Beyond the core regions of its empire, Spain claimed vast American dominions but struggled to hold them. Controlling the Caribbean basin, which was essential for Spain’s transatlantic shipping routes, was especially difficult, since the net of tiny islands spanning the eastern Caribbean — the Lesser Antilles — provided many safe harbors for pirates and privateers. Fortified outposts in Havana and St. Augustine provided some protection, but they were never sufficient to keep enemies at bay.

And Spain had powerful enemies, their animosity sharpened by the Protestant Reformation and the resulting split in European Christendom. In the wake of Martin Luther’s attack on the Catholic Church, the Protestant critique of Catholicism broadened and deepened. Gold and silver from Mexico and Peru made Spain the wealthiest nation in Europe, and King Philip II (r. 1556–1598) — an ardent Catholic — its most powerful ruler. Philip was determined to root out challenges to the Catholic Church wherever they appeared. One such place was in the Spanish Netherlands, a collection of Dutch- and Flemish-speaking provinces that had grown wealthy from textile manufacturing and trade with Portuguese outposts in Africa and Asia. To protect their Calvinist faith and political liberties, they revolted against Spanish rule in 1566. After fifteen years of war, the seven northern provinces declared their independence, becoming the Dutch Republic (or Holland) in 1581.

The English king Henry VIII (r. 1509–1547) initially opposed Protestantism. However, when the pope refused to annul his marriage to the Spanish princess Catherine of Aragon in 1534, Henry broke with Rome and placed himself at the head of the new Church of England, which promptly granted an annulment. Although Henry’s new church maintained most Catholic doctrines and practices, Protestant teachings continued to spread. Faced with popular pressure for reform, Henry’s daughter and successor, Queen Elizabeth I (r. 1558–1603), approved a Protestant confession of faith. At the same time, however, Elizabeth retained the Catholic ritual of Holy Communion and left the Church in the hands of Anglican bishops and archbishops. Elizabeth’s compromises angered radical Protestants, but the independent Anglican Church was anathema to the Spanish king, Philip II.

Elizabeth supported a generation of English seafarers who took increasingly aggressive actions against Spanish control of American wealth. The most famous of these Elizabethan “sea dogs” was Francis Drake, a rough-hewn, devoutly Protestant farmer’s son from Devon who took to the sea and became a scourge to Philip’s American interests. In 1577, he ventured into the Pacific to disrupt Spanish shipping to Manila. Drake’s fleet lost three ships and a hundred men, but the survivors completed the first English circumnavigation of the globe and captured two Spanish treasure ships. When Drake’s flagship, the Golden Hind, returned to England in 1580, it brought enough silver, gold, silk, and spices to bring his investors a 4,700 percent return on their investment.

At the same time, Elizabeth supported military expeditions that imposed English rule over Gaelic-speaking Catholic Ireland. Calling the Irish “wild savages” who were “more barbarous and more brutish in their customs … than in any other part of the world,” English soldiers brutally massacred thousands, prefiguring the treatment of Indians in North America. To meet Elizabeth’s challenges, Philip sent a Spanish Armada — 130 ships and 30,000 men — against England in 1588. Philip intended to restore the Roman Church in England and then to wipe out Calvinism in Holland. But he failed utterly: a fierce storm and English ships destroyed the Spanish fleet.

Philip continued to spend his American gold and silver on religious wars, an ill-advised policy that diverted workers and resources from Spain’s fledgling industries. The gold was like a “shewer of Raine,” complained one critic, that left “no benefite behind.” Oppressed by high taxes on agriculture and fearful of military service, more than 200,000 residents of Castile, once the most prosperous region of Spain, migrated to America. By the time of Philip’s death in 1598, Spain was in serious economic decline.

By contrast, England grew significantly during the sixteenth century, its economy stimulated, as colonial advocate Richard Hakluyt noted, by a “wounderful increase of our people.” As England’s population soared from 3 million in 1500 to 5 million in 1630, its monarchs supported the expansion of commerce and manufacturing. English merchants had long supplied European weavers with high-quality wool; around 1500, they created their own outwork textile industry. Merchants bought wool from the owners of great estates and sent it “out” to landless peasants in small cottages to spin and weave into cloth. The government aided textile entrepreneurs by setting low wage rates and helped merchants by giving them monopolies in foreign markets.

This system of state-assisted manufacturing and trade became known as mercantilism. By encouraging textile production, Elizabeth reduced imports and increased exports. The resulting favorable balance of trade caused gold and silver to flow into England and stimulated further economic expansion. Increased trade with Turkey and India also boosted import duties, which swelled the royal treasury and the monarch’s power. By 1600, Elizabeth’s mercantile policies had laid the foundations for overseas colonization. Now the English had the merchant fleet and wealth needed to challenge Spain’s control of the Western Hemisphere.