5 - The creation of a securities market in the later sixteenth century

Summary

The preceding two chapters have brought to light the difficult condition of the exchequer in Naples in the later sixteenth and seventeenth centuries. Even before the 1550s government receipts had lagged behind expenditures, and over time the gap between them had widened and become a fixture of fiscal and financial life. Expenses for the military and for the public debt loomed large in that process, for they outstripped other categories of expense and exerted a heavy weight on the Kingdom's finances. In those circumstances, only the spectacular growth of the funded debt had allowed the Kingdom to meet what obligations it did.

In its recourse to indebtedness, Naples was very much in tune with the times, for deficit financing, even in the proportions it assumed in the Kingdom, was one of the great innovations of sixteenth-century government; the term “financial revolution” used by some historians to describe it is only a slight exaggeration. At its best, deficit financing could be a powerful weapon in the arsenals of governments, for it could enable them to mobilize huge amounts of cash and thus greatly to expand their roles and their functions. For better or for worse, “the novel expedients” helped bring states into greater contact with subjects by influencing economic and financial markets, by attracting and, in however lopsided a fashion, redistributing wealth in society. Above all, they made possible the massive military outlays of the Spanish Empire, as well as the resolute defense against the Empire by the United Provinces.

The growth of the funded debt in Naples was assured by the same mechanisms at work in other parts of the Empire, such as Castile or the Netherlands.