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
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
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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