The Spanish, at the beginning of the 1500s, were the dominant European power. With a strong crown, unified religion, and lucrative exploration, they were unstoppable. However, in the seventeenth century, the Spanish monarchy crumbled from what it was in the early 1500s. How did they go from such dominance to shambles? Historians use the development of the Dutch Republic as an answer to this question. 

Under King Philip II, Spain was the biggest European power to date. A “one king, one faith” rule governed the lands, meaning Spain had a homogenous citizenry both religiously and governmentally. All citizens served the same God and respected the same King, a process that took hold first during the time of Isabella and Ferdinand. 

Unfortunately, maintaining this centuries-long lifestyle would ultimately lead to Spain’s demise. It would get to a point where the world was moving past Spain, almost like they were stuck in a time warp, upholding ideals that dated back centuries.  

The Dutch, on the other hand, were rather the opposite. They were experiencing their Golden Age around the same time Spain was declining, organizing their governments differently in the process. The Dutch structured their government, developed their economy, and controlled their expansion better than the Spanish did through the period 1550 to 1715. They prospered as a result. 

The organization of the Dutch government into the republic was something that was never seen before. The Dutch proved to the world that a republican form of government, on a large scale,  could be possible. A system in which citizens would be given representatives, therefore achieving political equality for most (not all), was never considered in Spain. They stuck with their monarchy, filled with incompetent leaders and irresponsible officials, weakening the country significantly. 

This led to the problem that whoever held the crown essentially controlled the country: absolute leaders had absolute power/authority over their subjects. Philip III, coming after Philip II, was a deeply pious man. Philip III did nothing in office and devoted most of his time, which could have been used to help the economy, to religion. He ignored that the country was faltering and instead prayed- probably for an easier job.

Weak kings continued until Count-Duke of Olivares, named Gaspar de Guzmán, sought to transform the country. Philip IV gave him his power- some say too much. Being a noble with little to no political experience, he sought to increase Spain’s influence by warring and conflict. On an empty treasury, Spain could not financially account for such aggression, which led to the outrageous taxing of peasants. This only inflamed the situation. 

Debts piled up; the losses meant more to them than their enemies. They were “one punch,” or one defeat, away from ceasing aggression until the 30 Years’ War rolled around. 

To preserve the catholic faith and beat back the rebellious protestants, Spain got involved in the 30 Years' War. This was a deathly decision for the economy, citizenry, and country as a whole. 

This was all made possible because of the absolutist structure: the king and Guzmán could make poor decisions almost single-handedly. In the Dutch Republic, multiple thresholds of permission had to be reached for the country to act. 

Spain, conversely, never considered what would happen to their system of religion. There were way too many officials and not enough workers. These officials never paid taxes, so, naturally, most citizens wanted to be either bureaucratic officials or clergymen. This system led to a dreadful funding system that destroyed the economy. Of course, when 25% of the population is tax-exempt, a huge burden falls on the backs of the poor. This is no way to conduct an economy. 

What happened to their treasury?

The Spanish, as opposed to the Dutch, did not control their precious metals. Gold, silver, and other valuable materials infected the Spanish economy like the flu. The Spanish did nothing to control the resulting inflation- they needed to limit the introduction of these metals into the economy. Prices went sky-high, depreciating the value of the Spanish coin. The treasury’s ability to fund the war effort given these circumstances was poor. 

The Dutch, on the other hand, did an excellent job at controlling their profits and managing their assets according to the status of the economy. The Dutch successfully developed their mercantilist policy culminating in the Dutch East India Trading Company, which was one of the most successful and profitable companies to ever exist. Mercantilism was incredibly effective in delivering the golden age to the Netherlands, while Spanish bullionism was out of practice by decades. 

One thing that the Dutch also economically prospered from was their religious toleration. How could a country prosper economically by acting religiously tolerant? 

The Spanish, in an attempt at religious purity, kicked out their loyal Muslim and Jewish citizens. The government fulfilled the wishes of the church while, in effect, crippling their economy. The middle class was essentially gone: a mass exodus of productive workers aggravated the wealth inequality. Now, you were either a noble, clergyman, government official, or peasant, with no in-betweens. 

The Dutch, with this religious tolerance, didn’t have economically inefficient jobs. A priest, however important, does not contribute to the economy in any way. There were too many aristocrats and too many church officials wasting economic potential in Spain, inflating the debt evermore.  

Finally, the Dutch controlled their expansion better overall. A surplus greenery, which was another innovative practice introduced by the Dutch, prevented agricultural problems- droughts and poor harvests were no match to their ingenious system. This, on top of all of the other examples, helped control expansion: investing in overseas exploration and colonialism can have its ups and downs. The “downs” were prevented by a strong economy, practical exploration, and form of government, all adding to vast expansion. 

For these reasons, the Dutch succeeded where the Spanish had failed. Mercantilism, the East India Trade Company, and republicanism were unstoppable. Religious intolerance, poor leadership, and bullionism were inversely unstoppable. If only the Spanish had taken note of their Republican counterparts would they have been prosperous as well.