Nature's Evil

At the end of the sixteenth century, the Spanish colonies were supplying silver and gold to the whole of Europe. Trading in precious metals extracted and processed by Native Americans, Philip II united the Spanish and Portuguese possessions to become the most powerful monarch in Europe. He had colonies on four continents; the Philippines were named in his honour, the sun never set on his empire. Pirates robbed individual ships but did not dare attack the majestic convoys which twice a year delivered American silver to Castile. When metal reached Seville, the crown imposed duties. It had to pay for the upkeep of the Spanish army in the Dutch provinces. It was building a great Armada, intended to conquer the globe. It financed expeditions in search of new revenues. It created a tobacco industry to stimulate internal consumption. As a result, bread, wool, labour, and almost everything else rose in price throughout Europe: this was one of the longest periods of inflation in history. The influx of silver did not stop at creating monopolies. Predominating in the exchange, a mono-resource becomes money. People have to earn more and more of this money to buy less and less.

Spanish diversification wasn’t at all effective. First, seventeen Dutch provinces – the most profitable part of the empire – revolted; then the English defeated the mighty Armada; and all this time the purchasing power of silver in Europe kept falling. In 1642 an imperial decree banned slavery. This led to a disastrous increase in expenditure. Supporting the mine-owners, far-off Seville made concessions, reducing its share of profits. But the mines were exhausted, profits fell, and the workers were dying or fleeing. Spanish extravagance and inertia were known throughout Europe. The crown was supported by raw materials – silver, wool and cod – but the lower orders had to live off subsistence farming. The metropolitan cities and the ports kept growing, and everything else was doomed to stagnation. Having seized a mountain of silver, the empire was now going to ruin. During the reign of Philip II, Spain defaulted on its debts five times and debased its currency: Spanish coins contained less and less silver. The Habsburg crisis led to a slump throughout Europe. In Russia, the succession crisis led to a civil war, Polish–Swedish intervention and decades of chaos – the Time of Troubles. The Thirty Years’ War ended with the taking of Prague by Swedish troops. The war devastated the German states; the losses – a third of the population – were comparable to the effects of the plague, remembered from the Middle Ages. The centre of European gravity was shifting north. The climate cooled, the Dutch canals froze, the English harvest failed and bread riots began. Not receiving any revenue, sovereigns raised duties, debased coins, and sold positions in the judiciary. Failing to meet their commitments, and unable to secure the common good, absolutist states turned into institutional parasites. 13

By the end of the seventeenth century the situation had improved. Gold from Brazil and new banking instruments, such as promissory notes, helped financial transactions. The first economic studies appeared – attempts to fathom the mysterious movements of raw materials, money and goods – and with them the projects of central banks in Scotland, England and France. Maritime trade moved from the Mediterranean to the Baltic and the North Sea. The economy of the Dutch Republic and her dependant, Sweden, were the drivers of growth. Stockholm became the new centre for magi and metallurgists, many of them trained by Italians or Bohemians. In 1627 the Dutch entrepreneur Louis De Geer moved to Sweden from Liège, which had been destroyed by the Spanish. Granted a concession by King Gustavus Adolphus, he smelted bronze but soon switched to iron and cannons. Under Dutch management the Swedish mines turned into suppliers of metal for the whole of Europe, including England; in the course of a century, iron smelting in Sweden increased by a factor of five. The old centres of primary commodities – Venice and Seville – went into a slump from which they would not recover.