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Are we repeating the same mistakes which led to the Fall of the first global Superpower; the Spanish Empire?

By : Ziad K. Abdelnour| 18 July 2010
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Taking a walk down memory lane or for those who don’t know that Spain was the first global Superpower with gold and silver flowing in from its American colonies, the Hapsburg dynasty became the dominant power in Europe.

It controlled rich parts of Italy through Naples and Milan, and Central Europe from the Netherlands through the Holy Roman Empire to Austria. In the 16th century it added the far distant Philippine islands to its empire. The Hapsburgs held off the Ottoman Turks, whose resurgent wave of Islamic conquest in the 16th century swept across the Balkans and nearly captured Vienna.

The Hapsburgs went into decline in the 17th century, and while any such momentous event has many causes, for our purposes the focus will be on the economic collapse of Spain, which not only sapped the empire of strength but served to build up the power of its rivals.

The demands of empire required a strong and growing economy, but Spain did not keep up with the economic expansion that was taking place in other parts of Europe. Madrid’s financial base fell out from under its empire. Spain could continue to consume in the short term because of the flow of precious metals from American mines, but it could not produce the goods it needed at home, which in the long-run proved fatal to its standing as a Great Power and as an advanced society.

Does all of this sound too familiar?

What industry there was, along with banking and shipping, was in the hands of foreign owners. This was one of the fundamental causes of the Spanish economy’s profound decline in the seventeenth century, maritime trade had fallen into the hands of foreigners. This, plus the “opening of the internal market to foreign goods,” produced a “fatal result.” Spain’s exports were at the same time under heavy pressure by competitors in third country markets.

I guess a nation that cannot control its domestic market will seldom be able to sustain itself in foreign markets, which are inherently less accessible and more unstable.

Yet, Spanish leaders were deluded by a sense of false prosperity. This is testified by the statement of a number of prominent officials in 1675; all encapsulated in the following sayings: “Let London manufacture those fine fabrics of hers to her heart’s content; let Holland her chambrays; Florence her cloth; the Indies their beaver and vicuna; Milan her brocade, Italy and Flanders their linens…so long as our capital can enjoy them; the only thing it proves is that all nations train their journeymen for Madrid, and that Madrid is the queen of Parliaments, for all the world serves her and she serves nobody.” A few years later, the Madrid government was bankrupt. The Spanish nobleman had foolishly elevated consumption, a use for wealth, above production, the creation of wealth.

Historians have traced the flow of Spanish gold and silver across the markets of Europe. Those who “served” Spain by establishing industries to manufacture goods for the Spanish market gained the money. Spain’s rivals, France, Holland (which started a successful revolt in 1568) and England, prospered by their trade surpluses, and reinvested the money to expand their own capabilities. The military empire of the Hapsburgs became the economic colony of other powers, or, to use a current phrase, Spain was the “engine of growth” for the rest of the continent.

Where there were jobs and prosperity, there was also rapid population growth, and rising tax revenue. Rival powers were able to field and finance military forces that could defeat the once superior Spanish forces both on land and at sea. The irony of this is that Spain was ruled by a warrior aristocracy tempered by centuries of constant warfare against Islamic hordes and Christian heretics. These nobles looked down on merchants and manufacturers and disparaged their mundane professions only to find that without a strong domestic business class they could not afford the fleets and armies that guarded the empire they had built.

Sounds familiar again?

Isn’t the American “empire” today also trying to consume more than it produces?

It is a fact that the U.S. trade deficit is nearing Spain’s nadir of imports being double exports. Both government spending and private consumption are financed heavily by debt. Washington is printing money, the modern equivalent of digging gold out of the ground, rather than earning the means to pay its bills. And the political and military elites are apparently indifferent to the fate of domestic business and industry.

Isn’t it time for us to all Americans to learn from the Spanish experience and take real drastic and corrective action while we still can?

It is ironic that America’s huge military spending is what made us an empire … but our huge military is what is bankrupting us … thus destroying our status as an empire.

Your feedback as always is greatly appreciated.

Thanks much for your consideration.

Comments

  1. Sune Hojgaard SorensenSune Hojgaard Sorensen

    I have just been reading through an article titled; Welfare & Warfare by Mr. James Quinn which has some astounding insights and is well worth a read in its entirety but I will draw out a few nuggets below with relevance to your posting on the US empire. “A man who has a pension for his old age is much easier to deal with than a man without that prospect.” – Otto von Bismarck 1880 “Yet there was a catch, a fatal flaw in the design of the post-warfare welfare state. What had started out as a system of national insurance had degenerated into a system of state handouts and confiscatory taxation which disastrously skewed economic incentives.” – Niall Ferguson, The Ascent of Money “The United States has hit the proverbial jackpot, with a rapidly aging population, a $106 trillion unfunded liability, an administration that has piled more unfunded healthcare obligations upon our future unborn generations, spineless politicians that refuse to address the crisis, and as the icing on the cake 700 military bases spread throughout the world and an annual defense budget of $895 billion equalling the total spending of the next 11 countries combined. The number of americans over 65 will surge by 35% over the next 10 years and then by an additional 30% in the following decade. Baby Boom demographics have caught up with politician promises. Therein lays the dilemma. Every day 10,000 Americans turn 50 years old. They will not vote for anyone who promises to cut entitlements. (…..) The United States is the modern day Roman Empire. Any reasonably intelligent person with a calculator can figure out that this will end in economic collapse. And still, we do nothing. Not only do we do nothing, we push our foot down on the accelerator by spending $2 trillion on wars of choice, commit $16 trillion to new drug coverage for seniors, and national healthcare for all at an unknown cost. THERE IS ONE LAW THAT CANNOT BE SKIRTED. AN UNSUSTAINABLE TREND WILL NOT BE SUSTAINED.” The article goes on to offer 6 ways to deal with the situation; “1. At least a 50% cut in annual military spending. 2. A drastic scaling back of Social Security, Medicare and Medicaid benefits based on age, means testing and instituting real market competition. 3. Scrapping the entire income tax system and replacing it with a VAT or flat tax. 4. Eliminating useless government agencies like the Department of Energy and Department of Education because they are complete and utter failures. 5. An across the board 25% reduction in every government program. 6. The elimination of the Federal Reserve and the linking of the U.S. Dollar to a basket of commodities including gold, silver, oil and agricultural products, in order to restrict corrupt politicians from spending money we don’t have. These six steps are the talk of a crazy man. There is no chance of any being implemented today.” The link to the full article with illustrations is below; http://www.financialsense.com/contributors/james-quinn/welfare-or-warfare

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