Industrial Evolution in Spain: Past, Present, and Future

Posted on Dec 19, 2024 in Geography

1. The Historical Evolution of the Industry

Spain experienced a late industrialization in relation to the advanced countries of Europe.

1.1 Industrialization Until the Early Twentieth Century

Several factors explain the late incorporation into the Spanish industrialization process:

An important technological backwardness compared to other European countries.
The shortage of funds caused by a bourgeoisie that did not commit to the industrializing process.
Need for foreign capital to supplement the limited domestic investment.
Important territorial imbalances in certain areas with abundant mineral resources.
The existence of a low-density population with very limited purchasing power greatly reduced the demand for industrial products.
An unstable political situation influenced by the loss of the colonies, the War of Independence, or political instability that followed.

The little industrial development that occurred during this period was due to protectionist policies and the building of the railroad. At this time, the sectors that had an enhanced role included mining, steel, and textiles. Industrial development affected Andalusia, Asturias, the Basque Country, and Catalonia. The exception would be Madrid, whose growth is related to the large population and its importance as the administrative and financial center of the country.

1.2 1900-1959: Years of Discontinuous Growth

Until the 1940s, alternate stages of crisis and prosperity had the following characteristics:

The failure to participate in the First World War had a positive impact on industrial development as it made Spain a provider for European economies.
Spain was affected by the consequences of the international crisis of 1929; there was a stagnation of industrial production that would link with the Civil War crisis.
Appeal of protectionist policies seeking to protect Spanish production.
Diversification in the chemical, cement, paper, and food sectors became important.

The Civil War: The Spanish Civil War paralyzed the industrial process. The destruction of resources, lack of capital funding that would prevent industry, and the demographic crisis generated a crisis situation.

The Autarkic Model: It provided an autarky that characterized the entire war. The primary objective was the exploitation of own resources, trying to replace imports. This policy limited the importance of capital goods and raw materials needed for significant industrial development since its purpose was to produce for a very limited market. With the creation of the INI (National Institute of Industry) in 1941, the State took the reins of the industry and became an industrialist, thus replacing the limited private initiative necessary for the financing of many companies. It focused on coal, electricity, petroleum, metals, vehicles, shipbuilding, and national defense.

Main Geographical Areas: On the industrial map, it is now appreciated how the differences between the coast and inland are consolidated.

1.3 The Industrial Boom: The Prosperity of the Sixties to the Crisis of the Seventies

There was an opening to the outside and a process of modernization that made it more competitive. The public company had a less important role, giving way to private capital.

The 1959 Stabilization Plan: The plan marked a break with the autocratic model and followed the economic guidelines proposed by the major international organizations. The new economic model intended for the globalization and liberalization of the economy. This opening to the outside made it possible for the Spanish industry to supply essential elements to make it more competitive. Capital coming from tourism, remittances from emigrants, and foreign investment were important for funding. The steel, auto, toys, and chemical-food sectors were emphasized.

The Development Plans: In 1964, the first development plan started, followed by two more. They aimed to encourage the development of industrial production, generate jobs, and balance the spatial distribution of industry by creating new industrial land through the establishment of so-called development zones. This planning is known as developmentalism and stayed for ten years when economic growth was fostered. It also consolidated industrial diversification and reduced the weight of certain sectors such as textiles, food, or extractive activities. However, technology-related activities increased, such as chemistry, metal, and transport.

Main Geographical Areas: The industrial location is inherited from the previous situation, and territorial imbalances are accentuated. The industry is concentrated in the traditional areas. It also called for encouraging the development of new industrial spaces, favoring the establishment in places like Vigo, La Coruña, Seville, Valladolid, Oviedo, and Granada.

1.4 1975-1985: The Oil Crisis and Industrial Reconversion – Integration into the EU

The extraordinary growth of Spanish industry in the 1960s was slowed in the decade of the 1970s. New factors came into play that slowed the pace of industrial production.

The Oil Crisis: With the large increase in oil prices in 1973 and the subsequent rise in 1979, a phase of crisis began. This marked the decline of the industrial sector and the launch of service-related activities. In this sense, it followed a global trend and started a clear process of outsourcing economic activities.

Other Factors of the Crisis:

Not only was the rising price of oil triggering the crisis:
The jurisdiction of the NICs (Newly Industrialized Countries) with much less expensive production (Korea and Brazil). These countries have passed the stage of economic underdevelopment. South Korea, Taiwan, Singapore, and Hong Kong are the most representative.
The poor adaptation to new technologies that help increase productivity and competitiveness.
Social problems and corporate governance, as high labor costs cannot compete with the prices of production in other countries.
The crisis of mature sectors themselves, very influenced by energy and the entry into the market of new materials.

The Industrial Reconversion: A series of steps were adopted, inspired by what had been done in European countries that faced this problem before. The Conversion and Reindustrialization Act established the main priorities for the recomposition of the Spanish industrial fabric:

Solving problems in mature sectors: technological backwardness, lack of international competitiveness, and excessive templates.
Increase the competitiveness of emerging industries.
Important participation of foreign investors to buy part of the capital of these companies.

In this process of conversion, aid is concentrated in large industries.

Main Geographical Areas: Together with measures focused on the reorganization of enterprises, a policy seeking re-industrialization of the areas in crisis was developed. ZURs (Areas of Urgent Reindustrialization) were created to promote investment and create jobs. To promote investment and generate new jobs, measures such as repayable grants or soft loans with years for amortization were implemented.

The Incorporation into the EU: Entry into the EU amounted to access to a wide-open market and the need to develop a competitive industry. One impact was the increase in exports. Market opening also favored the arrival of goods, technology, and foreign investment, which contributed to the modernization and optimization of our industries.

European Industrial Policy: Its objectives include adaptation to new economic conditions, concern for social and environmental problems, and promoting technological progress. Also outstanding is the support offered by the EU to the declining industrial areas.

2. The Spanish Industry Today

The changes produced in recent years have led to the reduction in the importance of many sectors that traditionally led industrial production.

2.1 Industrial Sectors

Areas where there was no great tradition have grown, which supposed diversification of production and development of certain leading industries. The sectors that have evolved most importantly are:

Food: Its growth is related to increased domestic demand and increased choice of foods. Currently, there is a tendency towards corporate concentration due to the need to increase the capitalization of companies to compete in the international market.
Automotive: After the reconversion, it has experienced significant growth by increasing domestic demand and export to the rest of Europe.
Textile: The industrial reconversion plan tried to make it more competitive by providing it with greater care in technology, design, and product quality.
Metal: It has been one of the sectors most affected by the crisis of the mid-seventies, based on the Cantabrian coast. The reasons were the appearance of new materials. Much of the sector has been dismantled.
Chemical: A sector with a strong presence of foreign multinationals. The refining of oil and its derivatives is important in most refineries located in coastal areas.
New Technologies: The rapid growth of the sector in recent years is due to the overcoming of a very poor start. Therefore, it still presents low values for total industrial production in Europe.

2.2 The Business Structure

In Spain, small and medium-sized enterprises dominate within the industrial sector. The privatization process developed over recent years should be emphasized. This process is due to the efforts of SEPI (State Society of Industrial Participations) to replace the INI in 1995, and its main objective is the consolidation of the public sector to increase profitability and improve the efficiency and competitiveness of publicly funded enterprises. It is characterized by the implantation of multinationals and the significant participation of foreign capital in Spanish companies.

2.3 The State of Autonomies and Endogenous Industrialization

The establishment of the State of Autonomies meant the transfer of powers to autonomous institutions, which would spark a regionalization of the industry. This answer helps explain the endogenous development of industries aimed at the exploitation of own resources of a particular place. The significance of these business initiatives of local or regional character is not confined to areas of industry, diversifying the economy of rural communities and improving the quality of life and service provision in affected areas.

2.4 R&D (Research and Development)

R&D is a basic element for industrial progress. It is the investment in developing new technologies to boost the productivity of enterprises and improve the quality of products, thus obtaining increased competitiveness and profitability. R&D expenses have increased significantly. Investment in R&D focuses on engineering, technology, life sciences, physical sciences, medical research, and pharmaceuticals. The government has developed the National Electronic and Computer Plan (PEIN), which facilitated the emergence of industries focusing on sectors such as electronics or telematics. The investment in R&D of Spanish companies is lower than that earned by most developed countries of the EU and the world’s most industrialized countries. This poses a problem since it involves the maintenance of foreign technology dependency, resulting in major economic loss and competitiveness. The development of investment in research and development can take a significant leap in our industrial model.

2.5 Environmental Policies

The sensitivity of public opinion regarding the problems of the environment has allowed the development of environmental policy. The most pressing problems are air pollution, contaminated water, and proper waste management. The EPER program stands out, a statewide registry of emissions and pollutant sources that seeks to tighten controls on air pollution generated by industries and induce manufacturers to reduce their emissions. Its main objectives are the collection of information on emissions from industries, validation by the environmental authorities of the information resources, and diffusion of the Internet registry.

2.6 Relocation

Spain has been affected by the consequences of the new international economic order. The relocation of factories that prefer to move to developing countries where labor laws are much more flexible, labor is cheaper, and environmental protection laws are not so demanding, is decreasing production and causing losses in industrial employment.

3. Traditional Industrial Landscapes and New Landscapes

The morphology of the various industrial landscapes is the result of a number of factors that have shaped over time. We can distinguish between traditional industrial landscapes and new industrial spaces.

Traditional Landscapes: They are characterized by a number of factors that influence their configuration: the presence of deposits of raw materials, energy sources, rivers, and good roads. They respond to the so-called classical model of industrial location, which allows easy access to products made to points of sale. These landscapes survive in the northern peninsula and part of Castile and León. They are also known as black landscapes as they mingle in the homes of workers blackened by high levels of contamination with the mines, deposits, and the chimneys of factories.

New Industrial Spaces: The most representative example is technology parks. These are modern industrial premises where high-tech companies are concentrated. The skill level of workers is very high. They are also a major draw to attract modern industries and new investment.

4. The Spanish Industrial Map

Factors such as congestion of the big industrial centers, cheaper transportation, less dependence on the areas of supply of raw materials, and technological advances in telecommunications have boosted the development of a trend towards industrial dispersion.

4.1 Axes in Expansion

These are the areas with higher growth in recent years. Their importance is due to infrastructure, strategic location, and their important industrial tradition.

The Mediterranean Coast: After recovering from the industrial crisis of the 1970s, it witnessed significant growth due to its unique infrastructure, its strategic position in the European area, the extraordinary transportation network, and a large population with high purchasing power.
Valle del Ebro: Its development was largely due to its strategic location. It connects three major industrial regions: the Basque Country, Barcelona, and Madrid. It is fueled by its communications with Europe and investment in infrastructure and transport. Zaragoza is the center impeller and diffuser, since there has been growth toward peripheral cores.
Madrid: Over recent years, two trends coexist: the consolidation of Madrid as an industrial focus and the beginning of a decentralization process that favors industrial development and its metropolitan area, including provinces and neighboring communities. The new model of the post-industrial city has found cheaper land in peripheral areas to establish their industries, solving problems of heavy traffic and pollution.

4.2 Areas in Decline

Largely concentrated on production, reconversion lived a complex and often traumatic experience and lost prominence in the Spanish industrial map due to the reduction of demand, low competitiveness, outdated infrastructure, and the existence of labor conflict. All of the Cantabrian coast and the Basque Country: their problems stem from an excessive dependence on natural resources that have been depleted and their specialization in traditional sectors that have not adapted to new market conditions and have undergone major external competition. Many of these areas are seeking economic output, so these cities have lost their eminently industrial character.

4.3 Areas Under Development

These are areas that have never had a major industrialization: Castilla y León, Castilla-La Mancha, Andalusia, Extremadura, and the two archipelagos. On many occasions, they have been conditioned by the development of Madrid. Currently, they are benefiting from industrial dispersal to the suburbs. In the archipelagos, industrial development is conditioned by the growth of tertiary activities related to tourism. Activities related to construction have developed extraordinarily.

5. Challenges and Problems of Spanish Industry

The need to continuously integrate new technologies into production processes, competition from new countries, or the existence of a large market is accompanied by some makeshift. The most important steps to take are the following:

The continuous updating of machinery brought about by the development of new technologies.
The modification of a business structure in which SMEs are very abundant and often have difficulty renovating, hiring highly qualified staff, and competing with multinational companies.
Specialization in sectors with open markets and where possible competition with other industrial countries.
Creation of appropriate industrial policies in which governments invest in research and infrastructure.
Develop business strategies to exceed national markets and take into account the large EU single market.
Ability to create new products with high market demand.
More flexible operation of industries to enable them to adapt to changing market characteristics.
Overcoming the dependence on the exterior for technologies, equipment, and energy sources.
Ongoing training of highly skilled professionals.
Avoid the relocation of businesses to other economically more profitable areas.
Facing competition from the production of the new EU member countries that often compete directly with Spanish production.
Match the quality of the national production of the most advanced EU countries.
Promote balanced development that does not show large differences between the Autonomous Communities.
Achieving a growth model that respects the natural environment.