page_title: Philip III of Spain
section_title: Economic decline and failed reform
hierarchical_section_title: Philip III of Spain / Domestic policy / Economic decline and failed reform
caption_attribution_description: English: un demi Real à l'effigie de Philippe III, 1617
context_page_description: Philip III was King of Spain. He was also, as Philip II, King of Portugal, Naples, Sicily and Sardinia and Duke of Milan from 1598 until his death in 1621.
  A member of the House of Habsburg, Philip III was born in Madrid to King Philip II of Spain and his fourth wife and niece Anna, the daughter of Holy Roman Emperor Maximilian II and Maria of Spain. Philip III later married his cousin Margaret of Austria, sister of Ferdinand II, Holy Roman Emperor.
  Although also known in Spain as Philip the Pious, Philip's political reputation abroad has been largely negative – an 'undistinguished and insignificant man,' a 'miserable monarch,' whose 'only virtue appeared to reside in a total absence of vice,' to quote historians C. V. Wedgwood, R. Stradling and J. H. Elliott. In particular, Philip's reliance on his corrupt chief minister, the Duke of Lerma, drew much criticism at the time and afterwards. For many, the decline of Spain can be dated to the economic difficulties that set in during the early years of his reign.
context_section_description: Philip III's reign was marked by significant economic problems across Spain. Famine struck during the 1590s through a sequence of bad harvests, whilst from 1599 to 1600 and for several years afterwards there was a terrible outbreak of bubonic plague across Spain, killing over 10% of the population. Mateo Alemán, one of the first modern novelists in Europe, captured the despondent mood of the period, describing 'the plague that came down from Castile and the famine that rose from Andalusia' to grip the country. Whilst the failing harvests affected the rural areas most, the plagues reduced the urban population most significantly, in turn reducing the demand for manufactured goods and undermining the economy further. The result was an economically weakened Spain with a rapidly falling population.
  Financially, Philip's situation did not appear much better. He had inherited huge debts from his father, Philip II, and an unhelpful tradition that the kingdom of Castile bore the brunt of royal taxation – Castile carried 65% of total imperial costs by 1616. Philip III received no money from the cortes, or parliaments, of Aragon, the Basque provinces or Portugal; Valencia only provided one contribution, in 1604. Philip did not openly challenge this situation, but instead depended more and more heavily on the Castilian cortes; in turn, the cortes increasingly began to tie new grants of money to specific projects, subtly but steadily altering the relationship between the king and cortes. By the financial crisis of 1607, the cortes had even insisted that it be recalled every three years, and that Philip take an oath – on pain of excommunication – to promise that he had spent the royal funds in line with the promises made previously to the cortes.
  Philip and Lerma's attempts to resolve this crisis largely failed, and were not helped by the increasing size of the royal household – an attempt to increase royal prestige and political authority  – Philip's own household costs rose enormously at a time of falling income. Philip's attempts to issue new currency – in particular the issues of the copper vélon coinage in 1603–04, 1617 and 1621 – simply created considerable instability. The costs of the Dutch campaign resulted in Philip's bankruptcy in 1607, and the crown's attempt to resolve this by converting the asiento tax system – high interest loans owed to tax farmers – into longer term juros bonds paying a much lower interest, produced a short-term benefit, but at the price of losing financial flexibility during future crises. By 1618, almost all Philip's incoming crown income was already assigned to its various creditors and he had almost no spending discretion left. Financially, the Spanish state had become dominated by Genoese bankers and lenders under Philip II, whose lines of credit had allowed the Spanish state to continue during its moments of financial crisis; under Philip III this process remained unchecked, building up considerable resentment against this foreign influence, some going so far as to term the bankers 'white moors'.
  Throughout Philip's reign, a body of analysis of Spain's condition began to emerge through the work of the numerous arbitristas, or commentators, that dominated public discussions from around 1600 through to the 1630s. These different voices focused heavily on the political economy of Spain – the rural depopulation, the diverse and bureaucratic administrative methods, the social hierarchies and corruption, offering numerous, if often contradictory, solutions. Nonetheless, through most of Philip's reign there was no significant attempt at reform – Philip continued to rule in line with local laws and customs. Philip encouraged consolidation of noble estates, selling off large quantities of crown lands to favoured nobles and creditors. There were no attempts to create an equivalent to the French intendant position – the closest equivalent, the corregidor, lacked the strong links to the crown required to overcome local opposition. Only in Philip's final years did reform begin to gain momentum; a reform comm
caption: Philip III of Spain
exif: {}