Public Sector Roles, Currency Impact, and Spain's 20th Century Economic Development

Macroeconomic Effects and Public Sector Roles

Impact of Low Currency Value (Devaluation)

The value of a nation's currency significantly impacts international trade and investment. If the value of the currency is low (devaluation), the following effects are observed:

1. Exports are stimulated by having much lower prices internationally.
2. The purchase of raw materials abroad is affected. (Note: While the text lists this as a positive impact, generally, a low currency makes imports, like raw materials, more expensive.)
3. It does not attract foreign capital to be invested in domestic products or assets, as the converted returns are lower.

Public Sector Duties in the Economy

Over the past two centuries, the public sector has gained new functions in economics:

1. Establish a legal framework: Providing a truly effective legal regulation and law (e.g., ensuring the government is efficient).
2. Determine macroeconomic objectives: Setting goals such as GDP growth, maintaining a near-zero deficit, lowering public debt, and keeping inflation under control (1–2%). This strategy aims to create jobs.
3. Infrastructure creation: Public administrations are the creators of large infrastructure projects for a country (e.g., transportation networks).
4. Provision of essential services: Governments provide many services that private enterprise leaves unfilled or offers at higher prices (e.g., safety, health, services for the elderly/3rd age).

Spanish Economic History: 1900-1960

Early 20th Century and the Roaring Twenties

The early twentieth century saw heavy industrialization, especially during the years of the First World War (1914–1918). However, at the end of the war, there was a sharp slowdown. In the 1920s (the Roaring Twenties), there was an economic breakthrough that coincided with the dictatorship of Primo de Rivera (1923–1930). State enterprises were created in strategic sectors, such as Telefónica and Iberia.

Crisis, Republic, and Civil War (1929-1939)

Following the economic crisis of 1929, indicators plummeted during the Second Spanish Republic (1931–1936), leading to increasing unemployment. During the Spanish Civil War (GC) (1936–1939), GDP fell by 50% per year. There was massive destruction of infrastructure, ports, and industries.

Post-War Reconstruction and Stabilization (1940-1960)

The decades of 1940 and 1950 were marked by reconstruction and the isolation of the Franco regime. GDP levels of 1936 were not recovered until 1954.

In 1959, the National Stabilization Plan was created. This plan fostered the internationalization of the Spanish economy, industrialization, and the development of the services sector. It restored the balance of payments and facilitated the import of foreign technology. Subsequently, five-year plans were developed for the economy, setting targets and creating industrial development zones (polygons of industrial congestion).

The National Institute for Industry (INI) was born in 1941 (mprssdlsta).