Military Expenditure, Spending Capacity and Budget Constraint in Eighteenth-Century Spain and Britain

Using new public spending statistics for Spain and other various indicators we show that Spain and Britain suffered larger increases in public expenditure in the periods in which they fought each other and other countries. The British Exchequer spent much more than its Spanish counterpart, especially on the Army and Navy and debt repayment. This situation helps to explain why Britain emerged victorious against Spain in the majority of these wars and was a consequence of the political and institutional changes made in England from 1688 onwards, reducing budget constraint and allowing Britain to mobilise the necessary resources to become the leading world power. In Spain, however, the changes required to eliminate the country's history of bankruptcies and increase its spending capacity were not made.