Economic history of Spain
Encyclopedia
This article covers the development of Spain
's economy over the course of its history.
and Celts were some of the earliest groups in what is now Spain. The Iberians developed agriculture and metal working. Celtic economy centered around cattle raising, like other Celtic societies. For some time, many historians have suggested that the prehistoric Celts living in Spain should be blended together with the prehistoric Iberians and be referred to as Celtiberians. However, the relationship between the early Celts and Iberians is not entirely known.
Carthaginians
and Greeks
also traded with Spain and established their own colonies on the coast. Spain's mineral wealth and access to metals made it an important source of raw material during the early metal ages. Carthage conquered parts of Iberia after the First Punic War. After defeating Carthage in the Second Punic War
, the Romans
governed all of the Iberian peninsula for centuries, expanding and diversifying the economy and extending Hispanic trade with the greater Republic and Empire.
, those kingdoms in the Iberian peninsula that today are known as Spain maintained their economy. First, the Visigoths took over in the absence of Roman administrators and established themselves as nobility with some degree of centralized power at their capital, which was finally moved to Toledo. Though it suffered some decline, most Roman law and much physical infrastructure such as roads, bridges, aqueducts and irrigation systems, was maintained to varying degrees unlike the complete disintegration that occurred in most other former parts of the western empire. Later, when the Moors
occupied large parts of the Iberian Peninsula alongside the Catholic kingdoms, they also maintained much of this Roman legacy; in fact as time went on they had Roman infrastructure repaired and extended. Meanwhile, in the countryside, where most people had always lived, life went on much as it had in Roman times, but with improvements due to the repair and extension of irrigation systems, and the introduction of novel crops and agricultural practices from the Islamic world. While trade dwindled in most of the former Roman lands in Europe, trade survived to some degree in Visigothic Spain, and flourished under the Moors through the integration of Al-Andalus
(Moorish Spain) with the Mediterranean trade of the Islamic world. After 800 years of warring, the Catholic kingdoms gradually became more powerful and sophisticated and eventually expelled all the Moors and any converted Muslims from the peninsula. The taking back of land and expulsion of the Moors is known as the Reconquista
.
The Kingdom of Castile
, united with the Kingdom of Aragon
, had merchant navies that rivaled that of the Hanseatic League
and Venice
. The reasons for this situation appear to have been rooted both in the structure of the economy and in the attitude of the Castilians and Aragonese. Like the rest of late medieval Europe, restrictive corporations closely regulated all aspects of the economy-production, trade, and even transport. The most powerful of these corporations, the mesta, controlled the production of wool, Castile's chief export.
The Reconquista allowed the Catholic Monarchs
to divert their attention to exploration. In 1492, Pope Alexander VI
(Rodrigo Borgia, a Valencian) formally approved the division of the unexplored world between kingdoms of what is today Spain and Portugal. The Treaty of Tordesillas
, which the kingdoms signed one year later, moved the line of division westward and allowed Portugal to claim Brazil
.
In 1492, when Cristopher Columbus brought 1,500 colonists with him on his second voyage, a royal administrator had already been appointed for what the Catholic kingdoms referred to as the Indies. The Council of the Indies (Consejo de Indias
), established in 1524 acted as an advisory board on colonial affairs, and the House of Trade (Casa de Contratación
) regulated trade with the colonies. The newly established colonies were ruled under the Kingdoms of Castile and Aragon, today known as Spain.
New discoveries and conquests came in quick succession. Vasco Núñez de Balboa
reached the Pacific in 1513, and the survivors of Ferdinand Magellan
's expedition completed the circumnavigation of the globe in 1522.
and Continental America
, valuable agricultural products and mineral resources were introduced into Spain through regular trade routes
. New products such as potatoes, tomatoes and corn had a long-lasting impact on the Spanish economy, but more importantly on European demographics. Gold and silver bullion from American mines were used by the Spanish Crown to pay for troops in the Netherlands
and Italy
, to maintain the emperor's forces in Germany and ships at sea, and to satisfy increasing consumer demand at home. However, the large volumes of precious metals from America led to inflation, which had a negative effect on the poorer part of the population, as goods became overpriced. This also hampered exports, as expensive goods could not compete in international markets.
Domestic production was heavily taxed, driving up prices for Aragon and Castile-made goods, but especially in Castile where the tax burden was greater. The sale of titles to entrepreneurs who bought their way up the social ladder (a practice commonly found all over Europe), removing themselves from the productive sector of the economy, provided additional funds. The overall effect of plague and emigration reduced Spain's population from over 8 million in the last years of the 16th century to under 7 million by the mid-17th century, with Castile the most severely affected region (90% of the Kingdom population were in Castile, as an example, in 1500, Castile 6 million, Aragon 300.000 hab.).
's reign. The Bourbon reforms, however, resulted in no basic changes in the pattern of property holding. The nature of bourgeois class consciousness in Aragon and Castile hindered the creation of a middle-class movement. At the instance of liberal thinkers including Campomanes, various groups known as "Economic Societies of friends of the Country" were formed to promote economic development, new advances in the sciences, and Enlightenment philosophy (see Sociedad Económica de los Amigos del País
). However, despite the development of a national bureaucracy in Madrid, the reform movement could not be sustained without the patronage of Charles III, and it did not survive him.
and Puerto Rico
remained under the Spanish flag in the New World. When Ferdinand VII was restored to the throne in Madrid, he expended wealth and manpower in a vain effort to reassert control over the colonies. The move was unpopular among liberal officers assigned to the American wars and they tried to restore the Bailen Constitution.
was appointed prime minister by the king, and for seven years dissolved parliament and ruled through directorates and the aid of the military until 1930.
Protectionism and state control of the economy led to a temporary economic recovery. The precipitous economic decline in 1930 undercut support for the government from special-interest groups. He established no new system to replace parliamentary government. Criticism from academics mounted. Bankers expressed disappointment at the state loans that his government had tried to float. An attempt to reform the promotion system cost him the support of the army. This loss of army support caused him to lose the support of the king. Primo de Rivera resigned and died shortly afterward in exile.
, failing to execute numerous reforms, including land reform. General strikes were common and the economy stagnated.
During the Spanish Civil War
, the country split into two different centralized economies, and the whole economic effort was redirected to the war industry. According to recent research, growth is harmed during civil wars due to the huge contraction on private investment, and such was the case with the Spanish divided economy.
Spain emerged from the civil war with formidable economic problems. Gold
and foreign exchange
reserves had been virtually wiped out, the massive devastation of war had reduced the productive capacity of both industry and agriculture
. To compound the difficulties, even if the wherewithal had existed to purchase imports, the outbreak of World War II
rendered many needed supplies unavailable. The end of the war did not improve Spain's plight because of subsequent global shortages of raw materials, and peacetime industrial products. Spain's European neighbours faced formidable post-war reconstruction problems of their own, and, because of their awareness that the Nationalist victory in the Spanish Civil War had been achieved with the help of Adolf Hitler
and Benito Mussolini
, they had no inclination to include Spain in any multilateral recovery programs or trade. For a decade following the Civil War's end in 1939, the wrecked and isolated economy remained in a state of severe depression
.
Branded an international outcast for its pro-Axis
bias during World War II, Francisco Franco
's regime sought to provide for Spain's well-being by adopting a policy of economic self-sufficiency. Autarky
was not merely a reaction to international isolation
; it was also rooted in more than half a century of advocacy from domestic economic pressure groups. Furthermore, from 1939 to 1945, Spain's military chiefs genuinely feared an Allied invasion of the peninsula and, therefore, sought to avert excessive reliance on foreign armaments.
With the war devastation and trade isolation, Spain was much more economically backward in the 1940s than it had been a decade earlier. Inflation soared, economic reconstruction faltered, food was scarce, and, in some years, Spain registered negative growth rates. By the early 1950s, per capita gross domestic product
(GDP) was barely 40% of the average for West European countries. Then, after a decade of economic stagnation, a tripling of prices, the growth of a black market, and widespread deprivation, gradual improvement began to take place. The regime took its first faltering steps toward abandoning its pretensions of self-sufficiency and towards a transformation of Spain's economic system. Pre-Civil War industrial production levels were regained in the early 1950s, though agricultural output remained below prewar levels until 1958.
A further impetus to economic liberalization came from the September 1953 signing of a mutual defense agreement, the Pact of Madrid
, between the United States
and Spain. In return for permitting the establishment of United States military bases on Spanish soil, the administration of President Dwight D. Eisenhower
administration provided substantial economic aid to the Franco regime. More than US$1 billion in economic assistance flowed into Spain during the remainder of the decade as a result of the agreement. Between 1953 and 1958, Spain's gross national product (GNP) rose by about 5% per annum.
The years from 1951 to 1956 were marked by much economic progress, but the reforms of the period were implemented irregularly, and were poorly coordinated. One large obstacle to the reform process was the corrupt, inefficient, and bloated bureaucracy. By the mid-1950s, the inflationary spiral had resumed its upward climb, and foreign currency reserves that had stood at US$58 million in 1958 plummeted to US$6 million by mid-1959. The growing demands of the emerging middle class—and of the ever greater number of tourists—for the amenities of life, particularly for higher nutritional standards, placed heavy demands on imported food and luxury items. At the same time, exports lagged, largely because of high domestic demand and institutional restraints on foreign trade. The peseta
fell to an all-time low on the black market, and Spain's foreign currency obligations grew to almost US$60 million.
A debate took place within the regime over strategies for extricating the country from its economic impasse, and Franco finally opted in favor of a group of neoliberals. The group included bankers, industrial executives, some academic economists, and members of the Roman Catholic lay organization, Opus Dei
.
During the 1957-59 period, known as the pre-stabilization years, economic planners contented themselves with piecemeal measures such as moderate anti-inflationary stopgaps and increases in Spain's links with the world economy. A combination of external developments and an increasingly aggravated domestic economic crisis, however, forced them to engage in more far- reaching changes.
As the need for a change in economic policy became manifest in the late 1950s, an overhaul of the Council of Ministers in February 1957 brought to the key ministries a group of younger men, most of whom possessed economics training and experience. This reorganization was quickly followed by the establishment of a committee on economic affairs and the Office of Economic Coordination and Planning under the prime minister
.
Such administrative changes were important steps in eliminating the chronic rivalries that existed among economic ministries. Other reforms followed, the principal one being the adoption of a corporate tax system that required the confederation of each industrial sector to allocate an appropriate share of the entire industry's tax assessment to each member firm. Chronic tax evasion was consequently made more difficult, and tax collection receipts rose sharply. Together with curbs on government spending, in 1958 this reform created the first government surplus in many years.
More drastic remedies were required as Spain's isolation from the rest of Western Europe became exacerbated. Neighboring states were in the process of establishing the EC and the European Free Trade Association (EFTA—see Glossary). In the process of liberalizing trade among their members, these organizations found it difficult to establish economic relations with countries wedded to trade quotas and bilateral agreements, such as Spain.
Spanish membership in these groups was not politically possible, but Spain was invited to join a number of other international institutions. In January 1958, Spain became an associate member of the Organisation for European Economic Co- operation (OEEC), which became the Organisation for Economic Co-operation and Development
(OECD) in September 1961. In 1959 Spain joined the International Monetary Fund
(IMF) and the World Bank
. These bodies immediately became involved in helping Spain to abandon the autarkical trade practices that had brought its reserves to such low levels and that were isolating its economy from the rest of Europe.
In December 1958, after seven months of preparation and drafting, aided by IMF, Spain unveiled its Stabilization Plan on June 30, 1959. The plan's objectives were twofold: to take the necessary fiscal and monetary measures required to restrict demand and to contain inflation, while, at the same time, liberalizing foreign trade and encouraging foreign investment. The plan's initial effect was deflationary and recessionary, leading to a drop in real income and to a rise in unemployment during its first year. The resultant economic slump and reduced wages led approximately 500,000 Spanish workers to emigrate in search of better job opportunities in other West European countries. Nonetheless, its main goals were achieved. The plan enabled Spain to avert a possible suspension of payments abroad to foreign banks holding Spanish currency, and by the close of 1959 Spain's foreign exchange account showed a US$100-million surplus. Foreign capital investment grew sevenfold between 1958 and 1960, and the annual influx of tourists began to rise rapidly, bringing in very much needed foreign exchange.
As these developments steadily converted Spain's economic structure into one more closely resembling a free-market economy, the country entered the greatest cycle of industrialization and prosperity it had ever known. Foreign aid took the form of US$75 million in drawing rights from the IMF, US$100 million in OEEC credits, US$70 million in commercial credits from the Chase Manhattan Bank
and the First National City Bank, US$30 million from the Export-Import Bank of the United States
, and funds from United States aid programs. Total foreign backing amounted to US$420 million. The principal lubricants of the economic expansion, however, were the hard currency remittances
of one million Spanish workers abroad, which are estimated to have offset 17.9 % of the total trade deficit from 1962 to 1971; the gigantic increase in tourism that drew more than 20 million visitors per year by the end of the 1960s, accounting by then for 9 % of GNP; a car industry that grew at a staggering compound rate of 21.7 % per year from 1958 to 1972 - and drove the rapid development of other industries that supplied and serviced it; and direct foreign investment, which between 1960 and 1974 amounted to an impressive US$7.6 billion. More than 40 % of this investment came from the United States, almost 17 % came from Switzerland
, and the Federal Republic of Germany (West Germany) and France each accounted for slightly more than 10 %. By 1975 foreign capital represented 12.4 % of all that invested in Spain's 500 largest industrial firms. An additional billion dollars came from foreign sources through a variety of loans and credit devices. The success of the stabilization program was attributable to plenty of good luck and good management and the impressive development during this period was referred to colloquially as the "Spanish miracle
", between 1959 and 1975 Spain had the next fastest economic growth rate after Japan
.
diverted Spaniards' attention from their economy. The return to democracy coincided with an explosive quadrupling of oil prices, which had an extremely serious effect on the economy because Spain imported 70% of its energy, mostly in the form of Middle Eastern oil. Nonetheless, the centrist government of Adolfo Suarez Gonzalez, which had been named to succeed the Franco regime by King Juan Carlos, did little to shore up the economy or even to reduce Spain's dependence on imported oil. A virtually exclusive preoccupation with the politics of democratization and the drafting of a new political system prevailed.
Because of the failure to adjust to the changed economic environment brought on by the two oil price shocks of the 1970s, Spain quickly confronted plummeting productivity, an explosive increase in wages from 1974 to 1976, a reversal of migration trends as a result of the economic slump throughout Western Europe, and the steady outflow of labor from agricultural areas despite declining job prospects in the cities. All these factors joined in producing a sharp rise in unemployment. Government budgetary deficits swelled, as did large social security
cost overruns and the huge operating losses incurred by a number of public-sector industries. Energy consumption, meanwhile, remained high.
When the Spanish Socialist Workers' Party
government headed by Felipe González
took office in late 1982, the economy, inflation was running at an annual rate of 16%, the external current account was US$4 billion in arrears, public spending was large, and foreign exchange reserves
had become dangerously depleted. In coping with the situation, however, the Gonzalez government had one asset that no previous post-Franco government had enjoyed, namely, a solid parliamentary majority in both houses of the Cortes (Spanish Parliament). With this majority, it was able to undertake unpopular austerity measures that earlier governments had not.
The Socialist government opted for pragmatic, orthodox monetary and fiscal policies, together with a series of vigorous retrenchment measures. In 1983 it unveiled a program that provided a more coherent and long-term approach to the country's economic ills. Renovative structural policies—such as the closing of large, unprofitable state enterprises—helped to correct the relatively poor performance of the economy. The government launched an industrial reconversion program, brought the problem-ridden social security system into better balance, and introduced a more efficient energy-use policy. Labor market flexibility was improved, and private capital investment was encouraged with incentives.
By 1985 the budgetary deficit was brought down to 5% of GNP, and it dropped to 4.5% in 1986. Real wage growth was contained, and it was generally kept below the rate of inflation. Inflation was reduced to 4.5% in 1987, and analysts believed it might decrease to the government's goal of 3% in 1988.
Efforts to modernize and to expand the economy together with a number of factors fostered the remarkable economic boom of the 1980s. Those factors were the continuing fall in oil prices, increased tourism, and a massive upsurge in the inflow of foreign investment. Thus, despite the fact that the economy was being exposed to foreign competition in accordance with EC requirements, the Spanish economy underwent rapid expansion without experiencing balance of payments' constraints.
In the words of the OECD's 1987-88 survey of the Spanish economy, "following a protracted period of sluggish growth with slow progress in winding down inflation during the late 1970s and the first half of the 1980s, the Spanish economy has entered a phase of vigorous expansion of output and employment accompanied by a marked slowdown of inflation." In 1981 Spain's GDP growth rate had reached a nadir by registering a rate of negative 0.2%; it then gradually resumed its slow upward ascent with increases of 1.2% in 1982, 1.8% in 1983, 1.9% in 1984, and 2.1% in 1985. The following year, however, Spain's real GDP began to grow by leaps and bounds, registering a growth rate of 3.3% in 1986 and 5.5% in 1987. The 1987 figure was the highest since 1974, and it was the strongest rate of expansion among OECD countries that year. Analysts projected a rise of 3.8% in 1988 and of 3.5% in 1989, a slight decline but still roughly double the EC average. They expected that declining interest rates and the government's stimulative budget would help sustain economic expansion. Industrial output, which rose by 3.1% in 1986 and by 5.2% in 1987, was also expected to maintain its expansive rate, growing by 3.8% in 1988 and by 3.7% in 1989.
A prime force generating rapid economic growth was increased domestic demand, which grew by a steep 6% in 1986 and by 4.8% in 1987, in both years exceeding official projections. During 1988 and 1989, analysts expected demand to remain strong, though at slightly lower levels. Much of the large increase in demand was met in 1987 by an estimated 20% jump in real terms in imports of goods and services.
In the mid-1980s, Spain achieved a strong level of economic performance while simultaneously lowering its rate of inflation to within two points of the EC average. However, its export performance, though increasing, raised concerns over the existing imbalance between import and export growth.
Spain
Spain , officially the Kingdom of Spain languages]] under the European Charter for Regional or Minority Languages. In each of these, Spain's official name is as follows:;;;;;;), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula...
's economy over the course of its history.
Ancient era
The prehistoric IberiansIberians
The Iberians were a set of peoples that Greek and Roman sources identified with that name in the eastern and southern coasts of the Iberian peninsula at least from the 6th century BC...
and Celts were some of the earliest groups in what is now Spain. The Iberians developed agriculture and metal working. Celtic economy centered around cattle raising, like other Celtic societies. For some time, many historians have suggested that the prehistoric Celts living in Spain should be blended together with the prehistoric Iberians and be referred to as Celtiberians. However, the relationship between the early Celts and Iberians is not entirely known.
Carthage
Carthage , implying it was a 'new Tyre') is a major urban centre that has existed for nearly 3,000 years on the Gulf of Tunis, developing from a Phoenician colony of the 1st millennium BC...
and Greeks
Ancient Greece
Ancient Greece is a civilization belonging to a period of Greek history that lasted from the Archaic period of the 8th to 6th centuries BC to the end of antiquity. Immediately following this period was the beginning of the Early Middle Ages and the Byzantine era. Included in Ancient Greece is the...
also traded with Spain and established their own colonies on the coast. Spain's mineral wealth and access to metals made it an important source of raw material during the early metal ages. Carthage conquered parts of Iberia after the First Punic War. After defeating Carthage in the Second Punic War
Second Punic War
The Second Punic War, also referred to as The Hannibalic War and The War Against Hannibal, lasted from 218 to 201 BC and involved combatants in the western and eastern Mediterranean. This was the second major war between Carthage and the Roman Republic, with the participation of the Berbers on...
, the Romans
Ancient Rome
Ancient Rome was a thriving civilization that grew on the Italian Peninsula as early as the 8th century BC. Located along the Mediterranean Sea and centered on the city of Rome, it expanded to one of the largest empires in the ancient world....
governed all of the Iberian peninsula for centuries, expanding and diversifying the economy and extending Hispanic trade with the greater Republic and Empire.
Middle Ages
While most of western Europe fell into a Dark Age after the decline of the Roman EmpireDecline of the Roman Empire
The decline of the Roman Empire refers to the gradual societal collapse of the Western Roman Empire. Many theories of causality prevail, but most concern the disintegration of political, economic, military, and other social institutions, in tandem with foreign invasions and usurpers from within the...
, those kingdoms in the Iberian peninsula that today are known as Spain maintained their economy. First, the Visigoths took over in the absence of Roman administrators and established themselves as nobility with some degree of centralized power at their capital, which was finally moved to Toledo. Though it suffered some decline, most Roman law and much physical infrastructure such as roads, bridges, aqueducts and irrigation systems, was maintained to varying degrees unlike the complete disintegration that occurred in most other former parts of the western empire. Later, when the Moors
Moors
The description Moors has referred to several historic and modern populations of the Maghreb region who are predominately of Berber and Arab descent. They came to conquer and rule the Iberian Peninsula for nearly 800 years. At that time they were Muslim, although earlier the people had followed...
occupied large parts of the Iberian Peninsula alongside the Catholic kingdoms, they also maintained much of this Roman legacy; in fact as time went on they had Roman infrastructure repaired and extended. Meanwhile, in the countryside, where most people had always lived, life went on much as it had in Roman times, but with improvements due to the repair and extension of irrigation systems, and the introduction of novel crops and agricultural practices from the Islamic world. While trade dwindled in most of the former Roman lands in Europe, trade survived to some degree in Visigothic Spain, and flourished under the Moors through the integration of Al-Andalus
Al-Andalus
Al-Andalus was the Arabic name given to a nation and territorial region also commonly referred to as Moorish Iberia. The name describes parts of the Iberian Peninsula and Septimania governed by Muslims , at various times in the period between 711 and 1492, although the territorial boundaries...
(Moorish Spain) with the Mediterranean trade of the Islamic world. After 800 years of warring, the Catholic kingdoms gradually became more powerful and sophisticated and eventually expelled all the Moors and any converted Muslims from the peninsula. The taking back of land and expulsion of the Moors is known as the Reconquista
Reconquista
The Reconquista was a period of almost 800 years in the Middle Ages during which several Christian kingdoms succeeded in retaking the Muslim-controlled areas of the Iberian Peninsula broadly known as Al-Andalus...
.
The Kingdom of Castile
Kingdom of Castile
Kingdom of Castile was one of the medieval kingdoms of the Iberian Peninsula. It emerged as a political autonomous entity in the 9th century. It was called County of Castile and was held in vassalage from the Kingdom of León. Its name comes from the host of castles constructed in the region...
, united with the Kingdom of Aragon
Kingdom of Aragon
The Kingdom of Aragon was a medieval and early modern kingdom in the Iberian Peninsula, corresponding to the modern-day autonomous community of Aragon, in Spain...
, had merchant navies that rivaled that of the Hanseatic League
Hanseatic League
The Hanseatic League was an economic alliance of trading cities and their merchant guilds that dominated trade along the coast of Northern Europe...
and Venice
Venice
Venice is a city in northern Italy which is renowned for the beauty of its setting, its architecture and its artworks. It is the capital of the Veneto region...
. The reasons for this situation appear to have been rooted both in the structure of the economy and in the attitude of the Castilians and Aragonese. Like the rest of late medieval Europe, restrictive corporations closely regulated all aspects of the economy-production, trade, and even transport. The most powerful of these corporations, the mesta, controlled the production of wool, Castile's chief export.
Union and exploration
Catholic Monarchs
The Catholic Monarchs is the collective title used in history for Queen Isabella I of Castile and King Ferdinand II of Aragon. They were both from the House of Trastámara and were second cousins, being both descended from John I of Castile; they were given a papal dispensation to deal with...
to divert their attention to exploration. In 1492, Pope Alexander VI
Pope Alexander VI
Pope Alexander VI , born Roderic Llançol i Borja was Pope from 1492 until his death on 18 August 1503. He is one of the most controversial of the Renaissance popes, and his Italianized surname—Borgia—became a byword for the debased standards of the Papacy of that era, most notoriously the Banquet...
(Rodrigo Borgia, a Valencian) formally approved the division of the unexplored world between kingdoms of what is today Spain and Portugal. The Treaty of Tordesillas
Treaty of Tordesillas
The Treaty of Tordesillas , signed at Tordesillas , , divided the newly discovered lands outside Europe between Spain and Portugal along a meridian 370 leagueswest of the Cape Verde islands...
, which the kingdoms signed one year later, moved the line of division westward and allowed Portugal to claim Brazil
Brazil
Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...
.
In 1492, when Cristopher Columbus brought 1,500 colonists with him on his second voyage, a royal administrator had already been appointed for what the Catholic kingdoms referred to as the Indies. The Council of the Indies (Consejo de Indias
Consejo de Indias
The Council of the Indies, officially, the Royal and Supreme Council of the Indies , was the most important administrative organ of the Spanish Empire, both in the Americas and in Asia, combining legislative, executive and judicial functions...
), established in 1524 acted as an advisory board on colonial affairs, and the House of Trade (Casa de Contratación
Casa de Contratación
La Casa de Contratación was a government agency under the Spanish Empire, existing from the 16th to the 18th centuries, which attempted to control all Spanish exploration and colonization...
) regulated trade with the colonies. The newly established colonies were ruled under the Kingdoms of Castile and Aragon, today known as Spain.
New discoveries and conquests came in quick succession. Vasco Núñez de Balboa
Vasco Núñez de Balboa
Vasco Núñez de Balboa was a Spanish explorer, governor, and conquistador. He is best known for having crossed the Isthmus of Panama to the Pacific Ocean in 1513, becoming the first European to lead an expedition to have seen or reached the Pacific from the New World.He traveled to the New World in...
reached the Pacific in 1513, and the survivors of Ferdinand Magellan
Ferdinand Magellan
Ferdinand Magellan was a Portuguese explorer. He was born in Sabrosa, in northern Portugal, and served King Charles I of Spain in search of a westward route to the "Spice Islands" ....
's expedition completed the circumnavigation of the globe in 1522.
Gold and silver from the New World
Following the discovery of America and the colonial expansion in the CaribbeanSpanish West Indies
The Spanish West Indies was the contemporary name for the Spanish colonies in the Caribbean...
and Continental America
Spanish Main
In the days of the Spanish New World Empire, the mainland of the American continent enclosing the Caribbean Sea and the Gulf of Mexico was referred to as the Spanish Main. It included present-day Florida, the east shore of the Gulf of Mexico in Texas, Mexico, Central America and the north coast of...
, valuable agricultural products and mineral resources were introduced into Spain through regular trade routes
Spanish treasure fleet
The Spanish treasure fleets was a convoy system adopted by the Spanish Empire from 1566 to 1790...
. New products such as potatoes, tomatoes and corn had a long-lasting impact on the Spanish economy, but more importantly on European demographics. Gold and silver bullion from American mines were used by the Spanish Crown to pay for troops in the Netherlands
Netherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...
and Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
, to maintain the emperor's forces in Germany and ships at sea, and to satisfy increasing consumer demand at home. However, the large volumes of precious metals from America led to inflation, which had a negative effect on the poorer part of the population, as goods became overpriced. This also hampered exports, as expensive goods could not compete in international markets.
Bourbon reforms
Economic recovery was noticeable, and government efficiency was greatly improved at the higher levels during Charles IIICharles III of Spain
Charles III was the King of Spain and the Spanish Indies from 1759 to 1788. He was the eldest son of Philip V of Spain and his second wife, the Princess Elisabeth Farnese...
's reign. The Bourbon reforms, however, resulted in no basic changes in the pattern of property holding. The nature of bourgeois class consciousness in Aragon and Castile hindered the creation of a middle-class movement. At the instance of liberal thinkers including Campomanes, various groups known as "Economic Societies of friends of the Country" were formed to promote economic development, new advances in the sciences, and Enlightenment philosophy (see Sociedad Económica de los Amigos del País
Sociedad Económica de los Amigos del País
The Sociedades Económicas de Amigos del País were private associations established in various cities throughout Enlightenment Spain, and to a lesser degree in some of her colonies .-History:The Sociedades Económicas were founded as part of a movement to...
). However, despite the development of a national bureaucracy in Madrid, the reform movement could not be sustained without the patronage of Charles III, and it did not survive him.
Napoleon and the War of Independence
Spain's American colonies took advantage of the postwar chaos to proclaim their independence, and most established republican governments. By 1825 only CubaCuba
The Republic of Cuba is an island nation in the Caribbean. The nation of Cuba consists of the main island of Cuba, the Isla de la Juventud, and several archipelagos. Havana is the largest city in Cuba and the country's capital. Santiago de Cuba is the second largest city...
and Puerto Rico
Puerto Rico
Puerto Rico , officially the Commonwealth of Puerto Rico , is an unincorporated territory of the United States, located in the northeastern Caribbean, east of the Dominican Republic and west of both the United States Virgin Islands and the British Virgin Islands.Puerto Rico comprises an...
remained under the Spanish flag in the New World. When Ferdinand VII was restored to the throne in Madrid, he expended wealth and manpower in a vain effort to reassert control over the colonies. The move was unpopular among liberal officers assigned to the American wars and they tried to restore the Bailen Constitution.
1822 to 1898
The economy was heavily focused around agricultural goods. The period saw some industrialization in Catalonia and the Basque Country and the construction of railways in the second half of the nineteenth century helped alleviate some of the isolation of the interior but generally little changed for much of the country as political instability, uprisings and unstable governments slowed or undermined economic progress.1898 to 1920
At the beginning of the 20th century, Spain was still mostly rural; modern industry existed only in the textile mills around Barcelona in Catalonia and in the metallurgical plants of the Basque provinces. The loss of Cuba and the Philippines benefited the country by causing capital to return and to be invested in updated domestic industries. But even with the stimulus of World War I, only Catalonia and the two principal Basque provinces, Vizcaya and Guipuzcoa, did the value of manufacturing output in 1920 exceed that of agricultural production. Agricultural productivity was generally 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, outmoded landtenure practices, as well as the age old problems of difficult terrain, unreliable climate, isolation and difficult transportation in the rugged interior. Financial institutions were relatively undeveloped. The Bank of Spain (Banco de España) 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.Primo de Rivera
An aristocrat, Miguel Primo de RiveraMiguel Primo de Rivera
Miguel Primo de Rivera y Orbaneja, 2nd Marquis of Estella, 22nd Count of Sobremonte, Knight of Calatrava was a Spanish dictator, aristocrat, and a military official who was appointed Prime Minister by the King and who for seven years was a dictator, ending the turno system of alternating...
was appointed prime minister by the king, and for seven years dissolved parliament and ruled through directorates and the aid of the military until 1930.
Protectionism and state control of the economy led to a temporary economic recovery. The precipitous economic decline in 1930 undercut support for the government from special-interest groups. He established no new system to replace parliamentary government. Criticism from academics mounted. Bankers expressed disappointment at the state loans that his government had tried to float. An attempt to reform the promotion system cost him the support of the army. This loss of army support caused him to lose the support of the king. Primo de Rivera resigned and died shortly afterward in exile.
Second Republic, 1931-1936
The republican government substituted the monarchy and inherited the international economic crisis as well. Three different governments ruled during the Second Spanish RepublicSecond Spanish Republic
The Second Spanish Republic was the government of Spain between April 14 1931, and its destruction by a military rebellion, led by General Francisco Franco....
, failing to execute numerous reforms, including land reform. General strikes were common and the economy stagnated.
During the Spanish Civil War
Spanish Civil War
The Spanish Civil WarAlso known as The Crusade among Nationalists, the Fourth Carlist War among Carlists, and The Rebellion or Uprising among Republicans. was a major conflict fought in Spain from 17 July 1936 to 1 April 1939...
, the country split into two different centralized economies, and the whole economic effort was redirected to the war industry. According to recent research, growth is harmed during civil wars due to the huge contraction on private investment, and such was the case with the Spanish divided economy.
The Franco Era, 1939-75
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...
and foreign exchange
Foreign exchange market
The foreign exchange market is a global, worldwide decentralized financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends...
reserves had been virtually wiped out, the massive devastation of war had reduced the productive capacity of both industry and agriculture
Agriculture in Spain
Agriculture in Spain is important to the national economy. Viewed in terms of land mass, Spain is one of the largest countries of Western Europe, and it ranks second in terms of its elevation, after Switzerland. A large part of the country is semiarid, with temperatures that range from extremely...
. To compound the difficulties, even if the wherewithal had existed to purchase imports, the outbreak of World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
rendered many needed supplies unavailable. The end of the war did not improve Spain's plight because of subsequent global shortages of raw materials, and peacetime industrial products. Spain's European neighbours faced formidable post-war reconstruction problems of their own, and, because of their awareness that the Nationalist victory in the Spanish Civil War had been achieved with the help of Adolf Hitler
Adolf Hitler
Adolf Hitler was an Austrian-born German politician and the leader of the National Socialist German Workers Party , commonly referred to as the Nazi Party). He was Chancellor of Germany from 1933 to 1945, and head of state from 1934 to 1945...
and Benito Mussolini
Benito Mussolini
Benito Amilcare Andrea Mussolini was an Italian politician who led the National Fascist Party and is credited with being one of the key figures in the creation of Fascism....
, they had no inclination to include Spain in any multilateral recovery programs or trade. For a decade following the Civil War's end in 1939, the wrecked and isolated economy remained in a state of severe depression
Depression (economics)
In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe downturn than a recession, which is seen by some economists as part of the modern business cycle....
.
Branded an international outcast for its pro-Axis
Axis Powers
The Axis powers , also known as the Axis alliance, Axis nations, Axis countries, or just the Axis, was an alignment of great powers during the mid-20th century that fought World War II against the Allies. It began in 1936 with treaties of friendship between Germany and Italy and between Germany and...
bias during World War II, Francisco Franco
Francisco Franco
Francisco Franco y Bahamonde was a Spanish general, dictator and head of state of Spain from October 1936 , and de facto regent of the nominally restored Kingdom of Spain from 1947 until his death in November, 1975...
's regime sought to provide for Spain's well-being by adopting a policy of economic self-sufficiency. Autarky
Autarky
Autarky is the quality of being self-sufficient. Usually the term is applied to political states or their economic policies. Autarky exists whenever an entity can survive or continue its activities without external assistance. Autarky is not necessarily economic. For example, a military autarky...
was not merely a reaction to international isolation
International isolation
International isolation is a penalty applied by the international community or a sizeable or powerful group of countries, like the United Nations, towards one nation, government or people group...
; it was also rooted in more than half a century of advocacy from domestic economic pressure groups. Furthermore, from 1939 to 1945, Spain's military chiefs genuinely feared an Allied invasion of the peninsula and, therefore, sought to avert excessive reliance on foreign armaments.
With the war devastation and trade isolation, Spain was much more economically backward in the 1940s than it had been a decade earlier. Inflation soared, economic reconstruction faltered, food was scarce, and, in some years, Spain registered negative growth rates. By the early 1950s, per capita gross domestic product
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
(GDP) was barely 40% of the average for West European countries. Then, after a decade of economic stagnation, a tripling of prices, the growth of a black market, and widespread deprivation, gradual improvement began to take place. The regime took its first faltering steps toward abandoning its pretensions of self-sufficiency and towards a transformation of Spain's economic system. Pre-Civil War industrial production levels were regained in the early 1950s, though agricultural output remained below prewar levels until 1958.
A further impetus to economic liberalization came from the September 1953 signing of a mutual defense agreement, the Pact of Madrid
Pact of Madrid
The Pact of Madrid, signed in 1953 by Spain and the United States, ended a period of virtual isolation for Spain, although the other victorious allies of World War II and much of the rest of the world remained hostile to what they regarded as a fascist regime sympathetic to the Nazi cause and...
, between the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
and Spain. In return for permitting the establishment of United States military bases on Spanish soil, the administration of President Dwight D. Eisenhower
Dwight D. Eisenhower
Dwight David "Ike" Eisenhower was the 34th President of the United States, from 1953 until 1961. He was a five-star general in the United States Army...
administration provided substantial economic aid to the Franco regime. More than US$1 billion in economic assistance flowed into Spain during the remainder of the decade as a result of the agreement. Between 1953 and 1958, Spain's gross national product (GNP) rose by about 5% per annum.
The years from 1951 to 1956 were marked by much economic progress, but the reforms of the period were implemented irregularly, and were poorly coordinated. One large obstacle to the reform process was the corrupt, inefficient, and bloated bureaucracy. By the mid-1950s, the inflationary spiral had resumed its upward climb, and foreign currency reserves that had stood at US$58 million in 1958 plummeted to US$6 million by mid-1959. The growing demands of the emerging middle class—and of the ever greater number of tourists—for the amenities of life, particularly for higher nutritional standards, placed heavy demands on imported food and luxury items. At the same time, exports lagged, largely because of high domestic demand and institutional restraints on foreign trade. The peseta
Spanish peseta
The peseta was the currency of Spain between 1869 and 2002. Along with the French franc, it was also a de facto currency used in Andorra .- Etymology :...
fell to an all-time low on the black market, and Spain's foreign currency obligations grew to almost US$60 million.
A debate took place within the regime over strategies for extricating the country from its economic impasse, and Franco finally opted in favor of a group of neoliberals. The group included bankers, industrial executives, some academic economists, and members of the Roman Catholic lay organization, Opus Dei
Opus Dei
Opus Dei, formally known as The Prelature of the Holy Cross and Opus Dei , is an organization of the Catholic Church that teaches that everyone is called to holiness and that ordinary life is a path to sanctity. The majority of its membership are lay people, with secular priests under the...
.
During the 1957-59 period, known as the pre-stabilization years, economic planners contented themselves with piecemeal measures such as moderate anti-inflationary stopgaps and increases in Spain's links with the world economy. A combination of external developments and an increasingly aggravated domestic economic crisis, however, forced them to engage in more far- reaching changes.
As the need for a change in economic policy became manifest in the late 1950s, an overhaul of the Council of Ministers in February 1957 brought to the key ministries a group of younger men, most of whom possessed economics training and experience. This reorganization was quickly followed by the establishment of a committee on economic affairs and the Office of Economic Coordination and Planning under the prime minister
Prime minister
A prime minister is the most senior minister of cabinet in the executive branch of government in a parliamentary system. In many systems, the prime minister selects and may dismiss other members of the cabinet, and allocates posts to members within the government. In most systems, the prime...
.
Such administrative changes were important steps in eliminating the chronic rivalries that existed among economic ministries. Other reforms followed, the principal one being the adoption of a corporate tax system that required the confederation of each industrial sector to allocate an appropriate share of the entire industry's tax assessment to each member firm. Chronic tax evasion was consequently made more difficult, and tax collection receipts rose sharply. Together with curbs on government spending, in 1958 this reform created the first government surplus in many years.
More drastic remedies were required as Spain's isolation from the rest of Western Europe became exacerbated. Neighboring states were in the process of establishing the EC and the European Free Trade Association (EFTA—see Glossary). In the process of liberalizing trade among their members, these organizations found it difficult to establish economic relations with countries wedded to trade quotas and bilateral agreements, such as Spain.
Spanish membership in these groups was not politically possible, but Spain was invited to join a number of other international institutions. In January 1958, Spain became an associate member of the Organisation for European Economic Co- operation (OEEC), which became the Organisation for Economic Co-operation and Development
Organisation for Economic Co-operation and Development
The Organisation for Economic Co-operation and Development is an international economic organisation of 34 countries founded in 1961 to stimulate economic progress and world trade...
(OECD) in September 1961. In 1959 Spain joined the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
(IMF) and the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
. These bodies immediately became involved in helping Spain to abandon the autarkical trade practices that had brought its reserves to such low levels and that were isolating its economy from the rest of Europe.
In December 1958, after seven months of preparation and drafting, aided by IMF, Spain unveiled its Stabilization Plan on June 30, 1959. The plan's objectives were twofold: to take the necessary fiscal and monetary measures required to restrict demand and to contain inflation, while, at the same time, liberalizing foreign trade and encouraging foreign investment. The plan's initial effect was deflationary and recessionary, leading to a drop in real income and to a rise in unemployment during its first year. The resultant economic slump and reduced wages led approximately 500,000 Spanish workers to emigrate in search of better job opportunities in other West European countries. Nonetheless, its main goals were achieved. The plan enabled Spain to avert a possible suspension of payments abroad to foreign banks holding Spanish currency, and by the close of 1959 Spain's foreign exchange account showed a US$100-million surplus. Foreign capital investment grew sevenfold between 1958 and 1960, and the annual influx of tourists began to rise rapidly, bringing in very much needed foreign exchange.
As these developments steadily converted Spain's economic structure into one more closely resembling a free-market economy, the country entered the greatest cycle of industrialization and prosperity it had ever known. Foreign aid took the form of US$75 million in drawing rights from the IMF, US$100 million in OEEC credits, US$70 million in commercial credits from the Chase Manhattan Bank
Chase Manhattan Bank
JPMorgan Chase Bank, N.A., doing business as Chase, is a national bank that constitutes the consumer and commercial banking subsidiary of financial services firm JPMorgan Chase. The bank was known as Chase Manhattan Bank until it merged with J.P. Morgan & Co. in 2000...
and the First National City Bank, US$30 million from the Export-Import Bank of the United States
Export-Import Bank of the United States
The Export-Import Bank of the United States is the official export credit agency of the United States federal government. It was established in 1934 by an executive order, and made an independent agency in the Executive branch by Congress in 1945, for the purposes of financing and insuring...
, and funds from United States aid programs. Total foreign backing amounted to US$420 million. The principal lubricants of the economic expansion, however, were the hard currency remittances
Remittances
A remittance is a transfer of money by a foreign worker to his or her home country. Note that in 19th century usage a remittance man was someone exiled overseas and sent an allowance on condition that he not return home....
of one million Spanish workers abroad, which are estimated to have offset 17.9 % of the total trade deficit from 1962 to 1971; the gigantic increase in tourism that drew more than 20 million visitors per year by the end of the 1960s, accounting by then for 9 % of GNP; a car industry that grew at a staggering compound rate of 21.7 % per year from 1958 to 1972 - and drove the rapid development of other industries that supplied and serviced it; and direct foreign investment, which between 1960 and 1974 amounted to an impressive US$7.6 billion. More than 40 % of this investment came from the United States, almost 17 % came from Switzerland
Switzerland
Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....
, and the Federal Republic of Germany (West Germany) and France each accounted for slightly more than 10 %. By 1975 foreign capital represented 12.4 % of all that invested in Spain's 500 largest industrial firms. An additional billion dollars came from foreign sources through a variety of loans and credit devices. The success of the stabilization program was attributable to plenty of good luck and good management and the impressive development during this period was referred to colloquially as the "Spanish miracle
Spanish miracle
The Spanish miracle was the name given to a broadly based economic boom in Spain from 1959 to 1974. The international oil and stagflation crises of the 1970s ended the boom.- The pre-boom situation :...
", between 1959 and 1975 Spain had the next fastest economic growth rate after Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
.
The Post-Franco period, 1975-1980s
Franco's death in 1975 and the ensuing transition to democratic ruleSpanish transition to democracy
The Spanish transition to democracy was the era when Spain moved from the dictatorship of Francisco Franco to a liberal democratic state. The transition is usually said to have begun with Franco’s death on 20 November 1975, while its completion has been variously said to be marked by the Spanish...
diverted Spaniards' attention from their economy. The return to democracy coincided with an explosive quadrupling of oil prices, which had an extremely serious effect on the economy because Spain imported 70% of its energy, mostly in the form of Middle Eastern oil. Nonetheless, the centrist government of Adolfo Suarez Gonzalez, which had been named to succeed the Franco regime by King Juan Carlos, did little to shore up the economy or even to reduce Spain's dependence on imported oil. A virtually exclusive preoccupation with the politics of democratization and the drafting of a new political system prevailed.
Because of the failure to adjust to the changed economic environment brought on by the two oil price shocks of the 1970s, Spain quickly confronted plummeting productivity, an explosive increase in wages from 1974 to 1976, a reversal of migration trends as a result of the economic slump throughout Western Europe, and the steady outflow of labor from agricultural areas despite declining job prospects in the cities. All these factors joined in producing a sharp rise in unemployment. Government budgetary deficits swelled, as did large social security
Social security
Social security is primarily a social insurance program providing social protection or protection against socially recognized conditions, including poverty, old age, disability, unemployment and others. Social security may refer to:...
cost overruns and the huge operating losses incurred by a number of public-sector industries. Energy consumption, meanwhile, remained high.
When the Spanish Socialist Workers' Party
Spanish Socialist Workers' Party
The Spanish Socialist Workers' Party is a social-democratic political party in Spain. Its political position is Centre-left. The PSOE is the former ruling party of Spain, until beaten in the elections of November 2011 and the second oldest, exceeded only by the Partido Carlista, founded in...
government headed by Felipe González
Felipe González
Felipe González Márquez is a Spanish socialist politician. He was the General Secretary of the Spanish Socialist Workers' Party from 1974 to 1997. To date, he remains the longest-serving Prime Minister of Spain, after having served four successive mandates from 1982 to 1996.-Early life:Felipe was...
took office in late 1982, the economy, inflation was running at an annual rate of 16%, the external current account was US$4 billion in arrears, public spending was large, and foreign exchange reserves
Foreign exchange reserves
Foreign-exchange reserves in a strict sense are 'only' the foreign currency deposits and bonds held by central banks and monetary authorities. However, the term in popular usage commonly includes foreign exchange and gold, Special Drawing Rights and International Monetary Fund reserve positions...
had become dangerously depleted. In coping with the situation, however, the Gonzalez government had one asset that no previous post-Franco government had enjoyed, namely, a solid parliamentary majority in both houses of the Cortes (Spanish Parliament). With this majority, it was able to undertake unpopular austerity measures that earlier governments had not.
The Socialist government opted for pragmatic, orthodox monetary and fiscal policies, together with a series of vigorous retrenchment measures. In 1983 it unveiled a program that provided a more coherent and long-term approach to the country's economic ills. Renovative structural policies—such as the closing of large, unprofitable state enterprises—helped to correct the relatively poor performance of the economy. The government launched an industrial reconversion program, brought the problem-ridden social security system into better balance, and introduced a more efficient energy-use policy. Labor market flexibility was improved, and private capital investment was encouraged with incentives.
By 1985 the budgetary deficit was brought down to 5% of GNP, and it dropped to 4.5% in 1986. Real wage growth was contained, and it was generally kept below the rate of inflation. Inflation was reduced to 4.5% in 1987, and analysts believed it might decrease to the government's goal of 3% in 1988.
Efforts to modernize and to expand the economy together with a number of factors fostered the remarkable economic boom of the 1980s. Those factors were the continuing fall in oil prices, increased tourism, and a massive upsurge in the inflow of foreign investment. Thus, despite the fact that the economy was being exposed to foreign competition in accordance with EC requirements, the Spanish economy underwent rapid expansion without experiencing balance of payments' constraints.
In the words of the OECD's 1987-88 survey of the Spanish economy, "following a protracted period of sluggish growth with slow progress in winding down inflation during the late 1970s and the first half of the 1980s, the Spanish economy has entered a phase of vigorous expansion of output and employment accompanied by a marked slowdown of inflation." In 1981 Spain's GDP growth rate had reached a nadir by registering a rate of negative 0.2%; it then gradually resumed its slow upward ascent with increases of 1.2% in 1982, 1.8% in 1983, 1.9% in 1984, and 2.1% in 1985. The following year, however, Spain's real GDP began to grow by leaps and bounds, registering a growth rate of 3.3% in 1986 and 5.5% in 1987. The 1987 figure was the highest since 1974, and it was the strongest rate of expansion among OECD countries that year. Analysts projected a rise of 3.8% in 1988 and of 3.5% in 1989, a slight decline but still roughly double the EC average. They expected that declining interest rates and the government's stimulative budget would help sustain economic expansion. Industrial output, which rose by 3.1% in 1986 and by 5.2% in 1987, was also expected to maintain its expansive rate, growing by 3.8% in 1988 and by 3.7% in 1989.
A prime force generating rapid economic growth was increased domestic demand, which grew by a steep 6% in 1986 and by 4.8% in 1987, in both years exceeding official projections. During 1988 and 1989, analysts expected demand to remain strong, though at slightly lower levels. Much of the large increase in demand was met in 1987 by an estimated 20% jump in real terms in imports of goods and services.
In the mid-1980s, Spain achieved a strong level of economic performance while simultaneously lowering its rate of inflation to within two points of the EC average. However, its export performance, though increasing, raised concerns over the existing imbalance between import and export growth.
See also
- Agriculture in SpainAgriculture in SpainAgriculture in Spain is important to the national economy. Viewed in terms of land mass, Spain is one of the largest countries of Western Europe, and it ranks second in terms of its elevation, after Switzerland. A large part of the country is semiarid, with temperatures that range from extremely...
- Economic historyEconomic historyEconomic history is the study of economies or economic phenomena in the past. Analysis in economic history is undertaken using a combination of historical methods, statistical methods and by applying economic theory to historical situations and institutions...
- Economic history of EuropeEconomic history of Europe-Technology diffusion in conflict:Conflict between regions, in Viking raids and in Crusader invasions of the Middle East incidentally led to the diffusion of and refinement technology instrumental to overseas travel, from the 8th Century to the 12th Century. People made improvements in ships,...
- Economic history of PortugalEconomic history of PortugalThe economic history of Portugal covers the development of the economy throughout the course of Portuguese history. It has its roots prior to nationality, when Roman occupation developed a thriving economy in Hispania, in the provinces of Lusitania and Gallaecia, as producers and exporters to the...
- Economic history of the worldEconomic history of the worldThe Economic History Of The World is a record of the economic activities of all humans, spanning both recorded history and evidenced prehistory.-Prehistory:...