Spain’s Economic Transformation: From Rural Exodus to EU Integration
Spain’s Post-War Economic and Social Transformations
Rural Exodus and Agricultural Modernization
The shift from a primarily agrarian society marked a significant turning point. Diminished cheap labor and a shrinking domestic market spurred modernization. Key developments included:
- Rural Exodus: Migration to urban areas led to increased agricultural wages.
- Production Increase: Agricultural output tripled, but its share of total exports decreased.
- Shifting Demand: Rising living standards altered consumption patterns, favoring products like fish, eggs, and dairy.
- Market Orientation: Farmers increasingly produced for markets, reducing home consumption.
- Land Ownership: Minimal changes occurred in land ownership distribution and exploitation structures.
Industrial Growth
Industrial growth was crucial for Spain’s economic expansion, exhibiting faster growth than agriculture. Notable aspects include:
- Domestic Focus: Emphasis on the domestic market.
- International Integration: Spain integrated into the global economy, primarily as a supplier of standardized manufactured goods with low technological content.
- Automobile Boom: The automobile industry experienced substantial growth, surpassing bicycle production.
- Foreign Technology Adoption: Spain primarily imitated rather than innovated in technology adoption.
- Employment Challenges: Industry struggled to absorb the workforce displaced by the rural exodus.
- Energy Demand: Increased demand for energy, particularly electricity and petroleum.
- Productivity Gap: Lower productivity compared to other European nations, coupled with domestic market protection, resulted in higher production costs and reduced competitiveness.
- Trade Deficit: A persistent deficit in the balance of payments (imports exceeding exports).
- Regional Development Policies: Implementation of regional policies aimed at industrializing various regions.
- State Intervention: Significant state intervention in industrial policy.
- State-Financed Shipbuilding: State financing of the shipbuilding industry contributed to inflation.
Urbanization
Demographic shifts included decreased birth and death rates, and increased life expectancy. Key features of this period:
- Urban Boom: Rapid urban growth, often without comprehensive city planning.
- Housing Policy: Franco’s government promoted homeownership with the slogan “a house for everyone.”
- Ownership Preference: A strong preference for homeownership over renting, reflecting the importance of family.
- Expenditure and Unrest: Average household expenditure grew, but labor unrest also increased.
- Emigration: Significant emigration to Latin America and Western Europe.
Spain’s Economic Crisis and Subsequent Growth (1970s-2008)
The Economic Crisis of the 1970s
Two oil crises severely impacted Spain, given its dependence on foreign oil and a permissive policy regarding oil consumption, unlike many European nations that reduced consumption. Consequences included:
- Investment and Savings Decline: A sharp fall in investment and savings led to a domestic market collapse.
- Labor Union Legalization: The legalization of labor unions in 1977 resulted in labor unrest, with real wages increasing faster than productivity.
- Stagflation: The economy experienced stagflation – a combination of slow economic growth, high unemployment, and inflation.
- Moncloa Pacts: The Moncloa Pacts were signed to address the public/external deficit and inflation.
- Agreements: Agreements between political parties, business associations, and labor unions aimed to control the money supply, government expenditure, and wages. This also included the devaluation of the peseta and tax reform (Fernández Ordóñez).
Industrial Crisis
- Job Losses: The economic crisis significantly affected industries like shipbuilding and steel, leading to job losses.
- Multiple Challenges: Industry faced demand contraction, increasing competition, rising costs, and low productivity.
- Delayed Response: Spain’s response to the recession was slower compared to other European countries.
- Industrial Weaknesses: Identified weaknesses included a lack of competitiveness, small plant sizes, limited internal competition, and insufficient international experience.
- Industrial Reconversion: Industrial reconversion, initiated in 1981, aimed to enhance profitability and productivity, but resulted in job destruction.
Growth and Structural Change (1986-2008)
- EU Integration: Spain fully integrated into the European Union, albeit with greater volatility in its economic cycle.
- Employment and Productivity: A reduction in employment but an increase in productivity.
- Agricultural Specialization: Agriculture saw increased specialization and technological adoption due to the EEC’s Common Agricultural Policy.
- Deindustrialization and Service Growth: A period of deindustrialization accompanied by growth in the service sector.
- Tourism as an Economic Engine: Tourism became a major driver of the Spanish economy.
- Retail Revolution: The retail sector underwent a revolution with the emergence of supermarkets, hypermarkets, and shopping centers.
- Technological Advancement: Significant technological change and human capital formation.
- Increased Migration: A rise in net migration to Spain.
- Increased Expenditure: Growth in public and private expenditure, particularly in personal training.
Integration into the EEC
- Growing Deficit: Increased Current Account deficit.
- Foreign Direct Investment (FDI): The deficit was covered by FDI.
- Convergence: Economic convergence with other EU member states.
- Agriculture and Fishing: Significant impacts on the agriculture and fishing sectors.