It seems to be a polular thesis that Spain declined because of huge imports of gold and silver from Peru and Mexico, ca. 1580-1700. The reasoning goes like this:
-the import of specie cause an enormous inflation in Spain. this made imported good cheaper than Spanish-made goods. This killed off Spanish industry.
-the huge wealth from the NW gave the Spanish kings the ability to carry on extended foreign wars (like the conflict with the Dutch0. These wars bankrupted Spain, and led to serious eefects (unpopularity of intellectual pursuits, instability).
-the “best and brightest” of Spanish society left Spain for the NW colonies, impoverishing the mother country,
The decline of Spain (as a world power) is easy to see-from being the world’s leading power 9in 1580), they feel to the point where an insignificant regional power 9the USA) beat them handily in a little war over Cuba (1899).
Is this these substantially correct? Or where there other factors at work? 
Sounds about right to me. What part of it are you having doubts about? You could also throw in the strangle hold the church had on the Spanish population, a few ruinous wars on the continent that Spain got itself into, etc…but for the most part, you pretty much listed the genearlly accepted reasons for Spain’s decline afaik anyway.
-XT
It has been said too that the newly wealth sort of made the spaniards"lazy". The overall productivity would have declined, the cultivated surface significantly reduced, and Spain would have relied on immigrants (from southern France and Portugal, for instance) instead of domestic labor.
I understand that some at least of these could have been caused by the inflation that raised the cost of labor, but still, I’ve seen mentionned that the afflux of wealth had societal effects too…
That said, gold from the new world isn’t the only explanation advanced for the decline of Spain. Social conservatism (look at the inquisition that survived in Spain long after it had lost any kind of influence in other european countries) and the lack of interest in the economic development of the country, while the british or french rulers or ministers were very proactive (at least at times) in this area. While the UK traded all over the world and France was trying to lure in technically competent people and create new industries out of whole cloth, Spain seemingly was seating on her ass, content with importing whatever she needed and not demonstrating a high level of interest in innovations.
The Rise and Fall of the Great Powers by Paul Kennedy devotes a chapter to the Habsburg empire (the transnational dynasty that included Spain in the sixteenth century). Kennedy’s book focuses on the concept of “imperial overstretch”: biting off more than you can chew and suffering long-term decline as a result. Having become very rich and powerful earlier, Spain became focused on ever more desperate attempts to preserve the status quo instead of innovating.
Another factor was Ferdinand and Isabella’s misfortune in not having a surviving male heir. Their daughter Juana married into the house of Hapsburg, which was historically based in Austria, and regarded Spain as a cash cow to be milked to finance expansion in the low countries and central Europe.
The Spanish and Austrian lines were separated again after the reign of Charles V, but damage had been done.
The problem was not really the amount of money they brought in from the colonies, but what they did with it. Basically it was frittered away on war and luxuries, as people above have mentioned. Had they 1/ been economically literate and b/ realised it was going to end, it could have been used to set the Spanish state up for the ages as a centre of industry and innovation.
You will see the identical scenario play out with most of today’s oil states. Lack of foresight is an abiding human characteristic.
Not so much lack of foresight as unbalanced incentives. In supply regions of any sort (supply regions being places that the rest of the world uses to supply itself with a single commodity, or perhaps two or three, in a close to if not totally unprocessed state), the class with access to the commodity being supplied gets the money and therefore the political power, and so skews everything towards preservation of their privileged status. Spain, inadvertently, turned itself into a supply region for gold and silver. As happened in Spain, this atrophies development in the rest of the economy.
Interestingly, the US today, with its massive current account deficit, has turned itself into a weird sort of supply region, where we supply dollars, the modern equivalent of gold and silver, and the rest of the world uses us to supply itself with liquidity. Hence the atrophying of our once-proud manufacturing, and the bloated dependence on finance and finance-related (such as housing, which depends on mortgage finance) activities.
Ask not for whom the bell tolls, and all that…
It has been said that by the 1700’s Spain was slipping so fast that you could see the decline from year to year! My question; weren’t at least SOME of the business class in Spain worried enough to change things? After all, look at spain after Franco-they have gone from a rather backward economy to a very modern, dynamic one. What was it that retarded spain-was it the grip of the Inquisition? Rigid class lines?
The better question is whether there even was a business class. The feudal system lasted longer in Spain because they had the gold from the Americas. As long as that gold was coming in there was no incentive to change. It was regarded as dirty for a Spanish nobleman to do any kind of work other than fighting.
As such, anyone who aspired to the nobility wouldn’t go into commerce bur rather would be a soldier.
I’d say it was sort of the opposite. All that gold in Spain gave a huge incentive towards the development of a business class in other countries - they needed to provide goods and services that Spain wanted in order to get the gold out of Spain and into their own country.
Mostly silver, not so much gold. The total gold imported between 1503 and 1660 amounted to about 185,000 kg, which expanded the European supply by 20%. Silver imports on the other hand ( mostly starting in the latter half of thew 16th century ) amounted to ~16,000,000 kg in the same period, which tripled the European inventory.
There were a number of attempts at reform, but given the demands of the imperial ( or “imperial” after Charles V ) government there was really only so much that could be done. The fact of the matter is that the Hapsburgs spent themselves to death. The specie from the Indies in no ways ever came close to equalling the budget outlay and the engine that drove the empire was Castile, on whose back most of those massive revenues were generated ( or failed to generate as repeated economic crises show ). The Spanish Hapsburg state was very heterogenous in terms of its component parts, each of which had a seperate government and different government institutions. Only Castile was in both an economic condition and a legal position to generate the kind of revenue the crown needed. By contrast Aragon for instance was shielded by a much stronger set of internal institutions that could resist taxation on the scale necessary to fund imperial ambitions.
Castile had entered its imperial phase in an economic boom, but it was a bit unstable. A number of decisions made to maximize returns in the short term ended up crippling it in the long term - for example the decline in food production in lieu of sheep-herding for wool exports, the retention of inefficient guild systems ( acquired from Aragon just when they were going out of style elsewhere in Europe ) or the granting of monopoly of textile exports to the New World. Combined with the sharp rise in prices of all Spanish commodities ( and Hamilton’s thesis as to the why of that has been sharply criticized ) and a muderous and intensely regressive taxation com, over the decades Spanish countryside was utterly wrecked and its industries undermined. Cultural issues involving a very large, generally impovershed, but utterly non-productive ( for cultural reasons ) class of lower nobility didn’t help either. Nor the internal issues with Jews and Muslims and their eventual expulsions. Nor any of a number of other factors.
Ultimately I’d say it was more Hapsburgs imperial ambitions that wrecked the Spain, with only a helping hand from the corrosive effect of a glut of silver and gold. The other huge booms in New World precious metals - the Brazilian gold boom on the first half of the 18th century and the second ( Zacatecas ) Spanish silver boom under the Bourbons either had neutral ( in Portugal’s case, which had an immensely immensely wealthy monarchy for half a century with little to show for it outside of fripperies like the Mafra ) or positive effect. While the first silver boom undoubtedly had some serious negative consequences, it was that the Hapsburgs were on the edge of economic crisis virtually every single year and kept digging themselves into holes that really killed the country.
- Tamerlane
Going back to the sterotype of Spanish laziness: much of this probably stems from macroeconomic conditions. With all the gold and silver around, you couldn’t form a capitalist class: you could only sell to your own people, and with the technology of the day, you had no leverage that way. Money was made more in farm production (which was fine in the Americas but Spain itself lacked the soil and climate to grow most ritzy goods), mining (similar issues), etc. And the Spanish couldn’t export things because of the massive inflation.
In such a situation, less activity becomes more logical. Increased effort will garner few, if any, rewards. Perhaps had monetary theory been more advanced at the day, things would have been different. But it was not for another 300 hundred years that mercantalism was starting to go the way of the dodo.
And the way they treated Queen Juana was some of the most disgraceful royal behavior in history. She was mentally ill and couldn’t fight back, so first her father and then her son kept her locked up in a windowless room in the castle of Tordesillas her entire life and just used their connection to her and her title to gain and hold power, while they treated her worse than a dog. She was the last of the original Spanish royal line.
Why would the gold have stayed in Spain causing inflation? As time went on, wouldn’t the gold have tended to spread out beyond Spain throughout Europe, causing the same inflation throughout the region? I’ve heard that the NW gold did bring about significant inflation, but I didn’t think it was limited to Spain.
Just as an aside, the amount of gold must have been truly staggering. I’m sure I’ve heard somewhere of a fairly primitive tribe, technologically speaking, that made fish hooks out of gold. It was that common in their territory.