Spain-CHARACTER AND DEVELOPMENT OF THE ECONOMY

Economic historians generally agree that during the nineteenth century and well into the twentieth, at a time when Western Europe was engaged in its great economic transformation, Spain "missed the train of the industrial revolution." Much of the chronic social and political turmoil that took place in Spain during this period can in large measure be attributed to the great difficulties the country encountered in striving for economic modernization. Throughout this period, Spanish social and economic development lagged far behind the levels attained by the industrializing countries of Western Europe. Spain's economic "take-off" began belatedly during the 1950s and reached its height during the 1960s and the early 1970s. A second cycle of economic expansion began in the mid-1980s, and if this one continues, it might catapult Spain into the company of Western Europe's more advanced industrial societies.

At the beginning of the twentieth century, Spain was still mostly rural; modern industry existed only in the textile mills of Catalonia (Spanish, Cataluna; Catalan, Catalunya) and in the metallurgical plants of the Basque provinces (see fig. 1). Even with the stimulus of World War I, only in Catalonia and in the two principal Basque provinces, Vizcaya and Guipuzcoa, did the value of manufacturing output in 1920 exceed that of agricultural production. Agricultural productivity was low compared with that of other West European countries because of a number of deficiencies--backward technology, lack of large irrigation projects, inadequate rural credit facilities, and outmoded landtenure practices. Financial institutions were relatively undeveloped. The Bank of Spain (Banco de Espana) was still privately owned, and its public functions were restricted to currency issuance and the provision of funds for state activities. The state largely limited itself to such traditional activities as defense and the maintenance of order and justice. Road building, education, and a few welfare activities were the only public services that had any appreciable impact on the economy.

Considerable economic progress was made during World War I and in the 1920s, particularly during the regime of Miguel Primo de Rivera (1923-30). The Primo de Rivera government initiated important public works projects, including construction of new highways, irrigation facilities, and modernization of the railroad system. It also made a start on reforestation programs. Industry and mining were growing, and there was an average annual increase in the industrial and mining index of 6.4 percent between 1922 and 1931. An income tax, however ineffectively collected, was introduced in 1926, and a number of new banks were started with state backing, to invest in projects considered to have national interest. Certain economic functions were turned over to private monopolistic operations--of which the most important was the petroleum distribution company, Compania Arrendataria del Monopolio de Petroleos (CAMPSA); others, such as transportation, were put under state control.

These steps toward a modern economic structure were slowed drastically by the political turmoil of the period, which culminated in the Spanish Civil War, and they were further exacerbated by the worldwide depression of the early 1930s. When the Civil War broke out in 1936, it eliminated what little chance Spain might have had to recover from the economic malaise of the period (see The Spanish Civil War , ch. 1).

Data as of December 1988