Spanish Economic Transformation in the 18th Century

18th Century Spanish Economic Developments

Internal trade experienced growth, facilitated by the elimination of customs to create a larger market with reduced transaction costs. Liberalized trade in agricultural products also occurred. The Bourbon monarchy addressed the issue of guild monopolies.

Foreign trade was liberalized, with increased port activity in Seville by decree, which boosted trade and encouraged domestic production.

Key Economic Activities:

• Textiles: Catalonia
• Iron and Steel: Basque Country, Ferrol, Cadiz, and Cartagena
• Marine Industries: Ferrol, Cadiz, and Cartagena

The imitation of British developments marked the early stages of the Industrial Revolution in Spain during the early nineteenth century.

The state attempted to overcome industrial backwardness through Royal Factories. However, these faced challenges due to inadequate resources, resulting in limited technological advancements and a focus on quality and luxury products.

Commerce

Internal Trade:

• Growth
• Transport Infrastructure: Development of a road network and shipping channels
• Elimination of Internal Customs
• Network of Fairs and Markets
• Madrid as a Central Market
• Guilds: Organization and corporatism (clothiers, jewelers, etc.)

Foreign Trade:

• Limitations of Atlantic Trade (Carrera de Indias, convoy system, Home Office)
• "Free Trade" Decrees (1765-1778)
• Expansion of Trade with American Colonies
• Increasing Domestic Exports with limited GDP contribution
• New Tropical Products: Sugar, cocoa, and coffee complemented precious metals.
• Growing competition from Britain for colonial market access, leading to naval conflicts in the late 18th century.

Finance

Financial developments included the creation of the Banco de San Carlos to raise funds for the deficit. Accumulation of debt led to the depreciation of the currency's real worth.

Conclusion

The period saw cycles of crisis and recession, with two main approaches:

• A conservative aristocracy that resisted economic transformation.
• An introduction of changes and anticipation of future trends.

The primary challenge was the need to break the constitutional framework; reform efforts focused on exiting critical junctures rather than fostering innovation.

The Eighteenth Century

Population

The periphery grew faster than the stagnating center. Spain's population growth lagged behind the European average (0.36% compared to Europe's 0.45%). Causes included a high birth rate, persistent high mortality, and an average life expectancy of 25 years.

Agriculture

Increased population led to a rise in agricultural production. Farmers received incentives, such as higher prices, to boost output, resulting in the cultivation of new lands. This caused conflicts with landowners over public lands and with farming communities needing pasture for livestock. These tensions were most pronounced in the interior.

During this period, the agricultural economy declined due to a lack of transformative means. The increased demand also raised incomes for feudal peasants, placing them in a difficult situation.

Livestock progressed initially but slowed in the second decade due to reduced grasslands and the decline of nomadic animal husbandry. This retreat contrasted with regional specialization.

Result: Farms followed different paths, all increasing production but slowing by the late 18th century. Production was not market-oriented, and specialization was absent, anchoring the agricultural sector in an extensive model.

• New lands were colonized (e.g., Sierra Morena), with settlers given land, but this effort failed due to high costs.
• Grain sales were permitted, preventing resale under institutional control, with prices adjusted to supply and demand.
• Attempts to divide communal property were not permitted by patricians.
• The rights of Mesta owners were limited.

These measures had minimal economic impact.

Industry

Industrial policy aimed for three goals:

• Import Substitution
• Placing basic strategic sectors under public control
• Establishment of Royal Factories