There was a time when geography teachers in northern Europe would often use an examination question that read: “Europe ends at the Pyrenees. Discuss.” Travelers who visited Spain before the advent of mass tourism in the 1960s retain impressions of what appeared to be essentially a Third World country, not quite Africa, but certainly qualitatively different to anything else to be experienced in western Europe at that time. The so-called express trains took over 14 hours to run from Madrid to Barcelona, Spain’s two most important cities, although, as the crow flies, the distance is only 300 miles. Today, modern electric trains run from Seville to Madrid, on to Barcelona, then through France to Paris. They are so fast and comfortable that Spanish airlines have reduced and cancelled many flight routes. In the 21st century, a British train operator chose the Spanish word Adelante to be the brand name of its new breed of fast diesel trains, which speaks volumes about changes in both Spain’s external image and its real economy.
From 1939 until the death of the dictator General Francisco Franco in 1975, the economic environment of business in Spain tended toward isolationism and protectionism. Large government-backed monopolies dominated key industrial sectors. In Spanish discourse, the years 1975–86 are known as the “transition.” In English-speaking circles, this word tends to be associated with the end of communism in Russia and the eastern bloc, and it could be argued that in many ways, Spain was the first European country to peacefully evolve from a near-totalitarian, planned economy to a pluralist, market-based democracy.
After Franco’s death, instead of the chaos that many feared, there developed a carefully crafted and intelligently manipulated transition from autarky toward a modern pluralist society. This phenomenon, together with the collapse of communism in eastern Europe and Russia between 1989 and 1991, made Spain the target for many commentators, journalists, and academics interested in the possibility of a “role model” that offered lessons in peaceful change in the post– Cold War world. It can be argued that Spain’s success contrasts with the dismal experience of, say, the Soviet Union, which, unlike Spain, lacked the institutions that were capable of adapting to a new democratic and market-orientated order.
Today, Spain is one of the most regionalized countries of the European Union (EU), with democratically structured autonomous communities such as Catalonia, Galicia, and Andalucia taking full responsibility for a wide range of government functions including education and economic development. Spain’s post dictatorship embracing of regional autonomy without the dreadful balkanization experienced by Yugoslavia provides another contrast with the communist transition.
In common with the leaders of those members of the eastern bloc (Poland and Slovenia, for example) whose transitions are widely regarded as having been more successful, most Spanish modernizers (the aperturistas) realized from an early stage that close contact with and eventual membership in the EU’s institutions would underpin and protect their new democracy and help foster economic development.
It can also be argued that well before the transition, Spain was (unlike the communist world) already participating in Western consumerism and popular culture, even if much of it was filtered through channels from Argentina, Mexico, or other of the more industrialized countries of Latin America. Unlike eastern Europeans under communism, Spaniards under Francoism wishing to emigrate found that there was no legal impediment to the mobility of labor, and on their return to Spain, the fortunate ones with money to invest could lock into a strong entrepreneurial culture that was already well established in the home country, together with a business environment which, although bureaucratic and sclerotic, was generally well regulated and, apart from some often-spectacular aberrations, part of a law-abiding civic culture, mostly free of corruption.
During the transition itself, Spanish policy makers were also far more circumspect than their eastern bloc counterparts in accepting the need for a headlong rush into wholesale privatization. It could also be argued that during the 1960s and 1970s, either by accident or by design, the Spanish educational system helped to better prepare the way for Spanish participation in the global economy by replacing French with English as the foreign language of first choice in the school curriculum. Last but not least, although to a large extent isolated from the European defense mainstream, Spain’s strategic geographical position at the edge of the North Atlantic ensured that throughout the Cold War it was de facto part of the Western alliance’s defense network through its acceptance of American military bases paid for, of course, in very useful U.S. dollars.
For Spain, the importance of EU membership was primarily political and psychological, providing Spain’s post-Francoist governments additional leverage to push through far-reaching measures of political and economic liberalization that brought Spain into line with the business environments of northwestern Europe. EU membership was also hugely popular among Spanish voters, and has enjoyed more or less all-party support. Spanish business interests were also enthusiastic.
Since 1986, when it joined the EU, Spain has experienced an unprecedented period of economic growth, and although economic expansion has been patchy and unemployment has been stubbornly high, at times growth rates have been among the highest in the EU. The movement toward the single market during 1992 was viewed by most Spaniards as the start of real integration into the European business and political culture, but also as an opportunity to promote Spain on the world stage. During 1992, Madrid was chosen as the cultural capital of Europe, Expo’92 took place in Seville, and Barcelona hosted the Olympic Games.
Western Europe has always been the most important market for Spanish exports and a major supplier of the Spanish economy. This pattern has been reinforced by EU membership. The concentration of Spanish trade in the EU is such that the largest four economies (France, Germany, Italy, and the United Kingdom) account for just over half of Spanish exports and supply just under half of imports. Spain participates fully in the Single European Currency, and has been a member of the euro since its launch in January 1999.
Despite all this, the Spanish economy can still be viewed as one of the least “open” in Europe, and its share of foreign investment is still not very high in comparison with some other countries, while Spanish investment abroad is small in relation to total output. On the other hand, the Spanish market is the fifth largest in Europe, with a population close to 40 million and a relatively high level of purchasing power.
One reason why the Spanish experience is important is that it provides an empirical counterargument to the “dependency” and “core periphery” theoreticians who predicted that free market forms of European integration would result in Europe’s already prosperous areas flourishing at the expense of the impoverished areas. Along with Ireland and (to a lesser extent) Portugal, Spain provides some practical evidence that cohesion can coexist and develop alongside supranational integration. Spain also provides encouragement to those who believe that political strength at the subnational level fosters economic strength. In spite of Spain’s labor market problems, it is not difficult to come across instances of articles in the international press of the “economic miracle” variety.
Spanish industry has traditionally been dominated by medium-sized firms, many of them family-run concerns that have been careful not to grow so big that there is a danger of the family losing overall control. From a globalist perspective, the lack of massive multinational firms could be seen as a handicap on Spain. However, in recent years, Spanish banks have been busy taking over other European banks; a Spanish company has become the owner of the three main London airports; and a Spanish toll-road company has won the contract to operate the Pennsylvania Turnpike in the United States.
From the late 1990s and into the 21st century, the building industry in Spain was a major motor of economic development in Spain, fueled by a buoyant housing market. Many of the houses being built were holiday and second-home apartments for buyers from other European countries such as Germany and the United Kingdom. Ironically, houses were being built in Spain at four times the rate in the United Kingdom, at a time when some British commentators were arguing that a shortage of housing supply in the United Kingdom was causing house price inflation. Many of the workforce in the Spanish building industry were immigrants and, generally, immigration into Spain was accounting for some 30 percent of all immigration into the EU. Much of the housing being built in Spain was purchased not for personal use, but by individuals and corporations for speculative purposes, with the intention of renting out.
The property market in Spain was already showing signs of slowdown when the U.S. subprime crisis of 2008 and the associated global credit crunch began to take effect. The Spanish building industry then became a major contributor to a problem of rising unemployment in Spain. The fact that many of the new unemployed were immigrants, a substantial proportion being illegal immigrants, and therefore not entitled to the safety net of the welfare state, added to social tensions in the outer suburbs of the large cities, and these tensions figured largely in the Spanish General Election of 2008, when the socialist prime minister José Luis Rodriguez Zapatero was grudgingly reelected, having had to defend immigration as being something vital to the economy, recruiting workers into the types of jobs that Spaniards either could not or did not wish to do. At the same time, he had to defend his record as a strict enforcer of measures against illegal immigration.
Modern Spaniards have living standards and expectations that occupy a different universe to those of their grandparents, and even their parents. However, in many ways, the growing middle class shares the worries, uncertainties, and insecurities of their counterparts in any other modern European country. Today, there is no doubt that Europe extends well beyond the Pyrenees, but there is much doubt about the type of economy and society that the Spaniards and their fellow Europeans wish to build.
- Mercedes Cabrera and Fernando del Rey Reguillo, The Power of Entrepreneurs: Politics and Economy in Contemporary Spain (Berghahn Books, 2007);
- Pablo N. Costada, Spain: Economic, Political, and Social Issues (Nova Science, 2008);
- Espicom Business Intelligence, Emerging Generic Markets in Western Europe: France, Italy, Portugal, Spain (Espicom, 2007);
- Joseph Harrison and David Corkill, Spain: A Modern European Economy (Ashgate, 2004);
- John Howell, Starting a Business in Spain (Cadogan, 2005);
- International Business Publications, Spain: Starting Business (Incorporating) in Spain Guide (International Business Publications USA, 2008);
- Hakime Isik, Cross Cultural Guide: How to Do Business in China, Russia, Spain and Colombia (VDM Verlag, 2007);
- Carmen Camarero Izquierdo, Carlos Hernandez Carrion, and Sonia San Martin Gutierrez, “Developing Relationships Within the Framework of Local Economic Development in Spain,” Entrepreneurship and Regional Development (v.20/1, 2008);
- Mario Izquierdo, Juan Jimeno, and Juan A. Rojas, On the Aggregate Effects of Immigration in Spain (Banco de España, 2007);
- Brigid Laffan, The European Union and Its Member States (Palgrave Macmillan, 2009);
- Felix Lopez and Natalia Martin, “Antecedents of Corporate Spin-Offs in Spain: A Resource-Based Approach,” Research Policy (v.37/6–7, 2008);
- Vicente Roca-Puig, Inmaculada Beltran-Martin, Juan C. Bou-Llusar, and Ana B. Escrig-Tena, “External and Internal Labour Flexibility in Spain: A Substitute or Complementary Effect on Firm Performance?” International Journal of Human Resource Management (v.19/6, 2008);
- Sebastián Royo, Varieties of Capitalism in Spain: Remaking the Spanish Economy for the New Century (Palgrave Macmillan, 2008).
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