Spain’s Industrial Revolution: Cotton, Steel, and the Railway
The Industrial Revolution in Spain
The Rise of Cotton Textiles
Industrialization in Spain began with the cotton textile industry, primarily located in Catalonia due to its existing manufacturing base. In 1870, information about advancements in England reached Barcelona, and English engineers subsequently trained local workers. This success can be attributed to Catalan employers who accumulated and invested capital, had access to skilled labor, and benefited from established transport and commercial networks.
Catalonia stood as the sole industrialized region in Spain. Between 1830 and 1860, a significant transformation occurred with the adoption of modern technology and mechanized cotton processes. This led to increased productivity and lower unit costs, allowing the cotton sector to expand its influence over other industries. Catalan cotton fabrics dominated the domestic market and competed internationally.
This growth displaced indigenous sectors like wool, flax, and hemp, while also substituting imported cotton goods. This import substitution was driven by technological advancements, strong protectionist policies, and specialization in medium-to-low quality items.
However, growth slowed after 1860 due to domestic challenges, including the lack of cheap energy. Entrepreneurs adopted steam turbines, which increased transportation costs.
The limitations of the internal market were addressed by the cotton industry, but at a high price. A lack of competitiveness in open markets led employers to opt for higher prices under protectionist policies, hindering further progress.
The Growth of the Basque Iron Industry
Following the decline of the steel industry in Manchester, attention shifted to the Basque Country (Vizcaya), which possessed iron mines but lacked coal. Vizcaya adopted the Bessemer process, necessitating the import of high-quality, low-cost coal from Great Britain. Basque entrepreneurs invested in railway construction and exported iron ore to Great Britain, which in turn supplied coal for manufacturing in Vizcaya. This reciprocal trade proved crucial for development. However, by 1866, the cost of steel production in Bilbao surpassed international prices.
A major obstacle was the limited internal market, which couldn’t absorb the entire supply due to several factors: the lack of modernization in agriculture, excessive spending on railway construction, the ability to import steel from abroad, and the textile industry’s pricing policies, which prioritized protectionism over stimulating the machine-building industry.
Basque steel producers, along with Castilian and Catalan textile manufacturers, favored protectionism over specialization for foreign markets or exporting semi-processed steel for domestic downstream production.
The Development of the Railway
Spain’s transport systems were inadequate and inefficient. Before 1848, railway planning was influenced by individuals familiar with the English railway system. Suberco’s report (1844-1848) formed the basis of railway legislation and helped define its characteristics.
Unable to finance the railway independently, the state auctioned off its management and operation to private entities, granting 99-year concessions. Decisions were made regarding ownership rights of forests needed for railway construction.
Spain adopted a different railway gauge than continental Europe and a radial network centered on Madrid, connecting to various points across the peninsula (where development was concentrated).
Liberals viewed this as a monopoly, emphasizing its public service nature and the state’s right to intervene.
A period of speculation ensued, with influential individuals profiting from railway construction.
In 1854, the progressive government accelerated the process, enacting the “Le Train” railway law in 1855, which supplemented the 1848 law and provided companies with stock grants and performance guarantees.
The Financial Companies Law of 1856 helped recover savings from the confiscation period and attracted foreign investment, primarily from France.
In Catalonia and Levante, narrow-gauge networks (like the rest of Europe) were built by local entrepreneurs. Two financial groups (Pereira and Rothschild), later joined by Prost, financed the core network.
Challenges Faced by Railway Companies
In 1865, a stock market crash occurred, largely due to the railway sector. Banks had heavily invested in railway construction and financing, but construction costs exceeded projections, and operating revenues fell short of expectations. Demand for transportation was insufficient to sustain private railway operations, leading companies to accumulate substantial debt.
This debt burdened the financial system, contributing to the crisis.
Historians debate the causes of the crisis. Some argue that the rapid pace of railway construction led to oversupply in a weak economy. This made it difficult for companies to maintain profitability, and investors shifted their focus to other sectors like wool and cotton. High tariffs on national steel also played a detrimental role.
In conclusion, despite the challenges, railway construction contributed to the unification of the Spanish market.