Spain: Capital, Madrid

Madrid 1561Madrid in 1561, seen from the Royal Alcázar of Madrid, Philip II’s residence in the city. Picture provided by Oronoz.

Spain: Capital, Madrid
The geographic isolation of Madrid is one of the determinant causes of Spain’s historical anomaly and its late incorporation into modernity
El País: España, capital Madrid
By César Molinas, published March 4, 2012

Since ancient times, people have chosen to establish communities close to the sea or navigable rivers. The principal reason for that was transportation: since there were no highways, railways, or airports, water was the fastest, cheapest, and safest medium of travel. Along with merchandise sailed the inseparable companions of commerce: ideas and innovations. The principal European capitals – London, Paris, Berlin, Rome, Vienna, Budapest, Moscow – had immediate access to sea or river transport. The exception is Madrid, which is located on a high plane hundreds of kilometers from the closest navigable body of water. The town of Manzanares (its old name) has another relevant geographic characteristic: at 655 meters (2149 ft) of elevation, it is higher up than Bern or Vaduz. Madrid is, after Andorra la Vella, the highest capital in Europe, which illustrates how grueling it was to access.

Who had the bright idea of putting a capital city in a place with such adverse geography? History says that it was Philip II, following his father’s advice to establish a fixed capital. Even then, the Austrian had three obvious choices: Seville, Lisbon, and Barcelona. The last he probably rejected for political reasons: after crushing the commoners’ rebellion, the king had much more power in the kingdom of Castile than he did in the kingdom of Aragon. Lisbon could have seemed like a too-recent incorporation to the empire (it had passed to his control through his own marriage).

But Seville? Why, with the empire fully engaged in its American enterprises, didn’t the monarch establish himself in Seville? Considering the psychology of a person who, committed to installing himself in the center of the peninsula, did not even choose Toledo but instead elected Madrid – the third largest community in Castile at the time, but one without a bishop – one could venture that Philip II didn’t want to be close to anyone who could overshadow him, a hypothesis backed up because, unsatisfied with the solitude of the Madrileño panorama, the sovereign decided to climb up the cliff of El Escorial, where even now he rests in his tomb.

Things being as they were, this town took in the court. This was, in my opinion, a transcendent event in Spanish history, one which indelibly marked the Spanish worldview (weltanschauung), culture, economy, and society. To put it more clearly: the geographic aberration of Madrid is one of the determinant causes of the anomalous history of Spain: that is to say, its failure to incorporate itself into modernity. In this article, I will focus on its economic consequences and territorial coordination, leaving other dimensions of this phenomenon to future articles.

For centuries, Madrid was just a court, situated in the inaccessible center of one corner of Europe, isolated from economic and commercial currents and ideas and innovation along with them. In this context, the Spanish elite, which had projected themselves worldwide in the 16th century, trended toward a rough immobilism in religious, cultural, social, and economic spheres. Along with that, as we’ll see in the third article of this series, Spain lost the centripetal force which had united the diverse possessions of the monarchy, even in the places where the sun didn’t shine. Madrid was characterized more by what it lacked than by what it had. As a court, it had, like all courts, courtesans, painters, musicians, and writers. As a village, it lacked the ambition of traders and entrepreneurs and the activity of scientists and engineers. Nor did it have the circulation of ideas. The reactionary court, unlike those of other European countries, never had the counterweight of a dynamic, industrious, and culturally enterprising city that could contribute to bringing Spain closer to the new waves that were transforming Europe. The isolation of the governing elite helped turn Spain into a bastion of resistance to early Protestant reform and every kind of progress afterward, as illustrated by the delicious anecdote that the list of 400 Spanish subscribers to the French Encyclopedia was headed by the Grand Inquisitor and the other principal executives of the Divine Office of the Inquisition. (Which shows admirable professionalism on the inquisitors’ part, I must say.)

The only reason to go to Madrid was to see the king. And people went to see him because, as Luis Garicano likes to point out, the only way to be rich in Spain was to be the son of a rich man or to be close to the king. In the heat of this court developed a Castilian capitalism, badly labeled finance capitalism, based on capturing rent and being close to power, which is typically Madrileño and has continued to be the dominant form of capitalism in our country to this day. In terms of their conceptions of business and the world, there is great consistency between nineteenth century historical figures like Fernando Muñoz, General Serrano, and the Marquis of Salamanca and the people who sit in the royal box of Santiago Bernabéu (football club Real Madrid’s stadium) today. It’s the same way of prospering: through political power, thanks to the BOE (Official Bulletin of the State), which has continued publication, unaltered, for centuries. How else can one explain, for example, the recent two year moratorium on preregistration of solar power plants so that the first correspondents can be covered? Is this not rent-seeking behavior? Ask about it in the Bernabeu.

In a recent book, El declive de los dioses (The Decline of the Gods), Mariano Guindal, whose pen recalls the brush Goya used to paint La familia de Carlos IV (The Family of Charles IV), writes fascinating reportage about the last 40 years of Castilian capitalism. The most egregious figures in that get-rich-quick culture – entrepreneurs, politicians, unionists, achievers, bishops, condottieres, and con men – form an ever-changing tableau in which the only constant is the business model, if you can even call it that. The gods fall, but Olympus doesn’t. Highly recommended.

The great Spanish businesses that have become multinationals – Telefónica, Banco Santander, Repsol, BBVA – are all regulated businesses which, regardless of the success they’ve had in capturing their respective regulators, are all too big, and they all now depend on the BOE. More than a few of their current directors have been favored by the ruling government, a practice which I fear will continue for the near future. In any case, these businesses are the most evolved and most equivalent instantiations of Castilian capitalism. Another group of businesses which has internationalized on a large scale, perhaps by virtue of necessity, is made up of the biggest public works constructors. They aren’t regulated, but they depend on the BOE more than anyone else.

Are there any relevant players in the Spanish economy that haven’t fallen under the paradigm of Castilian capitalism? In fact, there are. Businesses like Inditex, Mango, Abengoa (despite its love for the BOE), Mercadona, Gamesa, and many others follow different paradigms and have relevant commonalities. First of all, they are companies that stemmed from an entrepreneur’s vision of the future. This is a very important subject that I will go into more detail about in the next article. Suffice it to say that all the regulated businesses mentioned in the previous paragraph are lead by businessmen, some of them very good ones, but none of them by entrepreneurs. Botín, for example, has made Santander one of the best banks in the world, but he has never invented a new way of banking. Amancio Ortega, on the other hand, has invented a new way of producing, distributing, and selling confections. He has changed the world, not just his business. This is the root of the difference between a businessman and an entrepreneur. The first has a vision of his business; the second, the world. But we’ll leave this for the next article.

The second relevant feature of the unregulated companies I mentioned is that they are all on the periphery of the country: Galician, Catalonian, Navarrese, Levantine, or Andalucian. Coincidence? I think not: Spanish industrial capitalism, which was weaker than Castilian capitalism, has always developed on the periphery, close to navigable water. It has always been a timid capitalism, parochial and lacking ambition, as much in politics as in economics, although in this last respect it could have stretched itself out in the heat of globalization, abandoning the protectionist postures that have persisted since the ‘90s.

Madrid’s status as capital has formed Spain not only ideologically and economically but also physically. Germà Bel, to whom this article owes much more than just its title, wrote in his last, indispensable book, España, capital París (Spain: Capital, Paris), about how Madrid developed as political capital of Spain under the Bourbons. They were inspired by Paris’s traits as capital to design six “royal highways” (today’s highways A-1 through A-6) financed by the crown which radically reorganized Spanish territory forever. The motivation for the design was, and continues to be, strictly political – that notices and orders to the provinces circulate quickly and arrive everywhere at the same time – and had no economic logic whatsoever. Even today, this radical scheme is the paradigm for the way the Spanish administration operates. The principals of financing for the national communication network have not changed: the radial web is publicly funded, but everything else is privately funded. That is to say, the Mediterranean corridor has it rough, as the recent resurrection of the central corridor demonstrates. Madrid’s current status as economic capital, achieved in recent decades due to Barcelona’s confusion provoked by Catalonian self-absorption, added to 18th century policies, probably makes its status as total capital of the country irreversible. This should be the fact that determines whether future projects are politically viable.

I’ll finish with a counterfactual. What would Spain be like today if Philip II had chosen Seville as capital instead of Madrid? Would it be very different from what we know today? My intuition says yes, it would be very different, culturally, economically, and geographically. The city and court would have interacted much more; ideas would have circulated much more; the court and king would have had more contact with the real world. The Mediterranean access would probably be the country’s center of gravity, and Seville’s millennial wisdom would have contributed the touch of skepticism that has always been lacking in the round and mineral thought processes of the Spanish elites. “Look, César,” an ancient Sevillian aristocrat once said to me, “For the last two thousand years, we Roman patricians have had a divine life here…”

César Molinas, mathematician and economist, is Barcelonese by birth and
Madrileño by adoption. He has been an academic, leader, and investment
banker. He is now dedicated to biomedicine risk capital and to consulting.

Madrid Cuatro TorresView of the “Four Towers” of Madrid. Photo by Álvaro García.

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5 Comments on “Spain: Capital, Madrid”

  1. César Molinas Says:

    Many thanks for this.

    • jsmyth Says:

      It’s an honor to hear from you, sir! I really enjoyed the article. Let me know if you’d like anything else translated.

  2. César Molinas Says:

    Well, I dont’t want to push my luck but this article is the first of a series: there are three more in the offing …


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