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[[File: Spanish prisoners eating a meal HD-SN-99-01945.jpg|200px|thumb|left| Spanish prisoners after their capture in the Philippines]]
== The impact of the defeat on Spain==
Spain was very unstable at this time. It was divided between Democrats and those who wanted the return of an absolute monarchy. Many were sympathetic to left-wing ideas such as socialism and anarchism. The country was regularly the scene of political violence and bombings and assassinations were common. The defeat of the Spanish Empire added to the instability in the country. To the left, it was evident that the old order had failed and that change was inevitable and this encouraged extremists, such as the anarchists (CNT) to launch politically motivated strikes aimed at subverting the government. These strikes led to violence as in the ‘Tragic Week’ in Catalonia where a strike became an uprising that was bloodily repressed (1908). The Spanish defeat probably contributed to the growing political instability in the country. The Democrats were also bitterly divided between liberals and conservatives. The defeat in the war of 1898 was a disaster for the Spanish government who were Liberals. They were widely blamed for the defeat and they lost power soon afterward. The Spanish Conservatives were happy for the liberals to sign the humiliating armistice and blamed them for the defeat, which was widely known as the ‘disaster’ <ref> Trask, p. 13</ref>. The 1898 victory was a setback for the Liberals but the Conservatives were unable to capitalize on their difficulties. In the aftermath of the Spanish-American War, the Spanish political scene became ever more divided. There was some thirty governments in a period of 20 years. The Democrats and the politicians failed to provide the country with some stability. They missed a golden opportunity to democratize the country. In the 19th century, the Spanish military felt entitled to enter politics to ‘save’ the country. In the aftermath of the 1898 defeat, the army’s reputation was damaged, even though the ordinary soldiers had fought bravely. For some twenty years the military was so chastened after their defeat by the US that it did not intervene in politics, despite the constant and persistent instability<ref>Trask, p. 113</ref>. However, the political parties were not able to establish a stable democracy and in 1922 the army with the support of the monarch once again staged a coup and seized power.
[[File: San Juan Hill by Kurz and Allison.jpg |200px|thumb|left|A postcard showing the Battle of Manila Bay]]
==Economic Impact==
Economic thinking at the start of the twentieth century believed that Empires were essential for the benefit of large economies. Their markets and natural resources were essential for European economies. This was the orthodoxy in government circles in Spain. The defeat of Spain in the war of 1898 meant that the country lost access to natural resources such as sugar in Cuba and large markets, such as those in the Philippines. The loss of its colonies caused a great degree of economic dislocation and many companies and individuals became bankrupt. Many leading families among the nobility were ruined and lost vast estates in Cuba and the Philippines. This lead to the emergence of a new business class in Madrid and elsewhere who were more progressive and supported the liberalization of the economy. However, the influence of big landowners still thwarted the reform of the economy. However, the loss of Cuba, the Philippines, and other colonies benefited the country by causing capital to return and to be invested in domestic industries. This helped the country to industrialize, especially in the Basque Country and in Catalonia. Previously, Spanish capitalists had invested large sums in the country’s colonies and these were now diverted to local projects. This helped to modernize the Spanish economy and it was no longer as reliant on agriculture. The medium to long-term impact of the defeat in 1898 was on balance, a positive one <ref> Harrison, Joseph. An economic history of modern Spain (Manchester, Manchester University Press, 1978), p. 213</ref>.
