Spanish Economic Miracle and the 1959 Stabilization Plan

Economic Development 1959-1975

In the 1950s, the situation created by economic autarchy was untenable, and the system showed serious signs of decay. By 1957, the country was almost on the verge of bankruptcy. Inflation, shortages of foreign exchange, and trade deficits forced a change in economic policy.

The 1959 Stabilization Plan

In 1957, a new government incorporated Opus Dei ministers such as Ullastres and Navarro Rubio. They introduced an economic reform through the Legislative Decree of "New Economic Organization," which became the Stabilization Plan of 1959, designed as indicated by IMF and World Bank technocrats. This plan aimed to:

• A) Contain inflation, liberalize the economy, reduce state intervention, and achieve openness to the outside world. These measures allowed for a massive inflow of capital from multinationals, which, starting in 1961, began a process of high-rate growth.
• B) Achieve rapid industrialization and put the economy in a position to "take off."

However, this led to forced austerity for the Spanish people, as it cut public spending, restricted consumption and investment, froze wages, limited overtime, and devalued the peseta. Yet, the benefits were immediate, albeit at a high cost to workers who were deprived of overtime pay. Within two years, the effects of the Plan were noted, and the economy was enhanced, resulting in a dramatic upgrade during the 1960s.

The 1960-1972 Boom

Our economy was dependent on the outside world; the consequence was a negative balance of payments, but it benefited from economic growth in Europe, which allowed for a surplus through:

1. Tourism revenues
2. Foreign investment and low wages
3. Remittances from emigrants

Development Plans and Industrial Growth

Beginning in 1963, the government attempted to regulate growth through Development Plans:

1. Plans that assigned preferential investment and resources.
2. Plans that posed little public investment in private industry.
3. Plans providing for the creation of new industrial centers, known as development poles, in Zaragoza, Valladolid, Burgos, Vigo, and Huelva.

The mastermind behind these plans was López Rodó, who in 1962 was the head of the Commission for the Development Plan.

For this structural change, population migration to large cities and to Europe was essential, because the model did not generate sufficient employment growth for everyone. The result was a rise in wages in the countryside due to a reduced labor supply, the abandonment of unproductive land, and increased mechanization, which improved agriculture and increased the demand for industrial products.

Not all goals were achieved, but Spain reached one of the highest growth rates in the world, which the regime used as propaganda. Spain became the 10th industrial power in the world until the seventies.

The 1973-1975 Economic Crisis

The economic crisis of 1973-1975 hit the economy hard: high oil prices, the disruption of migration abroad, and a decline in tourism and exports. The consequences were business closures and unemployment, which increased labor disputes at the end of the dictatorship.