Quick Take: Will Trump Prevent the American Empire from Collapsing Like the Spanish Empire?
Why the US in the 21st century is similar to 16th century Spain
(This Quick Take is free. About two-thirds of my posts, those of the History of Mankind series, are for paying subscribers only. Don’t hesitate to comment and let me know what you think I got wrong, or right or whatever: the chance to get that kind of feedback from a larger audience precisely is one of the main reasons why most of my Quick Takes are free.)
There was a time in the mid-16th century when the sun never set on the Habsburg Empire and Spaniards dominated the world politically and militarily, and Castile produced its finest literature.
This literature, almost uniformly, depicts an impoverished land full of hand-to-mouth grifters for whom empire is a system for the rich to get richer and the poor to die in pointless wars in exchange for glory. Think “Grapes of Wrath” combined with “Three Kings” and the Netflix show “Ozark.”
As I’ve discussed before, Spain is a beautiful land but it will never be a wealthy country mostly because geography conspires against it, but the empire actually made everything worse — much like the American empire has done much to laid waste to lands that were once the envy of the planet and now have names like Rust Belt, Flyover Country and Baltimore.
There’s a technical explanation for this inescapable result of empire, and it’s called Triffin dilemma: the conflict of economic interests that arises between the short-term objectives of a nation, such as the American Republic, and the long-term international objectives of an empire.
This dilemma was identified in the 1960s by the Belgian-American economist Robert Triffin and is, in short, a result of the imperial necessity of having a currency that is widely available as a medium of exchange for vassals, neutrals and even rivals.
Spanish currencies during imperial times that were the stuff the pirate dreams, things called “Pieces of eight” (“Reales de a ocho”) and “doubloons” (“doblones”). They were so popular for centuries that the familiar dollar sign, in fact, was originally a symbol referring to the “piece of eight.” Indeed, when the American dollar was created, the Coinage Act of 1792 defined it as having "the value of a Spanish milled dollar as the same is now current."
Spain’s imperial endeavors were helped by the popularity and strength of its currency, since everyone was anxious to get paid or bribed with them. This had impacts back home, however, same as the dollar’s global popularity has impacted America.
Those impacts are an unavoidable consequence of the duality of all currencies (as both a store of value and an instrument of exchange), especially when it’s expanded across an empire. That partly explains why Bitcoin keeps falling every time there is a crisis in financial markets, even though many people expect it to be a store of value. Such duality has existed since the dawn of civilization; I wrote about that here:
Ultimately, what Triffin's dilemma says is that a global reserve currency, like the dollar or the Spanish imperial doubloon, must be available to everyone. This entails that the country holding reserve currency status must inevitably run a trade deficit, as has occurred in the United States since the end of the gold standard, beginning in the 1970s.
Demand for the imperial currency means that it will be regularly exchanged for goods and services: money is going out, imports are coming in. Given that the currency is regularly bought — and kept in store, as a reserve — by others, it becomes more valuable, eroding the metropolis’ overall competitiveness: before the collapse of Detroit’s car-makers, there was the collapse of Castile’s textile industry, booming and dominant in the 15th century, outcompeted by northerners with weaker currencies — mostly British and Dutch — in the 16th.
The result is a perennial trade deficit that can only be contained with punitive tariffs, like those announced days ago by Donald Trump. At the same time, such tariffs can only lead to imperial decline, as the empire’s currency becomes less useful for others to exchange or store, and the empire finds it harder to just build up debt to raise armies; the hoped-for-tradeoff is a reinforcement of the metropolis’ industrial base through import substitution.
Of course, any comparison between Spain’s Early Modern Catholic monarchy and the contemporary American Republic, with its string of military bases, acronyms and allies, is going to be imperfect. However, a recent paper on the economic decline of Spain during the imperial era makes the similarities plain: Spain like the modern US was a military power backed up by riches derived from commodities — gold and silver from the Americas in Spain’s case, while the US is the world’s largest oil and natural gas producer.
The paper — “Institutions and the Resource Curse in Early Modern Spain” by Mauricio Drelichman and Hans-Joachim Voth — focuses on the idea that Castile, Spain’s economic and demographic core, became too rich too fast:
“Before the silver windfall Castilian institutions had evolved in the direction of limiting government. Rent seeking was successfully contained through repeated bargaining between the Crown and the centers of economic activity, to the detriment of the traditional nobility and the clerical establishment… There is growing evidence that the resource windfall had negative effect on Spanish industry (Drelichman 2005a); here we argue that the silver boom also gave rise to institutions that allowed the Crown to set policy unchecked by other stakeholders in the political game. Those institutions persisted long after the resource rents dwindled, hindering Castilian economic growth for a long time.”
I do think this is a tad simplistic (but not wrong)1: it’s hard to assess exactly what the ideal speed of enrichment would be for any country. Could this reasoning be applicable to the US? Perhaps. Albert Henry Woolson, the last surviving veteran of the US Civil War, lived to see WW1, the Depression, WW2 and the Cold War. He died in 1956, at the start of an era of great power and influence for an American Empire he certainly never suspected he would witness.
More importantly, when one looks at the effects of Triffin’s dilemma2 on imperial Spain, the parallels are clear. For example, the creation of a military-industrial complex of sorts, devoted to “pursuing a string of wars” for the expansion of democracy salvation of souls, the accumulation of debt as eager lenders flocked to the court, and the rise of an imperial “meritocracy” filled with the winners of the imperial game, people like Hernan Cortés or royal advisors who knew how to handle tricky governance problems in places as distant as the Philippines and Sicily.
It’s worth considering these numbers provided by the guys at Powerline, a center-right, sort-of-neocon blog, because they apply to the US in 2025 but most could apply to 17th century Imperial Spain pretty well:
US share of world population: 4%
US share of world GDP: 26%
US share of world wealth: 29%
US share of world debt: 35%
US share of world military spending: 37%
US share of world foreign aid: 40%
So far, these numbers have backed each other up: a country with 4% of the population remains the dominant superpower because it accounts for 37% of the military spending, allowing it to generate 26% of the GDP and maintaining 29% of the wealth. But this also demands sacrifices that are stretching the capacity of US finances to the limit, forcing the maintenance of a gigantic apparatus of NGOs and various aid agencies that leaves 40% of international development aid under US management and means that 35% of all global debt is owed by the American taxpayer.
Trump’s tariffs, for now mostly frozen, have been widely derided and may never function as most people thought they would just days ago. Still, Trump the only person since Bill Clinton (who, satyr and crook or whatever you want to say, managed to stabilize the budget) to have presented a long-term plan to fix what for more than a decade has seemed like an uncontrolled slide that no one felt responsible for. His plan may not work, for various reasons, and it may not even be implemented, but somebody else may have to come up with a real alternative if the US is not to end like Imperial Spain ended.
Drelichman and Voth were writing in 2008, just as Daron Acemoglu was becoming a superstar in the field of economics, with his theory about “Institutions as the Fundamental Cause of Long Run Growth” — the title of a paper authored by Acemoglu and two colleagues in the 2005 Handbook of Economic Growth, edited by P. Aghion and S. Durlauf. This paper is cited in their bibliography.
Which Drelichman and Voth don’t cite by name.
As a boy, in the early 1950s, I had a severe addiction to m&ms. a bag for a a nickel had a good amount. I am lucky that passion has passed as now one cannot afford to become pre-diabetic.
I have watched my country become poorer and the wars, none of which we have in any since won, become stupider.
This is why I am chairman, CEO and only member of the neutralistassociationofthe.us.
It is probably too late, but we need to come home, adopt a neutralist foreign policy and more importantly, a neutralist ethos.
Thanks for sharing this interesting article.
I’m not entirely sure that there’s any very
close parallel or correlation between the economic impact of the ‘unit of account’ and ‘store of value’ function of the coinage of 16th and 17th Century Spain, and the effect upon the economy of the United States today of the reserve currency status of the $US.
The $US has been since 1971 purely a fiat currency, not backed by gold or silver, but merely by the good faith of the United States government, so the United States, because other countries are for the moment prepared to accept dollars as payment for their exports, can obtain useful and beneficial goods and services in exchange for pieces of paper, rather than pieces of eight.
Spain didn’t have that option, and from early modern times until the 19th century, and throughout the period of its empire in South America, operated a bi-metallic coinage system, with silver coins being used for day-to-day transactions, and gold Escudos for larger ones; ie the Spanish currency had a ‘real’ value, and not just a nominal value, and could be melted down for use as jewellery, or for other purposes according to the wish of the holder, but couldn’t merely be conjured up out of thin air.
Because of the high standard and consistent level of purity of the Spanish coinage both Reales and Escudos were widely accepted internationally, and both silver and gold flowed freely into and out of Spain in the form of specie.
In economic terms the impact of such large inflows of precious metals was an increase in the level of prices due simply to a supply and demand effect, and this price inflation spread from Spain to the rest of Europe, as new and increased supplies of silver and gold followed the intra-European trade routes.
The actual parallel between early-modern Spain and the United States in the 21st Century is perhaps that both countries, then and now, chose to waste immense resources in pointless and ultimately unsuccessful military adventures, and in pursuit of unachievable goals and objectives.
Had they instead chosen to focus their resources in the development of their domestic economies, the world would be a very different place, so perhaps that’s the lesson that the United States could learn from the Spanish experience.