Reform in Spain

Sun, Aug 21, 2011 at 2:50 AM

"The Story of Civilization", Vol. X, "Rousseau and Revolution", "Despite these deterrents, in Madrid and other centers men of good will-nobles, priests, and commoners, without distinction of sex-formed Sociedades Economicas de los Amigos del Pais to study and promote education, science, industry, commerce and art. Tehy founded schools and libraries, translated foreign treatises, offered prizes for essays and ideas, and raised money for progressive economic undertakings and experiments. Acknowledging the influence of French physiocrats and Adam Smith, they condemned the national accumulation of gold as a monument to stagnation, and one of them asserted: "The nation that has the most gold is the poorest...as Spain has shown." Jovellanos hailed 'the science of civil economy; as "the true science of the state." Economic treatises multiplied. Campomanes's Discourses sobre el fomento de la industria popular inspired thousands including the King.

Spain is often overlooked as an example in economic history. Spain, holding enormous 'wealth' in the form of the gold and silver mines of South America, was the poorest country in Europe. This happens in all countries with a monolithic source of wealth. People all gather around the one source of wealth, to get as much as they can. So no one becomes involved in the actual creation of wealth.

This is one of the reasons why the oil rich countries are poor. People all gather around the state to get their share of the oil money instead of creating their own industries and businesses. It is also an unavoidable fault of all centrally managed economies. People all gather around the state to get their share of the government payoffs.

Spain, once the greatest power of Europe, was humbled by mercantile nations like England despite the Spanish monopoly on gold and silver from the New World. In this period in history gold was a less real form of wealth than paper money from the bank of England, funded by its national debt. Gold was always worth its weight in gold, but it could not buy innovation, industry, or an entrepreneurial spirit.

"The expanding activities of the government required enlarged revenues. These were raised in some measure by state monopolies in the sale of brandy, tobacco, playing cards, gunpowder, lead, mercury, sulfur and salt. At the outset of the reign there were sales taxes of fifteen per cent in Catalonia, fourteen per cent in Castile. Jovellanos aptly described sales taxes. "They surprise their prey..at its birth, pursue and nip in as it circulates, and never lose sight of it or let it escape, until the moment of its consumption." Under Charles the sales tax in Catalonia was abolished, and in Castile it was reduced to two, three, or four per cent. A moderate graduated tax was laid upon incomes. To secure additional funds by putting the savings of the people to work, Francisco de Cabarres persuaded the Treasury to issue interest bearing government bonds."

To reform a stagnant economy with a tax system which had destroyed the industry of Spain, they abolished the sales taxes and replaced them with a graduated income tax. Today 'reformers' in the US want to abolish the graduated income tax and replace it with a sales tax. How ignorance of history dooms us to repeat the mistakes of the past. The poor do not have enough money to pay for the actions of the government. A sales tax takes money from those who can least afford it, and leaves the money of those with the most untouched.

"The obstacles to reform in Spain were as great in economy as in religion. The concentration of inalienable ownership in titled families or ecclesiastical corporations, and the monopoly of wool production by the mesta seemed to be insurmountable barriers to economic change. Millions of Spaniards took pride in indolence, and showed no shame in begging; change was distrusted as a threat to iddleness. Money was hoarded in palace coffers and church treasuries instead of being invested in commerce or industry."

The wealthy do not create wealth. They hoard it and arrange the laws to make sure that it is safe. Investment in new enterprises and ideas is too risky. Today we seem them rushing hither and thither to find a safe place to stash their hoards. None of the stimulus package money put in the hands of bankers went to investments in new industry, but it was all hoarded to make a good balance sheet, while they waited to find safe, sure, ways of getting interest from other people.

Today, in the US we see the wealthy as a class mindlessly repeating the mistakes which made Spain the poorest country in Europe a few centuries ago despite its having the most gold and one of the largest empires.

"The result of statesmanship and enterprise was a substantial rise in the prosperity of the nation as a whole. The middle classes profited most, for it was their organizations that remade the Spanish economy."

The wealthy hoard wealth, the state distributes wealth, the middle classes, small property owners engage in industry and trade and create wealth.

The sad fact is that today we have two parties, both want, in one form or another to repeat the failed policies which made Spain the poorest nation in Europe. Neither wants real reform of the type which helped to bring prosperity to Spain while France was overwhelmed by revolution.

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