Industrial Evolution: Spain's Economic Crisis and Location Factors

Spain's Industrial Crisis and Restructuring (1970s-1980s)

The mid-1970s marked the onset of an international crisis in Spain, triggered by rising oil prices and the economic transformations accompanying the third phase of the Industrial Revolution. The national unemployment rate surged from 1.1% in 1970 to 22% in 1985. Within the industrial sector, unemployment reached 16%, with a staggering 780,000 jobs lost between 1976 and 1985. Several factors necessitated industrial restructuring: business deficiencies, including a prevalence of small businesses, outdated facilities, and low productivity; excessive financial dependency; and the rising cost of capital. These challenges were compounded by the over-specialization of industrial sectors. First-generation industries, which constituted 27.8% of production in 1975, faced intense competition from emerging Third World countries. Furthermore, increasing labor costs due to rising wages diminished the international competitiveness and corporate profits of Spanish industry. In response, companies replaced labor with machinery and implemented policies of wage moderation and labor market flexibility.

Key Factors in Industrial Location Decisions

Industrial location factors have evolved over time. While the underlying considerations remain similar, their relative importance has shifted across different periods. Before deciding on the most convenient location, businesses evaluate these factors based on their specific needs and the desire to minimize costs. These essential factors include:

• Natural Resources

  The existence of natural resources was a decisive location factor in the past, especially when transport costs were very high and infrastructure was insufficient. Early factories were often located near mines to be close to sources of raw materials and energy. Today, raw materials and energy resources like oil, electricity, or natural gas are transported long distances in large quantities, reducing the direct dependency on immediate proximity.

• Transportation and Communications

  Companies typically locate in well-connected areas, which facilitates the arrival of raw materials, the movement of employees and customers, and the efficient distribution of their finished products.

• Labor Force

  When an abundant, low-skilled workforce is needed, large companies in developed countries often relocate parts of their industrial processes to regions in the developing world where wages are lower and there is less unionization. Conversely, if the industry requires a highly skilled workforce, it tends to locate near major cities in developed countries, where such talent pools are concentrated.

• Proximity to Sales Markets

  Locating near densely populated areas (sales markets) is an important factor for industries that use processed or less bulky raw materials, as it reduces distribution costs and allows for quicker response to consumer demand.

• Environmental Quality

  Factors such as a pleasant climate and landscape, along with social stability, also play a role in location decisions. Overall, factors affecting industrial location have varied over time due to changes in technology and business organization. While economic considerations remain primary, aspects like territorial knowledge, environmental quality, and entrepreneurial perception have also gained importance.