Spain’s Economic Transformation Under Franco: 1939-1975

Posted on Dec 12, 2024 in History

Growth of Autarky

1. Introduction

The civil war had important demographic effects on the economy, since it caused a decline in the labor force. Repression and exile affected sectors of skilled workers. Moreover, the economy was disjointed. Industrial and agricultural production was lower than in 1935 and the transport network was very poor. However, this is not sufficient to explain the negative trends in the years after 1939 and the slow recovery in activity levels before the conflict. During the second stage of the Franco regime, Spain jumped into an industrial society due to a confluence of many factors, among which we must stress the determining influence of the wave of prosperity, which affected all of developed Western Europe and that Spain took advantage of. The enormous expansion of the economy was accompanied by changes in the characteristics of a traditional society, which was dominated by cultural forms and patterns of behavior of rural tradition. In little more than a decade, Spain was modernized.

2. Economic Stagnation and Autarky: 1939-1950

The end of the war had negative repercussions for the economy: a short-term collapse of agricultural production, rationing, and hunger (“day of the single dish”). In the long term, it consolidated an uncompetitive economy in which influence-peddling and corruption were highlighted items. The attempted solution was self-sufficiency.

Autarky: Economic policy through which it aims to achieve self-sufficiency of a country from external factors. It is associated with state intervention involved in production, pricing, distribution, and consumption. There is official food rationing, ration cards, and largely excluded economic exchanges with other countries. It is characteristic of the first stage of the Franco regime, with a clear influence of German National Socialism and Italian Fascism.

Measures:

  • Prices were fixed by the state.
  • Companies were forced to take leave for any industrial plants.
  • Factories were reconverted to produce essential goods.
  • Permits for imports and exports were channeled through the state.
  • Farmers were forced to surrender agricultural surplus to the National Wheat Service, which caused the withdrawal of farmers.

In 1941 the Law on Protection of National Industry led to the creation of the Instituto Nacional de Industria (INI), a conglomerate of public companies that tried to produce the maximum possible, regardless of the costs and the increased number of sectors, although there were no favorable conditions for it. Major national companies were formed: Iberia, Endesa, SEAT, and the railway system was nationalized with the creation of RENFE.

Results:

  • Black market (estraperlo): Food rationing and the establishment of fixed prices made products disappear from the market.
  • Illegal economic activities: The black market (estraperlo). Attempts to punish clash with the good relations of the black marketeers (near Falange, the Army, or the government).

The economic stagnation caused by the lack of raw materials, energy, and capital equipment led to hardship and hunger. There were shortages of all kinds of products, and those available were of low quality. Production rates were below pre-war levels, and there was a proliferation of new rich individuals close to power who engaged in corruption, cronyism, and bribes for building permits, manufacturing, or supply (“Haig”). The country became accustomed to recommendations, certificates of good conduct, and policing or the heads of district and house established by Falange.

After World War II (1945-1950), Allied claims against Franco, the rejection of Spain by the UN (June 1946) considering it a “potential threat to international peace,” and the withdrawal of ambassadors (only those of Argentina and Portugal remained) aggravated the economic situation. The government responded with a demonstration of support for Franco in the Plaza de Oriente, a practice that would continue throughout the dictatorship. Spain would suffer a political and economic boycott.

From 1947, the confrontation between the US and the USSR favored the shift of the US in favor of the Franco regime for its anti-communism. Slowly international pressure eased, and trade restrictions were lifted, but Spain was not admitted to NATO and did not receive the benefits of the Marshall Plan.

3. Stabilization and Economic Growth: End of Isolation

1. The 1950s: The End of Isolation and the Stabilization Plan

This was a stage of consolidation of the dictatorship. It features:

  • The failure of autarkic policies caused a shift in economic policy with a change of government in 1951. Carrero Blanco entered this government as chief adviser of Franco, and Catholics outweighed the Falange.
  • End of rationing and the beginning of an expansive process of production.
  • The Cold War led to a change in attitude of the UN (allowed into the FAO and UNESCO) and the beginning of relations with the US and the Vatican (1953). In 1955, Spain would be accepted into the UN, and ambassadors returned.
a. Period 1951-1957

There was an annual increase in income, but with uneven and unbalanced growth. Among the first steps, we must highlight the partial liberalization of prices, trade, and the movement of goods. Rationing disappeared, and there was an increase in imports due to foreign credit. American aid took the form of the arrival of foodstuffs (grants), and credits for the purchase of food, raw materials, vehicles, and machinery in the United States. The Spanish reward was to allow American military bases in Spain.

To improve agriculture, several laws were developed, among which are the Land Consolidation Act and the Farm Act, which were clearly improvable. Since 1954, economic aid failed to save the situation, and the budget deficit and trade balance, coupled with a sharp increase in inflation, prevented faster growth, leading to the first conflicts in the streets. A stronger exchange was essential.

b. Period 1957-1959

There was a new change of government, in which the first technocrats of Opus Dei (López Rodó) came as ministers. Technocracy is a way of understanding politics in which the priority is economic progress and improved management without discussing the political principles thereof. A legislative package of economic reform was approved, known as the “Stabilization Plan.”

2. The 1960s: Economic Growth

a. Stabilization Plan (1959)

Objectives:

  • Leaving the autarkic model and reintegrating Spain into the international market.
  • Modernizing, liberalizing, streamlining, and restructuring the national economy.

Provisions:

  • Devaluation of the peseta to encourage exports.
  • Limitation of public spending.
  • Wage freeze to contain rising prices and inflation.
  • Tax increases.
  • Soaring interest rates and credit crunch to reduce the money supply.
  • Unification of the exchange rate system, suppression of red tape, and openness to international investment, except in strategic sectors such as defense and public services.

These measures led to Spain’s entry into the IMF (International Monetary Fund) and the World Bank.

Consequences:

  • During the first two years: economic slowdown, falling prices, consumption, and wages, and immigration (to France, Belgium, and Germany).
  • Reduction of the deficit and accumulation of money.
  • Fast industry growth and rural exodus to services (from rural areas to large cities: Madrid, Barcelona, Bilbao, Valencia, etc.).
  • Mechanization and modernization of agriculture.
  • Deficit of the balance of payments, offset by tourism, foreign investment, and foreign migrants.
b. Stage 1961-1973

From 1963: Development Plans (López Rodó): These tried to guide private investments and were planned for three years (though always renewing). Objective: Growth in key sectors through fiscal aids, export subsidies, grants, and the creation of development zones to promote new industries and create jobs in depressed areas. Three were produced: 1964-67, 1968-71, and 1972-75. They did not work. Economic growth was high and consistent, but not because of planning. Private initiative was more confident in the favorable conditions of specific areas and the international situation than in state planning.

Features:

  • The bank financed development and had great benefits.
  • Rural Spain became industrial.
  • Exports increased, and with them, state revenues increased due to migrants, tourists, and capital imports.
  • Modern agriculture appeared, along with the rural exodus.

However, we must also talk about negative consequences that occurred:

  • Strong regional imbalances.
  • Dependence on foreign technology.
  • Inflation did not go away.
  • Full employment was not achieved.
  • Migration continued.
  • INI deficit without tax reform.

Per capita income remained well below that of the more advanced economies of the rest of Europe. There was a profound transformation of the productive and open global capitalism, which ultimately meant a change in the lifestyles and mentality of the Spanish. Since 1973, the end of the “miracle.” The Arab-Israeli War resulted in a rise in oil prices, sparking a global economic crisis that affected Spain and stopped its expansion. There was an increase in unemployment, higher deficits, and a weak peseta.

3. Social Transformation

a. 1st Phase: 1939-1959

Spanish society of the 1940s and 1950s was marked by backwardness and poverty. The collapse of industry and services, along with the casualties of war and exile, brought about the ruralization of the country, in addition to a technical, scientific, and cultural delay. Hunger and poverty affected the majority of peasants and workers, but also impoverished the middle class, affected by the purges and the economic crisis. The old oligarchy and the political elites of Franco were enriched in the shadow of corruption.

Franco imposed profound changes in everyday life and cultural and religious behavior. During the Republic, there were all freedoms and a breadth of options for the organization of private life. With Franco, from 1940, there was an attempt at social control of the Spanish. It was a return to the countryside of the population due to the propaganda of the regime, which extolled the virtues of the simple life of the countryside against the dangers of the city and the economic difficulties of living in the city. Institutions were created to control the youth (Youth Front) and women (Women’s Section). In education, mandatory classes in Political Education (to teach the theory of the Falange) and the Catholic religion were introduced, while public religious processions, novenas, and “missions” were promoted. A paternalistic direction of society was sought from the State and the National Movement (rigid censorship) that included all factors of public and private life. Elementary school played a key role in indoctrination, and the first ideas about the regime were learned there.

b. 2nd Phase: 1959-1975

The enormous expansion of the economy in the 1960s and 1970s and demographic changes were accompanied by a modernization of society. The population growth rate increased due to birth (baby boomers), and the urban population increased to the detriment of the countryside. The development of industry and the service sector led to a major transformation of socio-professional structures. The number of employees increased, as did urban liberal professionals (doctors, lawyers, economists, corporate executives, etc.). The emergence of a large mass of modern industrial workers in Catalonia, Madrid, the Basque Country, and Asturias is highlighted, which gave rise to a new labor movement, active and against Franco. The volume of the middle classes also increased, and a new urban bourgeoisie developed that did not exist before. The number of officials increased, and the rural population decreased (Castilla – abandoned villages, completely), and only in Andalusia did the figure of landless laborers in poor conditions remain, which led to emigration. More than a million workers emigrated to France, Switzerland, and Germany. The rural exodus caused the emergence of suburbs and slums in cities, creating serious regional imbalances (poor Spain – rich Spain). In general, the standard of living was low, and the economic boom did little to improve public services.

The concentration of the population in large cities and opening to the outside (tourists) helped to vary the way of life and mentality. Social and cultural behaviors changed, and cultural freedom was demanded. One reason was the changes in education that culminated in the Education Act of 1970 (compulsory education to 14 years) and increased enrollment at all levels (elementary to university). State investments in education increased, and illiteracy decreased to the level of advanced countries. The number of college students increased significantly (trips abroad), and underground publications entered Spain, enhancing information related to the exterior. The family also began to experience changes: increased mobility, children left home earlier. There was a new mentality with the incorporation of women into work outside the home, albeit weak. At the same time, the standard of living began to increase: electricity, refrigerators, televisions (heavily censored), and cars (Seat 600). On the outskirts of large industrial cities, neighborhoods were full of a new popular culture.

There was also a religious change of mind, despite the rigid censorship: the call for freedom of thought and religious practice declined. The Church itself experienced a visible opening after Vatican II, and with it, a sector of the Spanish church began to distance itself from Franco. It was a time of great secularization of the clergy.

4. Conclusion

During the long Franco dictatorship, Spain was transformed into a relatively modern industrial country. Economic growth started in the 1960s was the result of Spain’s reintegration into the international market. The growth process was not due to the Franco regime but to the economic development of the rest of Europe in the process of expansion. A developed and liberalized policy for the 1960s and 1970s was reached after the complete failure of the fascist-autarkic policies of the 20 years prior. By 1970, the consumer society had led to a profound change of mentality. While the ruling class, ultra-Catholic and conservative, were relegated to the values of Franco, the rest of the country, especially the younger generations, evolved into very different positions. Proof of this was the gradual relaxation of attending religious services, the introduction of new patterns of social and sexual behavior, and cultural movements that came from outside. In short, the great age of Spanish development undoubtedly favored social progress and changing cultural norms that, far from strengthening the regime, weakened it from a political and ideological standpoint. The device created by Franco and his supporters had been unable to adapt its political structure to the profound economic, social, and cultural development that had occurred in Spain since the 1960s. Domestic opposition to a regime based on police repression, a one-party system, lack of basic liberties, and exclusive Catholicism did not stop growing. This clashed sharply with the new realities of an urban bourgeoisie, a new worker who claimed freedom and the right to strike, and an intellectual world, such as the university, which advocated freedom of ideas.

Ideology and Society in the Early Franco Era

It was the era of patriotic tests (of the ensigns and lieutenants or captains) who attended classes with their stars, if not in the uniform of the Falange. Upon entering each class, they raised their hands, drying the Cara al Sol, and said the ritual words. This one and another. Among the teachers, some were frightened and had to row. Others were in full frenzy, mixing the most ardent government fervor in a spirit of rather embarrassing professional hatred. Students were also divided into two classes: those that kept quiet and those that boasted constant family persecution (before 1939), nuns, aunts, uncles who were canons, generals or colonels as parents, and friendship with this or that known political figure. The Spanish bourgeoisie, after their time as Republican inclinations and fear of the revolutionary period, felt safe and was ready for anything.