Spanish Colonization of America: Administration and Economic Impact
**Section 7.3: Government and Administration of Spanish Colonies in America**
The discovery and colonization of America transformed the Spanish monarchy into a major economic and colonial power. Spain sought to maximize its benefits from these lands through the following measures:
- Systematic exploitation of American mines, especially the silver mines of Potosi (Peru) and Zacatecas (Mexico). The Crown obtained 20% of the production as a tax, known as the “royal fifth,” which was one of its main sources of income.
- Monopoly of trade with America, managed through the following procedure: Any merchandise, Spanish or foreign, sold in America had to be registered in the House of Trade of Seville and pay taxes to the Crown. The Indies Fleet, a group of merchant ships escorted by warships, departed from Seville to defend against attacks by pirates and corsairs. The fleet carried goods to Central American ports and then returned to Seville with American goods, gold, and silver.
However, the Spanish exploitation of the New World faced two serious problems:
- Attacks by pirates, privateers, and warships from enemy countries, who attempted to seize important shipments of gold and silver that the Indies Fleet brought back to Seville.
- European smuggling with America, which circumvented the Spanish monopoly and deprived the monarchy of significant income from trade taxes.
The new territories were settled by colonists who exploited the land using Indian labor through the encomienda system. The Dominican Friar Bartolomé de las Casas (1478-1566), Bishop of Chiapas (Mexico), defended the rights of indigenous people and denounced their situation. Emperor Charles V promulgated the New Laws of the Indies in 1542, recognizing all Native Americans as subjects of the crown. From a political standpoint, the land was considered an extension of Castilian territory. The new territories were organized as follows:
- Viceroyalties: Modeled after those in Aragon, they were ruled by viceroys, representatives of the king. Viceroys accumulated political power and military command, sometimes exercised by captains general from the Castilian nobility.
- Hearings: These were within the territorial demarcations of the viceroys. Their function was the administration of justice, while also performing consulting work and could meet with the king.
- Governors and General Captaincies: Established temporarily in border areas or areas difficult to defend.
- Municipalities: Operated according to Castilian law. Given the attempts to control fees by renowned Creole families, the emperor decided to appoint magistrates with judicial and political authority in his district.
**Section 7.4: Impact of America on Spain**
The discovery of the New World had diverse and unequal consequences. It had clear political consequences, leading to the creation of a vast empire outside Europe. New institutions were created, always along European lines. International law developed as a means of regulating the distribution of the discovered lands.
The economic consequences were far-reaching and reflected in many changes in trade relations from the 16th century onward. The Indies were a major source of trade for the Peninsula. Castile supplied wheat, vines, oil, cattle, clothing, weapons, etc., while America provided mainly gold and silver, as well as previously unknown agricultural products like corn, potatoes, cocoa, peanuts, and tobacco.
The American trade monopoly was granted to the port of Seville, from which all ships on the American route departed and arrived. In 1503, the crown created the Casa de Contratación (House of Trade) in Seville to control the traffic of people and goods and ensure the collection of royal taxes. Travel to America was organized through the Fleet system, where ships sailed together for mutual protection, conducting two expeditions a year (round trip). This system effectively monitored and protected American commerce from the continuous attacks of English and Dutch pirates.
Undoubtedly, gold, and especially silver, were the dominant commodities in American commerce. Throughout the 16th and 17th centuries, especially between 1531 and 1560, silver stocks in Europe tripled, while gold increased by a third. The massive influx of precious metals led to a dramatic price increase (400%) in Castilian territory due to the increased money supply without a corresponding increase in production. This phenomenon is known as the Price Revolution.
The Spanish Crown’s high indebtedness, first to fund expansion and then to maintain the Empire, meant that much of this treasure was spent as quickly as it was acquired. German and Genoese bankers provided the capital to equip the navy and army and were paid with high-interest loans, consuming the majority of the American treasure. The energizing effect of gold and silver on the Castilian economy was scarce, as the wealth that did not end up in the hands of foreign bankers was invested unproductively in jewelry and imported luxury goods.
Finally, the socio-cultural consequences led to significant changes in the New World, as European culture was quickly assimilated at the expense of indigenous cultures. In the Peninsula, America provided an escape valve for a segment of the population that did not fit into Spanish society: younger sons of noble families, people without a profession or work, and, above all, adventurers who had nothing to lose in the new lands.