Bargaining for absolutism: a Spanish path to nation state and empire building

Social scientists use the history of Spain and her empire as a standard against which they have sought to establish the relatively superior efficiency of Anglo-Saxon institutions. This historical ‘experiment’ underpins the core argument of new-institutional economic history. This paper argues that such comparisons have departed from a misleading characterisation of Spanish rule in the metropolis and overseas. For some time historians of Spain and Colonial Spanish America have emphasized that the Spanish system of governance was highly negotiated rather than absolutist. This is confirmed in the workings of the peninsular and colonial fiscal systems. This paper shows that revenues were not extracted to Madrid but instead widely re-distributed across regions. Contrarily to received wisdom there was a great degree of local autonomy in managing and allocating these intra-regional transfers of revenues. The crown barely controlled the system; yet, it acted as the ultimate arbiter of a very flexible arrangement that effected ultimately the distribution of the fiscal burden across colonial regions and economic sectors. This set-up explains the lack of serious challenges from within during 300 years of imperial rule. Napoleon’s invasion of Spain in 1808 and the abduction of the Spanish king caused a major shock to this system of redistribution. The implosion of Spanish rule led to conflict over revenues and resources among constituent parts of the empire. The search for a legitimate replacement ruler that ensued consumed the following century in postcolonial Latin America. A comparable pattern of constitutional failure, political instability – and poor economic performance – was replicated in Spain throughout the nineteenth century.