2.2.2.1 The end of the international isolation and the beginning of the economic development

The economy during Franco's regime took in two large periods. The first one from 1939 to 1959, coinciding with the most totalitarian policy of the regime and characterised by depression and stagnation. It was the economic autarchy. The other stage went from 1959 to 1973. It was an economic expansion period due to the Stabilization Plan. From 1973 to 1975 it was the ending crisis of the dictatorship.

2.2.2.1.1.-1959-1973

Due to the isolation generated after the civil war and following years, Franco changed his political and economic strategy by incorporating in his government a group of technicians who were expert in economics, the bureaucrats, many of them connected with the Opus Dei .The Trade and Wealth ministers presented the Stabilization and Liberalisation Plan of 1959.
This plan had a large objective : in one hand it intented to stop inflaction, i.e., stabilization of prices and wages, and, additionally, to liberalize the foreign sector , i.e, to import capital and to give larger freedom to imports and exports. As a consequence of this plan the peseta was devaluated and a light fiscal reform started. Furthermore, Spain achieved help from IMP & OEEC.

Basically , this plan consisted on modifying the autarchy by establishing the bares to change the Spanish economy into a classic capitalist system.
It is necessary to clarify that this initiative did not agree with the ideological Franco's principles, but it was an insitent measure on the part of the new ministers.
At the beginning , the results were negative: productivity decreased in the companies, fall of wages, increase in the cost of living, incease of strikes.
In those condictions, industries as the textile began to export in order to sell their superplus of goods.
The positive effects of the Plan began to be noticed from 1961 on, and even more from 1963 on.
 Causes of the economic expansion:

During the decade of the 60's, the GNP rose about 160% and the rent per capita was multiplied by 8. Spain became an industrialized country. It was evident that developping  an industry in that time was difficult since the resources were not enough. Therefore, looking for alternatives became necessary. These alternatives were tourism , the investiment of foreign capital and to export labour.
The supported expansion  of the westen countries economy and the strong devaluation of the peseta made possible that a growing number of foreign tourists came to Spain. The foreign currencies were one of the most important financing sources  on the Spanish development.
On the other hand , the facts that Spain had a dictatorship  repressing the worker movement, that labour was cheaper than abroad and that taxes were lower attracted the foreign capital, Spain was the suitable country to invest and to  obtain good benefits.
Another element that contributed to the Spanish economy was the labour export. Some European countries offered employment vacancies. Many Spanish  people used that as a stimulus to go to work abroad. In that way, Franco's regime was obtaining a double objective , i.e, Spanish workers sent currencies to their relatives as well as unemployement was being reduced.
Another source of economic expansion were the Development Plans. They consisted on investing state money in infrastructures- highways, swamps...- and on adapting spaces -industrial polygons-. The soil of these zones was cheap so that it stimulated to invest from Spain and abroad.
(Document 1 & document 2)

2.2.2.1.2.- The crisis (1973-1975)

The economic expansion of the 60's stopped from 1973 on, due to foreign reasons such as petrol crisis ; furthermore the political situation within the country had leaded to an internal crisis - that of the end of Franco's regime-. It caused a complex situation.
The first factor of the crisis was inflaction. In 1973 it rose to 10.6 % and in 1975, to 18.7 %. The second factor  was the decline of commercial relationships and , finally, the increase in the budget deficit.
The situation got worse by a hardness in the regime policy and the claim of sector preassures of the society.
In fact, in the last years of the dictatorship, The Spanish society had changed and the regime remained still inmobile.
(document 3)

2.2.2.1.3 Changes in demografic structure

After the postwar years Spanish demography was characterized by a decrease of birth and mortality rates.
However, birthrate increase is outstanding over the 60's decade which occurs at the same time as the industrial and urban development process of the country.
The must important flowing movements of people in the history of Spain were given during Franco's dictatorship, either the countryside  population to the city or the domestic migration and abroad.
The domestic migration followed a double trend from the rural areas to the industrial outskirts and within every region, from the smallest villages to the largest towns. The main reception areas were Catalonia, Madrid and Basque Country and the migratory zones were Andalusia, Estremadura, Castille-La Mancha and Galicia.
Domestic migration was very intense until the dictatorship end (1975), becoming stagnated in the 80's.
Migration to foreign countries took place between 1959 and 1973. The indirect effects of this event were not only economic but also social and political.
It is worth considering here an evolution of working population during this period of time.
It consisted of a decrease in primary sector while there was a substancial increase in secondary and service sectors which placed Spain for the first time among developed countries at the end of Franco's dictatorship.
These structural changes will produce important imbalances among the different regions of the country.
( documents4,document 5 & document 6 )

2.2.2.2 Towards a modern economy

The political process of stability allowed the approach of economic measures which contributed to consolidate the democratic transition process.
Adoption of measures to face the crisis as well as creation of an assistance state, following other European Countries model were the first democratic Government's aims (UCD and PSOE). The plan was also designed to support the starting points for an European complete integration.

2.2.2.2.1 First steps

In 1977 the first measures were carried out by Pactos de la Moncloa. They were   the result of all the political parties agreement and common assent with the purpose of removing protectionist measures in economy and beginning a set of reforms  which contributed to modernize the country.
These involved to accept the capitalist socioeconomic model, on the side of tradeunion groups, in exchange for improvements and social security benefits, that was called  welfare state.
 
1. Financial reform and social security spread

Most of the commitments, provided in Moncloa Resolutions, needed an increase of the state incomes which made essential a finacial reform. This was implemented in 1997.
Up to this time the state income structure was archaic and basically supported by the earned income, therefore sectors with more benefits paid little in proportion to their wealth which prevented the state from getting necessary resources to cover social services .
Financial reform provided a progressive tax system -from direct taxes on work income, company benefits, capital resources- and proportional with a tax scale which burdened the highest incomes while not so much the lowest. The system was completed by indirect taxes, to burden consumption.The most important is VAT which will be introduced in 1986 with Spain entrance into EEC.
Reform achieved to increase national incomes, althoug with a high cost, the tax fraud, leading to question justice and its aplication.

2. Public sector increase

In twenty years public expenses went from 25% of GNP in 1975 to 46% in 1995.
This was due to a process for ranking equalty with economies in the European environment related to assign money for services and social security benefits.
Even so, the situation was not equal to the one in European Union, which showed upper levels in public expenses (in 1995 this implied 46% of GNP in Spain whereas it was 51% in the European Union).
 
 

3. Descentralitation (state of autonomies). Expenses increase

Starting the state of autonomies caused a signifiant rise in public expenses, autonomous or local governments construction and investments related to infrastructures and communications improvement which allowed a relative territorial blance.
Centralist state was transformed into a more descentralized one where public expenses was shared among the different level of government- central, autonomous and local-.

4. Occupational market reform

When bussines sector and trade-union organizations were legalized, the Statue of workers, which was approved in 1980, controled collective bargaining between employers and trade-union. It was recognized by the Constitution.
In this way the social partners' role (employers and unions) became standard as official negociators, either in collective bargaining process or in social harmony with governments.
In a greater liberalitation context, employers daimed greater easiness to engage and dismiss, whereas workers and trade unions asked for greater social protection and a sequence of measures to encourage jobs creation.

5. Industrial rationalitation

With the aim of helping productive power and improving companies competitivity in international market, an industrial rationalization process was carried out, it consisted of unprofitable companies  withdrawl and financing plans to restructure production and work forces. These measures sought to favour foreign capital entrance and new factories instalment with modern technology.
Even though industrial rationalization process allowed Spanish industry modernization in part, it was done under a high cost in terms of uneployment and a productive capacity decrease, moreover it caused an industrial depopulation process in places where substitute activities were planned but didn't recover it.
An example is steel industry which provided work for 70000 people in 1975 but only 25000 workers in 1985.
 

2.2.2.3 Spain in Europe

2.2.2.3.1. The admission of Spain in the European Economic Community.

In 1985, under a PSOE government, Spain joined the EEC, becoming a member of the  economic, monetary and political European Community.
In 1992, the Maastricht Treaty was approved. This treaty  convered the EEC into the European Union,  establishing the suppression of the inner frontiers and fixing the criteria to reach a single currency- the Euro -. It also designed the lines of the economic policy that, from the 1992, would fight against the public deficit, reduce social expenses, cut  inflation, control interest rates and to stabilize the exchange rates .

2.2.2.3.2. Concentration of the banking system. 

 The admission into the European Union implied the introduction of mechanisms to guarantee free capital traffic and greater facilities for the installation of foreign banks in our country. At the same time it made possible for Spanish citizens to obtain credits from any  European bank. This new situation implied the liberalization of the financial system in order to allow with greater competition in credits granting.

Many banks decided to face foreign competition joining  or absorbing other banking entities.

2.2.2.3.3. The Spanish economy modernises and becomes international.

 The integrament  of Spanish economy in the international economy involved changes, transformations and a greater presence of multinational enterprises.
Agriculture reduced its proportion of employed population, increasing at the same time the productivity, thanks to the introduction of new techniques and  the selection  of species. Industry diversified its production increasing its competitivity. There was also  an important growth of the service sector. In this way, the structure of the occupied population in different activity sectors is similar to other developed  countries.
An increasing commercial opening to foreign countries also occured.  Exports rose from 10% to  20% of the GNP between 1975 and 1991, although they are still surpassed by imports.
This opening process to the world coincided with an important economic growth in the second half of the 80's and led to important changes in the Spanish society and in its standard of living.
During these years large infrastructure projects brought an important modernization of the Spanish society. The Olympic Games in Barcelona and the Universal Exposition of Seville in 1992 are important collective milestones that led to large infrastructure developments.
In general, there was an  increase of the revenue per capita that increased the access to consumer goods, though it is below the European average.

2.2.2.3.4.Demographic stagnation.

 The demographic trend in the 80's and 90's was the decrease of the birthrate and the increase in the life span. The reduction in birthrate has been particulary marked in Spain in recents years. In 1975 the average was of three children per family and in 1995 it was just 1,18. So, it is evident that with these figures, the generation relief is not guaranteed.
 The great migration  from the countryside to the cities during the years of development stopped in 1975. This movement ceased and some people went back to their original regions.  There is little or no Spanish emigration to other countries.
At the end of the 80's Spain became a receiving emigration country. The number of resident foreigners has grown. There is a particular large number of Latin American, African and Asian people. These foreign colonies are concentrated in economic sectors such as construction, domestic service and agriculture..., and located in zones such as Madrid, Barcelona and the Mediterranean coast... 
 

(Document 7)

2.2.2.4.A new challenge: The economic growth

Although the economic growth of the last years has permitted an increasing productivity,  it has been unable to absorb the unemployement generated in the previous crisis and recession years. This contradictory situation has generated wide  poverty areas and  submerged work whilst, at the same time a strong modernization of the society.
The absolute necessity to face unemployemented justified, from 1984,  the elaboration of different employment reforms. These reforms generated important changes in the occupational market: temporary contracts, training contracts...However, these regulations have not solved the main problem: unemployement.
(Document 8 & document 9)

Rising unemployement and an ageing population have created concern to maintein the current government expenses. A new economic policy has been created in order to cut  social costs and to start the privatization of the public services. It is evident that all the social sectors do not accept these measures, but propose the maintenance of the welfare state introducing greater rationality in government expenses and a greater control over communication  fiscal fraud.
In recent years important public transportation  and energy companies have been privatized. These processes have been preceded by many conflicts because reductions in work forces have been made.
The opening of the Spanish economy at the end of this century, has obliged companies to introduce technological changes and to improve the quality of their products and services in order to improve their position and competitivity in a new, interdependent and global economy.