Spain’s Economic Transformation: Autarky to 1960s Boom
Autarky in Spain
After the Spanish Civil War, the nation’s already fragile economy was further impoverished. The period of autarky, driven by the principle of self-sufficiency under Franco, aimed to isolate Spain from foreign dependence. This phase involved three core policies:
- Domestic Market Focus: Prioritizing national production for the domestic market.
- Nationalization of Resources: Placing all raw materials under the control of politicians.
- Strict Import Controls: Implementing rigorous political oversight on imports, requiring justification for each.
The goal was to domestically produce everything that was previously imported, regardless of cost or quality. This closed economic model was ultimately unsustainable, leading to the depletion of foreign exchange reserves. While Europe experienced post-World War II economic development, Spain remained isolated both politically and economically.
Strong financial controls significantly limited Spanish investment, subjecting it to a “financial despotism” where investment amounts were strictly regulated. Private banking was forced to invest in public debt issuance. The production system was “wasteful of energy” due to increasing demand and a lack of optimization. Despite a situation of “full employment,” the production structure generated little employment, requiring growth above 6% to create significant job opportunities. Development relied heavily on credit.
Spain had the lowest rate of cash flow, leading to a heavily indebted economy by the late 1960s. Growth was uneven, with the agricultural sector lagging behind the industrial sector. While final industrial goods saw significant development, intermediate goods did not, necessitating imports and impacting the balance of payments. There was zero investment in R&D&I, resulting in a lack of technological development to meet the needs of the industrial sector and continued dependence on foreign countries.
The 1960s: A Period of Transition
Following the crisis of the autarkic system in 1959, a period of controlled openness began. Spain faced three main challenges:
- Development: Fostering economic growth.
- Crisis Recovery: Overcoming the economic downturn.
- European Integration: Adapting the Spanish economy to compete within Europe.
The Stabilization Plan aimed to:
- Balance prices.
- Stabilize free trade.
- Establish the convertibility of the peseta.
- Curb inflation by restricting credit.
Several factors contributed to growth during this period:
- Social Desire for Improvement: A strong societal push to improve living conditions.
- Technological Catch-up: Addressing accumulated technological backwardness by importing new machinery.
- Import Liberalization: Relaxing import restrictions, albeit with prior authorization.
- Demand Growth: Increased private investment and exports.
- Favorable Foreign Trade: Spain’s abundant and inexpensive labor, coupled with savings and favorable deals for industrial landowners, stimulated savings and investment.
The burgeoning tourism sector also played a significant role.
Changes in the Production Structure
The 1960s witnessed significant changes in Spain’s production structure:
- Shift in Inputs: Transition from coal to oil products.
- Synthetic Materials: Emergence of synthetic materials and intermediate goods.
- Transportation: Replacement of rail by road transport.
- Increased Capital Intensity: Higher capital requirements per unit of production.
- Capitalization: Reduced manpower alongside increased production.
- Intermediate Goods: Greater utilization of intermediate goods.
- Credit Sales: Expansion of a new sales model based on credit.
Unresolved Issues
Despite the progress, several issues remained:
- Distorted Markets: “Development plans” distorted the functioning of free markets, hindering competition.
- Restrictive Tariffs: A restrictive tariff implemented in 1963 hampered imports.
- Excessive Financial Interventionism: Continued heavy-handed financial control.
- Energy Inefficiency: Persistence of a wasteful energy system.
- Low Job Creation: The production system generated limited employment relative to economic growth.
- Over-indebtedness: Excessive debt hindered modernization efforts.
- Unbalanced Growth: Uneven growth across different productive sectors.