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The Spanish Empire and its legacy: fiscal redistribution and political conflict in colonial and post-colonial Spanish America

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  • Grafe, Regina
  • Irigoin, Maria Alejandra

Abstract

The comparative history of the Americas has been used to identify factors determining longterm economic growth. One approach, new institutional economics (NIE), claims that the colonial origins of respective institutional structures explain North American success and Spanish American failure. Another argues that differences in resources encountered by Europeans fostered divergent levels of equality impacting on institutions and growth. This paper challenges the theoretical premises and historical evidence of both views offering a historicized, statistically and economically validated explanation for the institutional and economic development of Spanish America. First, it revises the structure of the fiscal system challenging the characterization of Spain as an absolutist ruler. Secondly, an analysis of fiscal data at regional levels assesses the performance of the Imperial state. It shows the existence of massive revenue redistribution within the colonies, disputing the notion of a predatory extractive empire based on endowments as the source of original inequality. Finally, we discuss how a contingent event, the imprisonment of the Spanish king in 1808, contributed to the disintegration of a 300-year-old empire. The crisis of legitimacy in the empire turned fiscal interdependence between regions into beggar-thy-neighbour strategies and internecine conflict. We conclude by arguing for a reversal of the causality from weak institutions causing economic failure to fiscal (and economic) failure leading to political instability.

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Article provided by Cambridge University Press in its journal Journal of Global History.

Volume (Year): 1 (2006)
Issue (Month): 02 (July)
Pages: 241-267

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Handle: RePEc:cup:jglhis:v:1:y:2006:i:02:p:241-267_00

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  1. North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(04), pages 803-832, December.
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  6. M.A. Irigoin & R. Grafe, 2006. "Bargaining for Absolutism: A Spanish Path to Nation State and Empire Building," Oxford University Economic and Social History Series _065, Economics Group, Nuffield College, University of Oxford.
  7. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
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Cited by:
  1. Vinokurov, Evgeny, 2009. "EDB Eurasian Integration Yearbook 2009," MPRA Paper 20917, University Library of Munich, Germany.
  2. Roberto Bonfatti, 2008. "Decolonization: the Role of Changing World Factor Endowments," STICERD - Economic Organisation and Public Policy Discussion Papers Series 001, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  3. Maria Alejandra Irigoin & Regina Grafe, 2012. "Bounded Leviathan: or why North and Weingast are only right on the right half," Economic History Working Papers 44492, London School of Economics and Political Science, Department of Economic History.
  4. Jeffrey G. Williamson, 2010. "Latin American Growth-Inequality Trade-Offs: The Impact of Insurgence and Independence," NBER Working Papers 15680, National Bureau of Economic Research, Inc.
  5. Gareth Austin, 2008. "The 'reversal of fortune' thesis and the compression of history: Perspectives from African and comparative economic history," Journal of International Development, John Wiley & Sons, Ltd., vol. 20(8), pages 996-1027.
  6. Irigoin, A & Grafe, R, 2012. "Bounded Leviathan: or why North & Weingast are only right on the right half," MPRA Paper 39722, University Library of Munich, Germany.

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