The Spanish Empire and its legacy: fiscal redistribution and political conflict in colonial and post-colonial Spanish America

Abstract

The comparative history of the Americas has been used to identify factors determining longterm economic growth. One approach, new institutional economics (NIE), claims that the colonial origins of respective institutional structures explain North American success and Spanish American failure. Another argues that differences in resources encountered by Europeans fostered divergent levels of equality impacting on institutions and growth. This paper challenges the theoretical premises and historical evidence of both views offering a historicized, statistically and economically validated explanation for the institutional and economic development of Spanish America. First, it revises the structure of the fiscal system challenging the characterization of Spain as an absolutist ruler. Secondly, an analysis of fiscal data at regional levels assesses the performance of the Imperial state. It shows the existence of massive revenue redistribution within the colonies, disputing the notion of a predatory extractive empire based on endowments as the source of original inequality. Finally, we discuss how a contingent event, the imprisonment of the Spanish king in 1808, contributed to the disintegration of a 300-year-old empire. The crisis of legitimacy in the empire turned fiscal interdependence between regions into beggar-thy-neighbour strategies and internecine conflict. We conclude by arguing for a reversal of the causality from weak institutions causing economic failure to fiscal (and economic) failure leading to political instability.

The ‘reversal of fortune’ thesis and the compression of history: Perspectives from African and comparative economic history

“…13 In the case of the Spanish empire, recent work has shown that the bulk of financial transfers were between colonies rather than to the metropole. This is part of a general challenge to North American interpretations of the Spanish empire as simply extractive (Grafe and Irigoin, 2006). For a later period of Spanish history, Domenech (2008, this issue) also questions the relalionship between extraction and the rate of development.…”

Property, land and territory in the making of overseas empires

“…Brule 2009;Alston et al 2009). In a different vein, social and economic historians have also produced, as it would be expected, a considerable body of research on topics with a direct relevance to the issues under review, such as agriculture and land tenure (Assadourian 2006;Banerjee and Lakshmi 2005), plantation economy (Schwartz 2004), land, credit and labour markets (Swami 2011;Boomgard 2009), and fiscal issues (Travers 2004;Grafe and Irigoin 2006), just to mention a few.…”

Building Fiscal Capacity in Colonial Mexico: From Fragmentation to Centralization

“…32932). Regina Grafe and Alejandra Irigoin (2006) have coined the term "bargained absolutism" for the second half of the eighteenth century, emphasizing the still active role played by corporate elites in government. 41 Even if the resulting centralization was not absolute, the argument still stands that the role of the central government in fiscal collection and enforcement increased to unprecedented levels, and that such increase was more pronounced in the regions where the corporate elites were more dependent on the Crown for economic rents and privilege.…”