industrial development

industrial development
   Broadly speaking, it is possible to divide Spain's industrial development into two phases: one slow, partial and lengthy, that took place during most of the nineteenth and part of the twentieth centuries; another, short and intense, that belongs essentially to the 1960s.
   Despite the lack of investment capital, which most economic historians ascribe to an inefficient agriculture, there was some modest degree of industrial development in nineteenth-century Spain (textiles, mining, iron and steel, and railways), but the process of industrialization was not maintained in the twentieth (except briefly during the dictatorship of Primo de Rivera in the 1920s). At the time of the Civil War (1936–9), Spain was still predominantly an agrarian country, and industrial production, which had peaked in 1929, did not regain those levels until the early 1950s. Spain's poor industrial performance during the post-Civil War years can be ascribed not just to the destructive effects of the war, but even more to her isolation during and after WWII and to the sheer economic incompetence of Franco and his ministers during the first fifteen years of the regime. Autarky, protectionism and importsubstitution, to some extent forced by Spain's exclusion from the Marshall Plan, led to a stagnant economy which lasted until the advent of US aid in the 1950s and a reorientation of economic policy. Initial expansion, however, only produced inflation and balance of payments crises in the later 1950s, and it was only with the implementation of the 1959 Stabilization Plan by the so-called technocrats of Opus Dei that sustained and intense industrial growth took place. From 1960 to 1974 Spain's industrial output averaged a year-on-year increase of over 11 percent, while the economy as a whole was averaging a 7 percent per annum increase. The change of economic orientation at the heart of the regime with the arrival of the new, less ideologically motivated ministers and their advisers, provided the framework for industrial take-off. But what actually made it possible was the happy coincidence of a number of factors external to Spain: US aid, foreign currency earnings from a tourist boom, emigrants" remittances from abroad, and the availability of cheap labour for foreign investors. All these factors together led to a huge increase in the capital available for investment purposes, and increasing earnings fuelled a consumer boom. The fact that Spain started from a retarded position meant that the possibilities for growth were that much greater, while the concurrent expansion of international markets and buoyant prices for industrial products favoured Spanish exports, which in turn made possible a greater volume of technological imports, especially of much needed capital equipment. Although the development of the 1960s and early 1970s temporarily turned Spain into the ninth industrial power in the world, it was not an unqualified success, and the roots of future problems were laid down in the very process of industrialization. First, there was excessive concentration on just a few sectors: iron and steel, shipbuilding, the metal-bashing industries in general, chemicals and cement. Second, all these industries were energy-intensive, and Spain was heavily dependent on imported oil. Third, industrialization was led by the state through its industrial arm, INI (National Industrial Institute), which, although successful in promoting industrial development, was more concerned with output figures than with efficiency. Fourth, there was excessive spatial concentration of industry: to the traditional industrial centres of Catalonia, the Basque country and to a lesser extent Asturias, were added the eastern provinces of Valencia and Alicante, the northern city of Valladolid, a few Atlantic ports for shipbuilding, and Madrid. Vast areas of southern, central and western Spain did not directly benefit from industrial development, despite the Franco regime's attempt at establishing development zones. Finally, Spanish industry was allowed to develop within a protectionist atmosphere in which the import of manufactured goods was controlled by tariffs or quotas and exports were encouraged by a variety of subsidies; such cosset-ting resulted in a lack of competitiveness.
   The effects on the cost of oil of the OPEC price rises of the 1970s, together with intense competition from newly industrialized countries, had such a severe impact on Spanish industry that Spain was threatened with deindustrialization as firms, both public and private, recorded huge losses. From 1975 to 1979 Spanish industrial output stagnated as shipyards and steel mills found themselves with few orders and households stopped replacing electrodomestic consumer goods. Forced eventually to take remedial action, the centreright UCD government and its successor the socialist PSOE administration implemented a policy of so-called industrial reconversion (reconversión industrial) in the 1980s which applied compulsorily to public sector companies and voluntarily to the private sector. Essentially the policy was one of a temporary propping up to enable companies to shed labour, modernize and become more competitive. Much of the government aid went in providing for early retirements and redundancy compensation as well as to write off losses, but some aid was also channelled into more positive aspects such as research and development, re-equipment, and rationalization through mergers. Just how effective the industrial reconversion programme was in saving great swathes of Spanish industry from total collapse remains a matter of debate. Ultimately the real saviour was to be foreign investment as Spain's long-drawn out negotiations to join the EC concluded in agreement. But it would be fair to say that with about a million jobs shed between 1975 and 1985, and with new foreign markets having been found to make up for sluggish demand at home, Spanish industry emerged from the ten-year crisis leaner, fitter and more competitive. The price paid for the lop-sided industrial development of the 1960s had been heavy—poor competitiveness leading to loss of jobs and import penetration in an increasingly liberalized international trading system—but in any case the fortunes of Spanish industry were finally and inevitably to be dominated by European circumstances.
   Further reading
   - Harrison, J. (1993) The Spanish Economy. From the Civil War to the European Community, London: Macmillan (chapters 2 and 5 offer a good summary).
   - Salmon, K. (1995) The Modern Spanish Economy. Transformation and Integration into Europe, London: Pinter (chapters 1 and 6 provide excellent syntheses).

Encyclopedia of contemporary Spanish culture. 2013.

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