientos specified “date, place, currency,

exchange rate, and interest rate.”7 Their interest was higher

(since they were often backed by less stable revenue streams).

But, some asientos were collateralized by juros (known as juros de

caucion or juros de resguardo). Interest rates for the Juros

fluctuated hugely (they averaged around 12% returns, around 1570-

75), and often lasted a few months, to a couple years at most.

These contracts were often very complex, and required

sophisticated networks in order to be paid out, at the right

time, place and currency. Repayment often included specific

clauses (like partial repayment in silver…).

6 Ibid, 1987 Ibid, 199

6

8

The asientos were often used "for disbursements abroad,

usually to pay and supply warring armies and fleets."9 The money

was supplied by small and medium investors, both in Spain and

Europe (about a 50/50 split), and the contracts were administered

by the large banking families of Europe, although the Genoese

bankers enjoyed a privileged position in the financing of Spain's

wars. 10

8 Drelichman, Mauricio & Voth, Hans-Joachim. Lending to the Borrower From Hell: Debtand Default in the Age of Philip II, 12149 Drelichman, Mauricio & Voth, Hans-Joachim, 910 Alvarez-Nogal, Carlos & Chamley, Christophe, 199

7

B. How were the instruments used

i. How did the lending process take place?

While the King always negotiated with many bankers at once,

these negotiations were always public; “discussing the amount of

credit that he needed with them as a group and dividing among

them the total amount. Each (banker) provid(ing) his portion

individually, knowing what the others were doing.”11 Bankers

often signed asiento collectively, with each individual

responsible for a part of the contract. Liability was not pooled,

though. If an individual was unable to satisfy his part of the

contract, the others had no obligation to front the money for

him. Cooperation between families was limited to the negotiation

process - after all, they remained competitors.12 By treating all

bankers similarly - regardless of their influence, or wealth,

allowed for a general sentiment of trust to exist between the

lender and the borrower. This attitude remained true during

defaults, when the King would often maintain proportionality in

his repayment.

11 Alvarez, Carlos, 3412 Ibid, 35

8

13

ii. Why did the King borrow through intermediaries (bankers) ?

Since the Spanish fiscal system was not centralized, and

most taxes were collected on a municipal level, the Crown needed

a reliable network of intermediaries that could gather the money

from various places, and then bring it back to Madrid, where it

could be spend as the sovereign and his ministers saw fit. The

Spanish crown lacked such an infrastructure, and the officials it

did employ often lacked the financial know how possessed by the

bankers and their associates. Since bankers themselves had

networks of intermediaries throughout the Empire and beyond, it

logically follows that the Crown would want to include private

individuals in its fiscal administration. For instance, Bartolome

13 institutions, 36

9

Spinola was charged, in 1629, with the sale of titles and

government offices for the Crown, while another financier from

Genoa, Octavio Centurion, was made facteur general of borders and

military strongholds, and was charged with the collection of

taxes from individuals and institutions fiscally responsible for

the upkeep of the defense of the Iberian Peninsula.14

Another important factor was the lower cost of borrowing

obtained by the bankers, in the name of the Spanish Crown, on

financial markets. The Spanish kings had somewhat of a reputation

for defaulting on their loans, so direct borrowing from small and

medium investors throughout Europe (who were the ones, in

reality, financing the Spanish Crown), involved high risk

premiums and interest rates. The reputation and reliable networks

of bankers like the Spinola in Genoa allowed them to obtain

contracts that were much more advantageous for the Spanish Kings,

and allowed them to borrow more (since the interest rates were

lower).15

14 Alvarez Nogal, Carlos, L'argent du Roi et les hommes d'argent (XVIe-XVIIe siecles), 190-9215 Ibid, 192-94

10

Bankers and men of money also played their role in the

determination of economic and fiscal policy for the crown.

Considering their great experience and understanding of the

financial networks in Europe, they constituted a major asset to

the Crown, which used them in an advisory capacity repeatedly.

Such men worked side by side with government officials, sometimes

even occupying official posts themselves -leading to a blurring

of the lines between public in private interest in 16th and 17th

century Spain. As such, one could not talk about public and

private money, or interests. They were symbiotic, and often

intertwined.16

iii. Bankruptcies, and the Medio General negotiation process.

The state of Spain’s finances under Philip the IInd was

nowhere near as drastic as has been suggested by previous

analysis. Expenditures did rise in the second half of the 16th

century, but so did the primary surplus generated by the crown.

Using statistical analysis, Drelichman and Voth conclude that

“Philip’s debt was sustainable until at least 1584”17. In this

16 Ibid, 194-9517 Drelichman and Voth (2011), The Sustainable Debts of Philip II: A Reconstruction of Spain’s Fiscal Position, 1560-1598, 30

11

model, the default of 1575 is presented as a “temporary setback”,

due to an “unforeseen increase in expenditures in the two

preceding years.”18 While the Spanish monarchy’s fiscal position

grows increasingly dire in the 1580s, namely due to the King’s

Enterprise of England and the continued fighting in the Low Countries,

the significant defeats met by the King’s armies were extremely

unfortunate and could not have been predicted. As Drelichman and

Voth remark, “had the Armada not been destroyed, the Crown would

have saved the expense of building a second fleet” similarly, a

victory in the Low Countries would have saved “vast military

expenditures” and “the rich cities of the Low Countries could

have been taxed heavily.”19 As such, the outcome of the Spanish

military endeavors in the late 16th Century was almost a worst

case scenario - and certainly was probably not anticipated by the

Crown, or those that did business with Madrid.

When looking at the three episodes of bankruptcy under King

Philip II's reign, one must not forget that the term as we use it

today is far removed from the meaning of the word, as it was

18 Ibid19 Ibid, 31

12

employed in XVIth century Spain. These episodes were an essential

mechanism to the Crown, in the management of its debt. They must

not be understood as "wholesale repudiations of obligations", but

rather "a rescheduling of debts."20 Each crisis would start with

a suspension of payment on the short-term debt by the Crown, who

would then go and negotiate with various cities the raising of

certain taxes and tariffs, in order to obtain additional revenue,

in order to negotiate some kind of financial settlement with the

owners of the asientos it had just defaulted on.21 During this

process, the King would transfer some of his short term asientos

into longer-term juros. Sometimes, the King would provide other

forms of compensation, that could take the form of offices,

titles, social incentives...22 Alvarez-Nogal and Chamley conclude

that “evidence of the actual dealings between the government and

the Genoese bankers seems to indicate that a significant part of

alleged reductions were transactions at prices not far removed

from market values.”23 Overall, bankruptcies were not excessively

harmful to those that lend to the Spanish king.

20 Alvarez, Carlos, 2721 Alvarez-Nogal, Carlos & Chamley, Christophe, 20222 Alvarez, Carlos, 27 23 Alvarez-Nogal, Carlos & Chamley, Christophe, 211

13

14

C. Why did bankers lend?

i. Presentation of various models

For a long time, the generally accepted sentiment on lending

to the Habsburg was that banking was “a sober business punctuated

by odd moments of lunacy [...] Genoese indulgence [...] caused

not only the first sovereign bankruptcy in 1557, but the second,

third and fourth as well.”24 Recent work from Mauricio Drelichman

& Hans-Joachim Voth (2011), Carlos Alvarez-Nogal & Christophe

Chamley (2011), amongst others, strongly disputes this claim.

Using Drelichman and Voth’s model (2011), based on a

comprehensive dataset which includes 438 lending contracts ,

signed between the King and his bankers, between 1566 and 1600,

we can assess the motivations and the solidarity mechanisms

uniting the lenders of the King. As the primary provider of loans

to the crown, Genoese bankers were the most prevalent lenders in

Madrid. They provided two thirds of the asientos loans, which the

King needed to fund his armies year-round when revenues were

insufficient, or expenses greater than planned. As such, they

were an essential source of financing for the King, who could

24 The Economist, 23-29 September 2006

15

difficulty do without their support. Genoese lenders often lend

with one another, and there was a certain degree of solidarity,

born out of necessity, uniting them. When the King default on one

loan, all other bankers would impose a moratorium on new loans,

making it very difficult for the crown to find the funds it

desperately needed. This is not to say that money was not

available elsewhere, but outsiders rarely lend to the King, since

they knew how expendable they were - lacking the network and

community that unified the Genoese - therefore increasing the

odds of the King defaulting on his loan, since it would not

affect his ability to borrow from his usual creditors in the

future.

16

25

Bankruptcies were linked more to liquidity problems than to

solvency issues. Philip II’s finances were actually rather solid,

or at least until the failure of the Spanish Armada and the

subsequent escalade in military expenses. Budget surpluses

usually covered the costs of servicing the debt. When the King

stopped payments on loans, a negotiation process would begin

between his administration and creditors, leading to a mediatio

general, which would be signed between all involved parties,

25 Drelichman, Mauricio & Voth, Hans-Joachim. Lending to the Borrower From Hell: Debt and Default in the Age of Philip II, 1209

17

detailing the restructuring of the existing debt. While haircuts

were always part of the solution, the losses experienced by the

crown’s creditors were never excessively drastic, and since

bankers only seldom invested their own money, or ever invested

alone, were rarely devastating. Only very few, small scale

banking families were put out of business in such a manner. For

instance, during the 1575 default, the King repaid on average 62%

of the amount stipulated in the asientos he had defaulted on.

During the 1595 default, the losses were much more limited

(approximately 20%).

ii. Profitability of lending?

In another paper26, Drelichman and Voth further their

inquiries in lending practices of 16th century Spain, using the

same data set. Here, they posit that lending to the King was

profitable, even when he defaulted on his loans, for a vast

majority of those involved. Losses sustained during the various

episodes of insolvency of the second half of the 16th century

were more than compensated by the fairly high interest rate on

the asientos. Because it is not the aim of this paper, we will not26 Drelichman, Mauricio & Voth, Hans-Joachim. Serial default, serial profits: Return to sovereign lending in Habsburg Spain, 1566-1600

18

enter in a detailed discussion of the dataset itself, or the

model generated form it (as it is not the aim of this paper),

nonetheless a few useful observations can be gleaned from their

research. Firstly, the authors conclude that "after accounting

for the effect of these defaults, the average rate of return on

short-term lending was 15.5%, more than twice the long-term bond

rate."27 Secondly, of the 60 families that lend their own money,

during the 1566-1600 period, "51 earned more than the long-term

bond yield. Of the five families that actually lost money, three

invested little [...] the absolute losses of these five families

amount to just over 75,000 ducats [...] this is less than 0.1% of

total short-term lending to Philip II."28

iii. The Genoese network

The Genoese banker, as a network of individuals engaged in

financial activities, were a relatively close-knit group of

individuals, who, although they were in direct competition with

one another, acted usually in concert with one another, when it

came to lending to the Spanish monarch, who returned the favor,

27 Ibid, 1628 Ibid, 10

19

and treated them equally - regardless of capital or influence.29

The Genoese bankers usually did not lend to the king alone; they

co-lent with one another, based on family ties, affinity or

personal relationships. What resulted was a complex network,

which connected nearly every financial family in Genoa, with the

Spinolas holding the central position in the aforementioned

network. The table bellow details the interaction between the

families, showing "total lending in thousands of 1566 ducats",

where "thicker lines indicate higher average lending."30 The

network featured bellow accounted for 72% of the principle in the

given year. This proportion was relatively stable through the

year 1600, although a slight decrease was noted following the

default of 1575, when it dropped to 67%. The members of the

network also often passed collateral from one to another, which

consolidated the cohesion of the network, and made it more

difficult for the King to make side deals, or for him to default

on a single member of the coalition.31

29 Drelichman, Mauricio & Voth, Hans-Joachim. Lending to the Borrower From Hell: Debt and Default in the Age of Philip II, 121830 Ibid, 121931 Ibid, 1220

20

32

33

32 Ibid, 121933 Ibid, 1222

21

iv. What recourse for bankers?

In normal years, a significant portion of the King’s

financing needs were provided for by the network of genoese

bankers.34 While these bankers were often competing with one

another, there existed a rigid set of rules that informed their

business dealings with the Spanish crown. When Phillip II found

himself in a position where he could not honor his financial

commitments, the Genoese coalition would act as a block - and

impose a moratorium on lending, until the crisis was resolved.

This made lending by outsiders very risky (since the King had no

incentive to reimburse a banker outside of the network - as he

had little leverage). There existed a strong continuity in the

families that lend to the Spanish Crown - very few new players

appeared, and very few pulled out.35 Despite attempts by the

Spanish Crown to negotiate individually with banking families

during the defaults of 1575 and 1596 (namely, by offering the

Spinola and the Grimaldo families preferential treatment), these

efforts failed and all investors eventually settled with

identical terms, through the medio general. Drelichman and Voth

34 Ibid 35 Ibid, 1223

22

rightly conclude “the tight network of mutual commercial and

other relationships kept individual opportunistic behavior in

check.”36 While in times of crisis, the Crown did turn to outside

lenders, like the Fugger family in Germany, these lenders were

always wary of the high risk they were accepting - since they

could not satisfy the entirety of the needs of the crown, they

exposed themselves to large losses, as the King would eventually

have to settle with the Genoese bankers, who collectively were

the only ones capable of providing the amounts of capital

needed.37

The stability of the relationship between the Genoese

bankers and Philip II is apparent, when looking at Drelichman &

Voth's (2011) dataset. When a banker entered in a contract with

the King, there was an 88% chance that he would do so again. And

while the default of 1575 did hurt some Genoese bankers, their

share in the total financing of Philip II's debt was only reduced

by three percent - from 67% to 64%. On the other hand, German

bankers, like the Fuger family, actually increased their

36 Ibid37 Ibid, 1224

23

participation in royal financing - from 4.3 to 10.9% - after

Philip's third and final bankruptcy.38

v. Non-monetary rewards

As we have seen, the complex web of financial and economical

relationships that bound the crown, it’s administrators and

various private individuals were not purely financial. Those that

facilitated lending for the Habsburg kings often had various

interests in the economy of the kingdom, and had much to gain in

lending to the crown. Carlos Alvarez (2003) provides a detailed

explanation of nonfinancial perks that came with financing the

crown’s needs. While these are not easily quantifiable, “social

status, power, prestige, political influence”39 were certainly

among them. In 17th century Spain, finance was not a purely

economic activity; social needs were an integral part of their

job. Furthermore, as a banker to the crown, came the privilege of

living at the court, in Madrid, of the most powerful political

and economic force of Europe in the 1600s. This opened the door

to a number of economic activities, more profitable and less

38 Ibid, 121539 Alvarez, Carlos. The Role of Institutions to Solve Sovereign Debt Problems: The Spanish Monarchy's Credit (1516-1665), 30

24

risky than lending to the King of Spain. For instance, the Fugger

family obtained the administration of two significant rents

thanks to its role in lending to the crown.40 Private individuals

were an integral part of the Spanish fiscal administration,

providing council and serving as subcontractors for the servicing

of many taxes. 41 The other major reason for lending to the

Spanish crown was that with it came the right to move the Kings

silver through Europe - one of the most profitable activities of

the time. Most of the King’s silver arrived from the colonies in

Madrid, where it was then distributed through Europe. As Carlos

Alvarez explains, “it was impossible to have access to the

Castilian silver markets and not participate in the financial

system of the Monarchy.”42

40 Ibid, 3241 Alvarez-Nogal, Carlos. L'argent du Roi et les hommes d'argent (XVIe-XVIIe siecles), 192-9442 Alvarez, Carlos. The Role of Institutions to Solve Sovereign Debt Problems: The Spanish Monarchy's Credit (1516-1665), 34

25

D. Case Study: The Financial Enterprise of Bartolome Spinola in Spain

Bartholome Spinola was one of the foremost, and most

respected bankers of 17th century Genoa. Carlos Alvarez-Nogal

describes his activity as being first and foremost “a coordinator

of information and activity."43 The greatest difficulty

associated with lending and borrowing, in 16th and 17th century

Europe, was the gathering of information, and the establishment

of trust between various parties. Reliable financial information

was difficult to obtain, even for wealthy bankers, or royal

authorities. Similarly, the networks that were required in order

to establish complex, short term lending agreements (like

asientos) were a rare and expensive commodity, which few mastered

as well as Bartholome Spinola. The Spanish Crown did not

necessarily trust the numerous intermediary and agents it

employed, and these agents were not necessarily well equipped to

establish financial contracts. As such, it was more logical for

the Crown to rely on the services of an experienced and savvy

43 Alvarez-Nogal, Carlos. Le cout de l'information dans l'entreprise Bartolome Spinola en Espagne au XVIIeme siecle, 3 ["un agent de coordination d’activite"]

26

financial negotiator, whose networks of information and

intermediaries were superiorly qualified.44

In order to successfully manage an asiento contract, Spinola

relied on a network of individuals, each of which would

accomplish a separate aspect of the contract, independently and

without knowing what the other actors involved might do. This

required an absolute trust in the ability, and the honesty, of

each person involved in Spinola’s entreprise, in order to

“harmonize the the decision making process of a group of agents,

which were working for a common economical goal, in a manner than

was more efficient than competitors.”45 The most efficient way of

accomplishing this, considering the very high costs associated

with the communication of information, was to employ agents in

the proximity of every relevant financial or logistical center.

Instead of paying wages, Spinola would subcontract parts of

asientos to local actors that he could trust, and who would

directly report to him. The absence of intermediaries was very

cost effective, and by sharing the risks (and the profits) 44 Ibid, 445 Ibid, ["harmoniser les efforts dans la prise de decision d’un groupe d’agents qui poursuivait un objectif economique commun et qui tentait d’y arriver d’une maniere plus efficace que ses concurents"].

27

associated a financial contract, a banker would reduce the risks

associated with an activity; if the risk is equally shared, then

there is a reduced chance that a specific actor will act

unreliably.

Spinola’s financial operation relied on a horizontal, and

not a vertical hierarchy. The Genoese banker was at the center of

a network of family members, trusted colleagues and friends, who

all reported directly to him. There was no hierarchy between his

collaborators, who all interacted directly with him. This

required Spinola to shoulder a very large workload, meaning that

he was obliged to remain at the center of his network (in

Madrid), and limit his movement, to maximize work time. While

such a simplified administrative structure did allow for an

efficient company, it also made Spinola the crucial element to

his entreprise. As such, upon death, financial organizations

would also dissolve, since so much of the smooth functioning

relied on the network and the experience of the banker at the

center of the web. Interactions, between Spinola and his

subordinates, therefore, were based not so much on fixed work

contract, but instead on “cooperation agreements” [accords de 28

cooperation].46 Such agreements did not imply a salaried

remuneration, relying on a pooling of profits, which tended to

incentivize individuals to better perform their function, since

their getting paid was directly dependent of the quality of the

work that they accomplished. Once again, the relational aspect of

this work is extremely crucial.47

Since trust between Spinola and his collaborators, and his

agents, was so important, and mechanisms for oversight were few

and expensive, the easiest method to guarantee honesty was by

knowing well the people one worked with, which can be

accomplished most economically by working with people directly

from one’s entourage. As such, it is not a surprise that bankers

like Spinola tended to employ and associate with people directly

from one’s community (religious, lingual), or even better, one’s

family. People were far less likely to act immorally, or deceive

people they were forced to live with on a daily basis, and the

threat of social ostracisation certainly made the opportunity

cost of fraud or deception much higher.48

46 Ibid, 8.47 Ibid, 27. 48 Ibid, 9.

29

Alvarez Nogal provides us with concrete examples of the

workings of Spinola’s entreprise. For instance, when a contract

called for the delivery of a certain amount of a currency to

several places, one of which where Spinola did not have an agent,

he would simply subcontract that portion of the contract to

another banker he could trust, who did possess an agent in the

aforementioned place.49 Business relationships between Spinola

and other trading companies were not exclusive, and one company

could deal with several bankers, who might be in competition with

one another. The underlying idea was to provide as much

flexibility and facility in financing contracts that were often

stipulated the delivery of very large sums, in places where

Spinola may not have associates of his own. When such business

relationships were established, criterion like “continuity in

work, seriousness, discretion, punctuality in transactions,

knowledge of the trade and a mutual understanding of the language

in question”50 were often determinant.

49 Ibid, 6.50 Ibid, 13 [“continuite dans le travail, serieux, discretion, ponctualite dans l’execution des ordres, une parfaite connaissance de la societe et de la langue dans lesquelles on travaillait.”]

30

Spinola's enterprise often relied on temporary hires, in

order to fulfill material aspects of contracts, particularly

asientos, that required the delivery of a sum of a certain

currency (or a physical good, like food, wool, sugar, military

supplies...) to a certain place. In such cases, a comisario would

be hired, whose function it was to supervise the logistics of the

safe transfer and delivery of the goods to their final

destination. This job was crucially important, as the goods or

sums transported were often very precious, and required a

collaborator of the utmost trust and reliability. Instead of

hiring different individuals based on need, Spinola would

gradually attempt to increase the loyalty of a temporary hire by

repeatedly employing the same person, each time granting him

increased responsibility in the venture, and remunerating based

on performance, upon delivery.51

As we have just seen, the most efficient business model for

a banker in pre-modern European societies of the 16th and 17th

centuries was a small, highly centralized one, where the leading

figure would hold direct relationships with all of his

51 Ibid, 15

31

collaborators, who were carefully selected according to strict

criterion, in order to maximize trust and therefore success. Even

temporary hires were provided incentives to remain faithful and

pay was often provided as a fraction of the entire contract,

which made good performance in the interest of all involved. The

only disadvantage of this model lay in the fact that the business

was entirely dependent on the man at its center - and could

collapse instantly upon his death.52

52 Ibid, 18

32

Conclusion

What kind of observations can we draw about the human and

financial networks centered around the Spanish crown in the

second half of the 16th century? The levels of centralization,

wealth and the military might of Philip the IInd was the greatest

Europe had seen since the Roman Empire, more than a thousand

years earlier. Firstly, it is apparent that the policy of the

Crown was well thought out, and made the best of a society where

information, and transfers of money and goods were logistically

extremely difficult. It managed an large Empire with contested

borders, in a state of semi-permanent warfare, despite lacking

the financial networks and fiscal policies of a modern state, and

did so quite successfully. While defaults did occur, due to the

precarity of it's fiscality, their effect was much less dramatic

than historians have previously thought. The risk of default was

accepted by bankers, who often stayed faithful to the Crown and

remained in its service for generations, testifying to its

profitability for both the King and European bankers,

particularly the Genoese.

33

The relationship between these two parties were strongly

symbiotic and the contemporary boundaries that we of conceive

today, between private and public money and interests, did not

exist. Those that lend to the King were often part of his

administration; collecting taxes, providing council and holding

various administrative offices, providing the former with greater

fiscal stability, while the former profited financially, socially

and politically from the relationship. Public and private spheres

were, in a way, a single entity.

34

Bibliography

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