Economic Change 1956-75

• The Treaty of Madrid in 1953 resulted in more investment and loans from the USA and a small increase in trade. The government used these to invest in industry, but there was mixed results. Targeted imports of raw materials and industrial machinery led to a doubling of industrial production during the 1950s, but the loans led to rising inflation. US money entered the economy but Spain neither produced more goods nor allowed a growth in imports. Therefore, inflation increased as more money circulated, but there were no more goods to buy.
• By the end of the 1950s inflation was increasing rapidly but wages were failing to keep up. Official figures from the beginning of 1957 indicate that inflation was growing by 30% whereas wage increased were lagging behind at around 20%. This led to a decline in the standard of living.

  Strikes occurred throughout 1957 and 1958, including coal miners in Asturias and construction workers in Madrid. The strikes were eventually broken up by beatings and police brutality.
• Jose Arrese, a leading member of the Falange, proposed ending the Spanish economic crisis by embracing a fully fascist economic policy. His ideas were nicknamed the Arrese Plan. He supported stricter autarky and greater emphasis on national syndicalism. Franco rejected the proposals and used them as an excuse to weaken the Falange's political power and influence.
• In February 1957, Franco initiated a cabinet reshuffle in which leading members of the Falange were demoted and a new generation of ministers from outside the Falange were given top jobs. Instead, they were technocrats who had a proven ability in academic and professional life. Many even had membership or sympathy with Opus Dei.
• Opus Dei is a secretive group associated with the Catholic Church and first founded by a priest in 1928 concerned with the problems of economic modernisation. Specifically, its members wanted to combat the growth of liberal and anti-clerical views that typically emerged during economic modernisation by having devout Catholics supervising economic growth to safeguard Catholic values. They were highly educated and put their faith in the free market.
• Following Franco's reshuffle, the new technocrats devised a new economic plan. The Stabilisation Plan of 1959 reflected their belief that greater economic freedom would resolve Spain's financial crisis. Therefore, it proposed breaking up corporatism and ending autarky.
• The Stabilisation Plan included the following measures:

  • the peseta was devalued and import/export restrictions were lifted to encourage international trade
  • reductions in public spending
  • wages were frozen
  • credit was restricted
  • government abandoned its control over prices
• The plan was designed to address Spain's currency problems and control levels of inflation. In the long term, trade and foreign investment provided the basis for considerable economic growth. However, in the short term, the ending of price controls led to further inflation and cuts in government spending led to rising unemployment from 1959 to 1961. Nationally, unemployment rose and reached nearly 35%. Levels were highest in poor rural areas. Pay also dropped so much that strikes declined as workers couldn't afford to refuse to work.
• As the economy grew and employment became more secure, workers felt able to risk protest and 1962 saw strikes once again.