Economic Reforms and Industrialization in Spain: 19th-20th Centuries

Posted on Jan 14, 2025 in Economy

Topic 1: 19th Century Economic Reforms

Agrarian Reform:

  • Increase in cultivated land through expropriation.
  • New structure of landownership, including large and small landowners, and laborers.
  • Privatization and increasing market influence for more effective land use.
  • Abolition of feudal property.

Fiscal Reform:

Introduction of liberal ideas to find new income sources and reduce debt.

  • Suppression of tithes.
  • Implementation of direct and indirect taxes.
  • Main problem: tax evasion.
  • State income doubled, benefiting the upper class.

Industrialization:

Failure, due to:

  1. Small internal demand.
  2. Loss of colonial markets.
  3. Scarce and expensive energy, particularly in Vizcaya and Catalonia.
  4. Heavy internal debt.
  5. Weak government and poor state.

Transport Revolution:

  1. Expansion of the roadway network, reducing reliance on animal transport.
  2. Railway construction, leading to internal market integration and reduced transport costs.
  3. Technological changes in ships and ports, resulting in integration into the international market.

Banking:

Two types of banks:

  1. Commercial banks focused on short-term investments.
  2. Credit banks focused on long-term investments.

Both invested in railways and public debt. The railway and banking bubble led to bank collapses and the creation of mixed banks, such as Santander and Bilbao.

Topic 2: Early 20th Century: Interventionism and Industrialization

Tariffs and Interventionism:

  1. Increasing state intervention, including commercial policy with tariff laws to support industry, fiscal reform under Villaverde, and industrial policy, such as naval initiatives.
  2. Custom tariffs on imports and exports.
  3. Protection did not lead to growth due to a lack of competitiveness.
  4. Low level of public expenditure.
  5. Interventionism increased during and after World War I.
  6. Primo de Rivera implemented more protectionism with barriers and increased public expenditure on infrastructure like roads.
  7. Increased intervention during the Second Republic.

Second Industrial Revolution:

  1. Began in 1870 in more advanced countries, reaching Spain in the 1880s and accelerating in the 1890s.
  2. Increased use of energy, particularly electricity and oil.
  3. Hydroelectricity was cheap in Spain, leading to heavy investment in the north.
  4. New Spanish industries were created, including steel and chemicals.
  5. Multinationals located in Spain brought in new knowledge.
  6. Petrol became a new source of energy.

Role of Banks:

  1. In the last quarter of the 19th century, banks in Bilbao and Santander financed companies, acting as mixed banks.
  2. Several new banks were created, including Hispanoamericano and Vizcaya.
  3. Predominance of a small number of mixed banks.
  4. Private banks bought national debt, leading to debt monetization. The Bank of Spain acted as a banker’s bank.
  5. An increasing number of savings banks brought competition, such as La Caixa.

Topic 3: Mid-20th Century: War, Autarky, and Stabilization

War:

  1. Both sides adopted a war economy, leading to increased public expenditure and decreased production, resulting in inflation.
  2. The impact of World War II was greater.
  3. Losses were not the main problem, but rather the policies implemented afterward.
  4. A great 20th-century depression followed the war.
  5. Social and political repression, intervention, and autarky.
  6. Decrease in real salaries.
  7. Price controls led to corruption and a black market.
  8. Imports, exports, and electricity prices were controlled by Franco.
  9. After World War II, Spain was isolated.

Industrialization and Import Substitution Industrialization (ISI):

  1. From 1951, a new government implemented a new economic policy.
  2. Slow liberalization, with less interventionism and a move away from autarky.
  3. The Cold War against communism led to the implementation of the Marshall Plan.
  4. Tourism increased.
  5. The ISI strategy was adopted to promote industry over imports, leading to inflation and an external deficit.
  6. The National Institute of Industry (INI) was created due to the private sector’s lack of capability.
  7. Law for the Regulation and Defense of Industry.
  8. Law for the Protection of Industries of National Interest.

Stabilization Plan (1959):

Transition from autarky to an outward-looking economic strategy. This included eliminating the external balance deficit, liberalizing and opening up Spain, implementing restrictive monetary and fiscal policies, establishing a new currency rate, and enacting economic reforms.