The economic development and decline of sixteenth- and seventeenth-century Castile has been the subject of considerable research in the last few years, and it has long been assumed that the rise of Madrid played an important role in dislocating the economy of the region. Yet little direct attention has been paid to the actual processes whereby a distinctive type of urban growth, the development of a political capital, undermined the relationship between town and country which was the basis of the economic activity of sixteenth-century Castile. The rapid growth of Madrid, in fact, coincides with the equally spectacular decline of Toledo, the largest urban center in the region until 1600. The interaction between the two cities, and between the urban sector and the countryside, during the period of prolonged economic stress at the close of the sixteenth century, helps to explain the severity of the crisis which Spain experienced in the seventeenth century.

Since at least the seventeenth century the economic development of Spain has been limited because the rates of growth achieved in the peripheral areas of Catalonia, Valencia, and Vizcaya were greater than that of the interior under the old Crown of Castile. The stagnation of the Castilian interior not only created a dull market for manufactured goods, but conserved a persistently strong traditionalist faction which long hampered Spanish political development. The resulting tension between the interior and the more modern peripheral sectors of society dominates Spanish history of the nineteenth and twentieth centuries.

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