Comment by carefree-bob

My hypothesis:

1. Empires do not generate wealth, they cost wealth. Or rather they do not generate an economic surplus (the wealth available to the central government via taxation that can be used for whatever the government/elites want). A nation of 10 million will have more economic wealth than a nation of one million, but most of that is needed to keep the 10 million alive and to maintain the infrastructure and pay the local police to keep everyone in line, etc -- only a small fraction of total wealth can be effectively taxed by the empire and spent on arbitrary stuff like increasing the size of the Navy. That is what I mean by surplus.

A nation starts out with an economic surplus (here, I mean a real surplus, not a surplus of silver, but of real wealth) and they use that surplus to get a big army and go conquering. And each time they conquer, a part of that surplus is expended until they reach their maximum extent.

If this was not the case, we'd have a one world government, where the bigger you get, the bigger your surplus and no one can compete with you. But that is not what we see, what we see is that empires expand until they can't afford to keep expanding. Why did England give up its colonies? Because after WW2 it had too many war debts and couldn't keep subsidizing those colonies -- they were too expensive to keep. Same reason for why Rome stopped expanding and had so many financial problems. The check on empire is always bankruptcy. You can look at the trillions the US spends on foreign wars, which far exceeds the economic benefit we get of waging those wars. You can argue, for example, that we got some oil from Iraq, but we still have to pay for that oil, so whatever discount we got on oil comes nowhere near the cost of invading and administering Iraq. That is how all empires work -- France was always better off, financially, just paying market rate for whatever minerals it could get in Africa than the massive resources it spent on trying to control and build infrastructure in Africa. Same thing for England. It doesn't even come close, when you add up the cost of the British Navy and colonial administration to whatever discount it got on raw materials over paying the market rate. Same thing for Rome, etc.

2. The situation with Spain was about financial wealth, not real wealth. They discovered huge silver mines in their colonies and were awash with silver. That dumping of money 1) created massive inflation, and 2) caused Spain to run a huge trade deficit, destroying domestic industry, as the Spanish currency was basically overvalued. It was this economic destruction that leads people to think Spain became lazy and stopped producing. They didn't become lazy, but with so much free money causing such high prices, Spanish industry could no longer be competitive with industry elsewhere. This is called "Dutch disease" as the same thing hit Holland and you also see it in the US with our overvalued currency. So you do not benefit, in terms of real wealth, when you dump a bunch of money on a country. You need just the right amount of money -- too much and you get inflation, too little and you get deflation. There is an optimal amount of money for an economy, and Spain exceeded it.

3. Many have studied the reason why England led the industrial revolution, and it is not a majority view that it had anything to do with the colonies. Most point to things like the availability of coal, development of financial markets, and of course the fact that a lot of the steam engine stuff was invented first in England.