The Economic Miracle Goes On

From 1960 until 1974 Spain’s economy grew an average of 6.6% per year: faster than any country in the world except Japan. Spain’s economic miracle took place during a period of high western prosperity and was largely dependent on favourable external circumstances. Three factors were especially important:

• Investment. Foreign investment in Spain increased rapidly once the economy had been liberalised. The United States was the most important source, followed by West Germany.
• Tourism. General prosperity made foreign travel a reality for large numbers of Europeans and North Americans. Spain, with its many beaches, warm climate and bargain prices, became an attractive destination and tourism quickly became the country’s largest industry.
• Emigrant remittances. From 1959 to 1974 millions of Spaniards left the country. The vast majority went to Switzerland, West Germany and France, countries whose growing economies were creating a massive demand for unskilled labour. There they joined Portuguese, Italians, Yugoslavs and Turks as ‘guest workers’. These emigrants sent large sums of money back to Spain: more than £ 1.5 billion in 1973 alone.

The great dependence on external conditions made Spain’s economic growth vulnerable to economic changes elsewhere. The oil crisis of 1973, which initiated an extended period of economic uncertainty in the Western world, brought Spain’s economic growth to a halt. The clearest sign of change was the dramatic increase in unemployment. The unemployment rate stood at 4.3% in 1975 but by 1980 it was at 11% and in 1985 it peaked at 21.5%.

Economic growth returned during the late 1980s. Although growth rates were well below those of the 1960s, they were still among the highest in western Europe. Unlike the earlier boom, this one was accompanied by high inflation and continuing high unemployment. Inflation was 6.6% in 1989 and 6.4% in 1990 – below the figure for earlier years but still significantly higher than the EU average of 4.9 and 5.2%. Unemployment also began to drop from the official figure of 21.5% reached in 1985, but it remained extremely high – 17.3% in 1989 and 16% in 1990, almost double the average for the EU. Particularly hard hit by unemployment were young people trying to join the work force for the first time.

Spain’s early industrialisation took place behind high tariff walls, and most industries remained small in scale. The liberalisation of the economy in the 1960s and the influx of foreign investment, however, added a number of large firms. It also made Spanish industry much more varied than it had been. The most striking example of this change was the automobile industry. Before 1960 Spain built few motor vehicles, but by the end of the 1990s it was producing 1.5 million annually in factories owned by Ford, Renault, General Motors, and SEAT (largely owned by Volkswagen).

Iron, steel, and shipbuilding continued to be important heavy industries in Asturias and the Basque Country, but in the 1980s they became subject to downsizing. Cotton and woollen textiles and clothing industries remain significant in Catalonia, as they have been since the early 19th century. Other leading manufacturing industries include chemicals, toys, shoes, and electrical appliances (televisions, refrigerators, and washing machines).

Spain’s foreign trade grew rapidly during the 1990s, but the long-established pattern of imports outweighing exports continued. The largest share of Spain’s foreign trade is conducted within the EU; its two largest trading partners are France and Germany. Outside of Europe the largest and most important trading partner is the United States. Spain also conducts significant trade with the United Kingdom, Italy, Portugal, Mexico, and Japan.

In the mid-20th century Spain was an exporter of agricultural products and minerals and an importer of industrial goods. This pattern has now changed, reflecting the increasing sophistication of the country’s economy. At the start of the new millennium Spain’s imports were dominated by crude oil, which accounted for about one-eighth of all imports. Other key imports were transport equipment, spare parts, computers, and coffee. The most important export was automobiles and mopeds, which accounted for more than one-sixth of the total. Other exports included fresh fruits, vegetables and nuts, chemicals, petroleum products, footwear, iron and steel bars, alcoholic beverages, electronic data-processing products and pearls.

Spain’s economic issues are different now. A US survey of Spain, the UK, the powerhouse Irish economy and that of near neighbour France follows.