Distant Tyranny – Markets, Power, and Backwardness in Spain, 1650-1800. By Regina Grafe
Review by Dryden Liddle
This book is part of a series by Princeton University on the Economic History of the Western World. As such, it fills an important gap in our knowledge of state formation in a significant part of Europe. Monarchical power, and the roles of the centre and periphery, have been much misunderstood since Spain’s so-called Golden Age, roughly 1500-1600. The ‘tyranny’ of the title is defined in separate chapters as Tyranny of Distance, The Historic Territories, and the Power of the Towns. This is a useful device to introduce empirical evidence demonstrating the relative importance of each of these factors in creating market and political barriers and inhibiting the growth of a national market for goods and services.
The themes also demonstrate the weakness of a centralised government in Spain and the importance of local ‘rights and customs,’ which devolved power to the regions and towns. Multiple levels of divided authority co-existed with competing claims, which had to be negotiated. Sovereignty was thus fragmented. Recent historiography has largely rejected the view of a power struggle between monarch and landed magnates with the Crown eventually centralising power in Madrid. Grafe portrays monarchical power in Spain as limited by territorial customs and rights (fueros), ecclesiastical privileges, separate demesnes or lordships (senorios) of the nobility, and the tax and trade privileges of certain guilds, such as the mesta for the trade in wool. This created an intricate mesh of jurisdictional fragmentation with which the Crown had to negotiate. She correctly contends that there was no inevitability that a nexus between military needs and fiscal revenues would create a unified state and overcome jurisdictional fragmentation to implement ‘national’ policies as some historians have suggested. All of this follows Elliott’s concept of a ‘composite’ state with many centres of power necessitating that the Crown negotiate with different power structures. But the concept of a ‘composite’ state was not exclusive to Spain. Grafe rightly criticises historians for being too focused on comparing Spain with France in their analyses of bureaucratic centralising states with limited constraints on the power of monarchs. Yet Spain was not unique in this regard. Immunities, privileges and concessions had been granted to magnates in Poland and elsewhere. The resulting weakness of monarchs in eastern and central Europe inhibited the development of centralised power and strong states in these countries.
The author, Regina Grafe’s, purpose is to demonstrate that the fragmentation of markets and multiple jurisdictional powers were the primary causes for Spain’s backwardness in the period 1650-1800. Thus the question for this reviewer is, does she achieve this and how does she go about her task? Grafe’s methodology is essentially that of an economic historian – quantitive analysis. She has had access to a series of price statistics in the account books of various religious institutions and colleges, as well as regional and national archives. She provides a helpful note on these sources. To demonstrate her thesis on market fragmentation she has chosen price series from the transatlantic trade in dried salted codfish. She convincingly shows the suitability of this product for her analysis and compares prices at ports of arrival in Iberia to prices in interior provinces. Cod is a homogeneous product, a staple commodity for a wide range of consumers with a protein level much higher than meat per kilo. She also writes that it is less subject to supply shocks due to drought or other weather conditions. She chooses cod rather than grains, used by many economic historians, because bread was exempt from tax in Spain. As her argument develops this becomes important, as her supporting evidence shows that differential town consumption taxes, and customs duties at the so-called ‘dry ports’ between historic territories, affected the degree of market integration and higher prices in interior towns. Grafe demonstrates that differences in cod prices between towns can be shown to relate more closely to different levels of consumer taxes levied by the towns. While high transport costs were important, Grafe demonstrates the significance of local and regional jurisdictional obstacles in impeding market integration. The coastal regions, particularly the Basque provinces, were more engaged in external trade and defended their rights to impose customs duties at their borders with internal regions while denying the central government’s right to tax goods at the port of entry. Grafe shows that it was more costly to trade cod from Bilbao to the interior than from North America to Spain. Imported goods became cheaper than domestic goods and it was more profitable for coastal towns to trade overseas than trade with the interior. Thus cheaper access to larger markets favoured the ports over the interior towns.
Her regression analysis measures the effect of transport costs and taxation on the price of cod at the point of consumption. Using grain prices would have excluded the market distortion effects of taxation because of bread’s tax exemption. With these price series Grafe is able to show the negative effect of Spain’s system of devolved consumption taxes on market integration – the so-called ‘alcabala’ or sales tax. The fiscal system strengthened the sovereign rights of territories and towns and no other source of revenue – not even silver – was as important as these taxes. This system was very old, but was further developed by the emperor Charles V’s financial secretary, Francisco de los Cobos, (1520-1547) as a means to obtain funds for the emperor’s campaigns. In effect, the towns advanced monies to the Crown through the Castilian cortes, which voted on an overall figure. This was then apportioned to separate towns in Castile who were allowed to collect sales tax in the areas under their control – effectively acting as sub-contractors for the central government. The taxation system was essentially the result of a negotiation between the town’s representatives in cortes and the Crown. Custom and consent had always limited the powers of monarchy in Spain. Local ‘rights’ or ‘fueros’ were asserted by reference to documents and tradition. But urban tax autonomy and internal customs barriers impeded the distribution of goods throughout a national market. As Grafe writes ‘….it was not a shortage of skills, capital or resources …. that affected Spain’s growth potential, …. but a failure to allocate these resources through integrated markets.’ Markets were also separated by different coinage and exchange rates between regions, which increased the cost of transactions.
The reader needs to understand Grafe’s statistical method and the supporting tables to find her case convincing. Such method, of course, must be highly qualified given the varied and fragmented sources employed. Yet such are the difficulties for economic historians of the period attempting to advance our knowledge of the past. So, does Grafe achieve her purpose in this work? The evidence she presents is convincing to this reviewer – tyranny of distance alone was not sufficient to explain poor market integration. Much prior work on institutions in Spain have similarly concluded that strong regional powers and the devolved tax system did indeed hamper the creation of a unified national market. This work therefore is a useful addition to our understanding of what happened to Spain after its Golden Age. One important finding of her price comparisons is the huge price difference of cod in Seville compared to the nearby port of Cadiz – cod was four times more expensive in Seville. This confirms other evidence we have on Seville’s cost of living in the 16th and 17th centuries, and throws further doubt on relying on Hamilton’s 1930s analysis of Spanish silver imports as a cause of rampant inflation throughout Spain. Seville with its monopoly of trade with the Americas was particularly affected and had incurred a particularly high level of debt to finance this trade. The town therefore had to raise taxes on consumer goods to service this debt – hence the price difference was mainly due to local taxes.
Unfortunately, the complexity of sentences in some cases makes it difficult for the reader – convoluted prose does not signify complexity of thought. What does ‘relaxed capital situation’ mean? (p. 225) or again ‘relaxed capital constraint?’
Dryden Liddle graduated with an MA in economics from Cambridge and spent 1965-69 in Madrid as a diplomat at the British embassy. He also worked at the UN for the FO. He then worked for 20 years as an investment banker in New York, London and Madrid, and finally in Washington with the InterAmerican Development Bank. Returning to Madrid as a business consultant, in 2001 Dryden started studying history obtaining an MA from the Open University and a PhD in 2010.