Economic Growth: Drivers, Characteristics, and the Spanish Case

Posted on Nov 29, 2024 in Economy

Employment and Capital Growth: A Circular Relationship

For employment and capital increase, the economy must grow, establishing a circular relationship because they are both cause and result of growth. The roles of institutions, social organization, and the presence of entrepreneurs are important. Economic upgrades encompass industry and agriculture, with companies establishing partnerships. Plotting development precisely is impossible.

Characteristics of Economic Growth

  1. Spatially Limited: Only a small part of the planet is in the developed area, corresponding with industrialized countries.

  2. Social and Institutional Transformations:

    1. The status of an individual depends on their activities.
    2. Society is urban, with more associations defending private interests.
    3. Institutional relations are robust and tend to be democratic.

  3. Productivity Growth: Productive factors (labor and capital) become more efficient, obtaining more outputs from the same inputs, increasing the availability of food and services.

  4. High Rates of Sustained Growth: Long-term GDP growth, despite possible dips, shows a positive trend. The long-term behavior of the economy is crucial, focusing on the trend rather than cyclical behavior. Spain between 1960 and 1974 is an example.

Differences Between Developed and Developing Countries

  1. Levels of Per Capita Income and Productivity: While not definitive for development status, these indicators offer insights and allow for comparisons.

  2. Sectoral Distribution of Employment and Production: Developed countries have smaller primary sectors and larger service sectors, often exceeding two-thirds.

  3. Widespread Poverty: Poverty exists in developed countries but affects a smaller percentage of the population, unlike developing countries where it can affect half the population.

  4. Income Distribution: Underdeveloped countries often have very uneven income distribution, concentrated in few hands. Developed countries have a larger middle class.

  5. Democracy, Equality, Justice, and Social Structure: These values are generally more prevalent in developed countries. Modernization and development are influenced by many factors, not just economic ones.

Economic Growth in Spain

Spanish Growth Characteristics Compared to the European Economy

  1. Intensity: Spain’s average GDP growth rate (3.3% between 1960 and 2007) has been higher than the EU’s (2.4%).

  2. Synchronization: The cyclical pattern has been similar to the EU, with coinciding growth rates.

  3. Variability: GDP fluctuations are higher in Spain than in the EU, with stronger expansion phases and more intense recessionary crises.

Phases of Economic Growth in Spain

  1. Between 1960 and 1973: The golden age of Spanish growth. Internal migration and emigration to European countries occurred. High growth rates and structural changes affected:

    • Demand: Families spent less on food as income increased, demanding more services and products, boosting production.
    • Trade: Increased trade in goods and services led to economic interdependence.

  2. Between 1974 and 1984: The global energy crisis caused stagnation and inflation, destroying employment. Unemployment and inflation were higher than in Europe. The Moncloa Pacts of 1977 implemented appropriate economic measures.

  3. Between 1985 and 1991: A growth phase with high employment generation. Spain’s entry into the EU in 1986 opened and liberalized markets.

  4. Between 1992 and 1993: A short period of crisis with reduced global growth and increased unemployment by 700,000 people.

  5. Since 1994: Growth intensity is lower but more stable, resulting in greater employment generation capacity. The impact of GDP increase on employment growth is considerably higher.