Economic Development 1938-56

• The Republican government had sent its gold reserves to the Soviet Union and the Nationalists had amassed huge debts by buying arms on credit. This meant that by the end of the war, Franco owed around $700 million to other countries. Spain paid these debts off by sending food and raw materials to Germany and Italy. Payments to Italy, although on reduced levels, continued until the 1960s.
• The civil war had also led to a reduction in the level of industrial and agricultural production, due to over half a million men and women dying during the war. With a diminished labour force, Spanish industry and agriculture struggled to improve. For a decade after the war farmland produced only a quarter of the cereal crops that it had produced before the fighting began.
• Industrial and agricultural workers suffered the most during the 'hunger years'. Most workers had to cope with low incomes, poor living and working conditions, relatively high taxes and virtually no social security system.
• Although Spain remained neutral, WW2 had a big impact on Spain's economy as it restricted supplies from abroad. The war resulted in global shortages of food, raw materials and peacetime industrial products. Although Spain was moving towards autarky, it was still partially dependent on imports.

  In addition, the Allies were unwilling to help Spain with loans or economic aid due to Franco's relationship with the Axis powers. As a result, Spain's economy remained in a state of depression and during the 1940s, Spain's economy was less productive and less wealthy than it had been in 1930.
• At the end of the Civil War, Franco and his Falangist supporters created a corporatist economic system. Corporatism was an essential part of the Falange's vision of a new society as they believed it combined the best aspects of capitalism and communism. They criticised capitalism for promoting the interests of the individual over the nation, while also arguing that communism put the interests of the industrial working classes ahead of those of the nation. Therefore, they argued that corporatism was superior as it combined aspects of the two to prioritise the interests of the nation.
• Franco's corporatist economy was based around syndicates that represented different areas of industry. In theory they were designed to promote social harmony but in practice Franco's used them to extend governmental control over the economy and workers. The Ministry of Syndicates oversaw negotiations within the syndicates to control wages, prices and set production targets.
• Franco embraced autarky because:

  • it was an aim of other RW dictatorships of the time
  • Franco hoped it would modernise/strengthen the economy
  • he believed it would provide the resources for a strong military-dominated state
  • military leaders feared an Allied invasion and didn't want to be overly reliant on foreign armaments
  • Franco believed autarky was necessary due to the Allies being unwilling to trade
• Franco implemented a series of economic measures which strictly controlled the import and export of goods. In 1941, Franco established the National Institute for Industry, which helped determine Spain's economic priorities and how the limited amount of imports could best serve the economy's needs.
• Franco's economic policies failed to stimulate economic growth, higher living standards or economic modernisation. Although, they did lead to some political successes.
• Corporatism was successful:

  • it allowed Franco to exert more control over the economy and workers
  • the introduction of corporatism helped Franco to retain the support of the Falangists, who saw it as the first step to a fully fascist state
• Autarky was never fully achieved. Nonetheless, from 1939-56 trade represented only 5% of Spain's gross domestic product, so in some sense, Franco did succeed in limiting Spain's economic interaction with the rest of the world.

  Autarky can also be viewed as an ideological success for the Falange, as it promoted Spanish independence and nationalism. It also allowed Franco to exert more control over the running of the economy and various interest groups within Spain.
• By 1958:

  • 45% of Spanish industrial plants were using machinery/technology developed before 1920
  • there was little attempt to modernise industry - only 2.4% of iron/steel and 0.3% of chemicals were produced in large modern factories
  • 65% of Spain's trading ships were produced before 1939 - some in the 19th century
  • between 1939-58 agricultural production remained below 1936 levels
  • the domestic industrial sector had to focus on a small consumer market - placed restrictions on level of investment/industrial production - employed less than 20% of working population
• Due to autarky, more focus was placed on producing synthetic substitutes, such as extracting oil from coal. This was not economically efficient and the oil tended to be of a lower quality. Cotton was replaced by synthetic fibres and the process was expensive and inefficient. In most cases, it would have made more sense to import the relevant materials.
• Autarky resulted in a rapid decline in foreign investment and trade with foreign countries, especially after WW2. Franco refused a $100 million loan from the USA as he wanted to pursue autarky rather than trade.
• Corporatism and autarky resulted in declining living standards as negotiations in syndicates favoured employers, meaning wages remained low but prices rose:

  • by 1956 - industrial workers' wages were 15-35% lower than 1936
  • price of basic food was higher - price of meat rose by 1000%, bread by 1200% and potatoes by 1800%
  • some historians argue the overall standard of living was reduced by 50% between 1936-56
  • between 1939-56 there were periodic rises of inflation - at some points inflation rose as high as 20%
• Agricultural production was so poor between 1947 and 1948 that Spain faced famine. Widespread starvation was stopped only by large imports of food, which undermined the policy of autarky.
• Social consequences:

  • between 1950-55 300000 Spaniards left Spain to live in Latin America
  • between 1939-50 200000 people died of malnutrition
  • in 1956 a spike of inflation made conditions worse - workers organised unofficial strikes supported by university students - demanded a minimum wage, equal pay for women, unemployment benefits + right to form free trade unions - strikes led to violence and were supressed
• Spain's economic problems were made worse by military spending. Between 1939-45, 50% of government spending went to the military. This resulted in less investment in agriculture and industry. During 1944-45, Spain was also impacted by a drought, further reducing agricultural production. This also made living standards decline.
• The rationing system implemented in 1939 also contributed to the 'years of hunger'. This system failed to operate effectively as:

  • there were insufficient rations to feed the population
  • extreme scarcity allowed food supplies to be manipulated by the corrupt and inefficient Francoist administration
  • rationing contributed to the population suffering food shortages and long queues for poor quality items