Prados de la Escosura (1993) has attempted a rough estimate of the real cost to
Spain of the loss of her colonies, making assumptions favourable to the generally
accepted view that the loss was significant. The first assumption is that the productive
resources embodied in exportables did not have alternative uses in the domestic
economy. A similar assumption is made regarding the services (shipping, insurance,
mercantile) provided by Spanish subjects in the colonial trade. In contrast to the non-
colonial trade, almost totally carried on non-Spanish ships, Spanish colonial legislation
ensured that the Indies trade used only national shipping. Therefore, with the decline of
Spanish American trade, a decline in Spanish maritime services closely followed. The
loss in revenues due to the cessation of precious metal shipments, and the reduction of
customs duties resulting from colonial independence, were also taken into account, the
assumption being that public revenues from the colonies were productively used in the
domestic economy. The upper bound estimate of Spanish losses implied by these
assumptions was not more than 8% of national income. And while it could be argued that
the profits from colonial trade represented a high proportion of the funds used to finance
investment in Spain, an upper bound estimate of their contribution made to total capital
formation is below 18% by 1784/96.
The long term consequences of the loss of the colonies depended on the flexibility
and dynamic nature of the industry concerned. The decline in manufactured exports from
many sectors illustrates the lack of competitiveness of Spanish industries: Spain could not
offer the Latin American consumer either the prices or the quality of her Western
European competitors, specifically Great Britain. For example, the Basque iron and steel
industry (which sold at least a third of its output to colonial markets at the end of the 18th
century) became uncompetitive from the 1770s onward. A similar situation characterised
the Valencia silk industry. Between the 1790s and the 1820s net exports of raw silk rose
while net imports of silk textiles increased. Catalan shipping was yet another industry
which had grown under colonial protection and suffered afterwards. However, Catalan
cotton textiles developed further once the colonial market had been lost. The more
competitive and flexible sectors of the economy eventually adapted to new circumstance,
particularly commercial agriculture which turned towards growing markets in Western
Europe. As mentioned earlier, the 19th century was a good time to do this, in that the
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