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From Castile and Aragon to Spain

An Economic History of the Iberian Peninsula in the 15th and 16th Century

Korean Minjok Leadership Academy
International Program
Yoon, Seong Heon
Term Paper, AP European History Class, June 2011

Table of Contents

I. Introduction
II. Timeline
III. Basic Information about Castile and Aragon
III.1 The Crown of Castile
III.2 The Crown of Aragon
IV. Economic Features of Castile and Aragon
IV.1 The Crown of Castile
IV.1.1 Wool Industry
IV.1.2 Agriculture
IV.1.3 Cloth Manufacture
IV.1.4 International Trade Centers
IV.2 The Crown of Aragon
IV.2.1 Huerta
IV.2.2 International Trade
IV.3 Chapter Analysis
V. Temporary Dynastic Union ? Catholic Monarchs
V.1 Background
V.1.1 Nationalism as 'Spaniards'
V.1.2 Same Royal Lineage
V.1.3 Domestic and Foreign Politics
V.2 Efforts for Economic Development
V.2.1 Increasing Economic Power of the Nobility
V.2.2 Establishment of Consulados
V.2.3 Incentives for International Trade
V.2.4 Reforms in Transportation and Postal System
V.2.5 Side Effects of the Efforts
V.2.6 Chapter Analysis
V.3 Currency Reforms
VI. Expansion to the New World
VII. Habsburg Spain
VII.1 Beginning
VII.2 Decline of Agriculture
VII.3 Madrid as the Capital of the Spanish Empire
VII.4 Inflation
VII.5 Financial Deficit of the Spanish Empire
VII.6 Chapter Analysis
VIII. Nueva Planta Decrees
IX. Conclusion

I. Introduction
            Throughout the history of Spain around the era of Habsburg regime, there were two major attempts to unify Castile and Aragon; one was through the marriage of Isabella of Castile and Fernando of Aragon in 1469, and another was through Nueva Plantas Decrees in the aftermath of War of Spanish Succession (1701-14). While the former was proven to fail as the dynastic union of the two crowns broke after the death of Queen Isabella in 1504, the latter succeeded in completely uniting Castile and Aragon by abolishing Aragon's institutions and replacing with those of Castile.
            From 15th to 16th Century, Spanish economy went through numerous changes, thus, such changes should have contributed to the unification to some extent. Therefore, this paper aims to examine the economic changes since the dynastic union of the two Crowns in 1469 until the end of the 16th century which made the unification through Nueva Planta Decrees possible. Also, it will trace back to the geographical and political conditions of Spain which influenced to such economic conditions, thereby contributing to the unification.
            To avoid confusion, historical terms such as people¡¯s names were written in the English way, such as Queen Isabella I of Castile, instead of Spanish Rey (1) Isabel de Castilla. However, certain distinctive terms such as La Casa de Contratacion were written in Spanish when proper English translation doesn¡¯t exist or writing in Spanish way was considered to be more appropriate. In such cases, English translations of the terms were written in following parentheses; for example, La Casa de Contratacion (The House of Trade).

II. Timeline

year(s) Socio-political Changes Economic Changes
1274 Formation of Mesta
1304 Murcia becoming Castilian territory, which enabled Castile's access to the Strait of Gibraltar
1469 Dynastic union of the two Crowns (temporarily, until 1504)
1492 Completion of Reconquista (Granada being conquered)
Christopher Columbus discovered West Indies
Alhambra Decree (Jews being expelled from Spain)
1494 Treaty of Tordesillas Consulado for Cantabrian wool trade being established in Burgos
1497 Ordinance of Medina del Campo
Cabana Real de Carreteros being established
1501 The court mandated all land that had at least once been used for pasturage be solely used for pasturage
1503 La Casa de Contratacion (The House of Trade) being established in Sevilla
1504 Queen Isabel died
1505 Establishment of Correo Mayor
1506 Ascension of king-consort Philip I of Castile
(beginning of Habsburg rule in Spain)
1511 Consulado for iron trade being established in Vizcaya, Bilbao
1516 Ascension of king Charles I of Spain (or the Holy Roman Emperor Charles V)
1519-1521 Herman Cortes conquered the Aztec Empire
1529 The Crown allowed ten Castillian ports to trade directly with the New World (temporarily, until 1573)
1532-1533 Francisco Pizarro conquered the Inca Empire
1543 Consulado de mercaderes being established in Sevilla
1557 First state bankruptcy
1558-1585 Ottoman-Habsburg conflicts
1561 Madrid becoming the de facto capital (The court being moved to Madrid)
1575 Second state bankruptcy
1597 Third state bankruptcy
1701-1714 War of Spanish Succession
1701-1716 Nueva Planta Decrees being signed

III. Basic Information about Castile and Aragon

III.1 The Crown of Castile
            The Kingdom of Castile, which first appeared as a county of the Kingdom of Leon, obtained the right as an independent kingdom in the late half of the 11th century, ending its position's alternating between a county of Kingdom of Leon and that of Kingdom of Navarre. In 1230, Kingdom of Castile and Kingdom of Leon were united to from the Kingdom of Leon and Castile, or simply, the Crown of Castile, as Ferdinand III inherited the former from his mother, Queen Berengaria of Castile and the latter from his father Alfonse IX of Leon. Since then, the Crown kept territorial expansion, conquering the Guadalquivir Valley during the regime of Ferdinand III.

III.2 The Crown of Aragon
            The Crown of Aragon was created in 1136, when the Kingdom of Aragon got tied the County of Barcelona (together with the County of Provence) through dynastic union. Starting from King James I's regime (13th century), the crown kept on its territorial expansion, gaining Mallorca and the Kingdom of Valencia through conquest, the kingdoms of Sardinia and Corsica through the grant of Pope Boniface VII (1297), and Kingdom of Sicily through marriage (1381).

IV. Economic Features of the Two Crowns Around the Dynastic Union

IV.1 The Crown of Castile
            The economic changes of Castile from around the 14th century were fostered by several domestic and international factors:
            First, the vast territorial expansion through Reconquista and following redistribution of the obtained land amongst nobles;
            Second, major demographic decline in mid-fourteenth century due to the Black Death;
            Third, enlargement of trade routes and international markets;
            Fourth, domestic urge of the nobility and the court for obtaining additional income or solving chronic fiscal problems.

IV.1.1 Wool Industry
            From the 14th to 15th century, the Crown of Castile experienced unprecedented significant growth in its wool industry; the sheep population skyrocketed from 1.5 million at the beginning of the 14th century to 5.0 million at the end of the 15th century. (2) Several factors could be attributed for this significant development. First, due to the terrible decline in labor force caused by epidemic Black Death, herding industry, which required relatively fewer workers, emerged as a plausible alternative for agriculture. Second, the emergence of a large market for wool due to England¡¯s ceasing her wool exportation as an attempt to protect her textile industry brought about skyrocketing demand for Castilian wool. Third, as Murcia and Guadalquivir valley became Castilian territories, Genoa-Flanders sea route through the Strait of Gibraltar got accessible to Castilian merchants. Last but not least, Castilian nobility and the court, which found sheep ranching a good way to obtain additional income and solve the chronic budget deficit, granted privileges to pastors through various institutions.
            In order to protect the economic benefits from the wool industry, a unique Castilian organization named Honrado Concejo de la Mesta de Pastores (Honorable Council of the Pastors Mesta), or shortly, Mesta existed. According to Wikipedia Spanish, Mesta, formed in 1273, was an organization "bringing together all pastors of Castile and Leon into an national association and granting important prerogatives and privileges such as exemption from military service, to testify in court, the rights of passage and pasturage, etc." (3)

IV.1.2 Agriculture
            Due to the conditions cited above, Castilian agriculture encountered transformation in its forms. In the process of distributing the land obtained through the Reconquista, nobles who owned large land began to run Haciendas, Spanish version of Latifundium. Also, as new trade routes and markets got accessible, nobles tended to cultivate commercial crops for exportation such as grape for wine and olives for oil. As a result, the balance of agriculture and sheep ranching got broken, which often caused skirmishes between farmers and pastors over the property of farmland, and in most cases, the nobles and royal families were on the side of pastors, allowing privileges for them.

IV.1.3 Cloth Manufacture
            Although Castile saw development in its cloth manufacturing industry in some centers such as Segovia and Cuenca as a natural consequence of booming wool industry, the cloth industry was still insufficient to meet the domestic demand for textile, especially for luxurious fabrics amongst the privileged classes. As a result, Castilian textile industry failed to compete against the mighty French and Flemish textile industry. As an attempt to protect domestic wool industry, Castilian textile merchant, in the Cortes in the fourteenth century, called for the cessation of importation (Madrigal, 1438) or reserving one-third of the wool for its own industry (Toledo, 1462) but failed. (4)

IV.1.4 International Trade Centers
            As a result of booming industries as well as increasing international trade, several commercial centers for different industries emerged.
            First, the triangle Burgos-Cantabrian coastal cities were major exportation centers of Castilian wool. Burgos was where wool produced all over Castile was collected, thus capital as well. In case of Cantabrian coastal cities, they performed the role of the trade centers for many Castilian products such as wine and iron from Basque country to England and Flanders and fish from Hondarribia (5) to the Mediterranean. Especially, in the 13th century, Cantabrian coastal cities formed Hermando de la Marina de Castilla (Fraternity of the Castilian sailors) from Hondarribia to Bayonne, which transported fish to Mediterranean regions, competing with the English. In Cantabria, Laredo and Castro Urdiales were major ports.
            Another trade center developed in western Andalucia, where Bretons, English, Florentine bankers, Basque sailors, Italian merchants and Genoese bankers would settle. Food products such as olive oil, tuna, wine and sherry and mercury from Almaden (6), which was mainly used as an amalgam in silver mines of Central Europe, were the main products traded there. Later, it became a major trade center of slaves and Sudanese gold which was transported from West African coast.
            Beside these, there were other commercial centers such as Segovia, Toledo and Cuenca in Meseta. Also, Basques established commercial colony in Bruges. In those commercial centers, merchants established Lonjas (markets) which performed as market places as well as currency exchange; la Lonja de Sevilla (the Market of Sevilla) was the oldest among them.

IV.2 The Crown of Aragon

IV.2.1 Huerta
            Unlike most regions in Iberian Peninsula where dry-land agriculture prevailed, in some regions of Aragon such as Valencia, a type of irrigation farming named Huerta prevailed, based on well-developed irrigation system. Huerta, directly translated into English 'garden', is defined as "a type of irrigation farming, very frequent near river valleys since it needs an abundant supply of water, although the drip irrigation system, very appropriate for horticultural plot, saves an enormous amount of water." (7) In such regions, the main agricultural product was fruits such as the orange. Due to the significance of Huerta, some regions were named after the agricultural from, and are still called by the names, for example, Huerta de Valencia and Huerta de Murcia.

IV.2.2 International Trade
            The economy of the Crown of Aragon, which was located along the coast of the Mediterranean Sea, had traditionally depended significantly on sea trade. Barcelona and Valencia were important international trade centers at that time, where merchants traded spices, crops, textiles and so on with Mediterranean, Atlantic and North African regions. As a result, Aragonese merchants boasted an advanced level of navigation to contemporary merchants. For instance, from the 13th century, merchants from Mallorca used compass for navigation as well as Portolan Chart. (8) Also, the famous Catalan Atlas was also drawn by an Aragonese-Jewish cartographer Abraham Cresques, which was an evidence of Aragonese knowledge of regions outside of Europe such as Central Asia and Africa.
            As a maritime superpower, the Crown of Aragon established unique institutions named Consulado del Mar (Consulate of the Sea) in coastal regions such as Barcelona, Valencia and Mallorca. Consulados were quasi-judicial institutions similar to current commercial courts of which the main role was the administration of maritime and commercial laws.

IV.3 Chapter Analysis
            While Castile was going through significant booming of its economy in the 14th and 15th Century, Aragon¡¯s economy was relatively stagnant. This could be explained by two factors. First, the trade center for European merchants was slowly but steadily moving from the Mediterranean Sea to the Atlantic Ocean, and Castile¡¯s efforts for Reconquista contributed to this movement as it conquered Muslims, who previously were major obstacles for Spain to access Atlantic sea routes. The opening of Genoa-Flanders sea route through the Strait of Gibraltar was a good example. Therefore, it was a natural consequence that Aragon¡¯s economy was relatively stagnant than Castile's.
            Also, thanks to Reconquista, the Crown of Castile gained vast territory as well as expulsive demographic increase. After the incorporation of Granada in 1492, which was considered the completion of Reconquista, the crown covered about two-third of the total area of the Iberian Peninsula, about three times that of the Crown of Aragon. Also, although difficult to precisely measure, Castile had five to six million inhabitants, while Portugal and Aragon each had no more than one million. (9) Based on such large territory and population, Castile could expand its wool industry, which emerged as a major source of income, thereby fostering boom in international trade based on wool as well.

V. Temporary Dynastic Union - Catholic Monarchs

V.1 Background
            When Isabella of Castile chose her husband, she had three candidates : Charles of Valois, the son of Charles VII of France, Alfonso V of Portugal, and Ferdinand, son and heir of John II of Aragon. Although marrying the French or Portuguese candidates seemed to be more beneficial to Castile in terms of diplomacy, and her half-brother King Henry IV hoped her to marry Alfonso, Isabella proposed to Ferdinand of Aragon and married him. It is said that she sent Catholic missionaries to all three countries and gained information about the tree candidates for her husband; while Charles was weak and incompetent and Alfonso was over forty years old, Ferdinand was a young and talented man. (10) However, her marriage was not just a love affair. Indeed, there were a number of other factors which made the matrimonial union between Castile and Aragon possible.

V.1.1 Nationalism as 'Spaniards'
            Despite territorial division, the Aragonese and Castilian shared the idea of identity as ¡®Spaniards.¡¯ Several factors can be attributed to for this sense of nationalism. First, among the intellectuals, especially Aragonese humanists such as Cardinal Margarit, the chancellor of Ferdinand¡¯s father John II of Aragon, there was a nostalgic mood to the antiquity when Spain was a union of only two provinces, Hispania Citerior and Ulterior, under Roman rule. (11) Moreover, increasing contacts with the outer world gave Castilian and Aragonese people a feeling of being 'Spaniards', as opposed to Englishmen or Frenchmen. For instance, fifteenth-century sailors, although from different geographical sectors of the Iberian Peninsula, would talk about "returning to Spain." (12)

V.1.2 Same Royal Lineage
            Although Isabella and Ferdinand were from two different families, they were from the same lineage; the two royal families of Castile and Aragon shared the same ancestry, the House of Trastamara. Isabella was the daughter of John II of Castile, grandson of John I of Castile, and Ferdinand was the son of John II of Aragon, grandson of John I of Castile, too. In other words, they shared the same great-grandfather. Although not a decisive factor, the fact that the royal family shared the same lineage took a role in facilitating the dynastic union of Castile and Aragon, reinforcing the sentiment of nationalism throughout Hispania.

V.1.3 Domestic and Foreign Politics
            In fact, the dynastic union of Castile and Aragon was of a highly political purpose; the crowns attempted to strengthen their monarchial authorities and raise power against foreign countries through a marriage alliance within the peninsula.
            In Castile, the royal authority had been seriously weakened for several decades. Forty-nine years of King John II's regime, in which his constable (13) Alvaro de Luna held in fact control over the country, resulted in Castile being hotbed of bribery and budget deficit of the court. (14) Although de Luna was executed for murdering a nobleman Alfonso Perez, which was a result of his political conflict between Isabel of Portugal, Queen of Castile, and Henry IV, half-brother of Isabella, succeeded King John II after his death, the situation got exacerbated. Combined with the suspicion on legitimacy of Joan la Beltraneja, the successor of Henry, his failure in politics resulted in succession conflict between Alfonso, brother of Isabella, such as the Second Battle of Olmedo (1467).
            While Castilians were quite easygoing in making matrimonial alliance and had other candidates for it, the one sought for the union more eagerly was the Aragonese due to numerous political difficulties within and outside the crown. Within the crown, the king was facing revolutions by Catalans. Moreover, after the Hundred Years¡¯ war, the expansionist ambition of King Louis XI of France¡¯s toward Pyrenees continuously pressed the Aragonese. Thus, a Castilian-Aragonese alliance seemed both desirable and necessary to the King of Aragon for the stability of his throne. This resulted in the overwhelming strength of Isabella¡¯s position in the matrimonial contract, signed at Cervera on 5 March 1469; Ferdinand was to live in Castile and fight for the Princess¡¯s cause and he was to take the second place in the government of the united country. (15)

V.2 Efforts for Economic Development
            After their marriage, the Catholic Monarchs carried out various socio-political efforts in order to stabilize united Spain. Among them, numerous economic reforms were included; for example, during Isabella's twenty-nine-year reign, no less than 128 ordinances, dealing with every aspect of Castile¡¯s economy, were made. (16)

V.2.1 Increasing Economic Power of the Nobility
            During the regime of the Catholic Monarchs, nobles boasted reinforcement of their authority both socially and economically. Due to distribution of the land obtained through conquest of Granada, nobles enlarged their land possessions; in late 15th century, two or three percent of the population owned ninety seven percent of the soil of Castile, and more than a half of the 97 percent belonged to a handful of great noble families such as Enriquez and Mendoza. (17)
            Beside such grand families of nobles, or Grandeza de Espana (Grandees of Spain), there were other lower classes of the nobility who shared prestige such as exemption from tax and privileged status before the law. Right below the twenty-five houses of Grandeza, there came titled nobles called Titulos, who in other aspects were indistinguishable from Grandeza. Just under the two classes of magnates, a group of nobles named segundones, the younger sons of great families who had no corporate entity of their own due to the mayorazgo system, a type of primogeniture which reserved bulk of the family¢¥s wealth for their elder brothers. The remaining aristocracy of Castile was the lesser aristocracy known as caballeros or hidalgos. Although they also had social prestige as nobles, their economic status varied a lot from person to person.
            As there were many hidalgos whose economic position was no better than upper citizens, many wealthy citizens purchased the title as hidalgo to obtain the privileges as the nobility. Even, from 1520s, the privileges of hidalgos were on sale as a method of bringing relief to a hard-pressed state treasury. (18) This shows that as commerce and industries developed in 15th and 16th century, the power of economy as a motor of social changes increased significantly.

V.2.2 Establishment of Consulados
            To encourage industrial development within the country, the Catholic Monarchs established many consulados, modeled after Aragon¡¯s Consulado del mar, in various industrial centers. The first Castilian city to have consulado was Burgos, of which the consulado, established in 1494, made the city the monopolistic depot for Castilian wool trade with the north. Although Burgos already had a merchant guild similar to consulado, it lacked the powers of jurisdiction of consulado. Thus, as Burgos obtained the power of jurisdiction related to wool trade it took a significant advantage in Cantabrian wool trade to its rival Bilbao despite its geographical disadvantage; Burgos itself was not a port, and even, it was over a hundred miles apart from the nearest port. (19)
            Other cities followed Burgos in establishing consulados. For instance, in Bilbao, the center of growing Vizcayan iron trade, special consulado for Vizcayan iron was authorized by King Ferdinand in 1511. Also, in Sevilla, Casa de Contratacion (House of Trade), an institution which was modeled after the Consulado of Barcelona and dealt with all matters involved in trades with the Americas, was established.

V.2.3 Incentives for International Trade
            As the court found international trade as a source of substantial tax income, it imposed various incentives to encourage growth in international trade. Establishing consulados was one attempt to foster international trade and it had significant impact in fact. Also, the Catholic Monarchs offered subsidies to assist in the construction of ships over 600 tons to encourage growth of a merchant fleet. (20) In 1500, the Navigation Law, by which Castilian goods could be only transported by Castilian ships, was passed. (21)

V.2.4 Reforms in Transportation and Postal System
            One of the major obstacles for Spain¡¯s economic development was the poor transportation system. Mule trains and ox-carts moved slowly and ponderously across the vast Meseta, which added terrifying costs of transport to the prices. For instance, the transportation cost of spices form Lisbon to Toledo was even greater than the original price paid in Lisbon. (22) Thus, the Catholic Monarchs imposed various reforms to improve the transportation system of Spain; roads were repaired and new routes were constructed in Granada. In 1494, Cabana Real de Carreteros, (Royal Cabin of Cart Drivers), an organization similar to Mesta for pastors, was formed to protect the privileges of cart drivers. They enjoyed privileged status on the Spanish highways and got exempted from local dues and tolls.
            The Catholic Monarchs reformed postal system as well. Again, the reforms were mainly imposition of advanced Aragonese institutions in Castile. In Aragon, an organization similar to a guild for postal service named Confraternity of Marcus was in charge of the postal system all over the country with notable efficiency. Under the Catholic Monarchs, Barcelona, home of the Confraternity, became the center of Spanish postal service. Also, in Castile, the title of Correo Mayor was made and given to the official who was in charge of arranging, managing and promoting the mail service between territories within the kingdom, and later, with other countries. (23) Succeeding generations of a Titulo family named Tassis held the office since its introduction in 1505.

V.2.5 Side Effects of the Efforts
            Although the efforts of the Catholic Monarchs made some certain fruits, it also brought about some side effects. Since the reforms were mainly adopting advanced Aragonese economic institutions such as consulados to Castilian economy, they were often unsuitable for Castilian economy. Also, the Aragonese institutions themselves were mainly focused on restriction and regulation by the monarch thereby leading the crowns into excessive usage of finance while other European economies were going toward more liberal system with less regulation. Last but not least, the expulsion of the Jews in 1492, as a part of Reconquista deprived Castilian economy both of skilled workers and capital.

V.2.6 Chapter Analysis
            Among the numerous ordinances and reforms made during the regime of the Catholic Monarchs, most took place in Castile. It was quite natural since despite the rapid growth in the 13th and 14th centuries, Castilian industries were still behind neighboring Aragonese one, which had traditionally developed through Mediterranean trades.
            Despite the adoption of several Aragonese institutions in Castile, the economic systems of the two crowns were still separated. The customs system was untouched, thus transportation of goods from Castile to Aragon, or vice versa, still caused heavy additional costs. (24) As a natural consequence, Castile and Aragon developed quite disconnected economic systems respectively according to their geographical locations; Castile's Atlantic system and Aragon¡¯s Mediterranean system. This segregation of two economic systems later resulted in contrary phases of economic development between Castile and Aragon; while Castile's economy encountered its heyday, Aragon's was in continuous downfall.

V.3 Currency Reforms
            As the matrimonial alliance of Castile and Aragon was only nominal, they kept on their separated political, economic and social system. Coinage was not an exception. The inhabitants of Aragon had reckoned, and continued to reckon in libras (pounds), sueldos (shillings) and dineros (pence). In case of Castile, its monetary system based on a money of account named maravedi was in chaos. Thus, in 1497, the Catholic Monarchs tried to stabilize Castilian monetary system through the Ordinance of Medina del Campo which formed the basis of Castile¢¥s coinage system consisted of golden Excelente menor or ducat (375 maravedis), silver Real (34 maravedis) and vellon (silver and copper) Blanca (half maravedi). (25)
            Aragon also went through currency reforms. King Ferdinand introduced a gold coin named excel-lent, which modeled after Venetian ducat, into Valencia and another coin named principat in Catalonia. As the two types of coin, excel-lente and principat, had equivalent values to Castile's ducat, the Kingdom of Spain now had three different coins with equivalent values. (26)

VI. Expansion to the New World
            As a result of Christopher Columbus' discovery of the West Indies in 1492 as well as the discoveries of other explorers such as Ferdinand Magellan, Spain became one of the leading European countries in exploration in and trade with the New World, especially with the Americas. It naturally resulted in the rapid movement of Spain's economic center from the Mediterranean Sea to the Atlantic Ocean. Thus, economic bipolarization between Castile and Aragon was accelerated.
            To encourage and regulate commerce and interaction with the New World, Casa de Contratacion (House of Trade), officially called Casa y Audencia de Indias (House and Court of Indias), was established in Sevilla, Castile. With the institution which collected all colonial taxes and duties, approved all voyages of exploration and trade, maintained secret information on trade routes and new discoveries, licensed captains, and administered commercial law, (27) Sevilla obtained almost monopolistic rights over Spanish trade with the New World until 1717, when the Casa was moved to Cadiz. As Sevilla obtained such privilege, other port cities naturally witnessed its relative economic decline. Palos de la Frontera in Andalucia was a good example. An Andalucian coastal city, of which fishing industry flourished and which played a pivotal role in Christianization of the New World, began to decline since the establishment of Casa de Contratacion in Sevilla. The city¢¥s ship owners and sailors emigrated to Sevilla or the America seeking for their enormous wealth. Eventually, by the 18th Century, the city only had about 125 inhabitants. (28)
            Beside Sevilla, other port cities thrived as centers of Spanish trade with the New World. Cadiz, home of Spanish treasure fleet, encountered unprecedented rapid economic boom since the 16th century. Also, La Palma, the most north-westerly in the Canary Islands, which was under Spanish control since 1493, was an important place for Spanish trade with the New World. Thanks to its geographical advantage, port of Santa Cruz de La Palma became one of the largest ports in the Spanish Empire, which was frequently attacked by pirates due to the enormous treasure. In order to further encourage trade, the court allowed ten Castilian ports to trade directly with the New World in 1529, although the ships had to put into Sevilla for registration of their cargoes when they returned. However, this decree was revoked in 1573 as it was found to be ineffective, probably due to the winds and currents unfavorable for navigation between north Spain and the Indies. (29)
            As European interaction with the New World increased, the center of European trade naturally rapidly moved from the Mediterranean Sea to the Atlantic Ocean. Consequently, Aragon¡¯s economic system based on Mediterranean trade went to downfall. In contrast, Castile's Atlantic economy met its 'Golden Age (edad de oro)' based on the influx of precious goods from the New World. In fact, Aragon was economically isolated in trade with the New World as Castilian coastal cities such as Sevilla and Cadiz, with various institutions and privileges granted by the court, established oligopoly over it.

VII. Habsburg Spain

VII.1 Beginning
            In 1504, Queen Isabella of Castile died, and the Cortes Generales, the royal court, appointed her daughter Joanna as her successor. Joanna¡¯s husband was Phillip, the Habsburg son of the Holy Roman Emperor Maximilian I and Mary of Burgundy, and he became king-consort Philip I of Castile. Shortly after, Joanna began to lapse into insanity, although whether she was truly insane is still a matter of debate among historians, and Philip assumed the regency on behalf of his wife in 1506. However, later that year, Phillip also died due to unknown circumstances, most likely to be poisoned by his father-in-law. (30) Since the son of Phillip and Joanna, Charles, was only six years old when Phillip died, Ferdinand I of Aragon ruled the entire country as the regent of Joanna and Charles. When, Ferdinand died in 1516, Charles began to rule the Kingdom of Spain, thus starting true Habsburg regime in the Iberian Peninsula.

VII.2 Decline of Agriculture
            One of the economic features of Habsburg Spain was the decline of its agriculture, which had quite devastating influence on the entire Spanish Empire. The agricultural lands were deserted and famers disappeared and left the fields empty. The decline resulted from a combination of several factors. First, the irrigation system, which was essential for farming in arid areas of the Iberian Peninsula, was not maintained properly. When Reconquista was completed, the conquerors found irrigation system already established by the Muslims. Although they settled and started cultivation, they had neither the knowledge nor the will to fix and maintain the irrigation system.
            Moreover, pastors, whom the court granted various privileges (See IV.1.1. Wool Industry), deprived of the land that the farmers could use for cultivation. For instance, in 1501, the court mandated all land that had at least once been used for pasturage be solely used for pasturage. (31) This brought about serious loss in the size of farmland, thus, the revenue of farmers.
            Last but not least, the failure of agriculture could also be attributed to the practice of entailing estates in behalf of the eldest son and granting lands to churches or monasteries, which were widely spread in the 16th Century. "Bringing honest work into contempt, and setting up numerous models of indolent and worthless lives," (32) the practice seriously devastated Spain¡¯s agriculture.

VII.3 Madrid as the Capital of the Spanish Empire
            In 1561, Phillip II moved the court to Madrid in Castile. Although it was not officially declared as the capital, the seat of the court was the de facto capital; Sevilla continued to control the commerce with the New World, and Madrid controlled Sevilla. As the capital, it faced dynamic changes in its demographics and industries. The estimated number of inhabitants in Madrid reached to about 130,000 (33) in 1659, while it was only 12,000 to 14,000 in 1563. Also, the revenue of Barca de Arganda (toll at the ferry near Arganda), which reflected the commercial activities of Madrid, jumped from around 4,000 reales in 1584 to 20,000 in 1680. (34)

VII.4 Inflation
            The great influx of silver and gold from the New World brought about serious inflation called the Price Revolution. From the beginning of the 15th century to mid-16th century, the average price increased six times greater. (35) The increase in price was especially pronounced in Castile, where bullion from the Americas directly flowed into. Although the influx helped the state to resolve its financial deficiency, it badly affected its economy, especially Castilian wool trade. Its relatively higher price than other countries weakened its price competitiveness, thereby exacerbating its trade condition.

VII.5 Financial Deficit of the Spanish Empire
            During his regime, Charles I (or the Holy Roman Emperor Charles V) went through numerous wars and skirmishes. To maintain the vast territory of his empire, which covered almost four million square kilometers across Europe, the Far East, and the Americas, he had to fight in many wars, thus, burden tremendous war costs. Much of his reign was devoted to fighting against the French Kings Francis I and Henry II during the Italian War, which, although was militarily successful, resulted in tremendous financial loss. Also, maintaining and expanding his Empire in the New World also brought about serious amount of cost. Last but not least, religious wars against Protestants, such as the Schmalkaldic War, also contributed in financial deficit of the Spanish Empire.
            As a result, when Phillip II, his son who succeeded to the Spanish Empire, ascended, he had to take a debt of about 36 million ducats which his father left. (36) Moreover, Phillip's domestic and foreign policies burdened the state's finance even more. To deal with the numerous conflicts between different authorities - as the territories in the Spanish Kingdom was ruled by different institutes - Phillip sent his agents and viceroys and tried to get involved in local administration, which resulted in serious inefficiency. (37)
            Like his father, Phillip spent much of his reign in warfare, again paying substantial war costs. Decades of Ottoman-Habsburg conflicts due to fear of Muslim dominance in the Mediterranean Sea, conflicts with the Netherlands and French king Henry IV for religious regions, exacerbated the already serious financial situation of the state. Especially, the open conflict with the Netherlands, who were the main recipients of Castilian wool, cut the routes for the export of Castilian wool, seriously worsening the Empire's economic situation. Above all, his conflict with Queen Elizabeth I of England, especially, the defeat of the Spanish Armada, was most critical in that the Empire's hegemony in the Atlantic Ocean was threatened.
            Eventually, under Phillip's regime, Spain declared state bankruptcy three times (1557, 1575, 1596). Although tax revenue greatly increased (the revenue doubled shortly after Phillip's ascension and at the end of his regime, it was four times greater than when he became the king), it was not enough for fulfilling the enormous amount of war cost demanded. (38) During his regime, the national debt, which was 36 million ducats when he came to the throne, quintupled. (39)

VII.6 Chapter Analysis
            While the entire Spanish economy saw its downfall under the Habsburg regime, the extent of decline and its effects differed in Castile and Aragon. In Castile, the influence of inflation and financial deficit of the court could be compensated, although much less than completely, through the industrial development of Madrid after being the capital and the enormous wealth brought from the New World. In contrast, Aragon, which was isolated in Spain¡¯s trade with the New World, had almost no means of resolving the economic doldrums that it was facing. Also, Castile had better demographic and territorial conditions at the beginning of the regime. While the Crown of Castile had territory of 378,000 square kilometers and 8,304,000 inhabitants, the Crown of Aragon only had territory of 100,000 square kilometers and 900,000 inhabitants at the beginning of the 16th Century. (40) Thus, Castile, with more A and inhabitants, could cope with the economic doldrums better than Aragon.

VIII. Nueva Planta Decrees (1701-1716)
            During and shortly after the War of Spanish Succession, King Phillip V, the first Bourbon king in Spain, suppressed the kingdoms of the Crown of Aragon, which had fought against him during the war, through a collection of decrees named Nueva Planta Decrees (Descretos de Nueva Planta, or shortly, DNP). As a means of punishment, the king abolished the political and economic institutions of all territories in Crown of Aragon except the Aran Valley. Also, these territories were to be ruled by Castilian laws, "most praiseworthy in all the Universe", according to the decree of 1707. (41) Therefore, the Crown of Castile and the Crown of Aragon, which were separated both economically and politically although under the same king, were truly united as Aragon was virtually 'absorbed' into Castile.

IX. Conclusion
            From the dynastic union in 1469 to the end of the 16th Century, the economy of Spain could be characterized by the word 'bipolarization'. Although Aragon had more developed economic system than Castile at the beginning, Castilian economic power much overwhelmed Aragon¡¯s at the end of the Habsburg regime. This can be explained by several factors.
            First, as the New World was discovered and Europeans started to trade with the New World, the economic center of Europe naturally moved from the Mediterranean Sea to the Atlantic Ocean. Thus, Aragon's Mediterranean economic system was destined to decline. Moreover, due to its geographical advantage over trans-Atlantic trade, cities of Castile such as Sevilla obtained monopolistic rights over trade with the New World, thus, enormous wealth as well. In contrast, Aragonese cities were isolated in the new source of wealth, in other words, it didn¡¯t have a means to compensate the loss of Mediterranean trade. Moreover, Castile had better demographical and territorial conditions for economic development. As mentioned before, Castile had about three times bigger territory and five to six times greater population than Aragon. (42) Also, as Castile obtained a substantial amount of land through Reconquista, it could obtain the infrastructures, such as the irrigation system, established by the Muslim population in the land. Therefore, Castile's economy could develop much faster than Aragon¡¯s thanks to its superiority in resources and labor.
            Last but not least, most economic policies that the court enacted were toward Castile more than Aragon. A prominent example is the prerogatives given to Castilian pastors. As the court found Castile's burgeoning wool industry profitable, it granted numerous privileges such as the priority is passage and land using over farmers. Thus, Castile enjoyed better support from the court for economic development than Aragon.
            Thanks to the factors mentioned above, Castile could develop its economy much faster than its neighbor Aragon. As a result of almost 200 years of economic bipolarization, Aragon, with the economic system much backward to Castile's, had to be 'absorbed' into Castile through the Nueva Planta Decrees.

(1)      Although Isabel was female, she was called a 'king (rey)' instead of queen (reina) to celebrate her feats in territorial expansion.
(2)      Banaza 1996 p.121
(3)      Article : Concejo de la Mesta. from Wikipedia Spanish "reuniendo a todos los pastores de Leon y de Castilla en una asociacion nacional y otorgandoles importantes prerrogativas y privilegios tales como eximirles del servicio militar, de testificar en los juicios, derechos de paso y pastoreo, etc."
(4)      Banaza 1996 p.122
(5)      a town in Basque country along the west shore Bidasoa River¡¯s mouth. Fuenterrabia in Spanish
(6)      a Castilian town well-known for its mercury deposit
(7)      Article : Huerto. from Wikipedia Spanish "un cultivo de regadio, muy frecuente en las vegas de los rios por ser un tipo de agricultura que requiere riego abundante, aunque el sistema de riego por goteo, muy apropiado en las parcelas de horticultura, economiza una enorme cantidad de agua"
(8)      navigation maps drawn in 13th century Italy, famous for its accuracy at that time
(9)      Elliot 2002 p.24
(10)      ibid. p.21
(11)      ibid. p.19
(12)      Quoted by Richard Konetzke, El Imperio Espanol (Madrid, 1946), p.81
(13)      In Castile, constable was an official who was the second person in power in the kingdom, after the king
(14)      Article : Alvaro de Luna, from Encyclopaedia Britannica Online
(15)      Elliot 2002 p.22
(16)      ibid. p.111
(17)      ibid. p.113
(18)      ibid. p.116
(19)      ibid. p.121
(20)      ibid.
(21)      ibid.
(22)      ibid. p.123
(23)      Article : Correo Mayor de Espana, from Wikipedia Spanish
(24)      Elliot 2002 p. 124
(25)      ibid. p.125
(26)      ibid.
(27)      Article : Casa de Contratacion, from Wikipedia English
(28)      Article : Palos de la Frontera, from Wikipedia Spanish
(29)      Elliot 2002 p.182
(30)      Article : Habsburg Spain from Wikipedia English
(31)      Elliot 2002 p.119
(32)      Moses 1894 p.124
(33)      Ringrose 1983 Appendix A
(34)      ibid. Table 2.1
(35)      Article : Price Revolution, from Wikipedia English
(36)      Article : Phillip II, from Wikipedia English
(37)      ibid.
(38)      Article : Felipe II, from Wikipedia Spanish
(39)      ibid.
(40)      Elliot 2002 p.25
(41)      Article : Nueva Planta Decress, from Wikipedia English
(42)      Elliot 2002 p.24

Bibliography The sources cited below were written in English, unless specially cited to be written in other languages such as Korean or Spanish
The websites cited below were visited in May to June, 2011.

Bibliographical Sources

World History at KMLA
1.      History of Castile, Alexander Ganse, First posted on September 8th, 2010
2.      History of Aragon, Alexander Ganse, First posted on September 19th, 2005. Last revised on April 14th, 2010

Secondary Sources

3.      M.Banaza, Geografia e historia de Espana y de los Paises Hispanicos Iberica (Geography and History of Spain and the Hispanic Countries in Iberian Peninsula), fifth edition, Vicens Vives, 1996, in Spanish
5.      Phillips, William D., and Carla Rahn Phillips. A Concise History of Spain. Cambridge: Cambridge UP, 2010. from Google Books (partially available)
6.      Elliott, John Huxtable. Imperial Spain : 1469~1716. London: Penguin, 2002.
7.      Ringrose, David R. Madrid and the Spanish Economy: 1560-1850. Berkeley: University of California, 1983. From LIBRO
8.      Moses, Bernard. The Economic Condition of Spain in the Sixteenth Century. Washington, 1894.
Wikipedia (English) :
9.      Article : Crown of Aragon :
10.      Article : Crown of Castile :
11.      Article : Nueva Planta Decrees :
12.      Article : Casa de Contratacion :
13.      Article : Timeline of Spanish History
14.      Article : Economic History of Spain
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16.      Article : La Palma :
17.      Article : Cadiz :
18.      Article : Phillip II of Spain:
19.      Article : Charles V :
20.      Article : Palos de la Frontera :
Wikipedia (Spanish)
21.      Article : Historia economica de Espana (Economic history of Spain)
22.      Article : Corona de Castilla (Crown of Castile)
23.      Article : Corona de Aragon (Crown of Aragon)
24.      Article : Huerto :
25.      Article : Concejo de Mesta (Council of Mesta)
26.      Article : Hacienda :
27.      Article : Correo Mayor de Espana :
28.      Article : Sevilla :
29.      Article : La Palma :
30.      Article : Cadiz :
31.      Article : Descretos de Nueva Planta (Nueva Planta Decrees)
32.      Article : Felipe II de Espana (Phillip II of Spain)
33.      Article : Palos de la Frontera ; http://es.wikipedia,org/wiki/Palos_de_la_Frontera

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