Fragmentation of an Empire: the Political Economy of Spain and Its Colonies in the Late Bourbon Period

Fernando Arteaga (George Mason University)

Abstract : How an empire that seemed cohesive for hundreds of years could easily fragment in a decade? I present a simple computational model of Spain’s political economy and do some simulations that could help explain the rationale behind such system. I also provide an analytical narrative in which I stress the importance of the Spanish Empire’s fiscal sociology, one in which certain political enterprises (Miners, Merchants, Crown) played key roles. I maintain that the empire had an implicit political arrangement; one in which the Crown maximized tax revenue through its power in managing the transatlantic trade. It did so by coopting a small set of local American elites (In Lima and Mexico City), which gained rents from their privileged trade position. It was a stable setting while Spain had sea supremacy. The advent of the British Navy in the late 18th century disrupted everything. Thereafter, the Crown attempted to decentralize its oceanic trade through new routes, and by trying to coopt a larger set of regional elites within the empire. This tactic backfired: it only gave major power to new local elites and created incentives for political fragmentation.

Deep Determinants of Preferences over Political Institutions: Monarchy Vs Republic in 1946 Italy

Paolo Buonanno (University of Bergamo)
Matteo Cervellati (University of Bologna)
Sara Lazzaroni (University of Bologna)
Giovanni Prarolo (University of Bologna)

Abstract : A growing literature studies the working of democratic institutions and their emergence. Little is known on preferences over political institutions in the population at large and on their historical drivers. We investigate the empirical determinants of the votes in the Referendum over Monarchy vs. Republic held, for the first time in universal franchise, at the end of WWI in 1946 in Italy. We construct a large disaggregate database to study the determinants of the votes for about 8100 municipalities in Italy. A main variable of interest is the exposure to the rule of more or less republican and monarchic sovereign polities in medieval times. We track the emergence, evolution and territorial disappearance of the sovereign polities in pre-industrial times. We build a time varying political score for the Italian peninsula that offers a proxy of the actual exposure to the rule of republics and monarchies in each location and each year over the period 1000-1861. The data allows a first measurement of past exposure to different political institutions and an exploration of their (cultural) legacy for preferences over Republic and Monarchy during the transition to democracy. The empirical analysis also accounts for economic conflicts of interests (in terms of historical land inequality), socio-economic conditions and for the role of short term contingencies (like fascist-nazi massacres and occupations along the nazi defensive lines during WWII).

Extractive States: the Case of the Italian Unification

Carmine Guerriero (University of Bologna)
Guilherme de Oliveira (Columbia Law School)

Abstract : Despite the huge evidence on the adverse impact of extractive policies, we still lack a framework that identifies their determinants. Here, we lay out a two-region, two-social class model for thinking about this issue, and we exploit its implications to identify the causes of the opening of the present-day divide between North and South of Italy. Differently from the extant literature, we document that it arose because of the region-specific policies selected between 1861 and 1911 by the elite of the Kingdom of Sardinia, which annexed the rest of Italy in 1861. While indeed pre-unitary land property tax revenues and railway diffusion were shaped by each region's farming productivity but not by its political relevance for the Piedmontese elite, the opposite was true for the post-unitary ones. Moreover, post-unitary tax distortions and the severity of the remaining extractive policies---captured by the region's taxation capacity and political relevance---determined the North-South gaps in culture, literacy, and development but not that in the manufacturing industry value added. Consequently, extraction neither eased the formation of an unitary market nor favored industrialization. Our results remain robust to considering fixed region and time effects and the structural conditions differentiating the two blocks in 1861, i.e., pre-unitary inclusiveness of political institutions, land ownership fragmentation, and inputs. Crucially, our framework clarifies the incentives of dominating groups in other unions, e.g., post-Civil War USA and EU.

How the East Was Lost: Coevolution of Institutions and Culture in the 16th Century Portuguese Empire

Bernardo Mueller (University of Brasilia)
João Gabriel Ayello (University of Brasilia)

Abstract : In 1498 Portuguese explorers discovered the sea route to Asia and for nearly 100 years no other nation managed to follow suit. This monopoly allowed Portugal to establish a vast maritime empire that positioned it to dominate the intercontinental trade in spices and other valuable goods between Asia and Europe, until then the domain of caravans through the Levant. But the Portuguese failed to exploit their lead. Even before the British and Dutch finally managed to navigate to Asia, a century later, the Portuguese enterprise in Asia was already in decline. We argue that the failure of the Portuguese enterprise must be understood in the context of the transition of a medieval society into the modern era, where new opportunities made possible by new technologies and circumstances put a strain on prevailing beliefs and institutions. These new opportunities required changes in culture and institutions to be fully taken advantage of, in particular the embrace of commerce as opposed to violence as the key organizing principle. The Portuguese made some moves towards those changes, yet the transition was slow, imperfect and incomplete. In contrast, the British and Dutch reached Asia with a culture that was more suited to commerce, and institutions (e.g. joint-stock companies) that allowed them to very quickly usurp Portugal’s hegemony in the region.