“The decline of Spain and the Genoese era of capitalism”: A Comment

Abstract

Prof Thompson presented Spain as a classic case of “overstretch” and rentseeking society. As he pointed out, the fundamental structural weakness of the Spanish economy and the specific stratification of that society in relation to the management of warfare, administration and financial requirements were responsible for the failure of the Spanish model of growth. So, the balance of power in Spain herself created a political economy of Empire incompatible with favourable conditions for economic growth. The management of politics, war, and finance appeared in some way disconnected and even in contrast to the development of a productive economy. Using the approach of the New Institutional economics, he demonstrated that, in the case of Spain, regulation and control need to be separated from their association with absolutism, centralization and state fiscality. Hampered by the Cortes, which represented the more conservative economic and social forces, the King never exercised a complete control over taxing power. State intervention was never successful or positive. On the other hand, the increasing organizational demands of politics and war in form of administration and financial resources offered a lot of opportunities for potential office- and rent-seekers. While rent- and officeseeking had deep roots in Spanish feudalism, the growing consolidated government debt also offered new investment opportunities, an alternative outlet for capital at a high rate of return.