Between 1500 and 1800, Iberian society was characterized by high inequality of income and wealth, low real wages that stimulated working relatively long hours and days, and some expansion consumption focused on low-quality manufactures. Despite the high levels of wealth of the upper groups living in large urban centers such as Madrid, Lisbon or Seville, Iberian consumption patterns did not experience a consumption revolution as they were highly conditioned by relatively low living standards. Although the second half of the eighteenth century was a turning point in Portugal and Spain – due to a reduction in the price of manufactured goods and greater openness to cultural foreign influences – economic and social changes excluded many disadvantaged groups of low-income earners, women, young children and poor people.

This chapter aims at placing the history of Spain and Portugal in a global context to revise many of the commonplaces that have been present for centuries about the history of both countries. It also explains this history in a comparative perspective with reference to other European countries as well as other imperial formations. Special attention is given to the different institutional systems and the political fragmentation of the Iberian Peninsula, as well as to the evolution of the different models of regional development. This also makes it possible to break with nationalizing visions of its economic performance, while the different regional trajectories and their connections are interpreted as part of a peninsular system that does not differ qualitatively from that of other regions of Europe, particularly Mediterranean Europe.The result is a more nuanced, less pessimistic – far from exceptionalism – and more realistic picture of peninsular history and a reflection on how that history has been influenced by imperial systems and globalization.

This chapter analyses the institutional architecture and political reforms of the Iberian monarchies from the sixteenth century to the end of the eighteenth century, underlining two main ideas. First, the persistence of an institutional model based upon jurisdictional autonomies until the end of the seventeenth century. This political framework was based on cooperation and negotiation allowing the participation of the different institutional and social bodies in the political decision-making process. Iberian monarchs and their ministers were able to establish alliances with local oligarchies, important noble houses, guilds and, of course, the Church. This system was partly disrupted by a movement of political reforms that reinforced State interventionism in the economy during the eighteenth century. Second, the limited economic impact of such reforms prevented an economic growth similar to other Western European territories. They faced resistance of the kingdoms and territories, which aimed to preserve their customs and the resistance of the privileged groups who struggle to maintain their properties and fiscal privileges. Both factors detained the attempts of centralizing reforms and undermined the process of increasing state capacity.