Economic Policy in Francoist Spain: 1939-1975
Evolution of the Economic Policy of the Franco Dictatorship
During the postwar years, from 1939 to 1959, Spain experienced autarky, a system where the nation’s needs were met solely through its own resources. Embracing self-sufficiency, Spain avoided external dependence. Franco made a virtue out of necessity. These were years of hunger, misery, and a daily struggle for survival. The state intervened heavily in the regulation of foreign trade, reducing imports, including consumer goods, raw materials, and electricity. This resulted in low industrial production. However, industry was favored with laws, measures, and aid. Spanish monopolies were promoted, all railway companies were nationalized and merged into RENFE, and the Telefónica Company became CTNE.
In 1941, the National Institute of Industry (INI) was founded to promote and encourage public companies such as Iberia, Endesa, and Seat. The state also regulated the tertiary sector, controlling production, marketing, pricing, and consumption. Low official prices caused a decline in production and a slowdown of modernization. This market control, lack of essential commodities, and rationing led to the proliferation of a black market for all types of products. A marked increase in the cost of living led to the growth of shantytowns and the use of caves as dwellings.
International Recognition and Economic Liberalization
In 1953, the regime gained international recognition with the agreement with the United States, which included defensive measures against the USSR and economic support. This allowed Spain to receive military material, financial and technical assistance, and to normalize diplomatic and commercial relations with Western bloc countries. This marked the beginning of external openness and the liberalization of the foreign economy. With new technocratic ministers, the Stabilization Plan began, allowing Spain to leave the autarkic period that started after the Civil War. The economic measures were restrictive to overcome the limitations of the previous period. The plan aimed to reduce inflation, liberalize foreign trade, achieve the economic convertibility of the Peseta, and liberalize domestic activity.
Spain opened up to economic neoliberalism, foreign investment, and experienced rapid growth in the 1960s. However, the increase in wages and costs led to emigration. Between 1960 and 1973, there was an increase in industrial production, improved productivity, and the import of technology and foreign capital investment. This allowed for increased exports and falling prices. The demand for consumer goods, especially vehicles, also increased, aided by installment purchases. Industries were competitive due to low labor costs, leading to the creation of new industrial enclaves.
Agricultural and Tertiary Sector Changes
In agriculture, there was a process of mechanization, the use of chemical fertilizers, and increased irrigation. This caused rural exodus and emigration, but also led to diversification and increased demand and production of food. The tertiary sector revived; intense urbanization, increased distribution and trade, improved means of transport and communication, and a great boom in tourism. Tourists brought significant income, leading to the “tourism boom” of the 1960s, as they sought warmth, beaches, and affordable prices. The banking sector was revitalized by the influx of foreign currency and investment.
The favorable international situation allowed Spain to sell its production, gain power at reduced prices, and access technology and investments. The economic upswing required a population increase, leading to a pro-natalist policy. These changes consolidated a capitalist, industrialized society in Spain. Despite this, Spain was unable to join the European Economic Community because it was not a democracy. However, the Preferential Agreement of 1970 helped reduce tariffs and boost exports. Spain constantly had to bear the pressure of other countries for their territories, leading to the decolonization of Morocco in 1956, Equatorial Guinea in 1968, Ifni in 1969, and Western Sahara in 1975.