Economic Development in Spain (1956-75)

Spain experienced a dramatic economic transformation in the 1960s and 1970s. Corporatism had failed to raise the living standards of the Spanish people, but a wave of free-market reforms allowed for the rapid growth of the Spanish economy. Much of the growth was fuelled by huge increases in foreign investment into Spain's industries as well as the growth of tourism. Some historians view Spain's economic revival as a 'miracle'.

Economic Crisis

In the late 1950s, the Spanish economy was plagued with an inflation crisis. US loans entered the Spanish economy in accordance with the 1953 Treaty of Madrid, however, there was no subsequent increase in industrial production and thus inflation spiralled. Because prices were rising faster than than wages, living standards for most Spaniards declined, for example, in 1957 inflation stood at around 30% but wages increased by just 20%. Declining real wages caused industrial unrest in some parts of Spain which were dealt with brutally by Spanish police. Poor economic performance led to many Spaniards becoming increasingly resentful of Franco's regime.

Cabinet Re-shuffle (1957)

In 1957, the make-up of Franco's government changed almost entirely. Members of the Falange had previously enjoyed significant of influence over decision making on economic and social issues, however, due the failure of the corporatist economic system, the Falange's popularity and influence began to decline. Moreover, because the Falange was still a fascist party, their presence within government was a barrier to Spain improving its diplomatic relations with other western democracies such as Britain and France.

Franco turned to technocrats from Opus Dei to solve Spain's economic crisis through the complete restructuring of the Spanish economy. Alberto Ullastres Calvo was appointed as minister for the economy and Mariano Navarro Rubio was appointed as minister for finance.

The Stabilisation Plan (1959)

The Stabilisation Plan represented the first attempt to liberalise and internationalise the Spanish economy. It effectively ended the failed corporatist economic system whilst also abandoning the policy of autarky:

• Trade restrictions were lifted to encourage international trade
• Government spending reduced to help lower inflation
• Government control over prices was lifted

Initially, the Stabilisation Plan caused Spain's economic problems to deepen. Cuts to government spending caused a rise in unemployment and the lifting of price controls resulted in higher levels of inflation. However, after an initial recession the Spanish economy soon began to grow rapidly. Through the 1960s, Spain had the second fastest growing non-communist economy in the world.

Foreign Investment

The abandonment of autarky and the lifting of trade restrictions encouraged foreign investment into the Spanish economy to the tune of $7.6 billion between 1960-74. The USA accounted for almost half of this investment. As a result, Spain's car and electronics industries were able to modernise quickly.

The Growth of Tourism

Spain's economic boom was in part due to the growth of its tourism industry. In 1959, 4 million tourists were contributed approximately $130 million to the Spanish economy. By 1975, there were more than 30 million tourists annually contributing around $3.5 billion to Spain's national income. The growth in tourism created jobs in the hotel and construction industries, lifted living standards in Spain's coastal towns and brought many Spanish workers out of poverty.

Emergence of a Consumer Economy

As wages and production increased, a consumer economy began to emerge in Spain for the first time. Average incomes almost tripled in the 1960s meaning more Spaniards could afford household appliances such as washing machines and electronic fridges as well as luxuries like televisions and cars. The economic boom didn't benefit everybody, however. Free-market reforms caused rising levels of inequality in income and wealth. For example, provinces such as Badajoz in the south-west and Granada had per-capita incomes that were less than half of some areas in the Basque region.

Wider impacts of Spain's economic transformation:

• Welfare - the provision of social welfare dramatically improved. By 1974, 79% of Spaniards were covered by social welfare, up from just 29% in 1950.
• Healthcare provision was also extended. Obligatory Health Insurance was introduced in 1963 to cover all Spanish workers against illness or injury. The number of doctors per head of the population also increased. Better healthcare provision had the wider impact of reducing infant mortality rates as well as increasing the average life expectancy from 62 in 1950 to 73 in 1975.
• Education received extra funding as having a skilled workforce would encourage further foreign direct investment. Illiteracy rates dropped and the number of Spanish universities had almost doubled by 1974.
• Tourism - the growth of the tourism industry meant that many Spaniards were exposed to the liberal, western cultures of Britain and France, resulting in limited changes to Spanish culture. Spaniards began wearing western clothes such as the bikini, for example, which had previously been outlawed.