Economic History of Spain - Gold and Silver From The New World

Gold and Silver From The New World

Following the discovery of America and the colonial expansion in the Caribbean and Continental America, valuable agricultural products and mineral resources were introduced into Spain through regular trade routes. New products such as potatoes, tomatoes and corn had a long-lasting impact on the Spanish economy, but more importantly on European demographics. Gold and silver bullion from American mines were used by the Spanish Crown to pay for troops in the Netherlands and Italy, to maintain the emperor's forces in Germany and ships at sea, and to satisfy increasing consumer demand at home. However, the large volumes of precious metals from America led to inflation, which had a negative effect on the poorer part of the population, as goods became overpriced. This also hampered exports, as expensive goods could not compete in international markets.

Domestic production was heavily taxed, driving up prices for Aragon and Castile-made goods, but especially in Castile where the tax burden was greater. The sale of titles to entrepreneurs who bought their way up the social ladder (a practice commonly found all over Europe), removing themselves from the productive sector of the economy, provided additional funds.

The overall effect of plague and emigration reduced Spain's population from over 8 million in the last years of the 16th century to under 7 million by the mid-17th century, with Castile the most severely affected region (90% of the Kingdom population were in Castile, as an example, in 1500, Castile 6 million, Aragon 300.000 hab.).

From 1580 to 1640 the crown of Spain was also the ruler of the powerful Portuguese Empire and its riches, through a dynastic union referred to as the Iberian Union. The Iberian Union opened to both countries a worldwide span of control, as Portugal dominated the African and Asian coasts that surrounded the Indian Ocean, and Spain the Pacific Ocean and both sides of Central and South America, while both shared the Atlantic Ocean space.