Protectionism vs. Free Trade in Spain (1893-1924)
Protectionism and Free Trade in Spain
This text, written by Basque industrialist Federico Etxebarria on December 9, 1893, advocates for protectionism to shield Spanish industry from foreign competition.
The Restoration and Economic Challenges
Following the restoration of the monarchy, Spain’s government alternated between conservatives and liberals, excluding broader citizen participation. The economy, primarily agrarian, suffered from outdated practices and a lack of mechanization.
Land ownership was concentrated in the hands of the Church due to “main mort” (where citizens bequeathed land to the Church in their wills, making it unsellable), and large estates known as “señorios.” This resulted in many landless peasants. Progressives attempted to address this through disentitlement, but the land ultimately remained in the hands of the wealthy.
Industrial Development and Protectionist Measures
Industry was limited and geographically concentrated, with textile production in Catalonia and ironworks in the Basque Country. Protectionism, through tariffs on foreign goods, benefited these industries by reserving the internal market for domestic producers. While this ensured sales, it also stifled innovation and led to economic stagnation, as there was little incentive to improve production methods.
The Basque iron industry had a significant trade relationship with Britain, importing coal due to the difficulty of extracting it from Asturias.
The Spanish-German Treaty and its Impact
A trade agreement with Germany allowed German products to enter Spain duty-free, creating competition for Spanish industries. Germany, with its modern iron and steel production, posed a significant threat to Basque factories, including Labe Garaiak, and those in Deusto, Aurrera, Zorrotza, Miraballes, as well as future industrial projects.
Etxebarria, recognizing the nationwide impact of this competition, urged the maintenance of tariffs and the rejection of the Spanish-German treaty, essentially advocating for continued protectionism.
Economic Modernization and the First World War
New sectors, such as electricity and chemicals, began to develop. Public finances saw improvements through interest rate reductions, tax increases, and expense control. The Bank of Spain gained control over money issuance after the law of 1899, controlling inflation and stabilizing the peseta. New banks and industries emerged, fueled by investments from the iron industry. The need to compete with Germany spurred improvements in Basque industrial facilities.
Spain’s neutrality during World War I proved economically beneficial. Warring nations purchased materials from Spain, leading to an economic boom. However, a subsequent crisis followed as the internal market couldn’t replace lost export markets, resulting in factory closures. Despite this, the iron and chemical industries continued to modernize, and railways and mines shifted ownership due to the withdrawal of foreign capital. The crisis persisted until 1924. During Primo de Rivera’s dictatorship, hydrographical valleys were created, along with companies like CAMPSA and Telefónica.