Chapter III—
The Decision to Disentail

Within a few months of the death of Carlos III in 1788, a tempest arose in France whose blasts would convulse the reign of his successor. In 1793 the government of the new French Republic declared war on Spain, and except for two brief respites, Spain would be at war for the next two decades. One of the grave decisions that hostilities forced on Carlos IV was to raise money by the sale of religious properties.

Wars have always placed a strain on the credit of European states, but throughout most of the eighteenth century Spain faced the strain with remarkable success. In part it benefited from dropping its commitments to defend an empire in central Europe after the War of the Spanish Succession, and in part from the growing economy of its empire in America. After 1770 its domestic economy was also growing rapidly, expanding the tax base of the crown, one of whose major sources of revenue was duties on exported and imported goods.^[1]

The Spanish treasury suffered from the cost of Spain's participation in the War of American Independence on the side of France and the new American nation. Because of the effectiveness of the British navy, trade between Spain and its American colonies declined, entailing a sharp loss

[1] Stein and Stein question the growth of the Spanish economy in this period in "Concepts and Realities." They rely on reports of royal ministers. What their sources show is that the ministers were not aware of where growth was taking place. Evidence of growth beyond that offered in Herr, Eighteenth-Century Revolution, can be found in Canga Argüelles, Diccionario de hacienda, s.v. "Libre comercio."

of royal revenues that domestic sources could not make up. To meet the deficit, the government of Carlos III created a form of paper money known as vales reales. They were interest-bearing bonds that were declared to be legal tender for private and public debts. The first issue in 1780 was for 16,500 vales, each of 600 pesos face value, equivalent to approximately 9,000 reales de vellón, the standard unit of currency in late eighteenth-century Spain, for a total issue of about 149 million reales. Each vale earned interest of 1 real per day for the first 361 days each year, almost exactly 4 percent per year. The government paid the interest only once a year, but when the vales were used as currency, it was easy to calculate the total value including interest to date. Legal penalties were prescribed for refusal to honor them, but since the unit value was large, they did not serve for retail purchases, salaries, or similar payments.^[2]

During the war the government made two more issues of vales, for a total of approximately 303 million reales. To put these sums in perspective, one may consider that the annual royal income from ordinary taxes in Spain and America in the five years 1784–88, years of peace, was around 500 million reales.^[3] For these issues, the unit value was 300 pesos each, to make their circulation easier. The effect of creating so much paper money was to depreciate its value vis-à-vis hard currency. At the end of the war the vales circulated at a loss of 13 percent, and at one point they were traded at 22 percent below face value. But the peace of 1783 restored confidence in them, and by 1784 they suffered a loss of only 1 percent. Despite further issues in 1785 and 1788 for approximately 99 million reales to subsidize the building of the canals of Aragon and Tauste, near the Rio Ebro, vales were quoted in these years at face value or even 1 to 2 percent higher. In 1785 and 1791 the crown redeemed 36 million reales' worth of vales.^[4] Between 1789 and 1792 it

[2] Hamilton, War and Prices, 79. All the issues of vales reales are listed in ANP, AF IV, 1608 , 2 : 11. The peso in question was defined as 128 cuartos. One cuarto was 4 maravedís, and 34 maravedís equaled one real. The peso was thus 15.059 reales (Hamilton, War and Prices, 22 n. 69).

[3] Barbier and Klein., "Revolutionary Wars," Table 1, gives the total receipts of the royal General Treasury, 1784–1807. For the five years 1784–89, they average 636 million reales, but they include loans and other extraordinary income. Cuenca Esteban, "Ingresos del estado," Table 4, breaks down the income of the General Treasury into ordinary and extraordinary income but gives figures starting in 1788. His figures for ordinary income 1788–92 are 20 percent lower than Barbier and Klein's figures for total receipts for these years, a ratio that, when applied to Barbier and Klein's mean total for the earlier years, gives 508 million.

[4] Hamilton, War and Prices, 79–82. Hamilton also mentions an issue of 3,990,000pesos in vales in 1791 by the Compañía de Filipinas, but this never became part of the royal debt. The monthly quotations of the vales from their first issue until 1808 are contained in ANP, AF IV, 1608 , 2 : 10 (see Appendix D). Further statements in the text of their rate of exchange against specie are based on this document, unless otherwise noted.

also paid off a loan of 3 million florins (or guilders) contracted in 1782 with the Amsterdam bankers Hope and Company and Fizeaux Grand and Company, and early in 1793 it successfully negotiated a new loan with Hope for 6 million florins.^[5] Spain was in a strong financial position at the opening of the last decade of the century and appeared to have inaugurated successfully the use of paper money, a transition that proved long and difficult for other countries, especially France.

Spain's entry into the war against the French Republic, following the execution of Louis XVI in 1793, initiated a new period of trial for its fiscal strength. The war was fought primarily on land, at the eastern and western ends of the Pyrenees. Very rapidly the Spanish royal finances suffered from the effects of the conflict. Although historians are developing a picture of the royal income for these years, the exact royal fiscal situation remains unclear.^[6] Until full accounts are developed, the most reliable information is still found in reports left by contemporary officials of the ministry of hacienda, which if not exact, tell us the conditions as they understood them and provide the information on which they relied in making their decisions.

Two reports of 1798 and 1799 by Miguel Cayetano Soler, secretary of hacienda after August 1798, have been preserved in the Real Academia de la Historia.^[7] In addition, José Canga Argüelles published in his Diccionario de hacienda a memoria he directed to the king on the state of royal finances in 1802, when he was an official of hacienda.^[8] Finally, when Napoleon took over the crown of Spain in 1808, he ordered a series of reports prepared on the Spanish royal finances, which have been preserved in the French archives.^[9] These provide additional details to fill in the picture of the rapidly developing crisis.

The crown found itself faced with a ballooning annual deficit. In 1793 its expenses (exclusive of the colonies) were 709 million reales, its

[5] Buist, Hope and Co., 280–81. Buist calls the Dutch monetary unit the guilder, but the Spanish documents always refer to it as the florin.

[6] Cuenca Esteban has sought in vain the full accounts of the royal finances, including expenditures ("Ingresos del estado," 184).

[7] Col. SG.

[8] Canga Argüelles, Diccionario de hacienda, s.v. "Memoria sobre nivelar en tiempo de paz los ingresos y los gastos del erario español, escrita de orden superior in 1802 por D. José Canga Argüelles. . . ."

[9] ANP, AF IV, 1608 , 2 –2 . There are 143 documents in the collection.

income 584 million.^[10] In the next three years expenses were 946, 1,029, and 1,070 million reales, while in 1796, a year of peace, income including that received from America rose to only 730 million reales.^[11] The total deficit for these four years was 1,269 million reales,^[12] equal to about two years' income.

The first response of the government to the urgent need for money was to revive the creation of vales reales. On 1 February 1794 it issued 16,200,000 pesos' worth of vales in units of 300 pesos. Concerned, however, that the vales would lose their gilt-edged reputation, the king signed along with this decree another, which proclaimed these and earlier vales to be a "national debt contracted in the public interest" and created an amortization fund (fondo de amortización ) to take charge of extinguishing this debt. The fund was provided with two sources of income. All municipalities were ordered to pay the fund 10 percent of their incomes from local taxes and the rent of municipal properties, the propios y arbitrios, as they were called. In addition, the national Bank of San Carlos, chartered in 1782 partly to help float the early vales, was to contribute the fees it received for the export of specie from Spain, which it alone was permitted to do. The royal advisers estimated that the combined income from these two sources would be 1 million pesos per year. Since there were now vales worth 50 million pesos in circulation, exclusive of those of the canals of Aragon, the provision was intended to maintain confidence in the vales rather than liquidate them rapidly. With this purpose in mind, the king proclaimed: "In no situation or urgency, whatever it may be, can these [funds] be seized for other purposes; concerning this I issue the strictest orders." The amortization fund was to be placed in a deposit "under three keys" to be held by the secretary of hacienda, the governor of the Council of Castile, and the Tesorero Mayor. It could not be touched without the orders of all three officials.^[13]

The war with France forced the government to make two more issues of vales reales, one on 15 September 1794 for 18 million pesos and an-

[10] According to Col. SG, Soler (1799), f. 211. Canga Argüelles says 730 and 629 million respectively (Diccionario de hacienda, s.v. "Memoria sobre nivelar"). Cuenca Esteban gives 567 million receipts from ordinary sources of income ("Ingresos del estado," 197, Cuadro 4).

[11] ANP, AF IV, 1608 , 2 : 25, f. 35. (Canga Argüelles, Diccionario de hacienda, s.v. "Memoria de D. Francisco Saavedra al Señor D. Carlos IV, 4 de mayo de 1798," gives the same figures.) Cuenca Esteban gives income from ordinary sources for 1794, 1795, and 1796 as 597, 489, and 790 millions.

[12] Col. SG, Soler (1799), f. 212.

[13] Both RDs, 12 Jan. 1794 and 16 Jan. 1794, in AHN, Hac., libro 8046, no. 5013.

other on 15 March 1795 for 30 million pesos. These issues included vales of 150 pesos, half the smaller previous denomination. The king was seeking to increase their usefulness and circulation, but since the smallest denomination was over 2,000 reales, they were still far from modern paper money destined for everyday transactions.^[14]

Each of these issues was accompanied by the provision of new sources of income for the amortization fund. The first established a tax of 6 percent on income from the rent of agricultural land and 4 percent on rents of buildings. The 6 percent also applied to income from seigneurial jurisdictions and other royal rights that had been alienated to individuals. These taxes affected all laymen (including nobles). In addition, having obtained the approval of the pope, the king ordered the clergy to provide an annual subsidy of 7 million reales out of its income from properties.^[15] For the 1795 issue the king established another levy on the church, again with papal approval, which required that income from vacant church offices and benefices be paid into the fund.^[16] The royal counselors soon found it advisable to strengthen further the backing of the vales. On 21 August 1795 the king decreed a capital levy of 15 percent on all property acquired in the future by secular vínculos and mayorazgos and ecclesiastical manos muertas, to go to the fund.^[17]

The decree that established the tax on income from rented property and the ecclesiastical subsidy stated that the king chose these sources of income in order to spare "the poorest classes of the nation," who already "contribute with their persons and property," and to burden instead "the property-owning subjects who live off unearned income [vasallos hacendados que viven de sus rentas ]." Earned income was exempted: "If [the owners] cultivate [the lands] themselves or for their account, they will pay nothing for the moment." The king justified the 15 percent capital levy on property transferred to ecclesiastical or lay entail as "a small compensation for the prejudices that the public suffers from the removal of these properties from the market." These statements echo the reform policies of the previous reign. The first recalled the ill-fated single tax envisaged by the Marqués de la Ensenada, while the levy on entailed properties was inspired by the repeated denunciations of en-

[14] Hamilton, War and Prices, 83. 1 use the official dates of emissions, given in RC, 8 Sept. 1794, AHN, CCR, no. 1086, and in ANP, AF IV, 1608 , 2 : 11. For contemporary Spanish thought on paper currency, see Fernández Marugán and Schwartz, "José Alonso Ortiz."

[15] AHN, CCR, no. 1086. Godoy, Memorias 1 : 168–69, furnishes details on the decree.

[16] Godoy, Memorias 1 : 170–71, quotes the decree in part.

[17] RCs, 21 Aug. 1795, AHN Hac., libro 8047, nos. 5263, 5264.

tail by the reformers. The royal counselors had found a pretext to introduce more just and beneficial tax policies—a figurative as well as literal silver lining to the clouds of war. On 20 November 1795 the hard-pressed king went even further, abolishing the servicio ordinario y extraordinario y su quince al millar, a property tax on commoners collected in Castile. He could ill afford to spare it, but the decree stated that he adopted the measure in order to encourage agriculture and reward his poorest and most numerous subjects for their loyal service in the present war.^[18]

The three wartime issues of vales amounted to 964 million reales, three-quarters of the total deficit for the four years 1793–96. To make up the remainder of the deficit, the crown resorted to direct taxes and loans, but its policy remained the same—where possible spare the king's productive subjects. New regressive taxes on salt and tobacco were matched by a rise in the price of stamped paper, used for notarized documents, and the extension of its use to ecclesiastical courts, a 4-percent deduction from salaries of royal officials earning annually 8,000 or more reales, and a one-time levy of 30 million reales on the income of the church.^[19]

Despite these efforts, tax revenues remained very sticky.^[20] At some time in the past in many parts of Castile the rentas provinciales had been converted into fixed annual payments levied on town and city councils, and their amount, known as the encabezamiento, could not be raised easily to reflect inflation or increased economic activity.^[21] Under the circumstances, the vales suffered a loss of confidence. After July 1794 they were quoted at a discount, and by the last month of the war they were 21 percent below par. Shaken, the government was forced to issue bonds for 240 million reales, similar in unit value to the largest vales but with 5-percent interest, higher than the vales. To make the offer more attractive, numbers would be drawn by lot, and the owners of the bonds bearing them would receive cash prizes totaling over 3 million reales.^[22]

France and Spain signed a peace treaty at Basel in July 1795. The

[18] RD, 20 Nov. 1795, Nov. Rec., VI, xvii, 12.

[19] Herr, Eighteenth-Century Revolution, 382.

[20] Cuenca Esteban shows income from rentas provinciales and ordinary taxes for 1793 to 1795 as 128, 125, and 140 million reales ("Ingresos del estado," Cuadro 4). See also Barbier and Klein, "Revolutionary Wars," which develops the inflexibility of the Spanish tax structure.

[21] The encabezamiento for Salamanca province in 1795, along with others, is in AGS, Dirección General de Rentas, Hacienda, legajo 2664.

[22] Loan of 31 July 1795, partially quoted in Godoy, Memorias 1 : 172–73, and referred to in RC, 11 July 1797, AHN, Hac., libro 8049, no. 5612.

effect on the royal credit was immediate. The discount of the vales declined from 22 percent in August to 10 percent or less in September, although it rose slightly in succeeding months. The royal counselors could congratulate themselves that they had survived the fiscal crisis, but their satisfaction rapidly vanished. The British government, still at war with France and convinced that Spain was now helping its enemy, ordered its navy to attack Spanish shipping. Faced with this threat, Carlos IV swallowed his regal pride and family loyalty and signed an alliance with the French Republic on 18 August 1796, and on 7 October 1796 he declared war on Great Britain. This proved to be the most momentous decision of the reign.

The first secretary of state, Manuel Godoy, who had flaunted the title of Prince of the Peace since the end of hostilities with France, has usually been denounced for the error of this decision. It is difficult to see, however, what other course the Spanish government could have taken, since it lacked a navy strong enough to protect its neutrality between the two powerful antagonists, France and Great Britain. The United States was to find itself caught in a similar predicament a few years later and eventually forced also to declare war on Britain. Spain, with more at stake and a tradition of alliance with France against England, opted for war with less hesitation, but the result, which its leaders could not foresee, was disaster.

On 14 February 1797 British ships under Horatio Nelson attacked a larger Spanish fleet off Cape Saint Vincent, the southwest promontory of the Iberian Peninsula, and won a major victory. Nelson then placed Cádiz under tight blockade, and the British navy intercepted shipping into other Spanish ports. The blockade at times became almost complete. Shipments of specie from America could not reach Spain, and the income from customs duties declined sharply, affecting a major source of royal income.^[23] The crown's income in 1797 was 487 million reales (it had been 584 in 1793), while its expenses rose to the unheard-of figure of 1,423 million, leaving a deficit of 945 million, a sum far in excess of the total expenditures in a year of peace.^[24] A sign of the seriousness of

[23] Mean annual income from customs, 1793–95, was 130 million; in 1796, when Spain was at peace, it was 211 million; for the five years 1797–1801, it averaged 78 million. (These figures may be misleading, since after 1798 the customs of Cádiz were assigned to the Caja de Amortización and may not have entered the treasury accounts.) Income from America, 1793–95, averaged 123 million; in 1796 it was 232 million; from 1797 to 1801, it averaged 17 million (Cuenca Esteban, "Ingresos del estado," Table 4).

[24] Col. CG, Soler (1799), ff. 211, 215. Cuenca Esteban, "Ingresos del estado," Cuadro 4, gives the income for 1797 as 496 million.

the situation was the decline in value of the vales. From 1796 to 1798 they were discounted between 15 and 20 percent. Besides being a threat to the public credit, this discount produced an added expense for the royal treasury. It was obligated to accept vales at face value, but when it placed them again in circulation, no doubt to avoid public anger, it did so at the current market value, despite the decree of their legal tender. Thus in 1797 it paid out 1,080 million in vales to meet expenses of 900 million.^[25]

It was impossible to resort to new taxes to cover this deficit. Additional levies on the lower classes conflicted with accepted policy, and they would have been ill advised in any case. The royal counselors no doubt recalled that a new levy had brought a rising of the countryside in Galicia in 1790–91.^[26] Now more troubles occurred, riots in Guadalajara and Seville in January 1797,^[27] and others in Asturias and Seville in the spring of 1798.^[28] Among the higher sectors of society, merchants and manufacturers, especially those of Catalonia and the Basque provinces, who depended on the colonial market, were in a state of depression that ruled out additional taxes on them. The privileged classes, clergy and property owners, had been angered by the taxes instituted during the French war and still in effect. A royal cédula of 8 June 1796 had added to the discontent of the clergy. Hitherto many ecclesiastical properties had been exempt from tithes. The cédula, for which the pope had given his approval, now required payment of tithes from harvests on all properties owned by religious orders, bishops, and archbishops. The resulting income was to go to the local priests, but the king insisted on receiving his usual two-ninths share of all tithes (the tercias reales ).^[29] Godoy recalled later, "Few acts as fair as this one met greater opposition and aroused more displeasure among the upper privileged classes."^[30] The measure could not solve the crisis, however, and the royal advisers found themselves forced to choose between more loans and more issues of vales.

Since no one wanted more vales—on the contrary it was urgent to shore up the credit of those in existence—they decided on new loans. On 1 July 1797 the king offered for sale 100 million reales' worth of

[25] Col. CG, Soler (1798), f. 202.

[26] Herr, Eighteenth-Century Revolution, 249.

[27] Ibid., 396.

[28] Moniteur (Paris), 12 prairial VI (31 May 1798).

[29] RC, 8 June 1796, AHN, Hac., libro 8048, no. 5313; also in Nov. Rec., I, vi, 14.

[30] Godoy, Memorias 1 : 179.

5-percent bonds with a face value each of 4,000 reales. The previous loan of 1795 had been in units of 10,000 reales, but now, the decree said, the king wanted to offer "the less well-off class of the nation" the "advantages" of subscribing. The bonds could be bought for vales or specie, and they would be paid off in twelve yearly batches in the currency in which they were purchased. The practice used in 1795 of offering prizes as an inducement to prospective purchasers would be continued: a lottery to be held in March 1798 would pay out 3 million reales to the two thousand owners of the bonds with the lucky numbers, first prize being 100,000 reales.^[31] The loan was rapidly subscribed, and on 29 November 1797 the king offered another 60 million to the public.^[32] The second offering was less successful, and the government closed it out in April 1799 without all the bonds having been sold.^[33]

At this critical moment, the ministry underwent a major transformation. Since 1792 Manuel Godoy had been its leading figure. From the start he had been unpopular. Of obscure Extremaduran origin and only twenty-five at the time of his appointment, he appeared to owe his rise to his intimate relations with the queen. Few contemporaries recognized that he was trying to revive the enlightened policies of Carlos III, after the reactionary interlude introduced by the Conde de Floridablanca in the early years of the French Revolution. Instead they blamed him for the military and naval defeats and the unpopular new taxes. The anti-revolutionary clergy found him especially dangerous, and the privileged sectors adversely affected by his fiscal policies were also ill disposed toward him. At the end of 1797, Godoy obtained from the king the appointment of a new group of ministers who enjoyed high repute and could be counted on to support reform. Jovellanos, still in banishment in Asturias, with some misgivings accepted the post of secretary of grace and justice, with responsibility for religious affairs. The secretaryship of hacienda went to Francisco de Saavedra, an equally upright royal servant with a good reputation in financial matters. A few months later, on 30 March 1798, Godoy resigned as first secretary of state. His unpopularity was certainly one reason, and the French Republican government also worked for his overthrow, probably because it believed he did not support the alliance between the two countries enthusiastically.^[34] Saave-

[31] RC, 15 July 1797, AHN, Hac., libro 8049, no. 5612, quoted in part in Godoy, Memorias 1 : 177–78.

[32] RC, 29 Nov. 1797, AHN, Hac., libro 8049, no. 5668; Godoy, Memorias 1 : 178.

[33] Hamilton, "Guerra e inflación."

[34] Herr, Eighteenth-Century Revolution, 398–99.

dra was given his position as first secretary of state with responsibility for foreign affairs, in addition to his direction of hacienda.

Hopes now centered on Saavedra to perform the miracle that would save the public credit and raise the income needed to pursue the war. On his recommendation, Carlos IV on 9 March 1798 formally established an Amortization Fund (Caja de Amortización) as a separate institution with its own director. To emphasize its separation from the royal treasury, its offices were located in the Bank of San Carlos, and it was to use the bank's agents in the provinces to collect its moneys. The king charged it with redeeming arid paying the interest on three types of government debt: the vales reales, the loans of 1795 and 1797, and the debts contracted outside the monarchy. It was assigned the sources of income previously established to redeem the vales as well as those that guaranteed the other types of debt. These included the income from the customs house at Cádiz and part of the income from the sale of stamped paper. The king's cédula expressed the hope that the Amortization Fund would end current speculation in vales and would find ways to lower the interest rate, "in order to encourage the industry and commerce of the nation." ^[35]

The creation of the new fund had only a passing effect on the royal credit. The discount on the vales declined from 19 to 16 percent, but by May it was back to the earlier figure. Abroad it failed to raise confidence in the credit of the Spanish crown. When the government sought to float a loan in Holland for 3 million florins to repay a Dutch loan of 1778 for the Canal of Aragon that now fell due, its bankers in Amsterdam, the Widow E. Croese and Company, could not raise half that amount.^[36]

By May the treasury had outstanding bills of 26 million reales against 10 million on hand, of which only 71,000 were in specie and the rest in vales.^[37] The predicted deficit for the year was now 800 million reales. In the emergency the king appointed a special committee, or junta, of ministers and leading merchants to provide a solution to the fiscal dilemma. The Conde de Cabarrús headed it. He had been a leading financial adviser of Carlos III, but Floridablanca had obtained his imprisonment in 1790 as a dangerous subject, and he had since been out of favor.^[38] The

[35] RC, 3 March 1798, AHN, Hac., libro 8050, no. 5707, quoted in Godoy, Memorias 1 : 182–86. Godoy claims credit for helping develop this cédula, along with Saavedra and Jovellanos.

[36] Col. CG, Soler (1799), f. 214. The Moniteur of Paris reported that the bankers refused to float the loan (22, 28 prairial VI [10, 16 June 1798]). See Buist, Hope and Co., 280, 283. On the loans taken out from Dutch bankers by Carlos III and Carlos IV, see also Riley, International Government Finance, esp. 165–74.

[37] Col. CG, Soler (1799), f. 214.

[38] Herr, Eighteenth-Century Revolution, 261, 393.

junta studied various options but its only immediate achievement was an appeal to the patriotism of the king's subjects in Spain and America. A decree of Carlos IV of 27 May 1798 admitted "an enormous gap" in available funds and urged his subjects to contribute to a voluntary public donation or else to a patriotic loan without interest, to be repaid after the war was over.^[39] As one might expect during a war that failed to arouse enthusiasm and that many blamed on Godoy, the results were disappointing. Where the junta hoped for a public donation of 200 million, it received only 23 million, and the patriotic loan produced only 1.5 million.^[40] The government also pressed for a loan from the church, to be paid off by one of the royal incomes from tithes (the excusado ) and got 36 million this way, a mere drop in the "enormous gap."^[41]

Saavedra did not survive the crisis in office. On 18 May Carlos IV placed the ministry of hacienda in the hands of Miguel Cayetano Soler. Formally Soler was still under the orders of Saavedra, who remained first secretary of state, but two months later the latter fell seriously ill and had to retire from the ministry. Soler became secretary of hacienda in his own right.^[42] Mariano Luis de Urquijo, known as an enemy of the conservative clergy, became acting first secretary. Jovellanos also retired at this time for reasons of health.^[43] It was Urquijo and above all Soler who had to face the crisis and save the nation. Urquijo was in office only until December 1800, when Godoy returned to favor, but Soler remained secretary of hacienda until the end of the reign.

2

At the end of August 1798, Soler prepared a report for the king that summed up the gravity of the situation: "Everything therefore calls inexorably for extraordinary measures to produce massive funds, without which the public credit will be ruined. If Your Majesty should fail to pay punctually the royal servants and the creditors of the state, the stability and very existence of the government will be jeopardized."^[44] Soler indeed had in mind "extraordinary measures" to save the crown, but he

[39] RD, 27 May 1798, AHN, Hac., libro 8050, no. 5754.

[40] The exact figures are 23,048,281, given in Col. CG, Soler (1799), f. 214, and 1,541,000 in ANP, AF IV, 1608 , 2 : 14. Soler says only 693,750 for the patriotic loan, but more must have come in later.

[41] Col. CG, Soler (1799), f. 14. The exact figure is 35,781,530. For the excusado, see Appendix G.

[42] Matilla, Catálogo 1 : 533, Orden general no. 5750.

[43] Herr, Eighteenth-Century Revolution, 421.

[44] Col. CG, Soler (1798), f. 204.

dressed them up in attractive colors. He had discussed his proposal fully with Saavedra, he said. "The best statesmen have much desired it and public opinion has accepted it." It was "to sell the real property of brotherhoods, charitable foundations, hospitals, and ecclesiastical benefices (patronatos y capellanías ), and also the estates belonging to the encomiendas of the military orders, and deposit the product in the Amortization Fund at 3-percent interest, to be used to extinguish the vales reales and royal bonds."

The idea of a direct attack on the wealth of the church was nothing new, he added.

I have read a memoir written in August 1794 and another in October 1796 when the present war was declared, which show with perfect clarity not only the great public benefits that would accrue to the state, as anyone can perceive, from the sale and subsequent circulation of those properties and the increase they would bring to the income of the crown, but also the private gains that those foundations would obtain by receiving punctually the interest on their capital. . . . The bad administration of those properties is so notorious that no one fails to lament the harm that their neglect and decay cause the public. Their yields, which could be a great source of national wealth, are reduced, and the pious intentions of the founders are betrayed. For these reasons alone, therefore, the transfer of these properties into active and taxpaying hands would be seen as very important and much applauded.^[45]

Soler knew well how to sweeten the pill!

He was correct in saying that statesmen had long discussed the problem of the extensive properties that belonged to ecclesiastical manos muertas, but on the whole they had muted any suggestions for their alienation. As we have seen, they fixed their eyes rather on the baldíos. Yet they never forgot that the manos muertas were a major form of entailed property and stood in the way of economic freedom. Campomanes first became famous as author of the Tratado de la regalía de amortización, which appeared in 1765. It was intended as a defense of a proposal under review by the Council of Castile that would require royal approval before a religious institution could acquire further property. Campomanes argued, as others had before him, that since canon law prevented the clergy from selling properties of religious bodies, eventually all property would belong to the church unless a restraint

[45] Ibid., ff. 205–6. The memoir of 1794 that Soler refers to is found in part in Sempere y Guarinos, Historia de los vínculos, 417–25. I do not know the one of 1796, but it may be the memoir of Juan Sempere y Guarinos given to Godoy in Nov. 1797, ibid., 431–32.

were placed on its acquisition. He went on to say, "If already at the beginning of the last century it was believed advisable (conveniente ), as we have seen, to dismember the superfluous property that the church already then had in excess, . . . how much more true this is today, given the unchecked expansion of acquisitions in the century and a half that has elapsed since then."^[46]

The Council of Castile failed to recommend the law, convinced by opposing arguments that the manos muertas were not yet so vast as to pose a serious threat.^[47] The reformers turned their attention elsewhere, as the need for food became the most urgent item on their agenda. When they looked again at land belonging to the church, it was with the idea of settling farmers on it. Then they discovered that there were two types of religious properties, those that belonged to recognized ecclesiastical entities like parish churches, cathedral chapters, and religious orders, and those that could be considered part of the public domain. The latter were properties that had been donated as endowments to pay for the performance of religious services and processions in memory of defunct donors (aniversarios and memorias ), to maintain shrines and altars devoted to the worship of saints, to contribute toward the activities of religious confraternities, and to support charitable establishments such as orphanages, asylums, and hospitals.^[48] These endowments were all known familiarly as obras pías. Another type of fund, more ambiguous in its nature, were the patronatos and capellanías, funds to provide income for members of the clergy. Many were sinecures, in the proper sense of the term, posts without souls to care for, and can be loosely translated as benefices. Nomination to patronatos de legos were made by laymen, presumably descendants of the founder, and thus were a kind of family property; nomination to capellanías came from ecclesiastical authorities such as bishops.^[49]

As a rule the properties of all these foundations and funds belonged to manos muertas. The catastro of the Marqués de la Ensenada listed them under "ecclesiastical property," and they were administered by the secular or regular clergy or by organizations like confraternities that were tied to the churches. Royal officials nevertheless distinguished be-

[46] Chap. 20, quoted in Justo Fernández, "'Regalía,'" 74.

[47] Ibid., 78–79.

[48] For examples of such bequests in sixteenth-century Seville, see Pike, Aristocrats, 117.

[49] Patronatos de legos were also known as capellanías laicales (see circular, 3 Mar. 1807, AHN, Hac., libro 8058, no. 6871). I am indebted to M. Christian Hermann for helping to clarify this point.

tween their properties and those belonging outright to churches and religious orders, as is evident in the recommendation of Olavide that "the government make many small owners with the lands that it has in its possession, such as those belonging to the towns [los propios y arbitrios], those of the military orders, those that belonged to the Company [of Jesus] and those belonging to capellanías and obras pías."^[50]

The reformers were very critical of the state of the lands belonging to obras pías and capellanías. Francisco Bruna observed, "There is nothing more common in Andalusia than the untilled scrubby lands and unkept vineyards of abandoned capellanías. When one sees a field in this condition in the countryside, one naturally remarks that it must belong to a capellanía."^[51] Jovellanos was even more severe. Medieval monarchs, he said, quite properly granted lands and other sources of income to the clergy to reward them for their services in war. Later, however, unrestricted gifts inspired by the piety of the faithful turned this practice into an abuse. "How many capellanías, patronatos, aniversarios, memorias, and obras pías have been established since the laws of Toro [of 1505] . . . allowed the makers of wills to give property to the church as a sacrifice of atonement!" The result, he complained, was a large number of clergymen with no useful function and great harm to agriculture. The church should be endowed with royal bonds and similar holdings rather than land.^[52] His reasoning seemed to rest on the difference between land, a limited good, and credit, of which there could be no finite amount.

Both Jovellanos and Olavide looked rather to the baldíos to solve the agrarian problem. Just as the Ley agraria was published, however, the troubles of the royal exchequer became acute, inclining the royal advisers to rethink the needs of the nation. In 1794 they received a memoria (the author is not identified) that echoed the ideas of the reformers—Spain is by nature a rich country made poor by its institutions, which prevent the multiplication of small farms—but stressed the possibilities inherent in a sale of religious properties. The estates of capellanías, hermandades, and obras pías, it said, must be worth 200 million pesos, and those of the churches and religious orders another 300. If this enormous sum were to be deposited in the royal treasury at 3-percent interest, "with the proper solemnities of papal bulls and the rest that is called for," the government would be able to attack Spain's enemies with such vigor that they would be "confounded and filled with terror by the mere

[50] Mem. ajust. (1784), §810, 258. See also §831, 263.

[51] Ibid., §1025, 299.

[52] Jovellanos, Informe, 102.

news of such a measure."^[53] The crown would gain funds, the nation farmers, the church a steady income, and the poor clergymen an honest salary. "The obras pías, freed from the corruption of their administrators, will produce more income and it will be spent for the holy ends intended by their founders."^[54]

Set aside in 1794, this proposal received new attention after the outbreak of the war with Britain. The Dirección de Fomento General (Office of Development) brought the idea to the attention of Godoy in September 1797. "There are," it said, "according to the census of 1787, 773 hospitals, 88 hospices, 26 houses for retirement, 51 foundling homes, a total of 938 establishments. . . . The obras pías are much more numerous, and all together account for an extraordinary mass of properties withdrawn from circulation, whose administration and cultivation are generally in the worst neglect . . . producing only 1- or 2-percent income for their owners."^[55] Their sale by the crown in return for a fixed interest on the capital would benefit their owners, provide the crown with "great assistance . . . in the present circumstances," and, if the measure were extended to other similar properties, "the national debt would be extinguished in a brief time."^[56] Juan Sempere y Guarinos, a former member of the Junta on the Agrarian Law of the Economic Society of Madrid, sent Godoy a similar memoir two months later. In May 1798 Saavedra, the secretary of hacienda, now fully convinced of the urgency of the matter, wrote the king a report on the critical financial situation that said, "What is most important is to decide once and for all on the sale of the properties of hospitals, brotherhoods, benefices, and obras pías." The extraordinary ministerial junta of May 1798 reviewed the proposals and gave them its blessing.^[57]

In February 1798, after Saavedra became secretary of hacienda and before Godoy's resignation, the king decreed a measure that offered the junta a precedent. Using the arguments of a generation of reformers in favor of the disentail of municipal properties, the king, on the advice of his ministers, ordered the sale at auction of buildings belonging to municipal propios that were rented out as private residences. The resulting

[53] Memoria in Sempere y Guarinos, Historia de los vínculos, 417–25 (quotation on 421).

[54] Ibid., 423.

[55] The text of the project in ibid., 425–30 (quotation on 426–27).

[56] Ibid., 430.

[57] Ibid., 431–32; Canga Argüelles, Diccionario de hacienda, s.v. "Memoria de D. Francisco Saavedra al Señor D. Carlos IV, 4 de mayo de 1798." On this subject see also Merino, "Hacienda."

capital was to be deposited with the royal tobacco administration, which would pay the municipal governments 3 percent on their deposits. The explanation offered for the measure was that private owners would take better care of the houses, the towns would receive a surer form of income, and the nation would gain from the free circulation of property, arguments drawn straight out of Jovellanos and his predecessors.

The act seems almost a trial balloon for ecclesiastical desamortización, and Godoy presents it in his memoirs as the first step in this direction, for which he takes credit.^[58] We now have a study of the effects of this decree in the city of Salamanca. While local officials began within a month of the order to prepare for its execution, the first sales were not completed until November 1799. By 1804 eighty-two separate sales had disposed of 90 percent of the houses belonging to the city.^[59] In advising the king to sell off religious properties in August 1798, however, Soler could have been encouraged by the reception given to this order, but he could not yet know how it would work out. A more positive precedent was the rapid disposal of Jesuit properties after 1769.^[60]

One can appreciate the dilemma faced by the king and his counselors. On the one hand, the accursed French revolutionaries had confiscated the properties of the church to pay off their national debt. On the other, the Spanish crown faced a bankruptcy like the one that forced Louis XVI to call the Estates General and thus begin the process that ended with the fall of the monarchy and his own execution. Soler's warning that "the stability and very existence of the government" were in danger voiced the crown's fear of fiscal insolvency inspired by the Gallic experience. But could Spain not avoid the catastrophe by adopting the French policy as a preventive measure? It would save the crown while doing no harm to the church, because the king would acknowledge the full value of its confiscated properties. How could the measure be criticized if the institutions affected were guaranteed a larger income than they now received in rents? Such was Soler's word to the king at the end of August. Carlos IV, sadly missing the moral support of Godoy and doubtless tormented by the perils of bankruptcy, approved Soler's proposal almost at once.

On 19 September 1798 Carlos signed four decrees that incorporated the recommendation of his secretary of hacienda. The most important read in part as follows:

[58] Godoy, Memorias 1 : 179–80, which quotes part of RC, 21 Feb. 1798.

[59] Infante Miguel-Motta, "Desamortización."

[60] See above, Chapter 1, section 7.

In order to continue procuring the welfare of my beloved subjects by all possible means amid the present urgent needs of the crown, I have believed it necessary to dispose of a massive fund that can serve two objectives. One is to substitute for the vales reales another debt with lower interest and fewer problems. The other is to give relief to industry and commerce by extinguishing the vales reales through more effective measures than those already adopted. Since my sovereign authority to make use of public establishments for these and other ends of the state is undisputed, I have resolved after mature consideration to alienate all the real property belonging to hospitals, hospices, houses of charity, homes for the aged, foundling homes, confraternities, memorias, obras pías, and lay patronatos. The product of these sales will be deposited in my Royal Amortization Fund at 3-percent interest per annum, as will the capital of any censos [obligations] owed to these establishments and foundations that are redeemed.^[61]

The decree furthermore "invited" the archbishops, bishops, and other prelates to alienate "properties belonging to capellanías colativas [benefices whose holders were appointed by prelates of the church] or other ecclesiastical foundations, depositing the product in the Amortization Fund at 3-percent annual interest." The logic of the decree is evident. It interpreted the possessions of charitable institutions and other obras pías and endowments for religious services to be public property, under the sovereign authority of the crown, and so too benefices whose holders were nominated by laymen (patronatos de legos). The king could dispose of such properties at will. Endowments for benefices under the full control of ecclesiastical prelates escaped the king's authority, but he could appeal to the prelates to help meet the national crisis.

Two other decrees ordered the sale of two other types of real property and the use of the product to redeem the vales. One were the possessions of the Company of Jesus that had not yet been sold.^[62] The other affected the properties of the Colegios Mayores, six residential colleges located at the Universities of Salamanca, Valladolid, and Alcalá de Henares. Carlos III had tried to reform them to eliminate the influence of the partisans of the Jesuits, but instead they had fallen into decline. The king now ordered their income from rents and tithes paid into the Amortization Fund and their properties sold, except those used for educational purposes, which went to the universities.^[63] The income from specific Jesuit properties had been assigned to certain obras pías; the decrees left in the air who, if anyone, was to receive the 3-percent interest

[61] RC, 19 Sept. 1798, AHN, CCR, no. 1221.

[62] RC, 19 Sept. 1798, ibid., no. 1217.

[63] RC, 19 Sept. 1798, ibid., no. 1222.

payable on the capital realized by the sales of the remaining properties of these two sets of institutions.

The fourth decree was distinct in nature. It gave permission to owners of mayorazgos and vínculos and other titles "that are inherited according to the rules observed in the mayorazgos of Spain" to sell their real properties at public auction provided they deposited the net proceeds in the Amortization Fund, "not withstanding whatever clauses [in their acts of foundation] may prohibit [their] alienation." ^[64] The king explained ingenuously that the purpose of the decree was to allow holders of entailed estates to contribute to the patriotic loan without interest that he had opened the previous May, but he guaranteed 3-percent interest to future owners of the mayorazgo, so that the heirs of the contributor should not be defrauded. The entailed estates would still exist, but in the form of royal obligations. Indeed, the king offered to pay the present owner the interest at once if his needs prevented him from subscribing to the patriotic loan. Royal permission to sell entailed family estates was nothing new, but before it had usually been given to individuals in financial need.^[65] The decree extended the authorization to all owners of entailed estates, thereby establishing a pregnant precedent that national urgencies could override private articles of vinculación.

3

The four royal decrees of 19 September 1798 initiated the long process of desamortización in nineteenth-century Spain. A number of developments contributed to the final decision. Most obvious was the urgency of the fiscal crisis. The decrees promised a sure way to shore up the faltering credit of the monarchy and solve the current fiscal dilemma. The owners of vales reales could use them at full face value to buy properties put up for sale, and the crown would be able to retire the vales from circulation as it received them in payment for properties. Henceforth the creditors of the crown would be the privileged, unproductive sectors whose properties were sold, the religious foundations and the individual clergymen who profited from them, and the landed owners of vinculos, to the extent that they chose to collaborate, rather than the merchants and other members of the productive classes who had been saddled with the burden of the vales that circulated at ever-declining market value.

[64] RC, 19 Sept. 1798, ibid., no. 1216.

[65] Jago, "Influence of Debt."

Although the measures avoided new taxes on all levels of society, they fitted in with the policy of tapping the resources of the idle rich rather than the industrious poor to pay the expenses of the state. The royal debt would remain, but consolidated at an interest of 3 percent rather than the 4 percent paid on vales or the 5-percent interest on the recent loans. At one blow the annual cost of servicing the debt would be reduced by at least a quarter. At the same time, the income of the crown would increase because the properties of the obras pías would lose their tax-exempt status as they came into the hands of laymen. Their harvests would be subject to alcabalas and similar imposts. Such was Soler's plan. It had one weakness: its success depended on the crown's not putting back into circulation the vales received—that is, on the product of the sales actually going to the Amortization Fund. This in turn depended on balancing the budget, an achievement hardly possible as long as the war with Britain continued. For the moment, however, the properties allocated for sale seemed so vast that even the expenses of the war were not a cause for worry.

Even though the decision to disentail was directed primarily at finding fiscal resources that would solve the current crisis, it was also inspired by the long consideration of the need for agrarian reform. The demands of war had, however, produced a major change in the plans of the agrarian reformers. The king would not, as they had urged, distribute the baldíos to impoverished farmers and laborers at modest cost in a kind of Old World Homestead Act or sell them to men of wealth to raise money for an economic infrastructure. The urgent need for liquid funds meant that the king must put properties up for sale at a good price, and this meant offering buyers not barren wastes but lands and buildings that would provide an immediate income. Those belonging to or controlled by the church fitted the need. For centuries ecclesiastical institutions had been buying up valuable estates or receiving them from the faithful as endowments for their many activities. For centuries, too, the crown had turned to the wealth of the church in its time of need. In the thirteenth century, Fernando III had obtained two-ninths of the tithes of Castile to support his war of reconquest,^[66] a tribute the kings still collected, now from all Spain. Fernando and Isabel had obtained the sale of indulgences, known as the bula de la cruzada, to support the conquest of Granada, a practice also still being followed. Felipe II had established the excusado, the right to the tithes of the most productive

[66] Nov. Rec., I, vii, n. 1.

household in each parish, to support his war against the Turks.^[67] In Part 2 of this study, we shall run into it still in operation at the end of the eighteenth century. Carlos IV was following an old-regime tradition when he selected the estates of obras pías to help him now. But to take over property rather than income was new, a product of changed circumstances and philosophies.

The beginning of desamortización reflected the evolution of eighteenth-century society. The expanding population inside and outside Spain increased the demand for food in the markets and transformed the relations among the factors of production. Labor became cheaper and land dearer. Those who controlled or used land were encouraged to apply more capital and labor to its exploitation. It was no accident that the king's counselors selected land as the resource that would attract available private capital and strengthen the royal credit. The reformers, from those of the 1760s through Jovellanos, had remarked on the high price of land—"scandalous," Jovellanos called it—and the exorbitant rents that owners were asking. Land was a factor of production in high demand. The fiscal exigencies of the war simply decided the crown to free some of it from artificial restrictions on its transfer. In this way desamortización was a belated response to the demographic revolution of the century, as the reforms of Carlos III had been an earlier one.

The invitations extended by the king to church prelates and owners of mayorazgos to sell estates under their control and place the proceeds in the Amortization Fund at 3 percent were thus more than desperate and artless appeals to their patriotism. Quite conceivably, their properties could command a high enough price on the market for the interest on the capital received to produce more income than the properties did. This was especially so if the properties were inefficiently tilled or managed by corrupt administrators, as the reformers kept repeating.

The king ordered the sale of properties of obras pías and similar ecclesiastical foundations, but he left the decision on the alienation of properties of capellanías up to the bishops and of mayorazgos up to their owners. One might conclude that the king was merely recognizing the difference between public property, which was under his authority, and private property, which was protected from expropriation. That something else was involved, however, is suggested by the king's response to Soler's recommendation to include the estates of the encomiendas of the military orders among those to be forcibly sold. The

[67] Ibid., II, xii, n. 1. See Appendix G.

military orders of Santiago, Calatrava, and Alcantara had been founded in the Middle Ages as brotherhoods of knights who took religious vows and fought against the Muslims. Since 1523 the king of Spain was their hereditary grand master, and their properties, which were extensive in Extremadura and Andalusia, could be considered part of the royal domain. Nevertheless the income from their encomiendas, or fiefs, went to their caballeros (knights), who since the end of the reconquest were honorary appointees, most of them titled aristocrats or wealthy hidalgos. Despite Soler's urging, the royal decrees did not provide for the sale of these properties. Although one suspects that at a practical level the royal counselors did not believe it advisable to stir up this influential group, the decision fits a more general pattern. The king could order the sale of the estates of obras pías because, as his decree said, "my sovereign authority to make use of public establishments . . . is undisputed." The throne might tremble beneath him but the king did not hesitate to proclaim an unabashed assertion of his absolute authority. Yet royal absolutism had its limits, and the rights of the church and the nobility presented one such limit. Desamortización as conceived by Carlos IV and his advisers had as its objective to shore up the monarchy, and for this purpose the privileges of the legal orders (estamentos ) were an integral part of the monarchy. The French revolutionary government confiscated all the estates of the church and those of émigré nobles. No such act emanated from the king of Spain, however dire the situation, for he was holding the dike against revolution, social and political.

Desamortización offered a way to cut the Gordian knot of reform, creating new landowners without destroying the economic basis of a society divided into legal orders. By transforming the capital of mayorazgos and manos muertas from real property to royal obligations that were expected to produce their owners a greater net income, the king would actually benefit the aristocracy and clergy. Thus in the decree on the sale of mayorazgo properties, the king congratulated himself for achieving simultaneously "the two important objectives of preserving intact the entailed estates, and with them the splendor of the families to which they belong, and of restoring the lands to the husbandry of active and industrious owners, with transcendental influence on the progress of the wealth and happiness of the nation."^[68]

Agrarian reform was still definitely part of the agenda. To assure that active owners acquire the land, the decrees specified that the sales should

[68] RC, 19 Sept. 1798, AHN, CCR, no. 1216.

be by public auction, "with prior assessment of the properties and the posting of thirty days' notice in the district capitals (cabezas de partido ) and the towns in the vicinity of the one in which the properties are located," "dividing the estates as much as possible in order to attract many buyers and multiply the number of owners."^[69] The decrees ignored the question of where industrious farmers were to find the capital to bid for the properties, but Jovellanos's Ley agraria offered reassurance: in the long run it made no difference how lands were transferred from entail to the free market. The working of economic laws would inexorably lead to their being farmed in the most efficient way, which in his mind meant in most places by small private owners. The long-term effect would be the highest possible output and hence the greatest welfare for the nation as a whole.

Nevertheless the war with Britain marked a major turning point in Spanish domestic policy. The food riots of 1766 brought to an end a long period during which the crown had sought to impose a less regressive and more efficient tax structure. For the next thirty years the government struggled to find an "agrarian law" that would produce more food. After 1796 the search for money to pay for wars and keep the monarchy afloat took over first priority. Except during the war against Napoleon, when the fight for survival as an independent people dwarfed all other considerations, the fiscal problem imposed by wars was to remain for half a century the primary consideration in the formation of royal economic policies. Agrarian reform remained on the agenda, but plans for it had to respond to the more imperative need for money. The critics of desamortización since Joaquín Costa have credited the generosity of the reforms planned by Carlos III to the capacity of his counselors—Aranda, Campomanes, and Olavide—to perceive the true needs of the rural society. One might better explain them as the product of a brief, fortunate period in Spanish history when royal deficits were not the dominant concern of the rulers.

[69] RCs, 19 Sept. 1798, ibid., nos. 1216, 1221.