The Impact of Public Debt and Confiscation in Spain
Public debt. On the other hand, the decree of February 1836 established the principles and mechanisms of the seizure, declaring the sale of all goods and other assets qualified or to be qualified as national. Among other things, the decree fixed in Article 3 the public auction as the standard for sales, pre-appraisal, and in Article 10, payment was allowed in cash or debt securities established for their full nominal value.
In total, between 1836 and 1844, properties worth 3.274 billion reais were sold. They had sold off 62% of the properties of the Church, first from the regular clergy (land, houses, monasteries, and convents with all their belongings) and then from the secular clergy (cathedrals and churches in general).
The farms were assessed by experts of finance and auctioned off after reaching a 220% average bid on the price of output. These bids were monopolized by bourgeois investors, as they were the only ones with liquidity, knowing they could push and easily control auctions. Additionally, it was an excellent deal: only 20% was paid in cash, the rest was paid deferred, and they were allowed to pay the debt at face value. As they were very undervalued in the market, buying on the stock and paying with them was a bargain for the buyer.
Although the moderate confiscation decree paralyzed during the decade in which it ruled alone (1844-1854), there was actually very little church property to nationalize.
The second major confiscation was initiated, again with the progressives in power (1854-1856), who had accessed power again through a military coup, the only possible remedy to the restrictions imposed on them by the Electoral Act of 1846 and the very Crown, which they never trusted for the tasks of government.
In fact, with the Madoz Law or “general confiscation” of May 1, 1855, the final and most important stage of this major liquidation operation was initiated. It was referred to as “general confiscation” because it was now not only about church property, but also about all redeemed properties, i.e., those belonging to the state and municipalities as well, including the municipalities themselves, and in general, all assets that remained unamortized.
It was, therefore, to supplement and complete the process initiated by the Mendizabal confiscation in 1836. The law was intended to be read, as its preamble stated, “a fundamental revolution in the way of life of the Spanish nation.” In these circumstances, any property belonging to dead hands that had not been included in previous confiscations was declared for sale. Among them, the properties belonging to the municipalities were particularly significant, whether they were owned by the people as a whole – their own – and the benefits produced were reversed in the entire community, such as infrastructure improvements, which the people could also enjoy personally and individually, for example, to take cattle to graze or to collect firewood for their homes.
The purpose of the Madoz Law, as had been the Mendizabal Law, was fundamentally to obtain financial resources for the State. Again, there was no concern for the progressive access to the land of the dispossessed. Freed assets would become the property of those most able to pay for them. That is, the procedure was also used for public auction sales; however, some technical improvements were made regarding payment, as it could only be made in cash within fifteen years, at a 5% discount of the time developed. These
conditions were modified in part in 1856, admitting in some cases debt securities to pay half of the total value of goods purchased, but only at the market price the day before the operation.
The Madoz Law was developed at great speed. Between 1855 and 1856, over 43,000 rural properties and about 9,000 urban properties were auctioned, worth close to 8000 billion reais. It is estimated that more than 1.7 billion reais in revenue was generated for the Treasury from this operation. On the other hand, the confiscation of Church property included in this law raised again, four years after the signing of the Concordat, relations with the Holy See. For this reason, the queen initially refused to sanction the law when it was presented in Aranjuez, where she was, along with Espartero and O’Donnell. After some delays and excuses, she had no choice but to sanction it, even with serious problems of conscience, which led to a break with Rome.
The impact of the confiscations was varied:
- First, there was the almost complete dismantling of the Church and its sources of wealth, since the tithe, its alternative, was also abolished in 1837. Only in 1845 would there be a contribution from religion and clergy. The Church was no longer the privileged class but retained its huge influence on attitudes and education, which it almost monopolized.
- Second, communal property was removed, resulting in a considerable worsening of the economic situation for farmers, who could no longer use the common areas of the municipality. These lands, which had been available for free and unrestricted use for firewood or grazing cattle, forced part of the rural population to migrate to the cities. In sum, this deepened the process of proletarianization short of a huge peasantry, which was expropriated of its resources from both proper and common goods.
- Thirdly, the confiscation did not solve the debt problem, but did contribute to attenuation. It managed to rescue almost half of the debt and began to tax a huge amount of property that had previously been exempt, thereby increasing the revenues of the tax. Only since the fifties, with the second confiscation and economic development, did the state debt dramatically decrease, although a part of it would be consolidated into the twentieth century.
- Fourth, the seizure did not produce an increase in agricultural production, contrary to what its promoters intended. The new owners, in general, did not undertake improvements but simply continued to collect rents, replacing the old feudal rights and tithes with new, more expensive leases.
- Fifth, the purchase of land, disabled a liquid money that had been vital to implement the incipient industrialization of Spain.
- Sixth, the confiscation resulted in a great loss and plunder of cultural property in the ancient monasteries. Many architectural works were ruined, and property (paintings, libraries, equipment) was sold at ridiculous prices and largely left to other countries. All this despite the fact that in 1840 a provincial committee had been established in charge of cataloging and guarding those assets. The consequences were felt in urban terrain, cultural, and religious contexts. In cities, large buildings of the monasteries became barracks, and public buildings were demolished to build great roads.
- Seventh, the seizure caused a strengthening of the structure of land ownership, emphasizing the large estates in Andalusia and Extremadura, for example. Land and urban property went to the old local landowners, new investors from the financial bourgeoisie, industrial or professional speculators, and brokers.