Spain’s Railway History: Impact and Development
The Development of Railways in Spain and Their Economic Impact
During these years, twenty railway companies were created. The most important were predominantly French, such as Madrid-Zaragoza-Alicante (MZA), Northern Rail, and Sevilla-Jerez-Cádiz. However, there were also other significant Spanish companies.
Subsidies and state guarantees, along with expectations of large profits, spurred the development. However, starting in 1864, it became clear that earnings expectations were dashed. The agricultural sector did not provide enough revenue to cover, let alone repay, the invested capital. This culminated in the economic crisis of 1866.
The failure of the railroad caused the collapse of the banking system. Construction was suspended between 1866 and 1876 and resumed in the last quarter of the century. Only a few companies emerged from the crisis. The two largest, Northern Rail and MZA, though also facing difficulties, were clearly the strongest. Thanks to a tacit agreement not to compete excessively, they consolidated their systems by acquiring smaller companies and expanding their networks with new construction.
The Impact of the Railway: Backward and Forward Linkages
It’s important to distinguish between the railway’s backward linkages (the stimulating effect on industries supplying it) and forward linkages (contributions to the production sector, in this case, transportation services to the economy).
The backward linkages of Spanish railways were not very significant. Their contribution to the demand for steel products was negligible during the main construction period, partly due to the tariff exemption of the Railways Act of 1855, which was not abolished until 1891. Later, in the 20th century, the demand for Spanish railway steel products was higher, but probably never reached 10% of total Spanish steel production.
Regarding the mechanical industry, especially the production of rolling stock, the tariff exemption also took its toll. Even into the 20th century, the railway’s demand had no perceptible impact on the industry, although some isolated examples of Spanish railway material sales are known in the late 19th century. The demand was much more significant in relation to the coal industry, whose production came to absorb a quarter. There also had to be considerable demand for timber by the railways, especially for laying sleepers.
As for labor demand, rail was certainly a very important sector. During the accelerated construction, it claimed some 60,000 rail workers, representing more than 3% of men between 16 and 40 years old across the country. In 1935, the sector employed about 125,000 fixed workers, approximately one-third of employment in the transport sector. However, the productivity of these workers was very low, the Spanish coal industry never had a great future, and the consumption of wood by the railways increased the country’s deforestation.
Concerning forward linkages, there is no doubt that a country with Spain’s physical characteristics could not modernize without a rail network to offset the dire conditions of circulation. Without a railroad, the supply of food and raw materials to cities, the transport of industrial products to other urban centers and rural communities, and the fluidity of the labor market would have been impossible. Industrialization, modernization, and even minimal growth of agriculture depended on it.
Consequences of Hasty Development
The Spanish rail network was started too late, and later, in the decade of 1856-1866, it was undertaken with undue haste. The consequences of this haste were poor planning, inadequate funding, and a speculative path, which resulted in weak physical infrastructure and a fragile business structure.