Spanish Industrialization: Growth, Transformation, and Challenges

Accelerated Industrialization in Spain

The period of accelerated industrialization in Spain involved significant political and structural changes, shifting the economy from a pre-industrial to a modern, industrial one. Industry became the primary engine of growth.

Between 1960 and 1974, the industrial sector experienced explosive growth, with rates exceeding 4%. This period saw a significant sectoral transformation. The primary sector's production and employment declined, while the industrial sector expanded. Spain's open economy was a key factor in this progress. The main drivers of change were domestic consumption, foreign markets, and industrial demand, with the latter being the largest contributor.

Consumer-Domestic Demand

Domestic demand experienced tremendous growth, driven by a structural shift in consumer behavior. This shift encouraged innovation and allowed the market to grow and modernize. Engel's Law illustrates this: as income increases beyond basic needs, consumers spend more on non-essential items. In 1958, demand focused on food, clothing, and footwear. By 1974, these items represented a smaller share of total consumption as consumers acquired other goods and services such as housing, leisure, tourism, health, education, and transport.

The increase in consumer income led to the consumption of goods beyond basic necessities, stimulating industrial production and the market for higher-quality products.

This shift in demand was due to the introduction of durable consumer goods and economies of scale. Increased investment allowed industries to produce at decreasing prices, and the location of factories further stimulated demand, leading to mass consumption.

Foreign Market

The foreign market performed exceptionally well, benefiting from significant international growth. Spain's engagement with foreign markets was facilitated by growth in other European economies, the devaluation of the peseta (making Spanish goods more competitive), foreign investments that modernized Spanish technology and increased productivity, and government subsidies for exports. The EEC Preferential Agreement also played a role.

While the Spanish industry participated in the foreign sector, its impact was not as significant as that of other major powers. Progress was concentrated in specific areas. The incorporation of foreign technology boosted productivity, leading to specialized industrial sectors that profited and expanded into sectors that consumed their products. The exchange market became a key driver for the industry.

Characteristics and Problems of the Spanish Growth Model

The changes that occurred were not due to a shift in the Franco regime's ideology but rather to the country's poverty and need for economic growth.

Distortions

The regime implemented protectionist policies for sectors that struggled to compete internationally, hindering internal and external liberalization.

Development Plans

The regime attempted to address regional imbalances by developing industrial infrastructure in less developed regions. However, these plans failed due to a lack of alignment with market forces and consumer needs.

Other Issues

• Excessive development of some mature sectors led to the need for further industrial restructuring.
• Deficiencies in supply factors, such as insufficient spending on education, infrastructure, and social programs.
• Government financing of projects rather than private investment, resulting in an industrial structure with limited competitiveness.

While Spain moved closer to Europe, it still lagged behind and needed further growth. The growth achieved was significant but not sufficient.