Industrial Evolution in Spain: From 1855 to Present

Posted on Dec 11, 2024 in Geography

Item 6: Industrial Location Factors

Industry thrives in locations most favorable for maximum benefit. These factors vary for each industry.

Between 1855 and 1875, the most influential factors in industrial location (Classic Factors) included:

  • Proximity to raw materials and energy sources
  • Amplitude of the consumer market
  • Cheap and abundant labor
  • Efficient transport system
  • High capital and management capacity
  • Support sectors (services, equipment)
  • Industrial development plans

During these years, this created a concentration of industry in cities such as Madrid, Barcelona, and Bilbao.

Since the 1980s, changes in location have been observed, but major industrial concentrations remain. Now, proximity to natural resources loses importance due to cheaper transport, as does the importance of proximity to the consumer market. Transportation and labor remain important. Currently, the main location factors include access to innovation and information, and the competitive advantages provided by the territory. The first concerns access to high technology. The territory is of great importance if it provides competitive advantages such as availability of convertible resources, a skilled workforce, an innovative environment, and social support for companies.

This change of factors gives rise to two trends:

  • The spread of part of the industry to outlying areas because of the problems presented by large industrial concentrations, including congestion, as well as rising ground.
  • Maintenance of industrial concentrations in core areas, given their strong appeal.

New technology sectors are installed, which require advanced infrastructure and services. They also seek central locations for registered offices and business management. These concentrations are located in the most advanced countries and most dynamic regions.

2. Spanish Industry, 1855-1975

2.1. The Onset of Industrialization (1850-1900)

Initially, the industrial boom was hindered by:

  • Shortage of human and natural resources
  • Low technological capacity
  • Low public demand
  • Political and military conflicts
  • Existence of a social hierarchy, with wealth associated with land

The consequence was the delay and lack of entrepreneurship, but also that Spain was consolidated as a peripheral country to the dominant centers, with unequal trade established based on the importance of capital, technological resources, manufactures, and exports. There was a massive influx of foreign capital for railway construction and mining.

Thus, the industrial features of activity and location were built:

a) Spanish industry is oriented towards import substitution, strongly dominated by light industries.

b) There is a predominance of small businesses, often family-type.

c) The largest companies are in coastal regions: Catalonia (textiles) and the Basque Country (iron and steel).

2.2. Slow Phase of Industrial Growth and Tariff Protectionism (1900-1936)

The first half of the twentieth century was marked by a series of historical events that affected Spanish industry unevenly. Protectionism prevented foreign competition but also hindered technological advances. The loss of the last colonies increased national investments by repatriating colonial capital. The First World War meant the realignment of trade between Spain and the rest of Europe. The momentum of public works during the dictatorship of Primo de Rivera enhanced the development of the steel industry, attracting foreign investment capital. Since the Civil War, economic recovery was impossible.

2.3. Stagnation During the Autarchy (1939-1959)

The expenditure involved in the postwar period and autarkic policies did not conducive to the necessary modernization of the Spanish economic structure. This was a time of economic retreat based on the principles of the strictest autarky. During these years, Francoist economic policy became a symbol of the regime’s economic power. The most important measure was the establishment of the National Industrial Institute (LNI) in 1941, with the objective of growth in the sectors needed to maintain autarkic development: steel, shipbuilding, oil, and the automotive industry. The LNI allowed the construction of a complex business, which included companies like ENDESA and ENASA. In the 1950s, the first tentative movements were generated in the rigid autocratic system, from the financial support provided by the United States and some European countries.

2.4. Industrial Growth (1959-1975)

The main factors that led to rapid and poorly articulated industrial development from 1959 were:

  • The Stabilization Plan (1959), Decree-Law on New Economic Review. Intended to achieve a high rate of industrial growth and economic integration in the Spanish international by removing bureaucratic obstacles, reducing wages and money supply, cuts in public spending, and opening the Spanish economy to investment and international trade.
  • The arrival of foreign capital in three ways: the exchange of migrants, tourism, and foreign investment.
  • Spain’s cheap labor.

The immediate consequence was the massive inflow of capital from multinationals in key sectors.

The main consequences and changes derived from the industrialization process were:

  • The replacement of agriculture by industry
  • The consolidation of Spain as semi-peripheral and dependent on the central economies
  • The progressive replacement of the production of consumer goods
  • The increase in regional inequality

In 1964, the State sought to promote industrial growth with plans that generated the creation of promotion centers in Zaragoza, Huelva, Valladolid, Seville, La Coruña, and Cordoba because it encouraged investment through financial and fiscal incentives. In conclusion, the industrial development of the 1960s is at the root of the crisis of the 1980s.

3. Crisis and Industrial Restructuring (1975-1985)

External causes of the crisis in Spanish industry:

  • The soaring price of crude oil and raw materials in 1973 and 1979
  • Investment diverted to the Third World
  • The progressive incorporation of technological innovation

Internal causes of the crisis in Spanish industry:

  • The rise of labor costs
  • Structural deficiencies of the production system and size
  • Instability

Consequences of the industrial crisis: The most significant is the dramatic rise in unemployment; the secondary sector was hardest hit by unemployment, with 780,000 jobs lost. The immediate effects were a drop in domestic consumption, generating serious social problems and, above all, a degraded labor market. The sectors most seriously affected and in need of recovery were those that held more manpower. By contrast, food, chemical, or robotic industries suffered minor effects of the crisis. The areas hardest hit by the process of industrialization were the Cantabrian cornice, Catalonia, and the south of Madrid, Asturias, Cantabria, the Basque Country, and El Ferrol.

The industrial restructuring process encompasses a range of political and economic measures designed to make an adjustment, modeling, and improving the industrial system. Policy measures were implemented to support industrial restructuring, accompanied by necessary re-industrialization.

By sector, the impact of the conversion was as follows: Steel, Marine, Textiles, leather, and footwear.

Reindustrialization Policy aims to rebuild the industry affected by conversion. The two complementary strategies that follow are:

  • Investment in technological renewal
  • The creation in 1983 of Zones of Urgent Reindustrialization

Measures to support industry have been directed toward financial aid and tax for the installation or expansion of companies. Undoubtedly, the ZUR have boosted investment in high-technology sectors in nuclei traditionally characterized by their industrial specialization. By contrast, no satisfactory results have been achieved either in employment or the conditions required for approval of projects because firms have favored medium or large, sometimes multinational, companies.

Finally, the late 1990s have undergone a recovery in Spanish industrial activity, from the hand of demand growth and increased competitiveness of our products in Europe.

5. Current Industrial Policy

Industrial policy today is characterized by reduced state influence and takes various measures to tackle the problems of the industry.

  • Reducing state intervention in industrial activity has the effect of increasing external openness and enterprise privatization.
  • Outer opening is due to our integration into the EU, marking the end of protectionism and increased external competition.

At the same time, we have integrated into the global context, which is reflected in increased exploration and importation of products. Simultaneously, one of our most profitable companies has been privatized, which has reduced the state debt. Since 1995, the LNI disappeared and SEPI (State Society of Industrial Participations) was created, which groups industrial and service companies with state participation.

Within the new policy is to correct the structural problem of the industry, particularly within European Union policy and to overcome the poor competitiveness of Spanish industry. To achieve this, they have tried to:

  • Accelerate conversion since 1991, imposed by the EU
  • Increase business competitiveness
  • Support SMEs, advising them, giving them financial aid

Programs are conducted to increase automation, promote advanced technologies, and encourage technological training of the workforce. Industrial promotion policies aimed at all industries, endogenous industrialization policy based on developing the potential and benefits of each environment.

Environmental policies are sensitizing public opinion to environmental problems.