Friday, 6 July 2018

The Napoleonic Wars: A Watershed in Spanish History?

New EHES working paper by Leandro Prados de la Escosura and Carlos Santiago-Caballero (Universidad Carlos III).

Leandro Prados de la Escosura
(Universidad Carlos III, Groningen, and CEPR)
The Napoleonic Wars (1793-1815) are usually depicted as a major juncture in European history. Historians’ assessments of the Peninsular War (1808-1814) tend to emphasise its negative short-term impact. In our new paper we survey the short- and long-run effects of war. 

The Peninsular War had deep and negative short-run economic consequences in Spain. The demographic direct and indirect impact represented the population falling one million short of its potential and just its direct effects were half a million casualties, around 5 per cent of the population the bloodiest conflict in Spain’s modern history. On agriculture the effects were ambiguous. On the one hand, lack of enforcement of Ancien Régime institutions, allow producers to increase cultivation and pay lower land rents. On the other, confiscations hit livestock and, therefore, the stock of capital. The war afflicted the industrial sector by reducing consumption, increasing transport costs and input prices, and diverting productive investment. Services were also disrupted and international trade collapsed, as did Government revenues. As a consequence, GDP per head fell, with uneven impact across regions.

Carlos Santiago-Caballero
(Universidad Carlos III)
The Peninsular War also sparked the fight for independence in Spanish America. The empire strengthened absolutist monarchy as colonial revenues (a substantial share of total revenues), as by reducing the need to increase taxation at the metropolis, allowed concentrating power without extensive bargaining with its subjects and institutions. The loss of the colonies had negative effects on capital formation, trade, manufacturing industry, and Government revenues, but the overall impact on GDP was much lower than previously assumed and mainly restricted to particular regions and economic sectors. However, by facilitating the fall of the absolutism, it may have contributed significantly to the transition to liberalism in Spain.

The institutional changes that started with and followed the Peninsular War were part of the liberal reforms. The liberal revolution brought with it a redefinition of property rights that changed the population status from subjects to citizens equal before the law, the liberalization of commodity and factor markets, and the Parliamentary control of public revenues and expenditure. It was, nonetheless, a long process fraught with difficulties and partial reversals.

A glance at the post-Napoleonic Wars era reveals a distinctive behaviour, when compared to the pre-war era, for any dimension of social and economic activity. Population expansion accelerated nearly doubling its pace in the late 18th century while the rate of urbanization increased remarkably. Agriculture became more efficient, gradually oriented towards expanding Western European markets, andconsumption per head improved. As for manufacturing, while traditional industries collapsed, modern industries continued adopting new technologies. The more competitive and flexible sectors adapted to new circumstances with the economy expanding steadily, except during Carlist War (1833-1839), and population growth was accompanied by a sustained increase in GDP per head. Nonetheless, despite faster growth and higher levels of per capita income than ever before, Spain fell gradually behind northwestern European countries.

The empirical evidence on the post–war era suggests that the Napoleonic Wars constituted a defining moment in Spanish history. However, the relevant question seems to be whether in the absence of war, the Enlightenment elite would have carried out the reform of the absolutist state, initiating a gradual transition towards a liberal society. Sound public finance and international integration into the trade and financial world, plus the spread of liberal ideas, prior to the war suggest a positive answer, while the connections between absolutism and the colonial empire and the difficulties and reversals faced by liberal reformers support a negative one.

Using structural breaks in the series, trends for the different variables before the war were computed and extrapolated to the post-war period, with counterfactual values compared to the actual ones. It can be suggested that had pre-war trends persisted in the early nineteenth century, the important gains achieved would not have been possible.

To sum up, the economic consequences of the Peninsular War in Spain were clearly negative in the short term with hard demographic effects, forced expropriations, a heavy blow for traditional industries, a severe contraction in international trade, and a decline in GDP per head. Nonetheless, the Napoleonic Wars triggered a complex transition from an absolutist empire to a modern nation. The liberal reforms redefined property rights and shifted the control of the executive to the parliament. The long-term consequences were a more efficient allocation of resources and sustained economic growth despite serious obstacles (civil wars and military takeovers) that deferred the transition. On the whole, the Napoleonic Wars may be depicted watershed.

The working paper can be downloaded here.

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