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

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  • Regina Grafe
  • Maria Alejandra Irigoin

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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Bibliographic Info

Paper provided by London School of Economics and Political Science, Department of Economic History in its series Economic History Working Papers with number 22467.

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Length: 68 pages
Date of creation: May 2006
Date of revision:
Handle: RePEc:ehl:wpaper:22467

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Postal: LSE, Dept. of Economic History Houghton Street London, WC2A 2AE, U.K.
Phone: +44 (0) 20 7955 7084
Web page: http://www.lse.ac.uk/economicHistory/
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References

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  1. Regina Grafe & M.A. Irigoin, 2006. "Bargaining for Absolutism: A Spanish Path to Nation State and Empire Building," Economics Series Working Papers 2006-W65, University of Oxford, Department of Economics.
  2. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  3. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, 06.
  4. William Easterly & Ross Levine, 2002. "Tropics, Germs, and Crops: How Endowments Influence Economic Development," Working Papers 15, Center for Global Development.
  5. Acemoglu, Daron & Johnson, Simon & Robinson, James & Thaicharoen, Yunyong, 2003. "Institutional causes, macroeconomic symptoms: volatility, crises and growth," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 49-123, January.
  6. Barbier, Jacques A. & Klein, Herbert S., 1981. "Revolutionary Wars and Public Finances: The Madrid Treasury, 1784–1807," The Journal of Economic History, Cambridge University Press, vol. 41(02), pages 315-339, June.
  7. Jeffrey G. Williamson & Luis Bertola, 2003. "Globalization in Latin America Before 1940," NBER Working Papers 9687, National Bureau of Economic Research, Inc.
  8. Stanley L. Engerman & Kenneth L. Sokoloff, 2005. "Colonialism, Inequality, and Long-Run Paths of Development," NBER Working Papers 11057, National Bureau of Economic Research, Inc.
  9. North, Douglass C., 1989. "Institutions and economic growth: An historical introduction," World Development, Elsevier, vol. 17(9), pages 1319-1332, September.
  10. John Luke Gallup & Alejandro Gaviria & Eduardo Lora, 2003. "Is Geography Destiny? Lessons from Latin America," World Bank Publications, The World Bank, number 14454, October.
  11. Jaime Jaramillo & Adolfo Meisel & Miguel Urrutia, . "Continuities and Discontinuites in the Fiscal and Monetary Institucions of New Granada 1783-1850," Borradores de Economia 074, Banco de la Republica de Colombia.
  12. John Luke Gallup & Jeffrey D. Sachs & Andrew D. Mellinger, 1998. "Geography and Economic Development," NBER Working Papers 6849, National Bureau of Economic Research, Inc.
  13. Adolfo Meisel, . "Subsidy -Led Growth in a Fortified Port: Cartagena de Indias and the Situado 1751-1810," Borradores de Economia 167, Banco de la Republica de Colombia.
  14. Stanley L. Engerman & Kenneth L. Sokoloff, 2003. "Institutional and Non-Institutional Explanations of Economic Differences," NBER Working Papers 9989, National Bureau of Economic Research, Inc.
  15. Engerman, Stanley L. & Sokoloff, Kenneth L., 2005. "The Evolution of Suffrage Institutions in the New World," The Journal of Economic History, Cambridge University Press, vol. 65(04), pages 891-921, December.
  16. 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.
  17. Jeffrey D. Sachs, 2003. "Institutions Don't Rule: Direct Effects of Geography on Per Capita Income," NBER Working Papers 9490, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. 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.
  2. Vinokurov, Evgeny, 2009. "EDB Eurasian Integration Yearbook 2009," MPRA Paper 20917, University Library of Munich, Germany.
  3. 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.
  4. 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.
  5. 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.
  6. 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.

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