Crisis and Collapse in Spain between 1793 and 1808

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Crisis and Collapse

Charles III died in late 1788, leaving Spain and the empire peaceful and reasonably prosperous. The Crown’s normal income was almost adequate for routine expenditures, and the royal debt was modest.

By January 1, 1808, however, the imperial panorama looked very different. Except for occasional interludes of peace, Spain had been at war since 1793. Its costly naval fleet had been destroyed in the battles of Cape St. Vincent and Trafalgar.

Napoleon was exacting financial tribute and largely determining Spain’s foreign policy. Colonial trade increasingly benefited neutral shippers rather than Spanish merchants and producers, and a rapidly growing debt burdened the royal treasuries in Spain and the colonies

In addition, the prominence of the powerful royal favorite Manuel Godov, grandiloquently entitled duke of Alcudia, prince of the Peace, and admiral-general of Spain and the Indies, had discredited the royal family.

Yet despite the numerous difficulties of these years, almost no one in Spain or the colonies expected that in less than two decades the entire mainland empire in America would be independent of Spanish rule.

The Cost of War

The execution of the French King Louis XVI on January 21, 1793, led Spain into the coalition of countries fighting against the spread of revolution. The nation was united against regicide, and initially the war enjoyed popular support. Military defeats, however, cost Spain its remaining portion of the island of Hispaniola in 1795.

Angered over Spain’s ending hostilities with France unilaterally, England attacked Spanish shipping. These provocations, a belief that a land war with France was more dangerous than a conflict with England, and varied dynastic ambitions led Spain to sign an alliance with the French republic.

War with Britain began in October 1796. The defeat of the Spanish fleet off Cape St. Vincent in 1797 opened the way for a British blockade of Cadiz until 1800.

The peace of Amiens in 1802 restored peace to Europe once more, and Spain, which already had ceded Louisiana to France, lost Trinidad. Spain by now little more than a French satellite, found itself in renewed conflict with England beginning in the late 1804.

Victory over combined Spanish and French fleets at Trafalgar in 1805 gave Britain uncontested dominance over the seas.

Spain’s repeated involvement in the war between 1793 and 1808 proved extremely costly in terms of both direct financial expenditures and the loss of trade and regular remittance of bullion from the colonies. An important consequence was that earlier policies to integrate Spain and the colonies economically gave way to short-term fiscal considerations. Reciprocity within the “colonial compact” succumbed to the Crown’s desperate attempts to extract as much revenue as possible from the Indies, regardless of the consequences for the colonial economies.

An Overwhelming Debt

Spain’s tax system proved unable to provide the funds necessary to meet the extraordinary expenses of war. Initially the crown borrowed from foreign lenders, government trust funds, and special treasury funds

Faced with rising interest rates as the price for further loans, however, the Crown turned to Spain’s own money market.

In 1794-95 it issued treasury bills (vales reales) worth over 64 million pesos de vellon, a sum equal to nearly 75% of the total regular peninsular revenues in these years

Buoyed by the sale of treasury bills and bonds, the treasury’s income in 1795 was the largest of the era. The deficit, however, was almost equal to total income in 1792, the last year of peace. The initiation of conflict with Britain in 1796 forced the crown to issue bonds and treasury bills whose total value exceeded all normal treasury income from the American colonies between 1792 and 1807

Napoleon’s demand for financial subsidies beginning in 1803 and the renewal of hostilities with England late in 1804 quickly pushed the Crown to the brink of bankruptcy.

Neutral Trade

The rapid deterioration of Spain’s finances after 1793 and the subsequent disruption of normal trading patterns profoundly affected Spain’s commercial and political relations with its colonies. The strength of the Spanish fleet and the alliance with Britain during the French war enabled American treasure to continue to reach Spain.

Protected convoys carrying bullion (gold or silver considered with respect to quantity rather than value) managed to maintain a reasonable level of trade with the colonies, although the number of sailings dropped. Conditions changed rapidly, however, following the initiation of hostilities with Britain in late 1796

The British blockade of Cadiz paralyzed Spain’s transatlantic trade. Whereas 171 ships sailed from America to Cadiz in 1796, only 9 ships arrived in 1797. Spain’s inability to maintain its trade with the colonies spurred colonial officials in Cuba and Venezuela to open their ports to neutral traders.

In Madrid, policymakers recognized that the colonies needed some trade outlets and that state services such as mail delivery and the provision of mercury and administrative supplies had to be continued. In addition, they wanted to maintain some portion of the traditional market share to prevent the colonies from establishing new industries and trade links that would ultimately undermine the entire colonial system.

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These goals underlay the Crown’s decree of November 18, 1797, sanctioning neutral trade. Although intended as a temporary wartime expedient to keep the imperial system afloat, the new policy facilitated the elaboration of non-Spanish commercial ties for colonial merchants and producers that could not be eliminated when peace returned.

The merchants of Cadiz fought tenaciously against neutral trade and secured a brief suspension in April 1799. Widespread noncompliance in the colonies and the continued need for revenue, however, led the Crown again to allow neutral trade in January 1801. After a brief peace and an attempt to reestablish the prewar system, ...

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