commercial
system. Yet in the end it saw the trade of the New World pass into the
hands of its rivals, its own marine reduced to a shadow of its former
strength, its crews and its vessels supplied by merchants from foreign
lands, and its riches diverted at their very source.

This Spanish commercial system was based upon two distinct principles.
One was the principle of colonial exclusivism, according to which all
the trade of the colonies was to be reserved to the mother country.
Spain on her side undertook to furnish the colonies with all they
required, shipped upon Spanish vessels; the colonies in return were to
produce nothing but raw materials and articles which did not compete
with the home products with which they were to be exchanged. The second
principle was the mercantile doctrine which, considering as wealth
itself the precious metals which are but its symbol, laid down that
money ought, by every means possible, to be imported and hoarded, never
exported.[4] This latter theory, the fallacy of which has long been
established, resulted in the endeavour of the Spanish Hapsburgs to
conserve the wealth of the country, not by the encouragement of
industry, but by the increase and complexity of imposts. The former
doctrine, adopted by a non-producing country which was in no position to
fulfil its part in the colonial compact, led to the most disastrous
consequences.

While the Spanish Crown was aiming to concentrate and monopolize its
colonial commerce, the prosperity of Spain itself was slowly sapped by
reason of these mistaken economic theories. Owing to the lack of
workmen, the increase of imposts, and the prejudice against the mechanic
arts, industry was being ruined; while the increased depopulation of the
realm, the mainmort of ecclesiastical lands, the majorats of the
nobility and the privileges of the Mesta, brought agriculture rapidly
into decay. The Spaniards, consequently, could not export the products
of their manufacture to the colonies, when they did not have enough to
supply their own needs. To make up for this deficiency their merchants
were driven to have recourse to foreigners, to whom they lent their
names in order to elude a law which forbade commerce between the
colonies and traders of other nations. In return for the manufactured
articles of the English, Dutch and French, and of the great commercial
cities like Genoa and Hamburg, they were obliged to give their own raw
materials and the prod