Crusaders, Scholars, and Dreamers

Spain in the Middle Ages was a cosmopolitan land with a magnificent and wealthy Islamic culture and the largest Jewish population in Europe. The Iberian Peninsula, now home to Spain and Portugal, was divided between Christian and Muslim states, but intermittent periods of relative harmony fostered prosperity and cultural exchange. In the city of Toledo, for example, Christian, Muslim, and Jewish scholars worked alongside one another compiling and translating great works of philosophy, science, and mathematics.

Islamic invaders had conquered the peninsula in 720, but beginning in the 11th century, Christian efforts to retake the region from the Muslims gathered steam. As Christian forces recaptured territories, often aided by crusaders from other parts of Europe, their kings rewarded them with land grants. To attract Christian settlers to otherwise sparse regions, they established fortified towns and conducted repartimientos, which allocated land to the king and to each settler. Centuries later, Spanish conquistadors would use a similar process to claim, partition, and settle land in the New World.

By the time Queen Isabella and King Ferdinand conquered the last Muslim stronghold in 1492, Spaniards had been fighting over, claiming, and administering new land for hundreds of years. The population, skilled in battle and in using weapons, had developed an institutionalized crusader mentality. This crusading zeal attracted like-minded men from across Europe—adventurers, entrepreneurs, and dreamers—who emigrated to Spain to pursue their fortune.

By the 15th century, Spain had a diverse population: moriscos, the descendants of Muslims, and conversos, the descendants of Jews who converted to Christianity, were significant minorities, as were gypsies, slaves from Africa, and thousands of other foreigners. But while the country became more racially and ethnically diverse, Spain's socially stratified society favored people of "pure" Spanish blood—a concept that would eventually lead to the creation of a caste-like system in the New World.

The various cultures living in Spain were divided by class into commoners and nobles, with the nobles' ranks further divided by status and resources. The majority of the people, the commoners, paid taxes and did most of the work, whether they were lawyers, merchants, clergymen, or farmers. But class divisions were fairly fluid and factors such as literacy and education allowed people to move up or down in society. In the coming decades, many conquistadors who searched fervently for gold and silver in the New World sought not only to enrich themselves, but also to raise their status in Spanish society. Yes, their lengthy and expensive expeditions required them to bring back something of worth to the king and their investors. But most explorers such as Christopher Columbus and conquistadors, including Hernán Cortés and Francisco Pizarro, used their conquests to attain titles, offices, and pensions from the King.

When Columbus arrived in Spain in 1486 hoping to secure financing for his expedition across the Atlantic, he was entering a country shaped by centuries of conquest and strict social mores and ruled by a religious faith that had become increasingly intolerant and expansionist.

Assembling the World's Most Powerful Empire

Spain's early steps toward building an empire began with the 1469 marriage of Isabella and Ferdinand, which united Castile and Aragon, two of the most powerful kingdoms on the Iberian Peninsula. Their fortuitous support for Columbus and other early explorers brought inconceivably large and bountiful colonies under Spain's rule. After Ferdinand's death, these American possessions, along with Spain's Italian possessions, passed to their grandson Charles I. By 1519, Charles had also inherited the Netherlands, Luxembourg, parts of northern and eastern France, and the lands of the Hapsburg Empire in Germany and Austria from his grandfathers. He was crowned Holy Roman Emperor Charles V. With that lofty title, he oversaw the most powerful empire in Europe for more than three decades.

Charles spent most of his reign battling to hold his empire together. He spent 16 years alone at war with France, his only real adversary on the continent. Although his ultimate victory over the French secured his hold on the Netherlands and gave him virtual control of Italy, the constant warfare placed Charles deeply in debt and increasingly dependent on loans from bankers.

In the East, Charles struggled to ward off invaders from the Turkish Ottoman Empire. In 1526, Süleyman I led the Turks to capture most of Hungary; they later twice besieged Vienna, the capital of the Hapsburg lands. In the Mediterranean, Muslim pirates threatened the Italian and Spanish coasts, forcing Charles to launch attacks against North Africa at Tunis and Algiers.

Europe was in a period of great religious turmoil and Charles deeply opposed the growing Protestant Reformation, which he believed to be an attempt by some towns and nobles to use the Church's resources to increase their autonomy from the empire. In 1546, Charles went to war against the Schmalkaldic League, a united group of Protestant princes and towns in Germany who managed to drive Charles' forces south into Italy in 1552. Ultimately, an uneasy peace was struck near the end of his reign.

While war raged in Europe, Spanish conquistadors toppled the two greatest New World empires, the Mexicas and the Incas, and claimed much of Central and South America for the Spanish Crown. As Charles found himself increasingly at odds with the growing Protestant factions in other parts in his realm, Spain discovered something that would tip the balance of power in its favor: New World gold and silver. Catholic Spain was soon the empire's most powerful nation.

Throughout Charles' reign, Spanish settlements continued to spring up across the Caribbean, through Central America, and along the Pacific Coast of South America. Except for the very rich and the very poor, Spaniards from all walks of life—farmers, merchants, artisans, bureaucrats—began resettling in the Americas. Most carried with them an allegiance to their home towns and the desire for a better life, which to them meant replicating their old life under better economic conditions. They quickly founded cities, some in the very spot indigenous populations had long had cities of their own, and partitioned the oversight of the surrounding land and indigenous people among the conquistadors, as they had in Spain.

When Charles decided to retire in 1555, he divided the largest empire on earth, which now controlled land on four continents, between his son, Philip II and his brother, Ferdinand I.

Debt and Decline

Philip II inherited a powerful but threatened Spain. During his reign, the country conquered the Philippines, founded the colony of St. Augustine in modern-day Florida, and brought Portugal, Brazil, and other Portuguese colonies in Africa and Asia under Spanish control. The fury of the Protestant Reformation had intensified and Philip, a devout Catholic, was forced to put down a persistent revolution in the Netherlands. To meet his empire's financial needs, treasure fleets were formally organized in 1564 to bring New World gold and silver back to Seville. The crown's share of all imported bullion: 10 to 20 percent.

Near the end of the 16th century, Philip's devout faith and lifelong mission to defend and propagate Catholicism led him into a devastating conflict with England's Protestant Queen Elizabeth I. In July 1588, he sent his armada of 130 ships with 7,000 sailors and 17,000 soldiers to England. Tens of thousands more troops waited to join them in the Netherlands. A Spanish victory seemed certain. But when the Armada reached the English Channel, the smaller but faster English fleet outmaneuvered the huge Spanish ships, allowing English fireboats to force the Spanish into a gunnery battle in the open water. When the Armada retreated north around Scotland and Ireland, nature took a hand in the fight: gale force winds began to blow the largest ships out toward the open Atlantic, destroying at least a third of the fleet.

As Philip was suffering this stunning defeat, financial pressures were weighing heavily on his empire. Soon, the gold and silver brought from the New World was only able to pay for his armies and to service Spanish debt held by Italian and German bankers. Tax increases on the citizens of Castile, still the wealthiest part of Spain, coupled with ruinous drops in harvests in the 1560s and 1570s led to a crisis by the 1590s. Food production and wages declined. Peasants who moved to the cities for work found ever fewer jobs while the wealthy began investing in government bonds, the juro, rather than new agriculture or manufacturing. A plague from 1596 to 1600 decreased Castile's population by 10 percent. By the early 17th century, the number of poor people had risen while the rich mortgaged their estates to preserve their lifestyles.

Spain's trade with the New World declined as its colonies developed their own trade and manufacturing and foreign merchants began providing them more goods. Without surpluses of manufactured goods or agriculture, Spain became increasingly irrelevant to life in the New World although its empire would survive for another century.

After Philip II, future Spanish rulers tried to maintain the empire against a steady stream of rivals, but the world as they knew it was crumbling quickly under the weight of their unsustainable financial situation.