The Impact of Rail Transportation on Spain’s Economic Development
5. The Transportation: Rail In Spain, the problem of transportation was one of the obstacles to economic modernization during the 19th century. Despite the building program of roads, these were insufficient; river transport was almost non-existent, and significant improvements in ports and steam transport were only realized towards the end of the century. The revolution in railway transport was the only alternative for the transport and the formation of a market. The delay in the construction of the railway (about 30 years compared to England or France) was due to both government neglect and the scant socioeconomic development, as well as a lack of capital, technology, and entrepreneurship. The first line constructed was Mataró to Barcelona, which opened in 1848, followed by Aranjuez to Madrid (1851) and Xàtiva to Valencia (1854). The impetus came with the Railways Act of 1855, in which the state granted a number of economic advantages to attract foreign capital: a minimum return of 6%, free importation of equipment, and a rail system franchise that would be maintained until 1891. This facilitated the creation of joint-stock companies and postponed investments in the industry, which, when railways were built, had not developed sufficient transport capacity. The railway sector was highly subsidized because the state offered subsidies per mile built. This often led to plans for grants based on the feasibility of constructing the same line. In the railway sector, we can distinguish 3 stages: 1. First Great Expansion from 1855 to 1866, characterized by capital mobilization and foreign company intervention, including the Madrid-Alicante, Cadiz, Seville, Zaragoza, and Barcelona-Madrid-Irun lines. 2. The Financial Crisis of 1866 led to a halt in construction due to low yields; the value of railway shares collapsed spectacularly. 3. New Constructive Phase that resumed from 1873 to trace the lines that had been paralyzed. However, the crisis led to the removal of many companies, with only the North and MZA (Madrid-Zaragoza-Alicante) remaining active. The 1855 Act was the regulatory benchmark for the construction of railways and would later influence economic history: 1. Radial Structure centered in Madrid, which complicated communications between industrial zones. This structure responded to a desire to affirm a centralized state. 2. Broad Gauge of the railway that hampered trade with Europe (requiring transshipment at the border). This was due to technical issues: the need to install larger boilers to increase power to overcome steep slopes. 3. Franchise System that served as a stimulus for domestic industry, which was almost non-existent, as foreign capitalists (especially French) had no interest in creating it. In contrast, production development in their countries abused franchises. The railroad did not encourage industry in Spain as it did in other countries, representing a missed opportunity for industrialization. In fact, manufacturers complained to governments, claiming that the damage caused by the free entry of foreign goods at better prices hindered their growth. While the Spanish industry was unable to increase its production at the necessary rate to supply construction companies, the steel industry was very modest, and construction machinery did not exist. If the network had been built more slowly, the economy would have collapsed. The infrastructure in other sectors and complementary economic structures were too weak to stimulate continued growth. The railway would be a stimulus rather than an obstacle to industrialization. However, without the railroad, the delay would have been greater. Despite all the limitations and absurdities of construction, the railway facilitated the exchange of people and goods between different regions, but it did not create a robust market due to limited industrial development in many areas where agriculture dominated the economy with few exchanges. If the volume of transported goods was so poor, it would not benefit the economy. 8. Why Did Spain Not Fully Industrialize in the 19th Century? The economic outlook explains why Spain did not fully industrialize in the 19th century and remained a backward and underdeveloped country. This situation can be summarized by the following reasons: 1. Moderate Agricultural Growth: Despite the changes introduced by the Agrarian Reform, liberal agriculture remained backward and traditional. Production increased, but this was due to extensive growth rather than an increase in productivity, as the introduction of new technology was very limited. We did not experience a generalized Agricultural Revolution; agriculture was not the engine driving the industrial sector. 2. Limited Population Growth: The population grew from 11.5 to 18.6 million between 1800 and 1900, but this growth was the lowest in Europe, maintaining a traditional demographic structure: high birth and death rates. This slow growth limited the workforce available for the industry. 3. Eccentric Position of Spain in Europe: Spain’s geographical position in the extreme southwest of Europe meant high transport costs. The distance was a disadvantage for both the acquisition of raw materials and for exports. 4. Low Purchasing Power: The vast majority of the population had very low incomes, with peasants devoting much of their salary to food and having little left for manufactured products. Therefore, the industry faced little demand and few incentives to increase production. 5. Decapitalization: The existence of debt (to tackle the chronic deficit of the Treasury) at high interest rates absorbed much capital that could have been invested in productive activities. Certainly, higher profitability and lower risk of debt discouraged industrial investment. This explains the dependence on European capital, which received very favorable concessions. 6. Scarce Capitalist Mentality: The Spanish bourgeoisie was not very dynamic and was burdened by a conservative mindset that favored protectionism. As a result, foreign companies dominated banking, industry, mining, agriculture, and transportation. 7. Unfavorable Provision of Energy and Raw Materials: Although coal was available, it was expensive and of poor quality with low calorific value. The iron ore from Vizcaya was not suitable for steel production before the spread of the Bessemer converter (1855). Additionally, water was a scarce resource in much of the country. 8. Delay in the Development of Heavy Industry: Heavy industry, particularly steel, only began to strengthen in Vizcaya from 1880. Overall, our industrial structure was “archaic” because the value of textile production was six times higher than that of iron and steel processing. Industrialization did not experience significant growth until well into the 20th century. 9. Delays in Railway Construction: The impulse from the Railways Act of 1855, which offered great advantages to attract foreign capital, was a stimulus for domestic industry in other countries but became an obstacle in Spain: a missed opportunity for industrialization. However, without the railroad, the delay would have been greater. Despite all the limitations and absurdities of construction, the railway facilitated the exchange of people and goods between different regions, but it did not create a robust market due to limited industrial development in many areas where agriculture dominated the economy with few exchanges. 10. Delays in the Exploitation of Mineral Wealth: The momentum would come from the Mining Law of 1868, which would mean a true “seizure” of the underground resources that would benefit foreign companies. The exploitation of mineral resources was limited to extraction and export to provide European industries, hindering the development of Spanish industry. Spanish mining contributed to balancing the balance of payments and attracted both capital and techniques from industrialized European countries. However, the benefits primarily went to foreign companies, as much of the ore exported was turned into capital goods, which were then re-exported to Spain. 11. Political Instability: Investments require stability and favorable expectations. In short, economic backwardness and political failure characterized 19th-century Spain, as the delays and difficulties were exacerbated by the liberal revolution. The Main Result of this backwardness and underdevelopment was, according to Jordi Nadal, the failure of the Industrial Revolution. This began in the 1830s with the modernization of the Catalan cotton and steel industries, but the pace was slow, and the country lagged behind others that had started their industrialization at the same time. The Industrial Revolution was frustrated, as it is difficult to find another country that began as early yet progressed so little over time. Therefore, Jordi Nadal refers to slow and incomplete industrialization rather than a true Industrial Revolution. This means rapid and deep changes did not occur in Spain, which, moreover, depended on foreign capital and technology. A real Industrial Revolution did not take place until the end of the century, primarily based on the textile industry and the steel industries in the Basque Country and Catalonia. It is evident that 19th-century Spain, like other Mediterranean European countries, was late to industrialize, or as stated, “did not catch the first train of industrialization.” However, delay is not synonymous with immobility; slowly, Spain increased its per capita income from the second half of the century. This new interpretation contrasts with the classic view of J. Nadal, which presents a negative perspective on the Spanish case compared to the English model. Recent historiography has tempered that vision, especially when compared with southern European countries, which are very different from the English case. France was a peripheral country in Europe, a second-order power, although the distance to other modern nations was reduced, but very slowly.