From 1620 onwards in the Iberian Peninsula, like elsewhere around the Mediterranean, the flattening out of the demographic trend indicates that the long sixteenth century of prosperity had come to an end (Parker and Smith 1978). Somewhat differently, in Europe's northwest the slowdown of population growth occurred only after 1650 and did not prevent this region from keeping its path toward financial, industrial, and commercial leadership. The shift of the economic core from Mediterranean borders to the northwestern Atlantic shores occurred within two military benchmarks that challenged the Habsburgs’ hegemony (Braudel 1966). The first refers to the Thirty Years’ War (1618–1648), a series of conflicts that began as a religious war in the Holy Roman Empire, but gradually widened, involving several European states. This protracted hostility coincided with the struggle for independence in the northern Low Countries, and as it happened, with the outbreak of the revolution in Catalonia and the Portuguese Restoration, which revealed the multiple, internal and external, tensions the Spanish monarchy faced thereupon. The second conflict that also gained European scope was the War of the Spanish Succession (1702–1714), a dispute for the throne between the French Bourbons and the Austrian Habsburgs. Each of these wars established political alliances drawn in the treaties of Westphalia (1648) and of Utrecht (1715), framing an international order dependent on the military might of the northwestern European states.

The political motivations of various European powers fostered institutional changes inherent in the rise of military expenditure which became the main justification for raising funds, either by public borrowing or by increased taxation. Thus, military concerns exposed the financial constraints of the traditional “domain state,” which drew income from royal property rights claimed over different types of assets and paved the way to the making of the fiscal state. Besides fiscal innovations, this institutional watershed comprised import-substitution policies, and all sorts of economic policies directed to strengthen the national state usually denoted in scholarship as the era of “mercantilism.”

Portugal was an active player in this backdrop that ascribed a different economic role to the state. The kingdom's political independence was reaffirmed in 1640, though it required a twenty-eight-year war against Spain (1640–1668) as well as an increasing tax burden that underpinned noteworthy steps toward the making of a fiscal state.