Spain’s Economic Shift: From Autarky to Developmentalism
Spain’s Economic Shift: Autarky (1939-1959)
One of the main objectives of the first stage of the Franco regime was to achieve economic self-sufficiency (autarky). This promoted an economic policy that advocated isolation from the outside and state intervention in the economy, rather than the free market. The autarkic economy had three main areas of action:
Regulations on Foreign Trade
The first area was the regulation of foreign trade. Imports and exports were to be completely controlled by the state. This limited the maximum foreign exchange by reducing imports, resulting in higher prices for products that the state imported and severe shortages of consumer goods. It also affected the availability of raw materials and power, which led to a decline in industrial production.
Promotion of Industry
The second area was the promotion of industry in order to ensure military and political independence of the new state. Public enterprises were created, promoting the development of capital goods industries which received public funds generated by high government spending. RENFE was formed, and CTNE was nationalized. In 1941, the INI was founded, which promoted the creation of many state-owned enterprises.
Agriculture Sector Regulations
The third area affected the agriculture sector, where the state regulated the production, marketing, pricing, and consumption of most products. Low official prices caused a drop in production. Productivity also declined considerably. The results of autarkic policies were deep economic stagnation, a collapse of foreign trade, a decline in production and consumption, a decreased quality of life for the population, and a halt to the modernizing trend of the Spanish economy.
Developmentalism in Spain
By the mid-1950s, it was clear that the possibilities for economic development in Spain, immersed in a system of autarky, were exhausted. It was therefore essential that a change of course opened up the Spanish economy and allowed it to accelerate growth in line with the Western world. Technocrats considered economic growth as the main guarantor of social stability, betting on a technical reform, without challenging the dictatorship, to find a way out of the serious economic and social consequences of autarky.
The Stabilization Plan of 1959
The first action was the Stabilization Plan of 1959, which proposed:
- The stabilization of the economy.
- Inner liberation of the economy, removal of auditors and regulatory agencies of fixed prices.
- External liberation of the economy, convertibility of the peseta to facilitate exchanges and facilitate the entry of foreign goods and foreign capital investment.
Economic and Social Development plans were added to this program.
Economic Transformation in the 1960s
There was an improvement in productivity due to low wages and the investment of foreign capital. Prices decreased, and exports increased. This stimulated an increase in wages and, with them, an increased demand for consumer goods. The economic transformation of Spain in the 1960s led to a crisis in traditional agriculture, and new employment opportunities offered by the industry stimulated the rural exodus. While the decline in farm labor did increase wages, agricultural employers began a process of mechanization, which caused a greater rural exodus. During this period, there was also growth in the service economy. Tourist arrivals led to an increase in revenue for the hotel business and complementary services. The banking sector grew, and international growth increased the volume of financial transactions.