Spain’s Economic Transformation Under Franco (1939–1973)
Spain’s International Position and Post-War Isolation
During the Second World War, Spain remained neutral, despite Franco’s meetings with Mussolini and Hitler. However, in late 1941, Spain partially supported the Axis by sending the Blue Division (Falangist volunteers) to fight against Russia. Only half of those volunteers returned by 1944.
After the war, the Franco regime faced severe challenges:
- Prince Juan de Borbón of Spain claimed the throne in 1945.
- The struggles of the maquis increased, harassing the regime and encouraging the people to revolt and overthrow the dictatorship.
- The UN considered the Franco regime illegitimate and encouraged all countries to sever relations with Spain. As a result, Spain was excluded from the Marshall Plan.
- Franco feared an invasion by France. He called for massive demonstrations in Madrid, rejecting “Judeo-Masonic-Marxist conspirators” in other countries, and built bunkers to deal with the possible invasion.
The Shift: Cold War and Recognition (1947 Onward)
Isolation began to shift around 1947 with the onset of the Cold War. The tension between the Communist bloc and the democratic bloc highlighted Franco’s ability to stop the spread of Communism in the western Mediterranean. Consequently, Spain was eventually recognized and aided by Western powers.
Economic Developments During the Franco Regime
1. Postwar Economy (1939–1959): Autarky
This period was characterized by Autarky, the aim being to achieve economic self-sufficiency due to the international isolation suffered. Spain did not benefit from the Marshall Plan (1947).
Key Features of Autarky
- Control of Imports/Exports: Only public companies could trade internationally to prevent the outflow of scarce foreign exchange needed to pay for essential goods like oil.
- Promotion of Industry: Focused on national defense and the industrial development of capital goods (machinery).
The State established a public monopoly, the INI (National Institute of Industry), in 1941. The INI bought loss-making private companies and grouped them together, creating various state-owned enterprises (e.g., Iberia, Renfe, Endesa). The state intervened to produce goods that private companies were unable or unwilling to supply.
Rationing and the Black Market
Rationing and the black market emerged because the policy of economic self-sufficiency was not achieved. The State controlled agricultural production and the market to supply the population. Producers were required to sell at fixed prices to the state, which then sold the goods (at a higher price) to ensure equitable distribution through the ration card, which remained valid until 1951.
This system fostered a black market where products were sold at triple the official prices. Farmers often hid part of their production, risking arrest. There was great hardship, especially in cities, due to the severe lack of production.
2. The Great Development (1960–1973)
The economic situation changed significantly in 1959 with the implementation of the Stabilization Plan. Ministers associated with Opus Dei, including Rubio and Ullastres, convinced Franco that production had stagnated, foreign currency reserves were depleted, and Spain was suffering from a significant economic backlog.
The Head of State consented to the new plan, which involved abandoning state protectionism, encouraging private enterprise, and introducing economic liberalism.
Sources of Investment for the Stabilization Plan
- Currency sent by Spanish emigrants.
- Foreign exchange generated by emerging mass tourism.
- Payments from North America for military bases established in Spain since 1953 (e.g., Puig Major).
- Investment from foreign companies installing operations in Spain.
This investment financed the Development Plans (1964–1974), led by López Rodó. These plans, copied from French models, included specific development objectives for private companies, focusing on mineral production, infrastructure, and the creation of industrial parks (e.g., Son Castelló).
There were also improvements in public services, including health (hospitals like Son Dureta) and education, with the introduction of the EGB and BUP systems in 1970.
Economic and Social Consequences
GDP, production, wages, and employment all increased, restoring the balance of payments through increased exports. This led to an improvement in the living standards and welfare of citizens.
However, the development failed to prevent regional economic imbalance, leading to the migration of more than 5 million people to urban industrial centers. Furthermore, the environment was not respected; dumping in coastal areas driven by tourism led to the disappearance of cultural heritage.