Spanish Railroad Construction and Economic Transformation (1855-1873)

Railroad Construction in Spain (1855-1873)

The laying of the railway network in Spain began in 1855, following the approval of the General Law of Railways.

Stages of Expansion and Crisis

The first major expansion of the route required a much greater mobilization of capital compared to other initiatives of that century. However, the financial crisis of 1866 led to a period of suspension of construction, evidenced by the low returns on rail investment. Profits were very low, and stock values plummeted.

A new stage began in 1873, aimed at completing the layout of the network, which had been paralyzed as a result of the previous crisis that had dissolved most construction companies.

Economic Effects of the 1855 Railway Law

The 1855 law established the policy for network construction, and several aspects significantly shaped Spain's economic history in the subsequent years. These effects included:

1. Radial Structure: The network was structured radially, centered in Madrid, which hampered communications between industrial zones.
2. Wide Gauge: The law set a width between rails greater than that of most European lines, thus hindering trade with the rest of Europe.
3. Duty-Free Imports: The law authorized construction companies to import all necessary materials duty-free.

Challenges to the Spanish Internal Market

In the first half of the nineteenth century, the guilds were abolished, taxes were gradually abolished, and fees and indirect taxes on trade were eliminated. An essential element for economic growth was the creation of a transportation system that would allow goods to move from growing areas to consumers quickly and affordably.

Despite the limitations and structural issues of its construction, the railway proved to be an indispensable tool. However, the main underlying problem of the internal market remained the limited industrial development in many Spanish regions.

Growth and Shifts in Spanish Foreign Trade

During the nineteenth century, exports grew at a rate similar to the rest of Europe, while imports grew slightly less. Initially, the most important exports were oil and wine, and the primary imports were cotton and linen.

Trade relations were significantly altered following the loss of the American colonies, which had previously served as Spain's main trading partners until their independence.

The Debate: Free Trade Versus Protectionism

The growing link to the rest of Europe was inseparable from the great nineteenth-century economic debate, which centered on two opposing policies:

• Free Trade: Advocated for removing barriers to international trade and ensuring the free movement of goods.
• Protectionism: Imposed restrictions on the entry of foreign products into the country.

It has been argued that a protectionist policy hinders relationships with the international market, acting as a brake on the specialization of production and hindering the supply of new technologies. This policy is considered one of the most significant causes of Spain's weak industrial development, despite the country realizing a significant effort to liberalize trade.