This again reflects Philips bad management of finance whereupon countries could not be relied upon to be self-sufficient or contribute to wars fought on behalf of the entire Monarquia. The result of this was that Castile bore the brunt of the effort to fund the Monarquia. This was an unreasonable burden, as Castile possessed neither the wealth, the manpower or the economic strength demanded off it. This policy of Philip further proves his ill-managed Royal finances. Such heavy taxation on one part of the Monarquia alone sent Castile into steady decline. Instead of being a successfully self-supported land, Castile began to heavily depend on outside imports, increasing the risk of further inflation, a threat that remained since its onset early in Philips reign throughout his inherited lands.
Philips highly infective management is reinforced by his failure to lift out of debt despite increased revenue. Bullion from the wealthy Americas boosted the wealth of Castile, as did the revenue from the Indies. Philip also increased finance through taxation, which backfired, and through borrowing money. Philip was forced into negotiating complicated loans with moneylenders that would allow him to continue paying back old debts while receiving fresh ones. However, even this was not enough to keep Philip from greatly failing financially, and declaring bankruptcy in 1557, 1575 and finally in 1596. The 36 million Ducat debts that he inherited became £68 million Ducats by the end of his reign. The diabolical state of finance was not helped by the grandiose lifestyle of the King, who maintained the mentality of the ever-important prestige display. Moreover, Philip failed to be interested in Fiscal matters, and appeared to launch plans without taking the care to cost them through.
Philip seemed to have greatly failed to be efficient on handling Royal finances. However, another view could argue that Philip made the best of a bad situation. For example, he managed to re-stabilise finance after the bankruptcies. Philip was initially dealt a bad hand by inheriting both a great debt and an extended empire from his father. This would entail a need for further finance, and Philip was immediately faced to raise this form a minus figure. Moreover, the increased lands now labelled as Philip’s Monarquia, would involve extended foreign war involvement, and in turn, war expenditure. The need to go to war in the interests of his inherited lands was forced upon the new ruler. War came with the territory, and the territory came with the inheritance. Philip had no choice in defending both his territories and his religion so the increased expenditure that resulted in bankruptcy was arguably inevitable and out of Philips control. Moreover, it is important to remember that the first declaration of bankruptcy was a further inheritance of Philip from his father, Charles I. Philip was faced with more difficulties from the outset of his reign. Inflation was taking hold in many countries across Europe, forcing Philip to find increasing amounts of money to fund both the running of government and also war expenditure. Moreover, territories such as the Netherlands that has previously provided great income for Charles, became a drain on finances. The Netherlands then, revolted against Philip and instead of contributing to the Royal finance, Philip was forced to spend increasing amounts combating the rebels.
It is also clear that Philip attempted to address the problem of unstable finances. The reorganisation of the departments of Finance was undertaken in order to increase efficiency. Philip was also effective in increasing revenue during his reign, albeit mostly in Castile. New taxes were introduced and old ones modified so that the wars of Spain could be funded. The ‘alacabala’ for instance, tripled in it yield by the end of Philips reign. Custom duties were effectively reorganised so that they were received directly by the Crown instead of the old method whereby tax farmers would retain a hefty proportion of the money collected. The ‘cruzda’ was introduced by the church to fund the wars against the Turks, and this too was effective by doubling its yield. Another new tax was effectively introduced to tax church property, furthering Philips income. The ‘subsido’ an existing tax was equally successful in increasing its revenue.
Evidence of Philips effective policies involving finance are reflected in the decrease of household expenditure during his reign. This shows that Philip has recognised the responsibility he had to improve the state of Royal finance. This could be considered impressive due to the mentality that Philip, and other Kings of this period, were fixed in. This was the age in which religion and national prestige far outweighed the necessity to deal with Finance.
It can convincingly be argued then, that Philip was a highly overworked King who made the best of a bad situation. He attempted, with limited personal time and resources, to manage the situation, and did so with reasonable success. Certainly he was effective in the matters which he did change, such as taxation. It can be said that financial failure was inevitable and that is was impossible for Philip to effectively succeed in regaining control of royal finance. I support this view as a far more realistic and pragmatic one than the opposing view which argues that Philip failed to deal with the underlying problems of Royal Finance. Instead he ignored opportunities to effectively reform finance so that bankruptcy was caused several times, indicated ultimately his failure to manage finance.
