Second Republic Spain: Social, Economic Policies & 1930s Depression
Social and Economic Reforms in the Second Republic
The Second Republic sparked conflict between opposing ideologies. It raised expectations for farmers and industrial workers, aiming to improve their living standards.
Economic Policy: Advocates for the gold standard persisted, overvaluing the peseta and hindering imports and exports.
Innovative measures led to increased business costs.
- Budget Deficit: The deficit was addressed with public debt but did not reach critical levels, as investors withdrew savings from productive enterprises to invest in debt.
Agrarian Reform: The redistribution of land provoked a strong reaction from social groups who supported the existing system. The Republican parties’ implementation of this measure was flawed, as it excluded properties in Andalusia and introduced farmers’ properties.
This resulted in significant political tension. For example, Mapfre, representing medium landowners, contested the insurance applied in cases of land reform.
Conclusion: From the beginning of capitalism, the dominant groups in Spain favored an economic model based on extreme labor exploitation and market reservation. These principles were widely accepted, except in modern agriculture. This required a political system that controlled the population. Productivity saw limited improvement.
The shift in this scenario was driven by international economic relations, which forced industries to evolve.
This led to the formation of unions to protect workers, even with liberal parties.
These clashes culminated in the tensions that led to the Civil War.
The 1930s Depression and the Second Republic
The growth cycle ended in 1929, exacerbated by the global crisis of 1929, which triggered endogenous depletion in Spain.
The 1929 crisis manifested as a financial system crisis and impacted Spain’s trading system.
Endogenous Factors: The modernization process concluded, reaching its peak. Further progress was hindered by the State’s interruption of investment programs and the negative reception of the new political regime by employers.
The Depression of the 1930s: Spain’s gold reserves and limited integration with the international economy initially shielded it from the worst effects of the 1929 crisis.
However, the commercial crisis did affect Spain, as countries implemented tariffs to protect domestic industries. The volume of imports and exports decreased significantly.
This led to a recession in sectors heavily reliant on external trade, such as specialized agriculture. The crisis had a cascading effect on the entire Spanish economy.
The trade balance deficit and capital generation were offset by the Republic’s public investment policies. Industrial production declined, but the overall GDP fall was less severe due to a stable population.
The crisis in Spain was less intense compared to other countries.
The Republic: Primo de Rivera’s monetary policy maintained the peseta at a high level, supported by Spain’s large gold reserves. However, this made Spanish goods more expensive. During the period of public investment, the deficit increased, leading to public debt and a deteriorating situation. Calvo Sotelo defended the peseta and aimed to adopt the gold standard when other countries were abandoning it. Foreign investment in Spain, particularly in penny stocks, declined when the true situation was revealed, leading to a financial system collapse.
The government also collapsed, leading to municipal elections and the establishment of the Republic. The aristocracy and banks, hostile to the Republic, withdrew funds, causing investment to plummet and triggering a stock market crisis similar to that in New York.
While increased wages boosted consumption, this was insufficient to stimulate aggregate demand (DA) due to the import crisis and the collapse of investment and exports, resulting in increased unemployment.