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send the silver at all speed. On July 11, hundreds of bags of silver were
loaded on mules and wagons and “moved from the capital to Veracruz by
forced marches to be loaded on two warships from Havana.”81 The treasure
ships traveled to Havana where they were instructed to rendezvous with
the French naval forces under De Grasse off the coast of Matanzas, at which
point the treasure was transshipped on August 17. The French Armada
then immediately headed north and on August 31 arrived in Chesapeake
Bay and successfully cut off Cornwallis from a sea exit. In this way, Mexican
silver contributed to the decisive surrender of the British army at Yorktown
and the victory of the American and French land forces under generals
Washington and Rochambeau.
In summary, during the war years of 1779“1783 the ¬scal contributions
of New Spain proved to be of strategic importance for imperial policy for
a combination of military and ¬nancial reasons. Our study indicates that
the administration of Carlos III was able to meet rising expenditures in the
1780s without risking bankruptcy in large part because of the remittances

80 This operation is reviewed in detail in Pedro Tedde “Los negocios de Cabarrus con la Real Hacienda,
1780“1783,” Revista de Historia Econ´mica, 3 (1987), 527“551.
81 M. Glascock, “New Spain and the War,” p. 187.
Resurgence of the Spanish Empire 47

of Mexican silver. This suggests that it is necessary to revise the hypotheses
of researchers such as historian Pedro Tedde who has argued that the Spanish
¬nancial success in the 1780s (in striking contrast to the ¬nancial failure
of its ally France) was due to the ability of the government of Charles III in
covering steeply rising wartime expenditures by intelligent handling of the
debt policy of the Spanish monarchy.82 Our analysis, however, indicates that
such an argument “ focusing almost exclusively on the metropolis “ tends
to leave the contributions of colonial Mexico largely out of the picture and
therefore makes it virtually impossible to understand the complex course
of imperial ¬nance. The fact is that the bulk of the war expenses in the
Caribbean and North America were not covered with funds from Spain,
but by Mexican silver.
Both during the war and after the conclusion of hostilities, the remit-
tances of silver “ raised by taxes and loans in Spanish America “ proved
to be essential pillars of the ¬scal and debt policies of the administration
of Charles III as well as of his son Charles IV, who became monarch in
1789. In the last years of the eighteenth century, however, as war became
an almost permanent state of affair, large military de¬cits became a charac-
teristic feature of royal ¬nance. The Bourbon monarchy therefore required
more and more money to pay army and navy as well as to cover service on
the ballooning public debt. As a result, the ¬scal and ¬nancial demands
of the metropolis upon the Spanish American colonies and, in particular,
upon Mexico increased dramatically. In the chapters that follow, we focus,
¬rst, on the analysis of the colonial tax system that provided the greatest
volume of revenues for the empire and, secondly, on the increasing number
and complexity of colonial loans for the metropolitan government.

82 P. Tedde, Pol´tica ¬nanciera y pol´tica comercial, pp. 139“217.
± ±
An Imperial Tax State: The Fiscal Rigors
of Colonialism

The colonies of Spain and Portugal only have contributed any revenue
towards the defense of the mother country, or the support of her civil gov-
ernment. The taxes which have been levied upon those of . . . England in par-
ticular, have seldom been equal to the expense laid out upon them in time
of peace, and never suf¬cient to defray that which they occasioned in time of
Adam Smith, Wealth of Nations, IV. 7. 9.9

In the summer of 1763, the British Cabinet, headed by Lord George
Grenville, announced the introduction of the ¬rst of a series of new taxes in
the thirteen British colonies in North America.1 After signing the Treaty
of Paris,2 the British government had resolved to assure its multiple victo-
ries by increasing its standing military forces in North America, a strategy
which inevitably implied considerable expenditures.3 According to Richard
Bonney, “the need after 1763 for a permanent military establishment in
the American colonies at a likely cost of some £224,000 per annum (civil
administration had cost a mere £50,000) meant that new tax revenues had
to be found in the colonies to meet the bill.”4 The ¬scal innovations were
soon confronted with strong protests. The rejection of the Navigation Acts,
the Sugar Act, and the Stamp Act by the colonists was one of the major

1 Grenville was First Lord of the Admiralty “and at the time of its passage (Navigation Act of 1763),
head of the Ministry in which he occupied the positions of First Lord of the Treasury and Chancellor
of the Exchequer.” George Louis Beer, British Colonial Policy, 1754“1765 (New York: Macmillan,
1922), p. 230.
2 The Treaty of Paris was signed on February 10, 1763 between Great Britain, France, Spain, and
3 Early in 1763, it became known that it was the intention of the British government to keep an army
of 10,000 men in America and that the colonies were expected to contribute to its support. For an
overview, see William R. Nester, The First Global War: Britain, France, and the Fate of North America,
1756“1775 (Westport, Conn.: Praeger, 2000).
4 Richard Bonney “The Struggle for Great Power Status,” in R. Bonney, ed., Economic Systems and State
Finance (Oxford: Oxford University Press/The European Science Foundation, 1995), p. 341.

Imperial Tax State 49

catalysts of revolution and of the war of independence (1776“1783) by the
new United States, according to most standard historical interpretations.
The protests and political con¬‚icts provoked by imperial taxes in the
thirteen colonies were not unique. In Spanish America, tax reforms intro-
duced from the 1760s also spurred a series of popular revolts, some of which
eventually became major social and political rebellions. In Mexico, a series
of localized protests were repressed quickly and bloodily: over 80 men were
executed by royal of¬cials in the late 1760s and many hundreds deported or
imprisoned and forced to do hard labor for life.5 In Peru and New Granada,
resistance to ¬scal reforms translated into massive mobilizations and the for-
mation of informal armies that threatened colonial rule in both viceroyalties
during the years 1780“1782. In Peru the repression of these movements led
to imprisonment and execution of thousands of peasant Indians, who had
risen in arms to follow their leaders Tupac Amaru and Tupac Catari. In New
Granada, in contrast, church of¬cials were able to negotiate a settlement
with the rebels, known as comuneros, avoiding the fall of Bogot´ by means
of a series of political and ¬scal concessions.
Tax revolts in Spanish America, however, did not lead to independence as
in the emerging United States, and the viceroyalties remained under control
of the Spanish monarchy for almost another half century. In this sense, the
Spanish empire in the western hemisphere proved surprisingly durable.
Clearly, the persistence of the colonial regime implied high ¬scal, political,
and economic costs for the inhabitants of Mexico, Peru, New Granada,
Chile, Buenos Aires, Venezuela, and the other territories under the sway of
the Catholic monarchy. The most striking contrast that can be established
is that between the ¬scal costs covered by the Spanish colonies and the
thirteen colonies in British America: already by 1770, colonial Mexico alone
provided the vicerregal administration with three times more tax funds
than did all thirteen colonies to their British administrations. Historians
have reconstructed the tax trends in Spanish America in the eighteenth
century but have not yet adequately explained how the Crown was able to
extract increasing amounts from their subjects. Fiscal coercion was certainly
a necessary factor but not a suf¬cient one. At the same time, there is no doubt
that social elites and corporations, such as the church and merchant guilds,
bene¬ted from the stability and prosperity of the colonial administration
from which they derived secular economic privileges and control over of¬cial
appointments. Indeed, whether one looks to the monarchy or to colonial
elites, it would appear that the introduction of new taxes, a more rigorous
state administration, and the expansion of colonial armies during the second

5 For details on tax revolts and repression in Mexico in the 1760s, see Felipe Castro Guti´ rrez, Nueva
ley y nuevo rey: reformas borb´nicas y rebeli´n popular en Nueva Espa˜ a (Zamora, Mich.: El Colegio de
o o n
Michoac´ n, 1996).
50 Bankruptcy of Empire

half of the eighteenth century contributed to a conservative revolution in
In short, it is our argument that the durability of the Spanish empire was
due, in great measure, to the success of Bourbon reformers in reforging an
imperial tax state, albeit of a quite complex character. By the decade 1790“
1800, the Spanish colonies generated more revenues than any other colonies
in the eighteenth-century world. The joint tax income of all colonial admin-
istrations in Spanish America at this time can be placed in the range of thirty
to thirty-¬ve million pesos a year.7 This ¬gure was somewhat more than
the total ordinary income of the government in metropolitan Spain: adding
them together made for a total of close to sixty million silver pesos.8 As a
result, circa 1790, the Spanish imperial state “ metropolis plus colonies “
produced a sum total of tax income which was equivalent to approximately
70 percent of peacetime revenues of the metropolitan government of Great
Britain and also almost 70 percent of the taxes collected annually by the
government of France, the largest and richest nation in continental Europe,
at the end of the old regime.9
Furthermore, as Herbert Klein has demonstrated, the growth rates of tax
receipts throughout Spanish America were among the highest in the world
between 1760 and 1790.10 The establishment of new ¬scal monopolies, the
rise in tax rates, the elimination of most tax farming, and the establishment
of a pro¬cient tax-accounting system throughout the vast empire bespoke
considerable state dynamism under the administration of Charles III (1759“
1788). The introduction of such policies implied a degree of modernization
of the state bureaucracy and appear to be comparable, in many regards, to
those underscored for other eighteenth-century European nations. Numer-
ous parallels can be found with the studies by historian Patrick O™Brien
and John Brewer which have demonstrated that the British state increased
its revenues with great rapidity as a result of a combination of tax reforms

6 See D. Brading, Miners and Merchants, Chapter 1, titled “Revolution in Government.”
7 Our estimates are considerably lower than those proposed in Herbert S. Klein, The American Finances
of the Spanish Empire, p. 28.
8 The ordinary tax income of the Spanish government in the year 1790 was 516 million reales, approxi-
mately 25.8 million silver pesos. (The average for 1785“1790 was 500 million reales per year without
including remittances from the colonies.) See data in J. P. Merino, Las cuentas de la Administraci´n, o
pp. 51“54.
9 For French and British tax revenues in 1785, see Eugene White, “France and the Failure to Modernize,”
in R. Bonney, ed., Economic Systems, p. 64. By 1790“1794, British tax income had reached a level of
around seventeen million pounds sterling per year, equivalent to more than eighty-¬ve million silver
pesos (or dollars). For Spanish revenues, see annual series in J. P. Merino, Las cuentas de la Administraci´n.
For the Spanish American treasuries the most important source is H. Klein and J. TePaske, Las cajas
reales de la real hacienda and J. TePaske and Herbert S. Klein, Royal Treasuries of the Spanish Empire in
America, 1580“1825.
10 H. S. Klein, The American Finances, Chapter 2.
Imperial Tax State 51

and the growth of a more ef¬cient and rigorous administration of thousands
of clerks and tax collectors. These ¬scal improvements provided the funds
for a striking increase in the size and strength of the British Navy and of
the armed forces, in general.11 A similar set of ¬scal, administrative, and
military reforms were applied by the Spanish crown in the metropolis and
extended to all its colonies; but what made this strategy distinctive is that
it could have been carried out so systematically by the absolutist regime of
Charles III throughout his vast overseas domains, stretching from California
to Chile and Cape Horn.
That the Bourbon monarchy of Spain should have been able to reforge
a ¬scal military state on an imperial scale and obtain a growing amount of
tax revenues from its colonial subjects despite the lack of representative
political institutions may seem surprising. Such a capacity to raise taxes
in an absolutist regime seems to run counter to the idea “ prevalent in
much current historical and political science literature “ that representative
governments are the best at raising taxes, as well as in contracting public
debt.12 Much has been made of the fact that some of the greatest absolutist
monarchies “ such as that of France, particularly in the eighteenth century “
faced severe problems in expanding tax revenues on a sustained basis.13
Actually, the same problems besieged the Bourbon monarchy inside Spain
itself, since attempts from the 1730s to modernize the tax regime in the
metropolis met with rather limited success.14 However, history offers many
examples of authoritarian regimes “ whether imperial or not “ that were
able to extract great amounts of monies from their subjects.
Recent historical research has demonstrated, in fact, that the implemen-
tation of Bourbon tax reforms was more effective in the Spanish American
colonies than in the metropolis.15 Coercion was an indispensable tool to
increase extraction of monies from colonial subjects, but other instruments
were also used to improve collection and diversify tax resources. Bourbon
administrative reform proved fundamental in this regard as an empire-wide
campaign was launched to increase the number, professionalism, and ef¬-
ciency of ¬scal bureaucrats. The detailed studies by Luis J´ uregui and Linda

11 P. K. O™Brien, “The Political Economy of British Taxation, 1600“1815,” Economic History Review,
2nd series, 41 (1988), 1“32 and John Brewer, The Sinews of Power, Chapters 1 and 2.
The classic statement is Philip T. Hoffman and Kathryn Norberg, eds., Fiscal Crises, Liberty and
Representative Government, 1450“1789 (Stanford: Stanford University Press, 1994). More recent is D.
Stasavage, Public Debt.
For an overview of debates, see R. Bonney, “Towards the Comparative Fiscal History,” in L. Prados,
ed., Exceptionalism and Industrialisation, pp. 191“215.
R. Pieper demonstrates the limitations of tax reform in metropolitan Spain in the eighteenth century.
See Renate Pieper, La Real Hacienda bajo Fernando VII y Carlos III, 1753“1788 (Madrid: Instituto de
Estudios Fiscales, 1992).
The fundamental reference work is H. S. Klein, The American Finances.
52 Bankruptcy of Empire

Arnold, among others, illustrate the increasingly professional character of
the colonial ¬scal administration “ branch by branch “ transforming it into
a complex and highly structured state apparatus.
But to collect more taxes without generating major protests, it was not
enough to have a more professional and more rigorous bureaucracy. As we
have already mentioned, in the viceroyalties of Peru and New Granada, royal
of¬cials initially provoked extreme reactions by tens of thousands of irate,
mostly poor taxpayers, although eventually the new taxes were put in place.
In New Spain, on the other hand, royal functionaries were more careful in
dealing with the privileged corporations that characterized the colonial
ancien regime. They negotiated speci¬c terms of ¬scal innovations with the
great miners and merchants as well as the church “ and after 1770 managed
to avoid major con¬‚icts with the artisan guilds and the Indian peasant
communities (known as rep´ blicas de indios). Historian Alejandra Irigoin has
argued in this regard: “In a political system in which the underlying nature
of the relationship between the crown and its subjects was understood to
be one of consensus, negotiation was a necessary and continuous process.”16
Nonetheless, negotiation was also accompanied by coercion and rigor as
applied by the Bourbon colonial administrations to all taxpayers, whether
Indian peasants or wealthy silver miners.
From a geopolitical perspective, it is clear that the colonial ¬scal regime
had a differential impact in the various regions of Spanish America, as we
have already suggested in our analysis of tax transfers: for example, the
silver-rich colonies tended to subsidize other colonies that bene¬ted from


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