[267] The most notable quality of Spanish, especially Castilian, society in the early sixteenth century was its energy and self-confidence, which brought with it an expansive sense of power and new possibilities. The imperial age was not merely a period of outward movement; it was also one of steady population growth and of some economic development. The population of the lands of the united monarchy amounted to about 7,000,000 in 1500, increased to approximately 7,500,000 by 1540, and to around 8,500,000 in the 1590s, a level which was not surpassed for two hundred years. The peak of Spanish imperial power thus coincided with the greatest population density the peninsula had ever seen, without which the sixteenth-century empire might not have been possible. However, imperial responsibilities did not at first wear heavily on that population strength. Emigration to the Indies probably averaged no more than 2,000 people a year. The European wars were fought almost entirely outside Spanish soil, and the proportion of European mercenaries in the 50,000 to 70,000 troops maintained by the crown increased steadily, especially in the closing decades of the century.
    Even so, most areas of the peninsula continued to be sparsely populated compared with the rest of western Europe. The demographic strength of Spain compared with potential rivals may be assessed from population estimates of 1600:
 

Spain and Portugal	9-9.5 million
The Germanies	20
France	16
Italy	13
Low Countries	3
England	4.5
Ottoman Empire	18-30

Only in the steppes of eastern Europe, outside the main orbit of European population, was density lower than in Spain. The population center of the peninsula throughout this period was Castile, with roughly four-fifths of all the people of the united monarchy. It was the size and vigor of Castilian society, its militant ethos, and its powerful system of monarchy on which the imperial system was based.
 
The social composition of the Spanish population at the beginning of the sixteenth century has been roughly estimated by Professor Santiago Sobrequés as shown in table 4. Compared with the social structure of the most productive areas of western Europe, that of Spain stands out for the higher proportion of peasants and the lower proportion of urban middle-class and artisan elements. The figures for the aristocracy do not include the tens of thousands of ordinary people in northern Castile able to claim petty hidalgo status and tax exemption from the sixteenth century onward because of local fueros.
 
Though the proportion of genuine aristocrats was not especially high compared with most of western Europe, the aristocracy in Spain, particularly in Castile, was conspicuous for its relative wealth and social prestige. The nobility dominated society in most parts of Europe during the sixteenth century, and in many areas it was their influence, not that of the middle classes, which increased during this period, but in no region was this so true as in Spain. Approximately half of the land in the peninsula was dominated by them, and most of the money spent ostentatiously flowed from grandes, not from capitalist or pre-capitalist elements. Economic developments of the sixteenth century accentuated, rather than diminished, the weight of these landholders in the society and economy.
 

Status, honor, and the dividends of fighting and conquest were prized, but mundane constructive labor was given a much lower priority. The idea of a major stratum of society in which people would be identified and judged by what they achieved through work was not taking hold to the extent that it was in some places elsewhere. [270] There did exist in Castile commercial-minded middle class elements, but they were proportionately fewer, less wealthy, and less influential. It is also true that in France and Italy, middle class people tended to use wealth as a means of lifting themselves to bureaucratic or neo-aristocratic status, by buying of land, offices, or titles, particularly during the seventeenth century. Only in England, Holland, and a few of the German and Italian towns was there any genuine bourgeois identification before late in the eighteenth century. The weakness of the Castilian middle classes was perhaps not so different in kind as in degree. But that degree of ambition and influence was decidedly less in Spain, and actually diminished during the sixteenth century, even though the size of the middle class did not. For ambitious elements in the lower classes, the empire and the military provided special opportunities for adventure, wealth, conquest, and ennoblement that were not easily found in other parts of western Europe.
 
The existing property structure of Castile was ratified by the Catholic Kings early in their reign. Their rulings of 1480-1481 and subsequent years were of extreme importance, because of the great changes of property that had occurred during the late-fourteenth and fifteenth centuries, with the broad extension of seigneurial domain and usurpation of town and crown lands. As explained in chapter 9, the united monarchy followed a dual policy toward the aristocracy: while reducing it to political obedience on the one hand, the crown fully ratified its social and economic predominance on the other. The aristocracy was required to return only half of the lands stolen from the royal domain during the reign of Enrique IV. Alienations before 1454 were thus officially confirmed. Moreover, after the conquest of Granada, all except the western part of the emirate was given to nobles in señorío, partly in compensation for the restitutions required earlier. The Cortes of 1504 specifically guaranteed the security of entailment (mayorazgos), providing permanent juridical protection for aristocratic domains. Such estates were further expanded in the early sixteenth century as a result of a new agrarian crisis occasioned by bad harvests, when a portion of the very small amount of land owned outright by peasants passed to the nobility.

Thus, by the beginning of the sixteenth century, there was established the system of seigneurial domain which would form the base of the Spanish social and juridical structure for the next three hundred years, down to the liberal reforms of the nineteenth century. Over half the land was held in señoríos, which grew even larger during the course of the century as some of the property of the crusading orders was sold to the nobility. The character of seigneurial domain remained heterogeneous in the extreme. There were basically three different kinds: territorial or solariego, based on the right to receive [271] annual rents or dues from peasant tenants; jurisdictional, which held grants from the crown to administer justice and serve as local government; and vassalic, differing from the simple territorial in that peasant obligations took the form of personal services and special dues rather than annual rents. Many seigneuries, however, combined at least two of these privileges. Furthermore, in almost all, the local domains were either exempt from taxation or paid taxes through their own channels, at a lower rate, without the intervention of royal tax collectors. Most señoríos also brought the right of the patronato particular, or local church patronage.

The upper nobility was officially categorized by the government of Carlos V in 1520, when twenty-five houses of the highest rank of Castilian and Aragonese aristocracy were designated Grandes de España, with lesser noble families placed on a scale graduated downward. Though the grandes contributed little to economic expansion, those of Castile prospered mightily during the sixteenth century. The large landholders were the only social class thoroughly ensured against the effects of the sixteenth-century inflation, and as the population increased, land became all the more valuable. Landholders welcomed the elimination of the last vestiges of serfdom, for that freed them from certain obligations to the poorer peasants. Traditional relations were more and more transformed into simple rentals, which could be raised to meet increased demand or prices. Castilian aristocrats became immensely wealthy in an agrarian economy, proportionately more wealthy than any others in western Europe.

The dominance of the aristocracy, especially that of Castile, was not only social and economic. Increasingly, as the century wore on, most of the important positions in imperial administration were given to Castilian aristocrats and their sons, as were the principal posts in the army and all the best benefices in the church. By the end of the century, opportunities for social advancement for the middle and lower classes had become extremely limited, and the formerly open society which had identified with the aristocracy had become a largely closed society dominated by a nonproductive aristocratic caste.

The church controlled close to 20 percent of the land in the peninsula, including an even higher proportion in certain fertile areas. Church lands were also protected by their own form of entailment-- the mano muerta. In northern Europe, church properties were thrown back on the market by the confiscations of the Reformation. Nothing of this sort occurred in Spain, where two-thirds of the land was dominated by church and aristocracy.

During the early sixteenth century there apparently arose, temporarily, a rural middle class--peasants renting large tracts of land and [272] urban landowners or petty nobles of hidalgo status--who produced directly for the market and enjoyed considerable prosperity for a generation or two. This small minority of wealthier peasants and intermediate elements were able to take advantage of the same growing and inflated market exploited by the aristocrats who were raising rents and lowering shares for peasant clients.

The vestiges of serfdom that restricted freedom of movement for a small minority of the peasantry in Castile were struck down by the Cortes of 1481. After that date, and for the most part before it, the peasants of Castile were juridically as free if not freer than the peasantry of any other kingdom of Europe. Yet juridical freedom did not bring prosperity. Little more than 1 percent of the Castilian peasants actually owned their land or had any prospect of acquiring capital. In Old Castile and León, much of the peasantry did enjoy stable emphyteutical rental relations, but the increase in population, spread of aristocratic domain, relative sterility of soil, and backwardness of technique placed increasingly greater pressure on Castilian agriculture as the century advanced. The underlying malaise was revealed by the bad harvests and agrarian crisis of the years 1502-1509. In the kingdom of Aragón the situation was of course worse, for the legal status of the Aragonese peasantry actually declined during the reign of Fernando. In parts of Andalusia, there was a conversion to latifundist farming, with an ever-increasing class of hired laborers.
 
The saving grace for much of the peasantry was the peculiar psychology of Spanish society. Being free, and nominal members of the dominant Catholic warrior society of the peninsula, even poor peasants had a sense of honor and status, of identity and worth. During the first half of the sixteenth century they also had the opportunity for social advancement in the empire. Hence the Castilian lower classes were not psychologically downtrodden, and certainly not humble.
 
By the sixteenth century, Spain was divided, roughly, into four economic regions: the north, centered in Old Castile, León, and the Cantabrian ports, its chief towns being Valladolid, Burgos, and Bilbao, drawing some trade from the central plateau; the southwest, centered in the Atlantic and the Indies route, through the ports of Seville, Cádiz, and Málaga, and also drawing on the central plateau; the Castilian southeast, whence wool and other goods from Toledo and Cuenca moved to Italy through Murcia and through Aragonese Alicante; and finally, the Aragonese Mediterranean east, led by Valencia more than by Barcelona.
 
The Catholic Kings encouraged the corporatization of the urban economy of Castile, and merchant consulates were formed on the Catalan pattern in Burgos, Bilbao, and later Seville. Throughout the [273] Middle Ages, Castilian towns had resisted the formation of guilds, their lower level of production requiring less organization, but the Catholic Kings favored guilds in order to regulate the urban population more precisely. The Castilian towns of the sixteenth century thus developed an archaic guild system at the very time that such a pattern was beginning to die out and be replaced by more open and flexible relations in the most economically progressive regions of Europe.
 
Though it is an exaggeration to call royal economic policy in Spain truly mercantilist at any time before the eighteenth century, the commercial and monetary policies of the Catholic Kings were in some respects pre-mercantilist. The monarchy tried by regulation to achieve a balanced (though not necessarily favorable) ratio of foreign trade, decreed navigation laws to foster Spanish shipping, instituted minor measures to protect domestic manufactures, and established strict control over precious metals from America, including a royal monopoly of the disposition of gold and silver, forbidding their export without prior approval. Though agriculture was ignored, a strong effort was thus made to advance commerce and protect the monetary resources of the united monarchy.
 
There was a definite increase in Spanish commerce during the reign of the Catholic Kings, thanks in part to their encouragement through protective maritime legislation and the fostering of wool exports. At first, northern Castile benefitted as much or more than the south; the Flanders wool trade probably reached its height between 1480 and 1500, before increased competition from England and diversion of part of Castilian production to other markets. The late-fifteenth and sixteenth centuries were a time of undeniable prosperity for the Castilian mercantile class, and thus the exodus of the Jews was felt not quite so much as it would otherwise have been. In wealth, skill, or extent of their operations, the merchants of northern Spain or Seville were not equal to those of Italy, Germany, or Flanders, but at the end of the fifteenth century the scope of their activity exceeded those of France, England, and Scandinavia, or for that matter, Catalonia, Castilian had become the commercial lingua franca of the Bay of Biscay. There is evidence that it was Castilian merchants who first taught the drawing up of bills of exchange to their counterparts in western France, and double-entry bookkeeping to the English. Yet they did not have an expanding middle-class, prosperous peasantry, or rising domestic production behind them. They were dependent largely on raw material exports and luxury imports. Once the Flemish and French markets were reduced by war and the main trade swung to the Indies, the merchants of northern Castile fell into irreversible decline, in the second half of the sixteenth century, under the pressure of heavy taxes and reduced volume of trade. [274] The most important overseas commerce for Spain in the sixteenth century was with America. This was also the only commerce which attracted investment from the aristocracy (save for certain activities in Catalonia and the Basque country). American trade was first set up on a regular basis with the establishment of the Casa de Contratación (Board of Trade) in Cádiz in 1503, modeled on the Portuguese Casa da India. It attempted rigid control of trade with America, but terms were liberalized in 1510, and after 1529 nine ports on both the northern and southern coasts were permitted to trade with the Spanish Indies. Expansion of trade after about 1505 provided a new outlet for Spanish manufactures and stimulated market agriculture in the south, particularly in the Guadalquivir valley. Spanish towns, however, were not manufacturing enough to satisfy the needs of an expanding colonial society, and colonial production itself had to be stimulated. Readjustment of the colonial economy at mid-century toward production in the colonies, along with a temporary decline in purchasing power for imports, brought a serious slump to the Spanish American trade between 1550 and 1562, a recession made all the worse by effects of the war with the French in the Atlantic and the Muslims in the Mediterranean.
 
A marked upswing in the American trade began in 1562 and continued almost without interruption until the end of the century. The major commodity was silver. Large-scale production in Mexico and Peru was finally made possible in the 1560s by the development of a process of extracting silver from ore with the use of mercury. Hispanic silver production reached its height in the 1580s and remained at a fairly high level until about 1630. Royal shares of bullion production were indispensable to financing the ambitious enterprises of the last two decades of the reign of Felipe II and to sustaining a tenuous Spanish military hegemony during the more difficult reign of Felipe III. Registered Spanish bullion imports for the period 1531-1660 were divided as follows:
 

1531-1580	2,628,000 kilos
1581-1630	11,461,000
1631-1660	2,896,000
	16,985,000 kilos

From the 1560s on, the trade of the southern coast, and especially Seville, increased greatly. Though native Spanish merchants handled a significant part of the trade, the most important mercantile group was the Genoese merchants and financiers who lived in Seville. They provided capital. know-how, and initiative for large-scale commercial and financial transactions, and increasingly during the reign of Felipe II served as the bankers of the Spanish crown. They, in turn, received [275] all manner of special grants, concessions, and monopolies, so that the commerce and finance of Seville could almost be called Hispano-Genoese. Genoese economic interests were important in establishing an absolute monopoly for Spanish manufactures in the markets of the Indies (1569), to the detriment of colonial and foreign products. They were also influential in giving the port of Seville a complete monopoly over the peninsula's colonial trade, as decreed by the crown in 1573.

The economy of Catalonia remained a regional economy under the united monarchy, but it did enjoy a modest restoration of prosperity from the time of the reforms of Fernando II in the 1480s. The redreç of 1481 restored confiscated property and straightened out most of the tangled property disputes of the fifteenth century, and it was followed by the settlement of the agrarian problem in 1483. Catalan textile producers were subsequently given a market monopoly in the Mediterranean possessions of the Hispanic crown, so that Sicily became for the Catalan economy of the sixteenth century what Cuba later was for that of the nineteenth. A restrictive tariff against competitive imports was restored to the principality, the plague of piracy was controlled (at least during the late fifteenth and early sixteenth centuries), and by 1495, Catalan merchants were able to reopen their consulate in Alexandria. The early sixteenth century was a time of modest but general commercial expansion for Catalonia, as trade grew with both North Africa and northern Europe. After about 1516, however, Portuguese competition had a depressant effect on Catalan commerce in the Mediterranean, and the Spanish treaty with Genoa in 1528, opening Habsburg Italy to Genoese goods, was a severe blow to Catalan exports. In addition, as warfare spread with Muslim powers in the Mediterranean, the Catalans relinquished most of their trade with North Africa for fear of falling under papal interdict.
 
Most frustrating of all was Catalonia's exclusion from direct participation in the rich Indies trade, an exclusion which had a severe retardative effect for two centuries. There were four reasons for the barring of the Aragonese principalities from American commerce: a) the legal jurisdiction under which the American empire had been carved out as the patrimony of the Castilian crown; b) the concern of the crown to preserve the major commercial opportunities for the Castilian economy, which was paying most of the taxes; c) monopolistic pressures from the merchants of Seville, especially from the Genoese group; and d) the lack of aggressiveness of the Catalans themselves, who during the sixteenth century never recovered the [276] vigor and dynamism of an earlier period. Catalan merchants made minor efforts to win a place for themselves in the American trade, but these were excluded by statute, especially after 1573. Thus throughout the Habsburg period the lands of the united monarchy for the most part retained their traditional regional economies. Catalan exports overland to Castile, for example, had to pay three separate excise or transit taxes (Catalan, Aragonese, and Castilian).
 
The only measure of economic integration carried out by the Catholic Kings, and preserved by their successors, was the purely monetary reform of standardizing coinage values in their peninsular realms. Catalonia did, however, benefit from one aspect of the American trade, when after 1578 shipments of American precious metals were switched eastward to the Mediterranean route, stimulating Catalan commerce with Italy. And it should be noted that after 1581 most offices in the empire were theoretically open to all the crown's peninsular subjects (including the Portuguese).
 
Catalan agriculture did not prosper to any great extent during the sixteenth century, because of poor climatic conditions and lack of specialization, markets, and technical improvement. The social malaise of much of the peasantry, however, had been cured by the reforms of Fernando. A Corts decision of 1511 prohibiting the passage of flocks through cultivated districts of Catalonia was another positive step: it defended agriculture from the sort of ravages inflicted by the Mesta in Castile. The attractiveness of the Catalan countryside compared with that of Castile or of southwest France is demonstrated by the fact that it was the only Iberian region to which immigrants came in any numbers during this period. By 1600, 20 percent of Catalan peasants were from poor, overpopulated Gascony and Languedoc.
 
The most disaffected class in Catalonia was the rural aristocracy, whose economic status had declined as a result of fifteenth-century social and political conflict. Though 71 percent of Catalonia was still terra de barons, emoluments from land were no longer enough to maintain the status of many nobles. Of approximately two hundred major aristocratic families in early fifteenth-century Catalonia, only ten or twelve retained the same high position in 1500. On the other hand, the petty aristocracy, or rural gentry, were proportionately more numerous in Catalonia than in almost any other part of the peninsula. Their resources were steadily reduced by social change, and they lacked the opportunities for employment in empire and army open to the aristocracy of Castile.
 
Impoverished and feeling a loss of prestige, many turned to brigandage and robber baronry in the more thinly settled mountain areas. Catalan bandolerisme terrorized the countryside during the [277] second half of the sixteenth and the early seventeenth century. It was very much like the brigandage in Calabría and the Balkans in the same period, which was also linked to economic stagnation. It was encouraged by the proximity of French Huguenots, who were on the border and sometimes crossed over to rob Catalan churches. The proportion of clergy in the general population--6 percent--was higher in Catalonia than in any other part of Spain, and church properties made attractive targets for the thieving and resentful. In some cases, Catalan robber barons won over the poorer peasants to assist them, and they became especially active when, after 1578, much of the American silver was shifted for eastward passage across Catalonia to Italy. This endemic plague did not abate until the passing of the old Catalan politico-social system after the middle of the seventeenth century.
 
During the sixteenth century the center of finance in the east remained the city of Valencia, which expanded its commerce and could draw on a prosperous hinterland of Morisco cultivation. Under the Catholic Kings, Valencia served as the banking center of the peninsula, until the weight eventually shifted to Seville. It might also be noted that the principality of Aragón had benefitted from the decline of Catalonia in the fifteenth century, and by the early sixteenth century Zaragoza was enjoying a modest new prosperity as a commercial and textile center.

The growth in Spanish population and the demand for food exports to the Indies before 1550, and to some extent after 1562, brought increasing amounts of land under cultivation. The aristocracy in some areas let out more and more land from its señoríos for farming, and tended to convert shares and feudal dues and services to straight land-rental agreements. Moreover, land had become the principal object of investment in the kingdom, even for fluid capital from urban sources: there were limitations on domestic manufactures, overseas commerce was uncertain, and most moneyed elements in Castile were oriented against risk and toward status. Censos al quitar -- short-term farm loans -- which sometimes bore as much as 50 percent interest, became one of the two major avenues of investment in Castile, rivaled only by state bonds. In 1618, it was estimated that there were more than one hundred million ducats invested in such short-term loans.
 
Yet it is erroneous ever to think in terms of general prosperity for sixteenth-century Castilian agriculture. The landholding aristocracy [278] was prosperous, and peasant agriculture in some areas--in several of the better-balanced or more fertile of the north, and in the Guadalquivir valley--enjoyed a degree of prosperity until the 1570s or 1580s, but Castilian agriculture as a whole advanced only in the amount of land brought under cultivation, not in productivity. In fact, the increase in cultivation could not altogether keep up with the rise in population, so that after the first great hunger of 1502-1509 there were periodic shortages throughout the century, bringing an intermittent need to rely on food imports. Since the united monarchy had no agrarian policy at all, its only response to the latent food problem was to try to keep food prices down by the tasa de trigo (grain price regulation) while encouraging grain imports. After 1539, the tasa de trigo became fixed policy.
 
The beginning of a long decline in Castilian agriculture was noticeable after 1550. Three factors involved were the steady price increases, the decline in opportunity to export for the American market after it began to produce for itself, and the unregulated competition of cheaper imports. The high price of credit and the growth of production costs, together with the comparatively lower sales price of food, made production relatively unprofitable. It was harder and harder for peasants to meet their loans and pay taxes and by the last decades of the century flight from the land had become general. This only increased the amount of territory under aristocratic control, while at the same time it continued to boost the numbers in towns and cities who were demanding cheap bread and lower food prices, thus further discouraging agriculture. The most fertile districts--in La Mancha of New Castile and in western Andalusia--may have remained fairly prosperous until the 1620s, encouraged in some instances by broader commercial cultivation of vineyards and olives, at least in Andalusia. The rice-growing region around Valencia continued to do well, but the general contraction of agriculture from at least the 1580s, if not earlier, was undeniable. It has been estimated that by 1600 one-third of the land cultivated earlier in the century lay fallow. The process spurred absenteeism, for the aristocracy, which in most cases had maintained their residences in a fairly profitable, income producing countryside early in the century, began more and more to take up permanent residence in the cities. Yet the decrease in agricultural profits did not diminish the economic weight of the large landholders; their domains were so extensive that they could still collect great incomes at reduced rates per hectare.
 
After 1570, food prices began to rise more rapidly than industrial prices, but this did not benefit most of the peasantry. A good deal of the profit went into the hands of black marketeers, and the cost of credit, land rent, and rural taxes rose even more rapidly.
 
[279] More of an effort was made to increase productivity during the second half of the century, as less and less capital went into commerce and most was invested in land censos. Swamp drainage and some new irrigation were introduced around a number of larger cities, but this was controlled to a great extent by the urban market and urban capital. It had no effect upon the vast unirrigated rural areas. To add to the hardship, evidence indicates that there was an abnormally large number of dry years in the sixteenth century.
 

During the height of Spanish power in Europe, from about 1540 to 1590, Castilian manufactures enjoyed a period of peak production and export. First in importance were woolens, produced mainly in [280] Segovia, Toledo, Cuenca, and Córdoba, and in the east at Valencia, Barcelona, Zaragoza, Huesca, and Perpinyá. Second were the silks of Valencia, Granada, and Toledo. The only metals of consequence continued to be the iron and steel of Vizcaya, some of which was exported to France and England. Principal markets, aside from the rapidly rising domestic market, were the Indies, Portugal, and Spanish-dominated Italy. Spanish woolens and all other textiles save silk, however, were totally unable to compete with the textiles of Flanders or other advanced regions in the general international market either with respect to price or quality.
 
The decline of textile production after about 1590 came for a variety of reasons: the rise in prices, heavily increased taxes, steeper production costs, including fairly high wages, and the failure to improve technology and the rate of productivity. Even among the urban oligarchs and merchants there was little of a production-oriented, proto-bourgeois attitude. Profits were usually invested in land or land loans rather than reinvested in business, and the Cortes of Castile sometimes urged the crown to restrict exports so as to keep domestic prices low. Moreover, the expansion and rigidification of the guild system discouraged new production relations and the use of new techniques.
 
There was a great expansion of naval construction, above all in Vizcaya, the shipbuilding center of the peninsula, but also periodically in Barcelona. The expansion of the Castilian navy and commerce diverted the majority of Basque fishermen into the carrying trade. The place once held by Basque fishing in the fifteenth century was never regained, and most of the peninsula relied increasingly on imported fish, especially from Brittany. The size of ships increased greatly, culminating in the huge Spanish and Portuguese galleons and carracks, designed for great overseas cargos and for defense. After 1588, the success of smaller north European vessels encouraged a return to smaller ships, making it easier also to reach smaller ports and inland waterways.
 
Expansion of the Indies trade after 1515 tended to divert shipping and capital from commerce with northern Europe. Thus the history of business and finance in sixteenth-century Castile in large measure is that of the decline of the north, especially in the last four decades of the century, and the growing prominence of the south, especially the key Seville-Cádiz area. The descent of Burgos began in the 1560s with plague and the beginning of the disruptions in the northern trade. Segovia, however, the main textile center, enjoyed two decades of prosperity, from 1570 to 1590, and did not enter into decline until the last years of the century. In general, the 1570s were a prosperous [281] decade for Spanish commerce, but this only encouraged the crown's policy of taxing exports more heavily than imports. The Basque industrial decline began about 1580 but was delayed by heavy shipping and shipbuilding orders. During the l580s, however, the percentage of shipping from the northern ports in the American trade through Seville decreased from 80 to 50 percent. The province of Vizcaya suffered more than any other part of Spain in losses of men and shipping from the Armada.
 
Another factor weighing heavily against Castilian commerce and industry was the broad and mountainous terrain, which presented severe obstacles to transportation and made a national market almost impossible. Goods in Castile were carried almost entirely by mule pack; one contemporary estimate placed the number of mules used in this way at 400,000. Yet the system was inadequate for a large exchange of goods. Hence the persistence of localism, small-scale local industries producing for their native districts, much duplication, failure to lower production costs or achieve volume, and inability to compete with the lower-priced and higher-quality foreign goods which they faced in the market by the end of the century.

Between about 1500 and 1660, bullion from America increased the silver in circulation in Europe by some 300 percent and the gold by about 20 percent. Nearly 40 percent of all this was paid into the Spanish royal treasury in the form of regular taxes and the "royal fifth" exacted on all precious metals. American bullion and the general increase in population were the two main causes of the general price rise of the sixteenth century. By twentieth-century standards, however, the sixteenth-century inflation was mild. Between 1516 and 1562, prices in Spain rose an average of 2.8 percent a year. From 1562 to 1600 the average annual rate dropped to 1.3 percent. That the rate of increase was no higher with so much bullion coming into the country was due In part to a slight increase in productivity, at least up until the last two decades of the century. Moreover, since so much of the metal soon left Spain, it was not all pumped directly into the Spanish economy. During part of the century, prices actually rose more rapidly in France than in Spain. Real wages for Spanish wage earners did not keep up with the price rise during most of the century, falling by about 20 percent during the first half and by about 12 percent during the second half as the inflation eased. The wage/price scissors presumably aided Spanish manufactures, reducing production [282] costs that often tended to be uncompetitive. At the same time, it should be remembered that grain price regulation kept grain prices, at least, lower in Spain than in France.

The key factor in the Spanish economy toward the end of the century was the tax system, which had reached ruinous dimensions. In Castile, the principal taxes were the alcabala, a general sales tax originally set at 5 percent of the price of goods but later raised; the servicio, a poll tax, paid only by commoners, that became a standard assessment after 1525; and customs. To these were added various special taxes, as well as income from royal domain (especially from lands of the former crusading orders). Contributions from the church were another major source of royal income, consisting of the dos novenos, a nominal two-ninths of the tithe collected by the church in most parts of Spain, the cruzada, drawn mainly from indulgences, the subsidio, a large annual tax on church income to maintain naval defenses against the Muslims, and the excusado, a sort of tax on income from church lands. Though the church grants normally yielded less revenue than the alcabala, the retention of great church properties in a traditional Catholic society did provide a significant source of income to the crown, probably more than if such properties had been secularized and divided among the upper classes, who controlled most of the rest of the land.
 
Aside from Castile, the major source of income for the Spanish crown before 1568 was the prosperous Low Countries, which sometimes provided as much as 3,500,000 ducats per year. Most of the other dominions paid lump sums, though there were also special taxes: Milan usually paid at least 300,000 ducats annually, plus a lucrative salt tax; Naples paid an average of 290,000 ducats annually between 1535 and 1552, plus excises; Aragón paid 200,000 ducats annually after 1533 but no excise or special taxes; and Sicily, 75,000 ducats annually, plus a wheat impost. By contrast, the income from America averaged only 350,000 to 400,000 ducats a year during the reign of Carlos V, and so was a minor factor in royal finance for that period.
 
This was an enormous royal income for the sixteenth century and remained the highest in Europe for over one hundred years, yet it never sufficed to meet the enormous expenses, mainly military, of the crown. During the reign of Carlos V the nominal value of taxes raised in Castile grew by approximately 50 percent, yet inflation lowered its real value by almost the same proportion. Under Carlos V the crown [283] normally spent about twice as much as it took in. The government of Felipe II inherited a debt of 70,000,000 ducats, which was partially repudiated in 1557. During the next sixteen years the crown's income doubled, but expenses increased even more rapidly. The inhabitants of the Aragonese principalities were protected by their constitutional systems from major tax increases, leaving the burden to Castile. The alcabala was sometimes raised to as much as 20 percent, and other excises were increased. Offices were sold at home and in the empire, as were a variety of monopolies. Bullion imports from America did increase greatly under Felipe II, accounting for between 20 and 25 percent of all royal revenue during the last fifteen years of his reign. This surpassed the income received from the church, which provided about 15 percent of the crown's resources, but amounted to only slightly more than the former revenues of the Low Countries, now mostly lost to the crown.
 
From the very beginning of the reign of Carlos V, the crown was forced to negotiate large-scale loans, and by the 1580s, if not before, borrowing by the Spanish crown had become the largest single financial operation in Europe. State bonds were fairly attractive to Spanish investors, and ranked with land purchases and short-term agricultural loans as one of the three main avenues of investment in the sixteenth century. Yet there was not enough fluid capital in concentrated sums within the peninsula to respond to most of the loan requests, and from the start the crown formed the habit of placing the bulk of its loans with foreign bankers, at first German and Flemish, and then to an increasing extent Genoese. Terms of these asientos became complicated in the extreme. They customarily took the form of juros de resguardo, or security bonds, each of which was assigned to account against one of the major sources of state income (such as the alcabala or cruzada), and which also served as negotiable securities, becoming the principal object of credit speculation in sixteenth-century Spain. Only about 10 percent of the juros, however, were paid off on time, and the rates of interest and payment were periodically adjusted. Approximately every twenty years the financial pressure on the crown became so great that there was no alternative to a declaration of partial bankruptcy and forced reconversion of the royal debt. This occurred in 1557, 1575, 1596, 1607, 1627, and 1647.
 
The financial burden carried by Castile increased steadily, while the decline of the Castilian economy in the late sixteenth century made it all the more difficult to meet the level of obligations. This created a vicious circle of mounting debt and weakening economic base. All commentators are agreed that over-taxation was a major cause of the breakdown of the Castilian economy, yet detailed studies of the effect of specific taxes on individual economic sectors and [284] social classes are lacking. The servicio was paid only by commoners, as was customary with such assessments in every part of Europe. By contrast, the alcabala, Castile's main excise duty, was paid by all classes in direct proportion to their involvement in the commercial economy. A new tax, the millones, introduced in Castile in the l590s, was levied on basic foodstuffs and so fell primarily upon the poor.
 
Liability to a tax such as the servicio varied greatly with the social structure of the regions. In the north, which had a stronger tradition of local rights and common privilege, a much higher proportion of the population were nominally of hidalgo rank and exempt from most taxes. More than half the people in the regions of Santander and Asturias claimed this status, and one-fourth in the Burgos district, but in New Castile, Extremadura, and Andalusia only a tiny minority were so favored. Altogether some 15 percent of all Castilians may have been exempt, and the Basque country retained its own regional fiscal system, with lower rates and widespread exemptions. The result was to throw a great burden on those least able to pay.
 
It is customarily presumed that the Castilian tax structure reinforced inherent social and psychological obstacles to the development of an achievement-oriented society--that it discouraged commercial and industrial enterprise and helped to fix ambition on the goal of nonproductive aristocratic status and escape from taxation. In general, this seems true enough, though during the first half of the century the actual burden of taxes in terms of real value decreased considerably, for rates were not increased to compensate for inflation. An exact correlation between increasing taxes and declining economic activity has never been worked out, but probably existed from the late decades of the sixteenth century on, as the rise in taxes outstripped the rising inflation. This may have been most important in the economic decline of northern Castile, where per capita rates on commoners were probably heavier than in the south: in the southern areas only a tiny fraction were exempt and hence the per capita burden on commoners was probably lower. On the other hand, continued prosperity in Seville and some other southern regions was due above all to the wealth of the American trade, and differential per capita rates of taxation may at first have been altogether secondary.
 
Taxation alone cannot be blamed for the lack of capital investment in productive enterprise. Since the system was totally regressive, large concentrated incomes were not reduced, and even at the end of the century significant sums were available for investment in state bonds, or, more commonly, in short-term agricultural or personal loans. Lack of productive investment was due more to the psychology, customs, and social values of Castile than to the undeniably severe fiscal pressure.

Even though the lines between the nobility and lower classes were drawn more sharply than ever in the sixteenth century by social exclusion, economic discrimination, and dwindling domestic opportunity, the sense of class antagonism felt at that time and since in other parts of Europe was not so common in Spain. Lower-class Castilians continued to identify themselves not as peasants or laborers but as Catholic Castilians, part of the superior caste, defined by their honor, an ineffable quality that adhered to them naturally regardless of scale of life or accomplishment. If anything, the determination to preserve honor, or caste identity, even among the poor and vulgar, increased. This explains the concern with "purity of blood," that sixteenth-century Castilian obsession which was almost stronger among the lower than the upper classes. Converso blood was more common, or at least more obvious, in the middle and upper classes than among the miserable. To be the descendent of poverty-stricken Castilian peasants or laborers meant that one was indubitably of "pure," "old-Christian" stock, for no Jew had to live under those conditions. Economic wretchedness was a badge of inherent caste superiority. All pure Castilians were members of nature's, or God's, elite. Hence the sense of individual dignity among the most lowly so frequently commented on by foreigners. This had nothing to do with equality or democracy. "Purity of blood" became rather the compensation for absence of equality or democracy in Spanish society. It helped justify a certain degree of informality in relations between classes that smoothed the great social and economic divisions that existed.
 
During the reign of Carlos V the influential Conversos so much a part of the court under the Catholic Kings were no longer to be seen. In 1556 Felipe II ratified an earlier church decree of 1547 making "purity of blood" necessary for clerical appointments. Among the upper classes, where many families had in earlier generations made wealthy Converso marriage connections, the purity of blood controversies were the excuse for bitter factional fighting, especially in local politics and business. Elaborate libros verdes were published revealing the taint or purity of family backgrounds of leading noble clans, leading to great scandal and exaggeration. Although nobles were in some cases not so caught up in the purity of blood mania as were commoners, the extent of accusation and persecution on such grounds was great enough to lead to a reaction in the seventeenth century, when libros verdes were finally banned.
 
This sense of Spanish society was transmitted to other areas with which Spaniards were in frequent contact, especially Italy. The pride and gravity of the Spanish demeanor became proverbial. These qualities [286] were accompanied by a tendency toward the emphatic and exaggerated in Spanish temperament and behavior, which may have laid the basis in manners for the baroque mood of the late-sixteenth and seventeenth centuries, but caused some wonderment in other societies with more modest and easy-going ways.

The increasing costs and pressures of empire, the beginning of economic decline, and the paranoid fear of heresy first began to produce strains in Spanish society during the l560s. Those working for uniformity in religion demanded stronger measures against the only large non-Catholic social group, the Moriscos.
 
The number of Moriscos within the kingdom of Castile in the second half of the sixteenth century was probably greater than half a million, and nearly 10 percent of the population. Of these, several hundred thousand were scattered through New Castile, Extremadura, and western Andalusia. By far the most concentrated nucleus were the quarter million who lived in the region of Granada in eastern Andalusia.
 
Possibly as many as two hundred thousand Moriscos had fled to north Africa after the original decree of nominal conversion in 1502. For two generations, the majority who had remained bribed their way to immunity from the Inquisition. They clung stubbornly to their religion and way of life, and their industry and skills sustained them despite onerous taxation. Some Moriscos were of slightly darker complexion than most Spaniards, but what set them apart was their clothing and their customs, for there seem to have been no very marked differences in physical or facial appearance. Their diet emphasized rice, fruit, and vegetables much more than the Christian, which was basically bread, meat, and wine. A more temperate, disciplined, and industrious mode of life and an emphasis on the family showed up in a distinctly faster rate of population growth. This was noted with dismay by Christians, who observed that "all Moors marry."
 
Carlos V had accepted the diverse territories and social groups of his empire, but Felipe II demanded greater conformity. It is true that factional interests among the aristocracy and court cliques influenced him to reject the process of bribery and toleration followed by royal officials in the past, but this decision accorded with the general trend of Spanish society and government. A decree of 1567 required that Muslim dress and social customs be abandoned. The measure was apparently enforceable among the several hundred thousand Moriscos [287] scattered in various parts of New Castile, Extremadura, and western Andalusia. On the other hand, it was difficult to impose among the large, compact all-Morisco population of the Granada region and of the Levantine countryside. Since the latter were partly shielded by their aristocratic Christian overlords, the brunt of the measure fell on the quarter-million Granadan Moriscos.
 
The Granada community was the only large remaining Morisco nucleus with significant internal cohesion and group identity. Its members were already disgruntled by new export regulations, and special taxes handicapped their silk industry. They had political contact with Morocco and more distantly and indirectly with the Ottoman empire and thus constituted a latent "Ottoman fifth column" ⁽²⁾ in Spain. The decree of 1567 was issued partly for reasons of national security, but the Granadan Moriscos were the more determined to ignore it because they realized that, for the first time in more than half a century, Spain was in a relatively insecure position. The great Morisco revolt began in the last week of 1568. Nearly a year was required for the crown to muster enough troops to deal with it, and the rebellion was not fully suppressed until 1571. The conflict was conducted with savagery by both sides. Approximately 60,000 Moriscos were killed and several thousand more were sold into slavery. Perhaps 50,000 fled to Africa, while twice that number were afterward dispersed over widely scattered parts of Castile. It is conjectured that no more than 40,000 were allowed to remain in the Granada region.
 
After the l570s the several hundred thousand Moriscos remaining in various districts of Castile underwent a slow but steady process of social and cultural absorption. The only large bloc remaining were those of the Levant and lower Aragón. There the old refrain Quien tiene moro tiene oro, "Whoever has a Moor has money," still seemed to be true. The landholding Valencian and Aragonese nobility continued to treasure the rents and other obligations paid by Morisco peasants, and managed in large measure to shield their tenants from the assimilation decree for the remainder of the century.
 
Yet the security problem had not been altogether eliminated. There were still Muslim pirates attacking the east coast, and rumors of secret intelligence between Levantine Moriscos and the Berber states. As Spanish power came under increasing strain during the reign of Felipe III, it became more and more difficult to accept with equanimity the existence of a still largely Muslim minority in eastern Spain. The final solution of the Morisco problem came, however, not so much as a protective measure but as a gesture that Spain still had the [288] strength to resolve a domestic quandary and complete the unity of Spanish Counter-Reformation society. The decision to expel the Moriscos once and for all was taken on the same day that the truce with Holland was signed in 1609, for that gave the crown a respite during which it could concentrate its military and naval strength in the Mediterranean, where Spanish forces had largely been on the offensive against Muslim sea power since about 1601. There were at that time fewer than 300,000 Moriscos left in Spain. Of these, about 135,000 were concentrated in the Valencia region, one-third of its inhabitants, and about 60,000 in Aragón, where they were one-fifth. About 80,000 to 90,000 were scattered around Castile among its some 6,500,000 inhabitants. The Moriscos of Valencia were moved out en masse in 1609-16 10 under heavy military security, but the roundup of Castilian Moriscos was more difficult and continued until 1614. Altogether, approximately 275,000 were expelled from Spain, mostly shipped out.
 
Technically, the expulsion was an impressive feat of logistics that could scarcely have been equaled by any other power at that time. It depopulated wide stretches of Valencia and southern Aragón and led to a great drop in agrarian and artisan production in those regions. It also struck an indirect but severe blow at the previously fairly prosperous Valencian middle classes. Since the regional aristocracy had already mortgaged much of their property to middle-class financiers and now found themselves without the Morisco labor from which most of the income from their domains was derived, the crown sanctioned cancellation of these debts. Yet there were no signs of immediate and severe economic dislocation, and price and wage levels remained about the same. Expulsion of the Moriscos was the last great step in eradicating the religio-ethnic pluralism of medieval Hispania. By 1614, the unitary Catholic society had been achieved.

Though their structures had not changed greatly in the late Middle Ages, the peninsular economies entered a new period of prosperity that began around 1510. The agrarian crisis of 1502-1509 had been overcome, there were new commercial opportunities, and in particular, the first imports of gold from the West Indies had begun arriving after 1505. From 1506 to 1521 wages rose more rapidly than prices, but after 1521 the price level started to rise more steeply. The beginning of this sixteenth-century inflation was the result of the political and social disturbances of 1520-1521, the arrival of Mexican treasure, [289] and the rising demand in both the domestic and Spanish American markets. The price rise became even more rapid after about 1535, then finally slowed down in the l560s.
 
During the middle decades of the century there was general expansion in the Castilian economy. Population rose, food production increased almost as rapidly, at least for several decades, the textile, shipbuilding, and Basque iron industries expanded, currency remained fairly stable, and after a mid-century decline, the Mesta began to grow again. The Aragonese economies also participated in this expansion, which continued during most of the reign of Felipe II.
 
The general contraction of the Spanish economy began around 1590. The last period of prosperity for the Castilian fairs was the 1580s. By the last decade of the reign of Felipe II, Castilian commerce and manufactures were in decline. State expenses were the most important single factor in this process, but for the common people the main problem was food. Major food shortages had reappeared intermittently since the mid-1550s and were frequent after the 1570s. The price of food staples rose more rapidly than prices in general, for the population continued to grow until the end of the century, while production was falling. By the close of the century, however, the sense of defeat and disillusion felt by the imperial government was being reflected in Spanish society. Castilians had not been especially poor by west European standards during the sixteenth century, but by the 1590s, if not before, their living standards were declining. More important was the diminishing will to cope with such challenges. By the turn of the century the population, ravaged by new outbreaks of plague, was declining, and Castilian society, in reaction to the challenges of empire, heresy, and its own ethnocentrism, was turning inward.
 

[347] A general introduction to sixteenth-century Spanish society is provided by M. Fernández Alvarez, La sociedad española del Renacimiento (Salamanca, 1970). The key question of the sixteenth-century Spanish economy -- the land -- has received little attention. For an introductory essay, see Carmelo Viñas Mey, El problema de la tierra en la España de los siglos XVI y XVII (Madrid, 1941), supplemented by Noel Salomon's monograph, La Campagne de Nouvelle Castile a la fin du XVIe siécle (Paris, 1964).
 
The basic question of seigneurial domain, its extent and influence, has been examined in an important work: Alfonso Ma. Guilarte, El régimen señorial en el siglo XVI (Madrid, 1962). Though somewhat defective in analysis, the classic study of Spanish bullion and the inflation is Earl J. Hamilton, American Treasure and the Price Revolution in Spain, 1501-1650 (Cambridge, [348] 1934). On government finance and economic policy, see Ramón Carande, Carlos V y sus banqueros, 3 vols. (Madrid, 1943, 1949), a key work, and also J. Larraz, La época del mercantilismo en España, 1500-1700 (Madrid, 1943).
 
Some of the best work in Spanish social and economic history of the imperial period has been done by French scholars. The monumental piece of research from this group is Pierre and Huguette Chaunu's Sévile et l'Atlantique (1504-1650), 8 vols. (Paris, 1955-59). There are three important works by Henri Lapeyre: Simón Ruiz et les Asientos de Philippe II (Paris, 1953); Une Famille de marchands: Les Ruiz (Paris, 1955); and, especially, Géographie de l'Espagne morísque (Paris, 1959). On two of the most important cities of the century, there are Bartolomé Bennassar, Valladolid au Siécle d'Or (Paris, 1966); Domínguez Ortiz's brief Orto y ocaso de Sevilla (Seville, 1946); and Ruth Pike, Aristocrats and Traders. Sevillian Society in the Sixteenth Century (Ithaca, 1972).
 
Broader aspects of Spanish commerce and finance are treated in Jacob van Kleveren, Europäische Wirtschaftsgeschichte Spaniens von 16. und 17. Jahrhunderts (Stuttgart, 1960). There is one monograph on the grain problem, E. Ibarra y Rodriguez, El problema cerealista en España durante el reinado de los Reyes Católicos (1475-1516) (Madrid, 1942). Aspects of the Vizcayan economy have been studied by J. A. García de Cortázar, Vizcaya en el siglo XV (Bilbao, 1966).
 
On the limpieza de sangre mania, see A. A. Sicroff, Les Controverses des statuts de "Pureté de Sang" en Espagne du XVe au XVIe siècle (Pans, 1960). The best study of Morisco society is Julio Caro Baroja, Los moriscos del reino de Granada (Madrid, 1957), and, on slavery, there is Domínguez Ortiz's "La esclavitud en Castilla durante la Edad Moderna," Estudios de Historia Social de España 2 (1952): 369-428.

1. Slavery was somewhat less important in sixteenth-century Castile than in Portugal. The number of slaves, both black and Mediterranean Muslim, rose to an all-time high of about 100,000, or 1.2 percent of the population, around 1600. Half of them were concentrated in Andalusia, near the sources of supply. Other centers of slave population were the Levant, Galicia, and the central axis of Madrid-Valladolid.

2. The phrase is that of Andrew C. Hess, "The Moriscos: An Ottoman Fifth Column in Sixteenth-Century Spain." American Historical Review 74. no. 1 (Oct. l968): 1-25.