2. From Empire to Peripheral Economy (1789–1840)

Just before the outbreak of the French Revolution, Spain had a huge Empire. The era of revolutionary and Napoleonic wars was a succession of military failures that made difficult for Spain to keep its Empire under control. By 1827 it had lost most of it. The chapter explains the collapse of colonial trade, the most productive outcome of all American riches for metropolitan Spain; the collapse of the absolutist Treasury, unable to cope with so many wars with much less income than before, and the crisis of the Old Regime followed by the painful birth of a liberal regime. To adapt to a much smaller economy and market, national integration between agriculture and manufacturing developed, at a lower productivity level, far from the British standard. The chapter concludes reviewing the place of Spain in the debate on the great divergence.