A History of Wealth and Poverty: Why a Few Nations are Rich and Many Poor, by John P. Powelson.


Spain and Portugal: Institutions, Pluralism, and Leverage


In the High Middle Ages, Iberia (Spain and Portugal) possessed advanced monetary and legal systems. Most peasants could move about freely. Rivalry among kings, nobility, and church offered potential leverage to peasants and bourgeoisie, just as they did in northwestern Europe. The power-diffusion process was beginning to work. Seeing little advantage in trying for the English throne rather than that of Castile, John of Gaunt preferred Castile. (He lost.)

By the sixteenth and seventeenth centuries, however, Iberia was "refeudalizing" along the lines of eastern Europe. Kings, nobility, and church had formed a solid front precluding vertical alliances and leverage from humbler subjects. With state intervention in virtually all economic activity, peasants and bourgeoisie were left out of major decision making. In economic growth, Spain and Portugal dropped well behind northwestern Europe. Instead of the power-diffusion process, the model characteristic of less-developed zones was now at work.

Suddenly, at the end of the twentieth century, another reversal occurred. Iberian economic growth accelerated. Spain and Portugal joined the European Economic Community (now the European Union) and began to adopt the institutions of the West. But in the mid-1990s, the economy is again beginning to stagnate. Was the acceleration only temporary, or will it resume?

The Declining Likelihood of Vertical Alliances and Leverage

Possibilities of alliance with leverage were available to Iberian peasants in the eleventh century, but they were not enduring. For example, peasant villages in western Castile and León "dissatisfied with the protection and services of their overlord might switch their allegiance to another defender." [1] By the twelfth century, however, this switching was limited to other gentry families within the same lineage, and two centuries farther on it was hardly possible at all.

By the fifteenth century, lands seized in the Christian Reconquest from the Moors had so strengthened the Castilian nobles that they appeared to be challenging the monarchy. [2] Why did not this competition provide opportunity for vertical alliances to lower classes, who might have swung their weight from one to the other in exchange for improved conditions? Possibly because the rupture between nobility and monarchy did not last. Buoyed by precious metals from the Americas, the monarchs increasingly "bought off" both the nobility and the church, much as the ruling house in Saudi Arabia buys off its potential opposition today. Hence there remained no independent upper power with which the bourgeois and peasants might ally: "between peasants and nobles there was nothing resembling a middle class." [3]

In still another example, by the twelfth century the cortes (parliaments) of Iberia were either similar to or more advanced than the parliaments of northern Europe. "[T]he first medieval parliament representing the three principal estates of society met in León in 1188, antedating the first parliamentary assemblies in all other European kingdoms." [4] This cortes "already included representatives of the people, besides the members of the clergy and the nobility who used to assist the king whenever he required their advice." [5]

But the lower classes did not take advantage of this cortes to enhance their bargaining power. From the fourteenth century on, as Castile expanded into most of Spain, its cortes became weaker relative to the king, although its Catalonian counterpart managed to retain some vitality. As a result, Castilian towns and peasantry could not defend themselves well against royal taxation. "Thus there did not develop in Castile the union of the lower nobility and upper middle class that later formed the backbone of the English parliament." [6]

By the sixteenth century, the cortes of Castile consisted only of the third estate. "Their function was only to vote taxes." [7] Even this capacity gave them no power. Virtually always they rubber-stamped the monarch's requests. "During the seventeenth century [its] powers, already minimal, lapsed completely. [8] The role of the Portuguese cortes declined similarly. [9]

The decline of the cortes reflects how the monarchs in both Spain and Portugal learned to "escape" negotiation with the middle and lower classes. The money stream from the New World relieved them of the necessity to appeal to the cortes for taxes and allowed the nobility to be exempt. For much of Iberian history, therefore, the nobility, seeing where their bread was buttered, joined the monarchs on the same side of conflicts. The same was so for the church, which was usually in the pocket of the king, although conflicts with the pope occurred. "Nowhere did the church come under more outright secular political domination than in Spain." [10] Hence the quarrels with both nobility and church, that supplied the bourgeois and peasants of northern Europe with potential for vertical alliances and leverage, were less pronounced in Castile and Portugal.

In Aragon, Catalonia, and Valencia by contrast, "the cortes possessed more authentic privileges and greater means of evading government control." [11]

This was in part because the rugged country, the distance from Valladolid (seat of the Castilian court) and the proximity to France of Aragon and Catalonia had given the rulers a certain independence, confirmed in their "privileges" (fueros). It was also because with fewer resources these territories were less likely to produce treasure than were the foreign settlements of Castile. (Castile did contend with Aragon for territories in Italy, however.) The relative insulation from the oppressions of Castile may have liberated Catalonia for its greater economic development today.


By the time of the Habsburg monarchs (beginning in the sixteenth century), power was vested absolutely in the king. This did not mean that the king ruled unchallenged or all by himself but that he maintained tight control over a bureaucracy to which decisions on taxes, war and peace, laws, prices and trade, and investments were entrusted, and the American treasure "bribed" the military, nobility, and church to support him. The limitations imposed on him were mainly those of financial and economic necessity and external military pressure, in contrast to northwestern European countries where they arose also from domestic interest groups. The aristocracy in the sixteenth century "had surrendered its feudal role to the demands of absolute monarchy and was now content to serve the crown in the subordinate fields of war, diplomacy, and viceregal administration." [12]

A refeudalization similar to that of eastern Europe took place in Iberia during the sixteenth and seventeenth centuries. It did not happen everywhere, for feudal obligations were dismantled in some parts just as they were being strengthened in others. For example, revolts in Catalonia had brought down feudalism as far back as 1486, when the Sentence of Guadalupe provided personal freedom for peasants. [13] But northwestern Europe and Catalonia, not the rest of Spain, were the exceptions to a general refeudalization in eastern and southern Europe. [14] The refeudalization took place more in the Iberian south than in the north, promoted by divisions of lands taken from Moors during the Reconquest and by strengthening the symbiosis of monarchy and landed aristocracy. It became a principal feature in the consolidation of landed estates that still marks southern Iberian agriculture today.

The following quotation shows the paternalism by which southern nobles depended upon the crown, together with the political defense the crown needed from the nobles. Vertical alliances with leverage to the lower classes by dividing these two was impossible.

Nobles had to get royal permission to marry, to alienate their patrimony, to mortgage their estates, in short to do anything that might weaken their class. For the crown regarded the nobility, somewhat naively, as a reserve of talent at the service of the country. [15]

The royal government took total control over all but the most local production. Trade with Asia, Africa, and the Indies (America) was licensed by the state through the Casa de Contratación in Spain and the Casa da Guine and Casa da India in Portugal. It was conducted in royally sponsored caravans for defense against pirates, mainly English. Gold and silver mined in America was the property of the king, to be shared with miners on terms set by the king, although much of it escaped because restrictions could not be enforced. High taxation and state regulations strangled both agriculture and industry far more in Iberia than they did in northern Europe. The middle class did not develop in Iberia. [16]

A paternalistic style cut across all society, resembling Chinese Confucianism though unrelated to it by origin. Extended families were ruled by the eldest male member; the lord of the land made decisions for aristocratic farms, with which peasant farmers complied. The upper society believed that authority and status rather than experience or knowledge led to correct decisions. For example, the Mesta, a privileged society of sheep owners, had drovers' rights across Spain twice a year from the thirteenth to the nineteenth centuries. Crops were demolished by these runs, while gains from them were shared with the crown. No one in authority questioned the inefficiency that they wrought upon food production and the hardships upon small farmers.

The sixteenth century — era of Charles I [17] and Philip II — marked the apogee of royal power. From then until the nineteenth century the monarch was theoretically absolute, but military exhaustion, loss of the Netherlands, inability to control distant territories such as the New World, weak kings, absolute rule exercised by southern nobles over their territories, and rivalries with the pope introduced confusion over the real power center. Both the kings of Spain and Portugal began to rule through "favorites" (validos) who theoretically acted on their behalf. [18]

A comparison with the rest of Europe is not so simple. Favorites and prime ministers throughout Europe had in common that they were chosen for the job rather than born into it, and therefore they opened the way for administration by competence rather than birth. But the range was wide, from England, whose emerging prime ministers in the seventeenth and eighteenth centuries mainly represented Parliament, through France, whose Richelieu, Mazarin, and others shared power with the king, to Spain and Portugal, whose favorites like Olivares and Pombal ruled almost absolutely in place of the king. Power in Iberia was equally or more concentrated than in France, where in turn it was more concentrated than in England. The king's relationship with his valido and his bureaucracy was therefore not one of give and take among independent-thinking intellectuals, such as was developing in England. Instead, it was one of subservience and paternalism among members of a closed circle. [19]

As a result of all these factors, the kings of Spain and Portugal remained absolute rulers long after the age of absolutism had begun to die in northwestern Europe. Industry and trade were monopolized by the crown and its cronies; wealth was gained by milking more than by production, not only in Iberia but also in America and Italy; countervailing groups and political pluralism were contained; no religious revolt comparable to the Reformation emerged; the Inquisition suppressed innovative thinking; and agricultural as well as industrial productivity lagged. Especially in Portugal, a few elite families continue to monopolize industry, even today; and a poor, Third World type of peasantry has persisted, especially in the south of both countries. In all these respects, Iberia has resembled eastern Europe and less-developed zones more than western. Further historical references to the concentration of power in the Iberian monarchy and state are listed in Appendix 15.1.

The Great Divide

Just as in eastern Europe, medieval peasants and lords in Iberia failed to negotiate, compromise, and make contracts vertically. Once again, land abundance and the alternative of long-distance trade may have been the inhibitors.

Land Abundance

Vast tracts of land characterized most of Iberian history, [20] yet to the peasants little was available. Instead, the main lands were monopolized by gentry for merino sheep, which required little labor. By contrast, small plots of agricultural land were farmed by landless tenants, who, although juridically free, did not have much choice of lords, for one was like another. The huge supply of destitute labor possessed little bargaining power. Spanish lords did not bargain much with peasants because they did not have to. They could always expel the peasants and find new ones, or they could convert to sheep raising with little need for peasants.

The absence of contract feudalism in Iberia also is attributed in part to the Reconquest, which began in the ninth and tenth centuries. With land regained from the Muslims, Iberian soldiers were mustered out as free peasants. For protection they committed themselves to lords in an institution known as behetría, "by which the peasants themselves elected the seignior and also had the right to replace him should they decide that he was not serving the community." [21]

At first glance, behetría would seem to provide a powerful weapon for the peasantry in negotiating to elect a lord. But it did not do so, for two reasons: (1) The wars of Reconquest and to hold the Netherlands and Italy, akin to the Russian wars of expansion, created a semimigratory society, in which lords and peasants did not easily settle into one-on-one relationships. (2) Since behetría was looser than the vassalage of northwestern Europe, the peasants and lords were not bound to each other. Peasant soldiers receiving land as a one-time award did not at the same time engage organizationally in a balance of power with negotiations that would enable them to participate fully in the economic decisions by which they were ruled.

Colonization in America and Italy continued the land abundance. In Sicily and Naples as in Mexico, Peru, and Brazil, settlements were more closely akin to those of Iberian feudal estates than to the plantation/industrial colonies of northern Europeans. Lack of interclass communication diminished the prospects for leverage by the lower classes. Possible exceptions were Catalonia and the Basque country, which in some ways appeared to belong more to northern Europe. Further historical references to land abundance in Spain and Portugal are listed in Appendix 15.2.

Long-Distance Trade

The ways in which the Spanish elites enforced and milked their monopoly over trade and industry included price controls; heavy taxation, especially of precious metals from America; confinement of international trade to the port of Seville and the Casa de Contratación; discrimination in privileges in favor of Castile, as opposed to Aragon, Catalonia, Portugal, and the others.

The haunting question is: Why were the monarchs unaware, for centuries, of the great potential to themselves of permitting greater freedom to business venturers? Even if their primary objectives were war, national aggrandizement, and personal power, could they not have understood that greater resources to achieve these would have resulted from fewer restrictions and less taxation of industry and trade? Could they not have worked out institutions by which they themselves would share in this surplus, together with lower classes? Possible answers are:

First, without being compelled to compromise with other classes, the very vision of positive-sum gains lay beyond the horizon of the Iberian monarchs. For example: "Ferdinand and Isabella had no intention of rescuing the crown from the aristocracy merely to subordinate it to the towns" [italics mine]. [22] The crown could not imagine any other arrangement than its own control. Likewise, Philip II and his successors could see no potential gain from integrating Portuguese merchants into the Spanish trading network during the dual monarchy (1580-1640): "By royal decree the Portuguese were explicitly denied the privileges of Spanish nationality, especially the privileges of trading to the Spanish possessions." [23]

Second, the monarchy was aware that greater freedom to producers and traders required sharing its power with them. Monarchs do not always foresee the greater economic output that comes with freedom to trade, but if they do, they do not always value it as highly as their power to suppress it. When power is factored in as a desideratum, mercantilism has its logic.

In sum, the weak formation of pluralism with leverage for the lower classes is attributable to the solidarity of monarchy, nobles, and church and the great communication divide between them and the bourgeoisie and peasants. Six historical citations are supplied in Appendix 15.3. Without being forced by threat to survival into acting in their own economic interests (as opposed to power interests), the power group would not do so.

Interest Groups

Interest groups did arise — guilds, labor unions, peasant associations, and employer associations — but they neither evolved nor functioned in the same ways as in northwestern Europe.


In northwestern Europe and Japan, guilds supplied management and negotiation skills for a contract labor system. In Iberia, by contrast, the nascent guild system was so burdened by royal restrictions that it failed to blossom until the sixteenth century. Nor did municipal governments jump to its defense. Rather, guilds were first formed in the fifteenth century under the tutelage of kings who saw in them ways of extending royal control. [24]

Guilds grew in numbers and power in the sixteenth and seventeenth centuries. They imposed the same restrictions for which guilds everywhere have been notorious: price controls, divisions of markets, control over labor, and limitations on production. However, as these restrictions were diminishing in northwestern Europe they were being strengthened in Iberia. "Guild organization, with its defensive mentality and the values placed on hierarchy and seniority, maintained a rigid framework around production" [25] in the seventeenth century.

Even as guilds were being dismantled in northern Europe in the nineteenth century, they were still gaining power in Iberia. Not until late in that century, and on into the twentieth, did freedom of corporate enterprise begin to find a place in Iberian economic culture. [26] Further historical references to guilds and corporations are listed in Appendix 15.4.

Labor Unions

In 1349, Pedro IV of Aragon prohibited workers from forming associations, while appointing a commission to set their wages. [27] From then until the nineteenth century, references to Iberian labor organizations fade out of the historical literature.

Unions increased in Iberia in the nineteenth century, just as they did in northwestern Europe. But unlike northwestern Europe, they were effectively contained until late in the twentieth century. More pointedly, the independence of labor unions has never been complete: they became instruments of royal or dictatorial (Franco or Salazar) control.

The first labor associations of Spain were organized in the 1830s, as reflections of socialist and Fourierist ideas from elsewhere in Europe. [28] They were legalized in Spain in 1887-90 [29] and in Portugal in 1911. [30] Their principal uncertainties have been (1) whether their purpose is to transform the political system (revolutionary, anarchist/syndicalist) or whether they exist mainly to bargain for wages and working conditions; and (2) whether they operate independently or rely for their gains on association with a sympathetic government.

Franco's syndicates were "instruments for controlling labor and for giving employers an edge in bargaining power." [31] Under Salazar in Portugal, unions "became instruments of government policy. . . . Most of the labor associations were made compulsory, while internal regulations restricted freedom of self-government and closely defined their powers in dealing with the gremios [employer associations]." [32] Obviously, unions that either depend on governments to negotiate for them or are political tools of those governments are not independent actors. They become estranged from the employers with whom they might otherwise bargain for positive-sum gains.

Peasant associations

Until the sixteenth century, peasant associations and rebellions bore a weak resemblance to those of northwestern Europe. Peasants sometimes banded together, formed alliances with higher-ranking groups, and exerted leverage. Some examples: (1) "by 1448, the crown had granted remences [Catalan peasants performing feudal obligations] the right to form local peasant syndicates to represent their claims and try to work out a settlement with the landlords." [33] (2) In 1462, Catalan peasants allied with the crown and some of the nobility in a ten-year war against the clergy and other nobility. [34] (3) A revolt by Galician peasants in 1465 was supported by the king, who wished to diminish the power of the landed gentry. [35] (4) In 1640, a Catalan uprising, aided by the French, occurred as part of an attempt at provincial autonomy. It was put down. [36]

Unlike the peasant movements in northwestern Europe and Japan, however, these occurrences did not become institutionalized into self-sustaining peasant organizations, associated with individual manors, possessing a corporate life, and capable of carrying on regular negotiations.

The division of peasants according to ethnicity and religion — such as Moriscos and Christians — and the tendency of Moriscos to move fluidly to Africa and back impeded their ability to organize. In Valencia, Moriscos were "protected" by landlords to whom they "belonged." Because they were hated by Christians from the outside, they were in a weak position to bargain for privilege or freedom, even with their landlords. Several rebellions by Moriscos were put down. In the mass expulsion of 1609, the Morisco problem was finally "solved" with a disruption of peasant-landlord communications throughout Spain, but especially in Valencia and Granada.

Despite a few victories in the fifteenth century, peasant rebellions were mostly put down in all centuries. By the seventeenth, peasant power had been so reduced by consistently unsettled conditions, and the nobility and the monarchy had forged such a firm alliance that all opportunity for peasants to split the upper-level groups to their advantage had disappeared. Further historical references to peasant associations and peasant rebellions are found in Appendix 15.5.

Legal and Monetary Systems

In the early Middle Ages Iberia was at least on a par with northwestern Europe in legal and monetary systems, and in some respects ahead. Only in the fifteenth and sixteenth centuries did its forward motion begin to stall. With all trading so closely mandated by the crown in both Spain and Portugal, and with merchants held in such low esteem, there was little scope for private traders, financiers, town politicians, business managers, and legists to create money, instruments for contracting, and law. In all these respects, Spaniards and Portuguese depended on the crown.


The roots of law in thirteenth-century Iberia were similar to those of northwestern Europe. [37] Furthermore, law was decentralized. "The Spanish realms were a vast accretion of overlapping fueros. . . . Castile, the most unified realm, had eight separate legal codes in 1492." [38] Canon law, several codices of Castilian law, Roman law, and Portuguese legislation were all in use by the thirteenth century. [39] The same was so for Portugal.

Trading on the great divide between the king and his humble subjects, however, the monarchy captured the law. Philip II possessed a "high sense of justice" and "concern for the impartial administration of law. But he also believed that his sovereignty gave him the right to execute private and secret justice, beyond the cognisance of any authority except God. This belief led him to acts of savagery and arbitrary despotism." [40] "'If it be my pleasure,' declared Philip in 1555, 'I shall annul, without the cortes, the laws made in the cortes; I shall legislate by edicts and I shall abolish laws by edicts.'" [41]

In Portugal, magistrates living in the king's court extended themselves downward into local jurisdictions, as ouvidores, who reported to the king. [42] "Under Alfonso IV even the local judges had to be confirmed by the king, and the administration of justice was firmly monopolized by the crown." [43] In 1512-21 a new code, the Ordenaçoes Manuelinas, brought a "tendency for a greater centralization under a stricter control by magistrates closer to the monarch." [44]

In both Spain and Portugal, the Inquisition was a device to concentrate power in the monarchy, by giving it a legal instrument to use capriciously against its enemies. It meted out its punishments heavily to the merchant class, which — in both political power and decision capacity — paid the main cost of the power accretion by the monarchy.

Often the law did not conform to surrounding reality, and therefore it was violated. "Although the export of bullion was prohibited by law [in the seventeenth century], the law was ignored, because the Spanish market and the Indies trade itself needed foreign manufactures." [45] But evading the law was not the ideal solution, for bribes and concealment could be expensive. There was always the risk of the law being capriciously enforced by a political foe.

In 1829, a uniform commercial code was worked out [46] for the first time in Spain, and in 1885 it was rewritten. [47] By then, Spain was in the era of parliamentary government. The big question is whether the laws enacted by parliament were the ones that would have been negotiated by representatives of producers, merchants, and their customers, or whether the law was mainly fashioned by political actors from their own power. Both Spain and Portugal had skipped the era in which commercial law might have been fashioned by direct negotiation among the parties concerned.

Portuguese law codes of 1832 and 1842 and constitutions of 1911 and 1933 seesawed between centralization and decentralization and tended to set up legal forms not necessarily followed in practice. The constitution set up a presidential regime with voting, but "Salazar's thirty-six year premiership transferred power to the government and reduced the President to almost nothing." [48] When the law of the land is specified in one way and enforced in another, it is difficult to know what the law is and what behavior is legitimate.

Thus, after an experience of the Middle Ages similar to that of the rest of Europe, Spain and Portugal entered the twentieth century with the laws of production and trade still captured by the state.

Money and Banking

In form, the early banking systems of Iberia were similar to those of northwestern Europe: private banks and money changers, and royal coinage subject to depreciation. Once again, the similarity was greatest in the thirteenth and fourteenth centuries, and once again greater in Catalonia [49] and the Basque country than farther south. After that, as all but the most local trade became regulated or monopolized by the crown, the monetary system too became oriented toward the crown.

In Portugal in the twelfth and thirteenth centuries, "an organized exchange between the country and the town grew up. . . . [E]ach demesne started sending most of its production to the nearest town. A generalized monetary economy naturally came into existence." [50]

As political centralization, expansion in the New World with its inflow of precious metals, and wars encompassed the combined monarchy of the sixteenth century, it turned toward the banking system for assistance in all these. In so doing, it inextricably confused the fiscal and monetary systems. It mopped up both the resources and the administrative capabilities of the banking system, making them less available for the private sector, and it monetized the state debt. [51]

The wars of the sixteenth century led the Spanish financial system, public and private, into disasters that spread to the Netherlands and Italy as well. With no state bank to create money, both Charles I and Philip II taxed the resources of the Netherlands to the full extent they were able. They also relied on financial markets such as Genoa, Augsburg, and Antwerp, and on German financial families such as the Fuggers and Welsers. [52]

Although sixteenth-century trade was vigorous — fairs and activity in the port cities rivaling northwestern Europe — nevertheless it all depended on massive infusions of money from America, from merchant bankers within Spain and on loans from abroad. When these sources dried up, the Spanish monetary system was near collapse. Public finance was a Ponzi-scheme, with high interest rates but ultimate loss of investment. The monarchy defaulted on its debts in 1557, 1575, 1627, and 1647. The Portuguese government declared bankruptcy in 1560 and 1605. [53] After the 1627 default, Genoese bankers refused to lend more to the king. [54] Philip IV responded by minting great quantities of vellon (debased copper currency). Inflation, heavy in the sixteenth century, was stabilized during 1611-20 but was set loose again in the mid-seventeenth century.55 "In 1680, the new government imposed drastic revaluation. Prices fell nearly 50 percent in two years, but the new money supply was totally inadequate for commerce and finance, and much of the economy ceased to function."56

Merchants and private banks did not step into the gap, probably for two reasons: First, the fiscal and monetary systems had become so intertwined that it was impossible for one to function independently of the other. Whatever shadow monetary system merchants might have initiated would have been sucked into the conventional fiscal/monetary system. Second, the fiscal system — and therefore the monetary system — was in such disarray that there was no unit of value to which merchants could adhere with the trust of their clients.

Monetary and fiscal instability, with ebbs and flows, continued for two centuries. In 1820, "the treasury lay in a state of total disarray and the debt increased steadily."57 Out of this disarray, Kindleberger finds that "Spanish financial history may be said to begin with the American War of Independence, when Spain joined France on the side of the colonies against Britain."58 At that time, the Banco de San Carlos was formed, popularly known as The Bank of Spain. A major purpose was to finance provisions for the military. Another Bank of Spain, formed by private shareholders in 1847, was authorized to issue money for all of Spain in 1851. Its first mission was to provide funds for the state.59 Thus a "significant obstacle to industrial progress was the close interdependence between the State and the nation's financial institutions, which caused the public and private sectors to compete for the limited funds available . . . The State had a number of advantages over the industrial sector." 60

Restrictive banking laws of the mid-nineteenth century were eased as the century progressed. A law of 1848 discouraged private banks, but two laws in 1856 eased the restrictions. Finally, in 1869, private banks were allowed to develop freely.61 In 1874, the Bank of Spain was granted a monopoly of currency issue.62 From 1898 to 1914, as the government decreased its borrowing, finance became increasingly private. But in 1962, during the Franco regime, the Bank of Spain was nationalized; a government Institute of Official Credit was set up to supervise five nationalized credit institutions; and private banks were required to choose between commercial and investment financing.63

In many respects, government controls over Spanish banks resemble those in other countries, such as in reserve requirements and maintenance of sound balance sheets, but the Spanish regulations have been more pervasive.

Interest rates have been regulated, and government has intervened directly in banking operations. The close relationship between crown or state and financial institutions has not died easily. In Portugal, on the other hand, at least until 1974 the "private sector was dominated by some 40 great families. . . Within this elite group, the top ten families owned all the important commercial banks, which in turn controlled a disproportionate share of the national economy."64 Thus the power concentration continued in both countries: in Spain in the state, and in Portugal in a small number of families.


In the High Middle Ages, Spain and Portugal compared favorably with northwestern Europe in economic organization, parliaments, law, and a monetary system. Agriculture and industry were on a par with the northern areas, but peasants were more mobile and feudalism was "looser" than in northwestern Europe. For the most part it was not contractual.

During the sixteenth century, the positions shifted. Compared with northwestern Europe, power in Iberia became more concentrated. With solidarity among the monarchy, nobility, and Spanish church, vertical alliances and leverage were foreclosed for the lower classes. Whereas in northwestern Europe both peasants and bourgeois were increasingly setting the terms of economic intercourse — with freer markets in both towns and international trade — in Spain and Portugal these powers became increasingly concentrated in the monarchy, which used them and abused them to promote its own wealth and power. Peasants became bound to their lords, with but little or no opportunity to negotiate any of their terms. War for national aggrandizement was a constant theme. Economic inefficiency, waste, and low incomes were the legacy.

Only in the nineteenth century did Iberia seem to reflect some of the institutions from northwestern Europe. But power concentration remained the dominant theme, whether in the monarchy or — in the twentieth century — in the dictatorships of Franco and Salazar. Yet surprises lay ahead.


  1. Payne 1973:1:69.
  2. Lynch 1981:1:5.
  3. Lynch 1981:1:13.
  4. Payne 1973:1:81.
  5. Marques 1972:99.
  6. Payne 1973:1:150-51.
  7. Lynch 1981:1:49-50.
  8. Payne 1973:1:8, 311.
  9. Marques 1972:298.
  10. Ozment 1980:188.
  11. Lynch 1981:1:9. See also Barber 1992:362.
  12. Lynch 1981:1:112.
  13. Brenner 1985:35.
  14. Payne 1973:1:328.
  15. Lynch 1981:2:140.
  16. Marques 1972:265.
  17. Charles I of Spain was also Charles V of the Holy Roman Empire.
  18. Payne 1973:2:27.
  19. Payne 1973:2:290.
  20. Lynch 1981:1:119; Barber 1992:341.
  21. Harrison 1978:8.
  22. Lynch 1981:1:5-6.
  23. Rich 1967:328.
  24. Payne 1973:273.
  25. Lynch 1981:2:160.
  26. Payne 1973:384.
  27. Epstein 1991:239-40.
  28. Payne 1973:601.
  29. Payne 1973:125.
  30. Marques 1976:29,139; Payne 1973:560.
  31. Baklanoff 1978:14.
  32. Marques 1976:182.
  33. Payne 1973:165.
  34. Payne 1973:166.
  35. Payne 1973:175.
  36. Payne 1973:313-14.
  37. Berman 1983:513.
  38. Melko and Hord 1984:41.
  39. Marques 1972:99-100.
  40. Lynch 1981:1:183.
  41. Cortes de los antiguos reinos de León y de Castilla, v. 677, cited by Lynch 1981:1:207.
  42. Marques 1972:98.
  43. Marques 1972:99.
  44. Marques 1972:187.
  45. Lynch 1981:2:183.
  46. Payne 1973:494.
  47. Payne 1973:494.
  48. Marques 1976:190.
  49. Payne 1973:103.
  50. Marques 1972:94.
  51. Payne 1973:293.
  52. Lynch 1981:1:59
  53. Marques 1972:278.
  54. Braudel 1982:398.
  55. Lynch 1981:2:7.
  56. Payne 1973:321.
  57. Payne 1973:428.
  58. Kindleberger 1984:146.
  59. Payne 1973:598.
  60. Harrison 1978:42-43.
  61. Aceña 1987:110.
  62. Aceña 1987:109-10.
  63. Aceña 1987:37.
  64. Baklanoff 1978:108.

Copyright © 1994 by the University of Michigan. First published in the USA by the University of Michigan Press, 1994.

Published on the World Wide Web by The Quaker Economist with permission from the University of Michigan Press, 2005.

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