"These huge fortunes were not invested in productive systems but actually led to the de-industrialization of the country. The land owners primarily profited from "funnel of gold" from Americas, as they had a monopoly on the export of oil and wine to the growing markets of the New World.

The supply of such goods is highly inelastic, and subject to diminishing returns. To increase production takes a long time. This expansion would produce the opposite of increasing returns, that is, diminishing returns which cause the cost of production per unit to rise rather than fall.

The result of the increased demand was consequently a sharp increase in the prices of agricultural products. At the same time, nobility owning land were exempt from paying most taxes, so the tax burden fell increasingly on on the artisans and manufacturers. Their competitiveness was, on the other hand, already being squeezed by rapid rise of prices of agricultural goods in Spain.

This undid the synergies and division of labour in Spanish cities, causing a de-industrialization from which Spain only finally recovered in 19th century. Spain protected agriculture to the extent that it killed manufacturing"

source: Reinert, Erik "How Rich Countries Got Rich . . . and Why Poor Countries Stay Poor" 2007