In the Wake of the English

The advent in Spain of a new monarch in 1759, Charles III, King of Naples, implied no immediate and radical change in fiscal policy, but it did in terms of military policy. Charles was in favour of a bigger show of overseas force, both militarily and diplomatically, and exploited the favourable juncture of the war raging at that time between France and Great Britain. This meant abandoning Spain’s policy of neutrality and buckling slightly under French pressure, leading to the signing of the third Pacte de Famille in August 1761. The Spanish government was coaxed in this direction by French promises of help in the recovery of Minorca and Gibraltar. Another decisive factor tipping the balance was its confidence in the traditional defensive capacity of the Americas. The war was not expected to last much longer, so Spain could hope to sustain it with no great outlay. The Americas would defray its military expenditure with the help of resources sent from Spain. Spain boasted significant liquidity at that time, tantamount to a complete year’s revenue (Registro). The fact that Spain entered the Seven Years’ War without making any changes to its fiscal or financial system is very telling. No new taxes were brought in, there were no hikes in existing taxes and no public debt was created. Spain, in other words, was confident of defraying war expenses from its current resources rather than financing it, thereby running completely counter to the tenets of a fiscal-military state (Torres, 2013).