Spain Economy - History


GDP (2008): $1,402 billion in current prices (seventh-largest Organization for Economic Cooperation and Development--OECD--economy).
Annual growth rate: .9%.
Per capita GDP: $34,600.
Budget: Income ............. $598 Billion
Expenditure ... $659Billion

Main Crops: Grain, vegetables, olives, wine grapes, sugar beets, citrus; beef, pork, poultry, dairy products; fish

Natural Resources: Coal, lignite, iron ore, uranium, mercury, pyrites, fluorspar, gypsum, zinc, lead, tungsten,copper, kaolin, potash, hydropower

Major Industries: Textiles and apparel (including footwear), food and beverages, metals and metal manufactures,chemicals, shipbuilding, automobiles, machine tools, tourism

Spain's accession to the European Community--now European Union (EU)--in January 1986 required the country to open its economy, modernize its industrial base, improve infrastructure, and revise economic legislation to conform to EU guidelines. In doing so, Spain increased gross domestic product (GDP) growth, reduced the public debt to GDP ratio, reduced unemployment from 23% to 15% in 3 years, and reduced inflation to under 3%. The fundamental challenges remaining for Spain include reducing the public sector deficit, decreasing unemployment further, reforming labor laws and investment regulations, lowering inflation, and raising per capita GDP.

Following peak growth years in the late 1980s, the Spanish economy entered into recession in mid-1992. The economy recovered during the first Aznar administration (1996-2000), driven by a return of consumer confidence and increased private consumption, although growth has slowed in recent years. Unemployment remains a problem at 10.5% (2004 est.), but this still represents a significant improvement from previous levels. Devaluations of the peseta during the 1990s made Spanish exports more competitive, but the strength of the euro since its adoption has raised recent concerns that Spanish exports are being priced out of the range of foreign buyers. However, this has been offset by the facilitation of trade among the euro nations.

An Overview of Spain

Spain is a country located in southwestern Europe on the Iberian Peninsula to the south of France and Andorra and to the east of Portugal. It has coastlines on the Bay of Biscay (a part of the Atlantic Ocean) and the Mediterranean Sea. Spain's capital and largest city is Madrid, and the country is known for its long history, unique culture, strong economy, and very high living standards.

Fast Facts: Spain

  • Official Name: Kingdom of Spain
  • Capital: Madrid
  • Population: 49,331,076 (2018)
  • Official Languages: Spanish nationwide Catalan, Galician, Basque, Aranese regionally
  • Currency: Euro (EUR)
  • Form of Government: Parliamentary constitutional monarchy
  • Climate: Temperate clear, hot summers in interior, more moderate and cloudy along coast cloudy, cold winters in interior, partly cloudy and cool along coast
  • Total Area: 195,124 square miles (505,370 square kilometers)
  • Highest Point: Pico de Teide (Tenerife) on Canary Islands at 12,198 feet (3,718 meters)
  • Lowest Point: Atlantic Ocean at 0 feet (0 meters)

Facts about Spain - Food, Culture, History, Sport, Economy

The sovereign state of the Kingdom of Spain is situated in the southwestern part of Europe on the Iberian Peninsula. It is bordered by the Mediterranean Sea to the south and east of its mainland. The country consists of a long history, a rich culture and a number of attractions for foreign tourists.

In Spanish, the country is known as Espana. Its capital is Madrid. Spain is a well-developed country with a high GDP, ranking as the 13th highest in the world. It is home to around 47 million people according to the population survey of 2012.

The discussion below reveals interesting and informative facts about Spain.

Facts about Spanish Food

Traditional Spanish specialties are mouthwatering. Whether it is time for el desayuno (breakfast) or la cena (dinner), you are in for a tempting and filling delight. Tapas – Spanish appetizers – are a special attraction for tourists. In addition, there are a number of other unique dishes which make up the tasteful traditional Spanish cuisine. Discussed below are the most famous dishes of the region.


Churros are enjoyed at breakfast or as a snack. They consist of fried pastry filled with fruits or coated with chocolate. The pastry is in the form of a thick stick.

Mantecados, Polvorones and Turron

These are special Christmas treats in Spain. Mantecados and Polvorones are a variety of almond cakes. They are made in different shapes and sizes and may be soft or crumbly. On the other hand, turron is a candy with almonds and honey as the main ingredients.

Tortilla Espanola

Contrary to the conventional Mexican tortillas, Spanish tortillas consist of an egg omelet with potatoes as an extra ingredient. The locals call it tortilla espanola.


It is a vegetable soup made mostly from tomato. Different variations of gazpacho exist in different parts of Spain. It is usually served with hardboiled egg.


Regarded as the national dish of the country, Paella is a rice dish enjoyed at La Fallas, the Spanish spring festival. It is made of rice, meat and vegetables. Famous variations of paella consist of sea food or rabbit meat.

Facts about Spanish Culture

Spain is famous for several of its interesting customs, festivals and other components of a colorful culture. The following facts provide information about the most popular customs followed in the country.


It is a popular type of Spanish folk music accompanied by spontaneous dancing. Flamenco consists of guitar as the dominant instrument. The style originated from the southern part of the country in Andalusia.


The famous bullfighting of Spain is one of the most exciting attractions of the country for tourists. The popular tradition is also termed as tauromachy.

San Sebastian Festival

The festival is celebrated in January in San Sebastian with bonfires and dancing. The remarkable feature of this festival is the popular taborrada drumming.

Fallas de San Jose

It is a spring festival which originated during the Middle Ages. Today, it is celebrated in the country through a nighttime parade and Nit del Foc – Night of the Fire. In the case of the latter, cardboard figures depicting grotesque scenes are burnt.


Sangria is the most famous beverage of Spain. It is dark red in color and is made from wine accompanied by a little amount of brandy. In addition, chopped fruits and sweetener add to the flavor of the drink.


Futbol, as pronounced by the Spanish locals, soccer is one of the most popular sports in the country along with bullfighting. It is almost regarded as religion and is, therefore, an important part of the country’s culture. Being home to two of the world’s most popular soccer teams, Spain has gained international fame in the world of sports.

Facts about Spanish History

Spain has a rich history which dates back to the prehistoric age. Archeologists have discovered evidence which shows that the region has been inhabited by hominids over a million years ago. The following facts reveal more about the interesting history of Spain.

  • The Iberian Peninsula served as an extremely important refuge to the survivors of the last ice age. Therefore, after the ice age ended, a large part of the northern Europe was repopulated from Spain.
  • In the 3rd century BC, Spain was being contested for by two imperial powers – the Romans and the Carthaginians. The Romans got hold of the eastern peninsula after the second Punic war.
  • Spain fell from the hands of Romans into the hands of the Visigoths in 5 BC.
  • The Arabs began their infiltration into the country in 711 which led to a long reign of Muslim power.
  • The Christians began fighting for the re-conquest of Spain. They completed their conquest in 1492 through the fall of Granada.
  • After experiencing a series of imperial rule, revolutionary movements and dictatorship, Spain finally became a democratic state in the 1980s.

Facts about Spanish Economy

The following facts about Spain economy are provided by the World Bank and CIA Factbook, 2013.

  • The currency of Spain is Euro.
  • Spain’s gross domestic product is the thirteenth highest in the world. It amounts to $1.31 trillion.
  • The GDP per capita is equal to $30,100 and is three times higher than the average GDP per capita of the world.
  • The GDP of Spain is falling at the rate of 1.6 annually. However, this rate is 4.6% slower than the average rate for the rest of the world.
  • Owing to a high GDP per capita, the standards of living in the country are high. However, the Spaniards also face 25.1% of unemployment rate which affects the earnings and living conditions of individuals.

Facts about Spanish Tourist Spots

Spain is full of tourist attractions. Discussed below are the most popular tourist spots of the region.

La Concha

La Concha is one of the most popular city beaches in the entire Europe. It is situated in San Sebastian and offers various activities including surfing. Apart from a beautiful view, tourists can enjoy eating at the nearby restaurants.

The Palacio Real of Madrid

Built by Carlos III in the eighteenth century, the famous Palacio Real – Royal Palace – is now home to the King of Spain. The spectacular building is worth a visit.


The island of Ibiza, situated off the coast in Spain, is the ultimate party spot for Europeans in the summers. It offers various restaurants, night clubs as well as beach bars.


A relic of Spain’s Muslim dynasty, Alhambra is a must-visit spot. It was built in the 14th century as a fortress as well as palace by the Nasrid Sultans. The building is situated on a plateau which overlooks Granada. It exhibits unique Muslim art.

Aqueduct of Segovia

The wonderfully built Aqueduct of Segovia is a legacy of the Romans. Built in about 50 BC, the aqueduct is still used to supply water from the Frio River to Segovia.

Facts about Sports in Spain

The most popular sports in Spain are bullfighting and soccer. A number of other sports activities, including tennis, gold, Formula One racing, water sports, skiing, basketball, and cycling, are also common.

People and Society



noun: Spaniard(s)

adjective: Spanish

Ethnic groups

Spanish 86.4%, Moroccan 1.8%, Romanian 1.3%, other 10.5% (2018 est.)

note: data represent population by country of birth


Castilian Spanish (official nationwide) 74%, Catalan (official in Catalonia, the Balearic Islands, and the Valencian Community (where it is known as Valencian)) 17%, Galician (official in Galicia) 7%, Basque (official in the Basque Country and in the Basque-speaking area of Navarre) 2%, Aranese (official in the northwest corner of Catalonia (Vall d'Aran) along with Catalan, <5,000 speakers)

note: Aragonese, Aranese Asturian, Basque, Calo, Catalan, Galician, and Valencian are recognized as regional languages under the European Charter for Regional or Minority Languages


Roman Catholic 68.9%, atheist 11.3%, agnostic 7.6%, other 2.8%, non-believer 8.2%, unspecified 1.1% (2019 est.)

Age structure

0-14 years: 15.02% (male 3,861,522/female 3,650,085)

15-24 years: 9.9% (male 2,557,504/female 2,392,498)

25-54 years: 43.61% (male 11,134,006/female 10,675,873)

55-64 years: 12.99% (male 3,177,080/female 3,319,823)

65 years and over: 18.49% (male 3,970,417/female 5,276,984) (2020 est.)

Population pyramid

Dependency ratios

total dependency ratio: 52.4

youth dependency ratio: 21.9

elderly dependency ratio: 30.4

potential support ratio: 3.3 (2020 est.)

Median age

total: 43.9 years

male: 42.7 years

female: 45.1 years (2020 est.)

Population growth rate

Birth rate

8.05 births/1,000 population (2021 est.)

Death rate

9.78 deaths/1,000 population (2021 est.)

Net migration rate

1.39 migrant(s)/1,000 population (2021 est.)

Population distribution

with the notable exception of Madrid, Sevilla, and Zaragoza, the largest urban agglomerations are found along the Mediterranean and Atlantic coasts numerous smaller cities are spread throughout the interior reflecting Spain's agrarian heritage very dense settlement around the capital of Madrid, as well as the port city of Barcelona


urban population: 81.1% of total population (2021)

rate of urbanization: 0.24% annual rate of change (2020-25 est.)

note: data include Canary Islands, Ceuta, and Melilla

Total population growth rate v. urban population growth rate, 2000-2030

Major urban areas - population

6.669 million MADRID (capital), 5.624 million Barcelona, 835,000 Valencia (2021)

Sex ratio

at birth: 1.07 male(s)/female

0-14 years: 1.06 male(s)/female

15-24 years: 1.07 male(s)/female

25-54 years: 1.04 male(s)/female

55-64 years: 0.96 male(s)/female

65 years and over: 0.75 male(s)/female

total population: 0.98 male(s)/female (2020 est.)

Mother's mean age at first birth

Maternal mortality rate

4 deaths/100,000 live births (2017 est.)

Infant mortality rate

total: 3.14 deaths/1,000 live births

male: 3.51 deaths/1,000 live births

female: 2.74 deaths/1,000 live births (2021 est.)

Life expectancy at birth

total population: 82.21 years

male: 79.22 years

female: 85.39 years (2021 est.)

Total fertility rate

1.51 children born/woman (2021 est.)

Contraceptive prevalence rate

note: percent of women aged 18-49

Drinking water source

improved: urban: 100% of population

unimproved: urban: 0% of population

total: 0% of population (2017 est.)

Current Health Expenditure

Physicians density

3.87 physicians/1,000 population (2017)

Hospital bed density

3 beds/1,000 population (2017)

Sanitation facility access

improved: urban: 100% of population

unimproved: urban: 0% of population

total: 0% of population (2017 est.)

HIV/AIDS - adult prevalence rate

HIV/AIDS - people living with HIV/AIDS

HIV/AIDS - deaths

cases of COVID-19 or 7,802.3 cumulative cases of COVID-19 per 100,000 population with 169.2 cumulative deaths per 100,000 population as of 13 June 2021, 45.93% of the population has received at least one dose of COVID-19 vaccine the Department of Homeland Security has issued instructions requiring US passengers who have been in Spain to travel through select airports where the US Government has implemented enhanced screening procedures

Obesity - adult prevalence rate

Education expenditures


definition: age 15 and over can read and write

total population: 98.4%

female: 98% (2018)

School life expectancy (primary to tertiary education)

total: 18 years

male: 17 years

female: 18 years (2018)

Unemployment, youth ages 15-24

female: 34.5% (2019 est.)

Economic History of Spain

This comprehensive account of the economic development of Spain, available for the first time in English, is generally regarded as a major achievement in Spanish historiography. It covers the entire history of Spain’s economic and social evolution from prehistoric times to the end of the nineteenth century. The book originated from lectures given at the University of Barcelona by Jaime Vicens Vives, who has been called Spain’s greatest historian in recent decades. Aware of all the major interpretations of Spanish history, the author draws upon the recent research of Spanish, French, and American historians yet to the overall picture he gives his own imprint.

Originally published in 1969.

The Princeton Legacy Library uses the latest print-on-demand technology to again make available previously out-of-print books from the distinguished backlist of Princeton University Press. These editions preserve the original texts of these important books while presenting them in durable paperback and hardcover editions. The goal of the Princeton Legacy Library is to vastly increase access to the rich scholarly heritage found in the thousands of books published by Princeton University Press since its founding in 1905.

Related Books

The Development of Modern Spain: An Economic History of the Nineteenth and Twentieth Centuries

Press, 2000. xvi + 528 pp. $49.95 (cloth), ISBN: 0-674-00094-3.

Reviewed for EH.NET by Vera Zamagni, Department of Economic Science,

University of Bologna (Italy).

This monograph by Gabriel Tortella (professor of economic history at the

Universidad Alcal? de Henares, Madrid, Spain) was vastly appreciated by all

those who could read it in Spanish. Its translation into English is very

welcome. Its publication adds to the collection of volumes that present case

studies of countries which have succeeded in making the transition to modern

economies, but which have never attracted enough attention by international

scholars and readers because of the absence of a good account in English. The

book achieves the goal of presenting the peculiarities of Spanish economic

history with an approach that is inspired by the more quantitative and

analytical standard that prevails in contemporary economic history, while at

the same time remaining readable for those who have only a basic knowledge of

economics. No one could have succeeded better than Gabriel Tortella in keeping

this difficult equilibrium between rigor and readability. His vast research

into Spanish economic history, his systematic collaboration with all the

leading economic historians of Spain, and his knowledge of international

comparisons make him the ideal author for such a work.

The book is not perfect, however. No work of general economic history can be

better than the basic research on which it has been constructed. Let me

address a couple of the weakest aspects of research in Spanish economic

history, which are mirrored in Tortella’s book. The first problem is

periodization. There is by now a consensus that economic history is best dealt

with systematically over rather long periods of time. The most important

decision for a general economic history is, therefore, to identify the

relevant turning points within which to arrange an analysis of the economy. I

think that a clear identification of such turning points is still missing in

Spanish economic history. Tortella takes the view of dividing up the time span

into nineteenth and twentieth centuries, but there are several contradictions

in this, that come out of the very arguments developed by the author. The

nineteenth century is hardly a coherent period and, with the exception of

agriculture, all other sectors present some interesting development only from

the middle of the century, continuing undisturbed into the twentieth century

at least up to World War I, if not into the 1920s. Tortella is quite aware of

this (see his pp. 231-34, but also p. 299 and passim), but is in no position

to fill in the gap. As for the twentieth century, the often drawn comparison

with Italy shows that a real discontinuity in Spain comes with the civil war

and its aftermath. Although Tortella recognizes this, he does not suggest a

more pertinent periodization, which would allow us to understand what was

really lost in the twenty years of Franco’s autarky. In countries that have

experienced a dictatorship during the industrialization period, it is

important to understand where and to what extent the dictatorship has produced

economic discontinuities, if any.

Another aspect that deserves more attention is the interconnection among

sectors: industry, trade, banking and state intervention must be analyzed in

separate chapters to obtain a systematic and coherent treatment, but their

interconnections must be made clear. What were the links among agriculture,

industry and trade? Was there any visible impact of industrialization on

trade? What were the relationships between banks and industry? What were the

impacts of government policies on the modernization of the country? The author

has tried his best to answer some of these questions, but because a coherent

periodization has not been established, the dispersion of events in each

sector prevents any clear treatment of interconnections among sectors.

Finally, it is always difficult to combine enough description with

interpretation. I think this is one of the strongest aspects of Tortella’s

book. He has gathered all the most interesting interpretative lines advanced

in his own research (see for instance the quite intriguing chapter eight on

the entrepreneurial factor that is directly taken from work he presented in

Milan some years ago) and in the research done by his colleagues and has given

a good account of them so that the reader can go to the original sources if

interested in greater depth.

This is a book that will rightly become the standard textbook on Spanish

economic history for sometime to come. I hope that increasing knowledge of the

experience of countries like Spain, Italy or, indeed, Ireland, will

definitively convince scholars who draw international comparisons of patterns

of growth that synchronic comparisons are certainly of use in determining the

timing of take off and the reasons for delays, but not in deciding the final

outcome of the process of modernization, while diachronic comparisons over a

sufficiently long span of time are more rewarding and suggestive.

Vera Zamagni is professor of Economic History at the University of Bologna

(Italy). Her latest publication in English is the chapter “Evolution of the

Economy,” in Patrick McCarthy, editor, Italy since 1945, Oxford

Spain Economic Growth

2015 2016 2017 2018 2019
Population (million)46.446.446.446.446.7
GDP per capita (EUR)23,21924,00625,03625,88226,692
GDP (EUR bn)1,0781,1141,1621,2021,245
Economic Growth (GDP, annual variation in %)
Domestic Demand (annual variation in %)
Consumption (annual variation in %)
Investment (annual variation in %)
Exports (G&S, annual variation in %)
Imports (G&S, annual variation in %)
Industrial Production (annual variation in %)
Retail Sales (annual variation in %)
Unemployment Rate22.119.617.215.314.1
Fiscal Balance (% of GDP)-5.2-4.3-3.0-2.5-2.8
Public Debt (% of GDP)99.399.298.697.695.5
Inflation Rate (HICP, annual variation in %, eop)-
Inflation Rate (HICP, annual variation in %)-0.6-
Inflation (PPI, annual variation in %)-2.1-
Policy Interest Rate (%)- - - - -
Stock Market (annual variation in %)-7.2-2.07.4-15.011.8
Exchange Rate (vs USD)- - - - -
Exchange Rate (vs USD, aop)- - - - -
Current Account (% of GDP)
Current Account Balance (EUR bn)21.835.431.123.324.9
Trade Balance (EUR billion)-24.2-18.8-24.7-33.8-32.0

The Decline of Spain

When Philip II died in 1598, the tendrils of Spain reached across almost the entirety of Central and South America, north and south Italy, and the Benelux area. Gold and silver from her massive American empire fueled Spanish dreams to wrest control of Italy and the Netherlands from France, and to spread Catholicism all across the world.

Philip II

And yet, 300 years later, the Treaty of Paris ended the Spanish-American War, and with it, the Spanish colonial empire died. Cuba was lost, as was the Philippines, Puerto Rico, and Guam. In an attempt to salvage whatever could be saved, Spain sold her remaining Pacific colonies to the newest European power, Germany.

To quote Regina Grafe: “Contemporaries and historians alike considered Spanish shipping resources basically inadequate from at least the later sixteenth century onwards. Yet, this just deepens one of the big puzzles of Spanish imperial history. If Spain was so deficient in the naval arts, how did it hold together the largest western empire for three centuries?” – The Strange tale of the decline of Spanish shipping, p. 81

But this, the sheer amount of territory spread throughout the world, was part of Spain’s problem. The easiest way to reach her Italian possessions was via the Mediterranean. The easiest, and by far the least dangerous way to supply her Benelux strongholds was to use the Spanish Road (a supply route from Barcelona to the Benelux via Lombardy and Burgundy). The only way to reach her American colonies was across the Atlantic Sea, an ocean that became increasingly difficult to navigate safely, as the (then) upstart English, French, and later Dutch navies also began sailing to the New World, often in direct competition with Spain.

The Spanish Road

The Thirty Years’ War, which began almost as an local conflict in the Germanies, soon spread and expanded. The Dutch rebellion against the Spain and the Franco-Austrian skirmishes in northern Italy are just two conflicts that, while they had nothing to do with religion or the Germanies, became intertwined with the general warfare between the northern and southern Germanies.

Spain, in particular, was involved in numerous conflicts throughout the Thirty Years’ War: she held territory in Italy and the Benelux which came (or already was) under fire, and there were trouble brewing internally as well. Though Spain saw early successes, she was eventually curbed and began losing vital positions and battles. In 1637 the Dutch captured the mighty fortress of Breda, in 1638 Bernhard of Weimar took Beisach, effectively cutting the Spanish Road in half. This loss was incredibly hurtful, as it now forced Spain to sail all supplies to the Netherlands via the English Channel, rather than splitting up the supply chain between the Channel and the Spanish Road. This, of course, relied on England being friendly and allowing Spain to move through the Channel. In 1639, a large Spanish fleet manned by Antonio de Oquendo was destroyed by the Dutch at the Battle of the Downs, a fleet which was partly tasked to relieve the situation in the Netherlands.

The Battle of the Downs

Jackson J. Spielvogel writes “Philip II went bankrupt in 1596 from excessive expenditures on war, and his successor, Philip III, did the same in 1607 by spending a fortune on his court. The armed forces were out-of-date, the government was inefficient…” and later he writes that during the reign of Philip III “many of Spain’s weaknesses became apparent. Interested only in court luxury or miracle-working relics, Philip III allowed his first minister, the greedy duke of Lerma, to run the country”. – Western Civilization, p. 516

It strikes one as odd that a country that could practically bathe in precious metals from her overseas colonies, managed to go bankrupt twice within 11 years. But what happened to all that wealth?One theory suggests that – because the Spanish had so much gold, they could easily buy commodities from other countries without producing them itself. Because consumer goods could easily be bought, there was little incentive to produce goods and undertake the necessary investment and develop the technology to produce goods. Therefore, it is argued this ‘easy wealth’ was a factor in limiting economic development.

In macro terms, we could see 16th century Spain as a country with a very large trade deficit – financed by capital inflows (gold, silver, and other precious metals). But, this is an unbalanced economy – consumption enables high current living standards, but when the gold dried up, Spanish business and industry had been left behind other European nations. Nations without a windfall of gold had a much greater drive to create wealth rather than just consume it.

Great Britain, by contrast, arguably, gained just about the right amount of gold. Great Britain never gained enough of the Latin American gold to become just a nation of consumers. The prospect of gold actually motivated a rapid expansion in naval technology. It was around this time, that Britain’s navy and ship building capacity increased rapidly. This sowed the seeds of Britain’s future Empire. But, it was an Empire which was at least partly based on industry and production. The English may have exploited natural resources in countries like India, but they also had the incentive to manufacture goods – and this motivation contributed to the industrial revolution.

But let us turn our attention back to Philip II, and let us look at the magnificent work of J. H Elliot (one of, if the not the most respected historian in the field of Spanish history). He found that the 1590s was one of the worst decades for Spain, but I’ll let him tell the tale:

“During the 1590s there were numerous signs that the Castilian economy was beginning to crack under the relentless strain of Philip II’s imperial adventures. The apparently inexhaustible stream of silver from the Indies had tempted the King to embark on vast enterprises which swallowed up his revenues and added to his mountain of debts: the Invincible Armada alone is said to have cost him 10,000,000 ducats, and in the mid-1590s he was probably spending over 12,000,000 ducats a year. How long he could continue to spend on this scale would ultimately be determined by the revenue yielding capacity of his dominions both at home and overseas, and there is good reason to believe that by the 1590s this capacity was reaching its limits. Less than a quarter of the King’s annual revenues came from remittances of American silver the rest was borrowed, or was paid for by taxes raised primarily by Castile.” – Imperial Spain: 1469–1716, p. 190

Later, he speaks about the bankruptcy of 1596, which seemed to be the answer to the question “For how long could Spain bear the economical cost of imperial delusions?”, and says, that “as in all operations of this sort, there were inevitable casualties, and the most important victims of the bankruptcy proved to be the fairs of Medina del Campo. The fairs, which had recovered from the royal bankruptcy of 1575, and had functioned with considerable regularity since reforms in 1578 and 1583, were now once more interrupted and when they started operations again in 1598 it soon became clear that their great days were past. The financial capital of Spain was to shift definitively in the early seventeenth century from Medina to Madrid, and such payments as were made in Medina del Campo during the course of that century were no more than sad reminders of a departed age. The towns of north Castile were fading into history, their streets still walked by the ghosts of Simón Ruiz and his friends – figures from a time when Spain basked in the largueza that came from abundance of silver, and when Castile could still provide financiers of its own.” – Imperial Spain: 1469–1716, p. 191

Castile, arguably the most important part of Spain, took the main hit of the economic demands of the wars Spain waged in the 16th and 17th centuries. By the time the Thirty Years’ War and the Franco-Spanish Wars began to escalate, Castile was increasingly weary and tired, so denuded of men that the levies were a pitiful affair, effectively making it more and more impossible to keep the armies up to strength. The economic position by now was also exceptionally grave, Spain’s last source of economic strength was the trading system between Seville and the America, and it was failing.

The flow of silver

Effectively, the merchants lost confidence, as the Sevillian shipping was in decay, and by 1640, Spain’s supply of silver abruptly ended when there were no silver fleets. The whole system of credit and confidence by which Seville had for long shored up the Spanish Monarchy was gradually crumbling. This might not sound huge, until one considers that Seville was effectively Spain’s center of Silver trade, as it was called the “Sevillian Commercial System”, and provided Spain with its silver and credits. Therefore, when it began to crumble due to the result of the decaying trade with America and the interference of Spanish officials, the fall of the Sevillian silver trade meant a crumbling of the Spanish economy which was built upon it. Nothing was made better by the fact that Spain was in a state of unending war and abuse prior to the 1640s, and so many wars eventually pay a toll on even an empire as grand as the Spanish Empire.

By 1640, the Spanish army was spent and tired, the funding of the war effort was rather poor, and the constant defeats in its recent wars meant Spain was losing means of funding its wars. The loss of the connectivity of the Spanish Road particularly secluded its European possessions in Italy and the Netherlands, increasing the costs needed to supply and support them, all the while making it harder for them to send back their wealth to Spain. Spains acute lack of good leaders in the 17th century compounded its problems further.

Therefore, with Spain slowly but surely losing its wars with France, and its economy slowly crumbling, the Spanish did one last thing to ill the public. The Spanish decided that there was still a chance of victory through a prolonged stalemate with France, where an induced exhaustion of France would bring her to terms. This would require unrelenting pressure on the French, which would require all of Spain to help and contribute towards, as Castile was worn out and mostly a spent force. This meant for example, that Catalonia would have to be prepared to dedicate troops to Italy and a renewed offensive across the Flanders border.

Throughout February and March of 1640, troops clashed with the civilians, and the counts and dukes proved unable to retain order. In the ensuing rebellions, the Catalans were repeatedly alienated by Castile, since they meant to use Catalonia to fund the wars and bear the burden of Spain’s problems at the time.

One could almost compare the decline of Spain with the decline of (Western) Rome. The massive wealth procured from America allowed the Spanish monarchs and minister to throw money at every problem that arose, but it gave the country no incentive to evolve its own internal economy.

In the case of Rome, Rome’s greatness had come from conquests that provided the Romans with the means to expand still further, until there were not enough Romans to conquer and govern any more peoples and territory. When pressure from outsiders grew, the Romans lacked the resources to advance and defeat the enemy as in the past. Still, the tenacity and success of their resistance were remarkable. Without new conquests to provide the immense wealth needed to defend and maintain internal prosperity, the Romans finally yielded to unprecedented onslaughts by fierce and numerous attackers. Rome prospered because of her conquests, because of the minerals she could mine in France and Spain and when they proved insufficient and there was no longer any chance of pushing forward to conquer new mines, the Roman economy faltered. Rome would have needed an economic revolution similar in strength to the industrialization in order to survive and that was impossible.

And this seems very similar to what happened to Spain. While the other European powers, who could not survive only on gold and silver, began expanding their economy and eventually undergo massive industrialization, Spain was left behind.

Further, France, for example, focused on strengthening her borders, and sow chaos and dissent among her neighbors. England consolidated her command of the British Isles and made her navy a priority of utmost importance, as did the Dutch. The French territory was all connected with each other, and the English colonies were easily protected by her massive, strong navy. Spain simply had too many fronts, all requiring focus at the same time.

The Spanish Empire

When the other European powers caught up to Spain, they had modernized and many of them were self-sustaining and what they could not make themselves they had the means to procure either via economical or military means, abilities that Spain lacked.

The Porfiriato

The new election in 1872 was won by Sebastián Lerdo. Lerdo basically continued the policies of Juarez. When his term was up in 1876 Lerdo wanted to run for a second term. Díaz rebelled again on the basis of the no reelection principle. Initially Díaz' revolt was unsuccessful and Díaz had to flee to the U.S., but later he returned and led an army which defeated the government forces. Lerdo went into exile and Díaz took control of Mexico City. He was elected president in 1877. When the first four-year term of Díaz was up in 1881 he, in keeping with the no reelection principle, declined to run for a second term. He chose Manuel Gonzalez to serve in his place, but Díaz was not satisfied with this rule by proxy. When Gonzalez' term was up in 1884 Díaz ran for the presidency again and won. Altogether Díaz ruled Mexico for 34 years, although not always as the official holder of office.

Some additional information on Díaz' background is in order here. He was born in Oaxaca in 1830 to a poor mestizo family. He initially intended to go into the priesthood and began training for this career when he was 15 years old. But that was the time of the U.S.-Mexican War. Díaz enlisted in the army. After the war with U.S., Díaz, with the encouragement of Juarez, studied law for a while, but he decided to make the military his career. He continued serving in armies during the War of Reform (1857-1860) and the rebellion against the French-imposed Empire of Maximilian.

After the overthrow of Maximilian Díaz decided to retire from the military. He went back to Oaxaca. Soon he had political disagreements with President Juarez and decided to enter politics.

When Díaz became president of Mexico in 1877 there were virtually no funds for public projects. Díaz concentrated on building up a political machine and putting down rebellions. He gave government jobs to mestizos. He secured the support of the Creole class by leaving their land holdings alone and giving some positions of honor in his administration. Likewise he gained the support of the Church by leaving Church properties untouched.

Since Díaz had no significant amount of funds for the economic development of Mexico he left this field to private industry. He encouraged foreign investment. Writers of a Marxist persuasion decry the profits which foreigners made in Mexico under Porfirio Díaz, but his strategy got railroads built and the minerals mined. Labor benefited from the jobs created. The gains of the foreign investors were more than matched by the gains to Mexico. The notion that because the foreign investors gained Mexico did not gain is sophmoric if not moronic.

While Díaz' economic policy may have been reasonable with respect to foreign investment, in trade policy it was highly protectionist. In the political sphere Díaz was a tyrant. He was a centrist and he virtually destroyed the political structures at the state level. In 1910 he told a foreign magazine journalist that he would not run in the next election. But when the time came he did run. However he allowed Francisco I. Madero, a liberal reformist from Coahuila, to run against him. Díaz won the election and imprisoned Madero before releasing him to leave Mexico. Madero went to St. Louis in the U.S. and from there he planned a revolt which was joined by others. Madero created in St. Louis the Plan of San Luis de Potosí. The Plan was distributed in dissident areas of Mexico. Local leaders, particularly Francisco "Pancho" Villa in the state of Chihuahua, decided to join Madero's revolution. Other local leaders joining Madeo were Pascual Orozco of Chihuahua and Emiliano Zapata of Morelos. Rebels captured Cuidad Juarez and other state capitals. Díaz' forces collapsed and Díaz, then eighty years of age, resigned the presidency on May 25, 1911 and went into exile in France, ultimately dying in Paris years later.

Economic Development in Spain, 1815–2017

In assessments of modern-day Spain’s economic progress and living standards, inadequate natural resources, inefficient institutions, lack of education and entrepreneurship, and foreign dependency are frequently blamed on poor performance up to the mid-20th century, but no persuasive arguments were provided to explain why such adverse circumstances reversed, giving way to the fast transformation that started in the 1950s. Hence, it is necessary to first inquire how much economic progress has been achieved in Spain and what impact it had on living standards and income distribution since the end of the Peninsular War to the present day, and second to provide an interpretation.

Research published in the 2010s supports the view that income per person has improved remarkably, driven by increases in labor productivity, which derived, in turn, from a more intense and efficient use of physical and human capital per worker. Exposure to international competition represented a decisive element behind growth performance. From an European perspective, Spain underperformed until 1950. Thereafter, Spain’s economy managed to catch up with more advanced countries until 2007. Although the distribution of the fruits of growth did not follow a linear trend, but a Kuznetsian inverted U pattern, higher levels of income per capita are matched by lower inequality, suggesting that Spaniards’ material wellbeing improved substantially during the modern era.




In assessments of modern-day Spain’s economic progress and living standards, inadequate natural resources, inefficient institutions, lack of education and entrepreneurship, and foreign dependency are frequently blamed on poor performance up to the mid- 20th century , but no persuasive arguments were provided to explain why such adverse circumstances reversed, giving way to the fast transformation that started in the 1950s.

There has been historiographical debates and controversies on several aspects of the economic developments in 19th century , but very few on the Spanish economy under Franco’s dictatorship. This article will address some of the major debates, many of them still lacking a consensus view. First, trends in output are described and their determinants investigated jointly with an analysis of Spain’s performance from an international perspective. Then, the focus is on how the fruits of economic progress were distributed over time. Finally, interpretations about the long-run performance of Spanish economic in the 19th and 20th century is dealt with.

Economic Growth Over Two Centuries, 1815–2017: Overview

Gross domestic product (GDP) multiplied 74-fold in Spain between 1815 and 2017 , which implies an average cumulative rate of growth of 2.1% per year. As the increase did not take place at a steady pace, five main phases may be established: 1815–1850 1850–1950 (with a shift to a lower level during the Civil War, 1936–1939 ) 1950–1974 1974–2007 and 2007–2017 . In the phase of fastest growth, the so-called Golden Age ( 1950–1974 ), GDP grew four and a half times faster than during the previous hundred years (and almost sevenfold than the early 19th century ), and twice faster than over 1974–2007 , while the recent Great Recession represented a fall in real GDP of 8% between 2007 and 2013 . Only in 2017 the GDP level for 2007 was overcome (see Prados de la Escosura (2017) where a more detailed exposition is provided).

Changes in the composition of GDP by type of expenditure are revealing of the transformation experienced by the Spanish economy over the last two centuries. The share of total (private and government) consumption remained stable at a high level up to the late 1880s, and only fell below 85% of GDP after 1953 , which initiated a sustained decline that reached a trough by the mid-2000s. Such a contraction in the share of total consumption conceals an intense decline in private consumption paralleled by a sustained rise in government consumption that resulted from the expansion of the welfare state and the transformation of a highly centralized state into a de facto federal state from the 1980s onward.

Investment oscillated around 5% of GDP in the second half of the 19th century but it doubled during the railways construction boom in the late 1850s and early 1860s. Since the 1900s a long-term rise has brought the relative size of investment to above 30% of GDP in 2006 . Phases of investment acceleration are associated with those of faster growth in aggregate economic activity.

The integration of Spain into international markets also increased over time, but the increase did not follow a steady pattern and, from this, three main phases can be distinguished: a gradual rise in openness (i.e., exports plus imports as a share of GDP) since the 19th century that stabilized in the early 20th century at a high plateau a sharp decline followed from the early 1920s to the 1950s, reaching a trough during the 1940s. Then, a cautious but gradual exposure to international competition took place since the 1950s, facilitated by the reforms associated with the 1959 Stabilization and Liberalization Plan, and accelerated after the end of Franco’s regime. It is worth stressing the correspondence between investment and imports trends, which suggests that economic growth was stimulated by international trade.

The changes in the composition of GDP by economic activity also reflect the deep transformation associated with modern economic growth. Agriculture’s share underwent a sustained contraction over time, except for the autarkic reversal of the 1940s. The evolution of industry followed an inverse U shape, expanding its relative size up to the late 1920s and resuming its relative increase since 1950 , to stabilize at a high plateau, and, then, contract sharply from the mid-1980s. The construction industry remained mostly stable below 5% of GDP until the mid- 20th century , exhibiting a sustained increase since the early 1960s that peaked during the mid-2000s, more than doubling its relative size. Services made a high and stable contribution to GDP, fluctuating around 40% up to mid- 20th century , and expanded from less than one-half to three-fourths of GDP between the early 1960s and 2015 .

Comparing the sectorial composition of GDP to that of labor may be illuminating. Agriculture’s share (measured in hours worked) exhibits a long-run decline from above three-fifths to less than 5% since 2006 . Agriculture provided the largest contribution to employment up to 1964 , when it represented one-third of total hours worked. The evolution of the relative size of services presents a mirror image of agriculture, which was the largest industry from 1965 onward, reaching three-fourths of the total hours worked by 2015 . The steady expansion of industry, except during the Civil War reversal, overcame agriculture’s share by 1973 and peaked by the late 1970s, reaching one-fourth of employment, which then initiated a gradual contraction that cut its relative size by almost half by 2015 . Construction, in turn, more than trebled its initial share by 2007 , sharply contracting as the sector’s bubble ended during the Great Recession.

But to what extent a larger amount of goods and services affected individuals’ living conditions? GDP can be decomposed into GDP per capita and population. Since population trebled, real GDP per capita experienced a 19-fold increase between 1815 and 2017 , growing at a cumulative annual rate of 1.5%. The implication is that output per person drives total GDP expansion (Figure 1). Such an improvement, though, took place at an uneven pace. After growing at a moderate 0.4% between the end of the Napoleonic Wars and the mid- 19th century , per capita GDP growth raised to 0.7% per year over 1850–1950 , doubling its initial level in hundred years. During the next quarter of a century, the so-called Golden Age, its pace accelerated more than sevenfold (at an annual rate of 5.3%), so by 1974 per capita income was 3.6 times higher than in 1950 . Although the economy decelerated from 1974 to 2007 , and growth per capita slowed down to 2.5% yearly, per capita GDP in 2007 more than doubled its level in 1974 . The Great Recession ( 2008–2013 ) shrank per capita income by 11%, but, nonetheless, by 2017 , it had recovered its level in 2007 and almost doubled the one enjoyed at the time of Spain’s EU accession ( 1985 ).

Figure 1. Real GDP growth breakdown into its components, 1815–2017 (%).

In comparative perspective, Spain’s GDP per capita followed a similar path to that of the western European nations, although its level has remained systematically lower. Moreover, the improvement in Spain’s GDP per capita did not fit a monotonic pattern, at odds with the steady progress experienced by the United Kingdom, the United States, and, to a lesser extent, France. It could be argued, then, that the roots of most of differences in GDP per person between Spain and advanced countries in the 21st century should be searched for in the early modern era. However, a closer look reveals that long-run growth before 1950 was clearly lower in Spain than in the advanced countries. Sluggish growth over 1883–1913 and not taking advantage of its World War I neutrality partly account for it. Furthermore, the progress achieved in the 1920s was outweighed by Spain’s short-lived recovery from the Depression that was brought to a halt by Civil War ( 1936–1939 ), and a long-lasting and weak postwar reconstruction.

Thus, Spain fell behind between 1815 and 1950 (Figure 2). The 19th century and the early 20th century witnessed sustained per capita GDP growth while paradoxically the gap with the industrialized countries widened over 1883–1913 . The gap deepened further during the first half of the 20th century . This finding is at odds with the predictions of the convergence theory that posit that the more intense the growth, the lower the initial level of income.

Figure 2. Spain’s relative real GDP per capita, 1815–2017 (1990 Geary-Khamis $ Spain as a percentage of each country’s level).

The opposite happened between 1950 and 2007 . The Golden Age ( 1950–1974 ), especially after 1960 (a common feature of countries in the European periphery such as Greece, Portugal, and Ireland), stands out as a phase of outstanding performance and catching up with the advanced nations. Steady, yet slower growth after the slowdown during the transition years to democracy ( 1974–1884 ) allowed Spain to keep catching up until 2007 —a trend reversed by the Great Recession. On the whole, Spain’s relative position compared to other western countries has evolved along a wide U shape.

GDP per capita depends on the amount of work per person and the level of productive effort. GDP per capita and labor productivity (measured as GDP per hour worked) evolved alongside each other between 1850 and 2017 , even though, as the number of hours worked per person shrank—from about 1,000 hours per person-year to less than 700—labor productivity grew at a faster pace. The main element behind the decline in hours worked per person is the reduction in hours worked per fully occupied worker, which has fallen from 2,800 hours per year in the mid- 19th century to about 1,800 today. Thus, it can be claimed that long-term gains in output per capita are entirely attributable to productivity gains, with phases of accelerating GDP per capita, such as the 1920s or the Golden Age ( 1950–1974 ), matching those of faster labor productivity growth (Figure 3). A breakdown of the gains in labor productivity into the contributions made by the productivity increase within each economic sector and by the shift of labor from less productive to more productive sectors (i.e., structural change) indicates that structural change accounts for over a third of the aggregate labor productivity growth since 1850 .

Figure 3. Real GDP per capita growth breakdown into its components 1850–2017 (%).

But what lies under the rise of labor productivity? Is it a more abundant use of capital broadly defined (i.e., encompassing physical and human capital) or a more efficient use of the available broad capital, namely, total factor productivity?—Here, physical capital is understood as the flow of productive services provided by an asset that is employed in production. Capital assets are produced goods that are not consumed but used for production (dwellings, infrastructure, machinery, transport material). Human capital is understood as the flow of productive services provided by the knowledge, skills, competencies, and attributes embodied in individuals, including schooling and skills acquired through work experience.

In Spain, labor productivity growth over the long run is accounted for, in similar proportions, by broad capital accumulation (physical and, to a lesser extent, human capital) and efficiency gains (Prados de la Escosura & Rosés, 2009). Furthermore, main spurts in broad capital accumulation and in efficiency gains tend to coincide, as can be observed during the years of the railways construction (1850s–1880), the electrification (the 1920s and 1950s), and the adoption of new vintage technology in the Golden Age ( 1950–1974 ) (Figure 4).

Figure 4. Labor productivity growth and its sources, 1850–2000 (%).

Nonetheless, a closer look reveals a clear divide before and after 1950 , with capital deepening (namely, an increase in capital per hour worked) as the leading force over 1850–1950 , contributing to two-thirds of labor productivity growth—except in the 1920s—and efficiency gains as the hegemonic force between 1950 and 1985 (and in the 1920s), contributing to two-thirds of labor productivity growth in the Golden Age ( 1950–1974 ) and one-half in the 1920s and during the democratic transition ( 1975–1985 ). Furthermore, the acceleration of labor productivity growth in the 1920s and the Golden Age was almost exclusively attributable to efficiency gains. From 1986 onward, broad capital accumulation became the main driver of labor productivity regrowth, while efficiency gains stagnated and even declined.

Thus, while in the 1920s and over 1950–1985 efficiency gains largely explained the labor productivity increase that accounted for the improvement in GDP per capita, during 1986–2007 the increase in GDP per capita was dependent in roughly similar proportions on the number of hours worked per person—that resulted from new employment opportunities—and on labor productivity which, in turn, derived from a more intense use of capital. Hence, a more extensive and not so intensive kind of growth characterizes the post- 1986 period that corresponds to the time when Spain was a permanent member of the European Union.

How such a reversal, from efficiency gains to capital accumulation, in the source of labor productivity growth can be account for? An assumption is that, as economic growth took place, Spain became closer to the technological frontier, making further gains in efficiency more difficult. Moreover, structural change, namely, the shift of resources (i.e., labor) from lower labor productivity sectors to those of higher productivity (i.e., from agriculture to manufacturing) is a once and for all change that had largely taken place by the time Spain joined the European Union. Thus, Spain would have exhausted its catching-up potential, and efficiency gains slowed down, adjusting to the growth in total factor productivity in the most advanced countries.

However, a summary inspection of the evidence suggests that this has not been the case, as in terms of total factor productivity growth Spain stayed at the bottom among the Organisation for Economic Co-operation and Development (OECD) countries between the mid-1990s and 2007 (Corrado, Haskell, Jona-Lasinio, & Iommi, 2013). Thus, an alternative explanation is required. Comparative evidence indicates that firms’ expenditure on research and development are lower in Spain than in most OECD countries, as it is also the case in investment in intangible (intellectual property) and human capital. The context is further aggravated by the low degree of competition of products and factor markets. Furthermore, the re-allocation of resources toward services and construction has taken place in a context of lower investment and innovation that led to declining efficiency.

Income Distribution in the Long Run

How have the fruits of growth been distributed? Trends in aggregate inequality measured by the Gini coefficient are provided in Figure 5. The Gini coefficient measures the extent to which the distribution of income (or consumption expenditure) among individuals or households within an economy deviates from a perfectly equal distribution. A Gini of 0 represents perfect equality, while an index of 1 (100) implies perfect inequality (Prados de la Escosura, 2008).

Figure 5. Income inequality, 1850–2017: Gini coefficient.

The evolution of inequality presents the shape of a wide inverted W with peaks in 1916 and 1953 . Different phases in the evolution of inequality can be observed. A long-term rise is noticeable between the mid- 19th century and World War I. Then, a sustained reduction in inequality took place during the 1920s and early 1930s, stabilizing during the Civil War ( 1936–1939 ) and World War II. The decline in inequality was sharply reversed during the late 1940s and early 1950s, with a peak in 1953 similar to the one reached in 1918 . A dramatic fall in inequality took place in the late 1950s and, again, in the early 1970s. Since 1973 , inequality has stabilized at comparatively low levels, fluctuating within a narrow 30–35 Gini range.

In comparative perspective, Spain matched the evolution of OECD countries during the last century and a half, except for the autarchic period that followed the Civil War in which Spain’s inequality was way above the European average.

How can these inequality trends be interpreted? In the early phase of globalization, from the early 19th century to World War I, the fall in inequality during the phases of opening-up to international competition (the late 1850s and early 1860s, the late 1880s and early 1890s) and the rise in inequality (from the late 1890s to the end of World War I) coinciding with a return to strict protectionism, could be predicted within a Stolper-Samuelson theoretical framework which posits that protectionist policies favor the scarce factors of production (land and capital, in this case) while it penalizes the abundant one (labor). In the late 19th and early 20th centuries , this tendency would have been reinforced by the fact that tariff protection did not push out workers as in other protectionist European countries (i.e., Italy and Sweden). The depreciation of the peseta in the 1890s and early 1900s made more difficult the emigration decision as the cost of passage increased dramatically (Sánchez-Alonso, 2000a). This explanation fails, however, to explain the rise in inequality between the mid-1860s and the early 1880s that could be attributed to a rise in capital and land returns relative to wages associated to the railways construction and to the exploitation of the mining resources after its liberalization, and not least to the agricultural export boom.

The reduction in inequality during a period of globalization backlash between the 1920s and the early 1930s, would demand a different explanation as other forces conditioned the evolution of inequality. Accelerated growth, capital deepening, and structural change all helped reduce total inequality in the 1920s. Wage inequality rose with rural–urban migration and urbanization, given that urban wages were higher and with a larger variance than rural wages, but the gap between returns to property and labor declined. Institutional reforms that included new social legislation, especially the reduction in the number of working hours per day, and the increasing voice of trade unions, contributed to a rise in wages relative to property incomes (Cabrera & del Rey, 2002 Comín, 2002).

The fall in inequality during the early 1930s, i.e., in the years of increasing restrictions to commodity and factor mobility, is again at odds with the Stolper-Samuelson model. Forces pushing for redistribution were in place in Spain. On the whole, a reduction in the gap between returns to property and labor more than offset the rise in wage inequality. The Great Depression possibly had a negative impact on the concentration of income at the top of the distribution (i.e., the returns accruing to proprietors). Alvaredo and Saez (2009) observe, however, an increase in top income shares for 1933–1935 in Spain, which coincided with the post-crash recovery. Wages (in nominal and real terms) rose in a context of trade unions’ increasing bargaining power and labor unrest. In the early 1930s, a new legislation that tended to increase labor costs, threats to land ownership, and workers’ attempts to control factory engendered insecurity among proprietors which led to a severe investment collapse and provoked political polarization in Spanish society (Cabrera & del Rey, 2002 Comín, 2002).

The fact that the Civil War broke out after one and a half decade of inequality decline and the economic growth of the 1920s, which led to the alleviation of absolute poverty, demands explanatory hypotheses. Had the Civil War economic roots? Unfulfilled expectations to share increases in wealth by those at the bottom of the distribution during the II Republic ( 1931–1936 ) may contribute to explain the social unrest that preceded the Civil War. Furthermore, the shrinking gap between returns to property and to labor in a context of social unrest, including threats to property, during the early 1930s provides a potential explanation for the support of a non-negligible sector of the Spanish society to the military coup d’état that triggered the Civil War ( 1936–1939 ).

How can the rise of inequality during the autarchic years after the war be interpreted? Wage compression took place as a result of the re-ruralization of the Spanish economy (the share of agriculture increased in both output and employment) and the ban on trade unions. A parallel decline in the concentration of income at the top during the 1940s took place simultaneously (Alvaredo & Saez, 2009). Thus, in contrast with the experience of the 1930s, while inequality was falling within both labor and capital returns, polarization between property and labor caused a rise in total inequality. International isolation, resulting from autarchic policies, would intensify these trends, with inequality rising as scarce factors, land and capital, were favored at the expense of the abundant and more evenly distributed factor, which is labor.

A dramatic decline in inequality started in the late 1950s and reached into the early 1960s, that is, prior to the phase of liberalization and opening-up that followed the 1959 reforms. The spurt of economic growth in the 1950s brought with it improvements in living standards, urbanization, and an increase in the labor share within national income. Furthermore, populist policies by Franco’s Minister of Labor led to a substantial pay rise across the board in 1956 (Barciela, 2002). A careful investigation of the process of inequality reduction during the 1950s is warranted.

The opening-up to international markets in the 1960s and early 1970s favored labor as the abundant factor and, hence, contributed to reducing inequality, while stimulating growth and structural change that, in turn, played a non-negligible part in keeping inequality at moderate levels.

The rise in savings, helped by the financial development that went together with economic growth, facilitated access to housing ownership which, in turn, helped to reduce the concentration of property incomes (Comín, 2007 Martín Aceña & Pons, 2005). The diffusion of education surely played a role in the decline of inequality by reducing the concentration of human capital (Núñez, 2005). Moreover, the decrease in regional disparities, conditioned by technological catch-up, the generalization of basic education, and convergence in employment composition must have also impinged on income distribution (de la Fuente 2002, Martínez-Galarraga, Rosés, & Tirado, 2015). Furthermore, the increase in social expenditure in the late Francoism ( 1960–1975 ) must have had an effect on reducing inequality.

Increasing political participation after democracy was reinstated in 1977 and led to a progressive fiscal reform and to substantial increases in public expenditure on social transfers (unemployment, pensions), education, and health that had a strong redistributive impact. However, phases of declining and rising inequality have alternated since the restoration of democracy with the result that levels of inequality have remained within a 30–35 Gini range.

Thus, it can be argued that the social transfers and progressive taxation brought by the welfare state have allowed the contention of inequality levels within the 30–35 Gini range, while the “market” Gini (i.e., the measure of inequality before taxes and social transfers) increased. In fact, the evidence for the 21st century shows that, in the absence of social transfers, income inequality would reach similar levels to those of the early 1950s (Figure 6). A similar finding is obtained for OECD countries (OECD, 2016). Why Spain, alongside other OECD societies, has become so unequal before progressive taxation and social transfers demands careful investigation.

Figure 6. Progressive redistribution since democracy? Market Gini breakdown into Gini and progressive redistribution, 1970–2016.

Note. Progressive redistribution is the difference between the market Gini (income distribution before taxes and social transfers) and the Gini (distribution of disposable income after taxes and social transfers).

As income distribution became more egalitarian and growth accelerated from the late 1950s onward, absolute poverty (i.e., those living on 2 US dollars a day, as measured today by the World Bank) was practically suppressed by the mid-1960s (Prados de la Escosura, 2008).

Assessing Spanish Economic Development

Spanish economic historians have traditionally focused their research in the 19th century and left aside the 20th century which has been more the field of economists. Economic history research has concentrated on specific periods such as the economic growth during the 1920s, the economic policy of the Second Republic ( 1931–1936 ), the Civil War, and the different phases of Franco’s regime. The absence of debates and controversies about the Spanish economy during the 20th century as a whole is striking.

The generation of economic historians publishing in the 1970s and 1980s focused their attention on the reasons why the Spanish economy did not industrialize in the 19th century while other European countries successfully did. Behind this reasoning lays an interest in understanding whether the Civil War and Franco’s dictatorship were caused by failure and economic backwardness in the long run. Although an increasing number of post- 1980 Spanish economic historians had been trained as economists, Spanish applied economists were hardly interested in the long-run development.

Spanish political history has been turbulent both in the 19th and 20th centuries . After the Peninsular War, three civil wars occurred in the 19th century (the Carlist wars in 1830s, 1840s, and 1870s), as well as the Cuban war of independence ( 1898 ). In the 20th century the Civil War was the most decisive event ( 1936–1939 ). The monarchy collapsed twice, in 1868 and 1931 , giving rise to a brief first republic in the 19th century and the second republic in the 1930s ( 1931–1936 ). Spain did not participate in the two world wars. After the death of dictator Franco ( 1975 ), the transition to democracy consolidated, adopting a fully democratic political system with the 1978 Constitution and joining the European Union in 1986 . Spanish modern history began with the loss of the colonial empire and the collapse of the Ancien Régime and culminated in the early 21st century with an economic crisis ( 2008 ) that has had strong political and institutional consequences.

Growth and Backwardness, 1815–1936

During the 19th century Spain underwent a complex transition from a colonial empire under the Ancien Régime to a modern nation with a liberal system of property rights. This transition has created a negative view of post-imperial Spain, placing it among the peripheral European countries, and terms such as failure, stagnation, and backwardness are commonly used to describe its economic performance up to the Civil War (see O’Rourke & Williamson, 1997).

The inability of the Spanish economy to modernize in the same way as other Western European countries can only be understood, according to most historical interpretations, by a detailed study of a set of internal and external determinants.

The Peninsular War ( 1808–1814 ) had deep and negative short-run economic consequences in Spain and also sparked the fight for independence in Spanish America. Nonetheless, the Napoleonic Wars triggered a complex transition from an absolutist empire to a modern nation.

The liberal regime reforms, up to the mid- 19th century , included a redefinition of property rights that implied that all citizens became equal before the law. The liberalization of commodity and factor (i.e., capital and labor) markets suppressed guilds, the Mesta, and mayorazgo, and brought with it the disentailment of land property, while the Code of Commerce, and new legislation and regulation on mortgages, patents, banking, and the stock exchange are introduced. Moreover, liberalism represented the parliamentary control of public revenues and expenditure. Needless to say, serious obstacles to reform emerged on the way, with civil wars and military takeovers as major setbacks that deferred the completion of the transition to the last quarter of the 19th century . In Spain, as in other nations, liberal reform was carried out with contradictory results in terms on economic modernization (Tedde, 1994). Neither information and transaction costs were reduced enough, nor were property rights clearly defined on the long term. The financial organization of the state did not respond to the needs of the new society. However, a glance at the post-Napoleonic Wars era reveals a distinctive behavior, when compared to the pre-war era, for any dimension of social and economic activity. The long-term consequences of liberal reforms were a more efficient allocation of resources and sustained economic growth despite social and political instabilities (Prados de la Escosura & Santiago-Caballero, 2018).

The government has also been held responsible for the economic backwardness in the 19th century . The diversion of capital away from industry and back into agriculture through land disentailment the establishment of a system of ownership within an inefficient institutional framework the application of budgetary policies conducive to rising interest rates and the crowding out of private investment are all state implementations that have been mentioned by historians (Nadal, 1975 Tortella, 2000).

Agricultural backwardness is an essential component of the internal explanations of the Spanish economic performance in the 19th century . Natural resources and property rights are seen by Tortella (1994) as major obstacles to the development of Mediterranean-type agricultures such as Spain. On the one hand, the low productivity of agriculture, coupled with the maintenance of a large percentage of the labor force in this sector, is considered responsible for the low levels of per capita income and the narrowness of the market for consumer goods (Milward & Saul, 1977 Nadal, 1973). On the other hand, slow demographic expansion is linked to high mortality rates set within the context of agricultural backwardness (Nadal, 1984).

Quantitative evidence casts serious doubt on the argument that agriculture was key to the Spanish industrial revolution “failure” as Nadal (1973, 1975) forcefully argued (Prados de la Escosura, 1988 Simpson, 1995). Agricultural production grew in both absolute and per capita terms during the 19th century . However, when seen in the context of Western European nations, Spanish agriculture is not quite as buoyant: productivity experienced lower growth rates, and differences with Britain and France (already large by 1800 ) tended to widen during the 19th century , and there was no significant reduction during the 20th century (O’Brien & Prados de la Escosura, 1992). Differences in product mix and in output per hectare emerge as key factors of Spanish agricultural retardation. What share of the blame natural or social factors take is a question that still requires further research.

Not all interpretations blame agriculture exclusively on Spain’s economic backwardness compared to Western Europe. Economic historians have also stressed the sluggish industrial performance during the late 19th century (Carreras, 1984 Prados de la Escosura, 1988). However, performance in the early 19th century was more successful for Spanish industry, and especially for Catalan textiles (Rosés, 2003). Several scholars underscore the rent-seeking attitudes of the Spanish entrepreneurs who sought protection rather than facing their competition in the international markets (Fraile, 1991 Tortella, 2000).

Quantitative evidence casts serious doubt on the traditional interpretation of Spain’s industrial backwardness according to which domestic demand was the main obstacle to the growth of manufactures during the 19th century . The inability of industry to sell in the international market and the low level of industrial productivity seem enough to explain this phenomenon. In this context, the attitudes and strategies of the Spanish industrial entrepreneurs become especially relevant. In view of international competition, they redirected their efforts toward the domestic market in search of rents and government protection (Fraile, 1991). The low per capita income associated with a backward agricultural sector is no longer sufficient to explain the lagging Spanish industrial growth during the 19th century .

External forces have been emphasized in historical explanations of failure and retardation. The loss of Latin American colonies following wars against Britain and France, the Napoleonic invasion, and the re-orientation and gradual integration of the Spanish economy into a broader Western European economy over the 19th century are perceived to have been harmful to Spanish development (Vicens Vives, 1959). As a result of colonial independence, trade flows and government revenues declined. Domestic investment also fell, even though with colonial emancipation came a repatriation of capital. The manufacturing industry may have been worst hit because the colonies had provided it with a protected market. Financial, commercial, and transport services in cities like Seville and Cadiz which had been closely linked to the colonies also suffered.

There is no conclusive evidence to support the view that the loss of the empire was responsible for Spain’s economic retardation in the long run. Fontana (1991) finds direct links between Latin American independence, the fall of the Ancien Régime, and the Liberal Revolution in Spain. If this hypothesis is correct, then the loss of the colonies could have contributed significantly to the economic and social modernization of Spain. Despite the doubtless negative effects in the short run on capital formation, government revenues, trade in goods and services, and the manufacturing industry, the overall impact on GDP was much lower (less than 8% of GDP) than was estimated by historians, and was concentrated in particular regions (Prados de la Escosura, 1993). From the quantitative evidence available, it can be suggested that the loss of the colonies seems to have had a less profound and widespread impact upon the Spanish economy than the historical literature has suggested. The more competitive and flexible sectors of the economy eventually adapted to new circumstances particularly commercial agriculture that oriented supply toward the growing markets in northwest Europe.

Regarding the shift from colonial to European markets, the fact is that the former already represented a smaller share before colonial independence. Furthermore, although foreign trade represented only a small part of Spain’s GDP, it acted as a significant and perhaps indispensable stimulus to economic modernization during the 19th and the early 20th centuries . Trade exerted moderate but positive linkages and externalities on the Spanish economy. Foreign demand induced more efficient allocation of resources, and the exploitation of their natural advantages through specialization in cash crops and minerals. This represented a positive development in a situation where trade provided a “vent for surplus” of Spain’s natural and human resources. The flexibility exhibited by changes in the composition of exports and imports, and the long-run evolution of Spain’s balance of payments, imply that historians who analyze Spanish trade in terms of mono export patterns and chronic debt crises experienced by Third World countries are transposing metaphors and concepts to a totally different world. Theories of dependency formulated for Latin America seem to have limited relevance for 19th-century Spain. Specialization along the lines of comparative advantage provided Spain both with absolute and relative improvements in welfare as measured by the real terms of trade. Favorable relative prices and employment opportunities are the key elements behind the observed and measured favorable trends.

Hence, the counterfactual hypothesis implicit in historiography of a more efficient growth path, independent from the international economy, does not seem plausible. There is no quantitative evidence to support that productivity in the export sector was inferior to productivity in sectors serving the domestic market. In addition, the domestic market does not seem to offer any equally efficient alternative allocation for production factors used in the export sector. On the contrary, it could be hypothesized that a larger foreign sector would have increased employment and productivity levels, resulting in higher real income. Consequently, trade emerges not as the hegemonic element in the country’s economic modernization, but rather as a small but indispensable stimulus of development.

Since the late 19th century restrictions on both domestic and external competition help explain sluggish growth during 1883–1920 despite the Restauración’s ( 1875–1923 ) institutional stability that should have provided a favorable environment for investment and growth (Fraile, 1991 1998). Increasing tariff protection, together with exclusion from the prevailing international monetary system, the gold standard, may have represented a major obstacle to Spain’s integration in the international economy. Currency instability, following the abandonment of the Gold Standard, helped isolate Spain from international capital markets, especially from the inflows of international capital investment in the 1880s and 1890s (Bordo & Rockoff, 1996 Martín-Aceña, 1993 Tena Junguito, 1999). The Cuban independence in 1898 had little direct impact on Spain’s economy but a large indirect one that intensified protectionist and isolationist tendencies (Fraile & Escribano, 1998). Neutrality during World War I hardly brought any economic progress, and GDP per capita shrank, a result that challenges the conventional view of the war stimulus for growth through import substitution.

Although economic links between the metropolis and the last colony were already weak, Cuba’s war of independence caused substantial macroeconomic instability. Macroeconomic instability together with a sudden stop in international investment reduced capital inflows sharply leading to the depreciation of the Peseta. From 1895 (the beginning of the Cuban War) until 1905 , the peseta depreciated by approximately 30%, due to a combination of fiscal disorder, monetary expansion, and a flexible exchange rate (Martín-Aceña, 1993 Prados de la Escosura, 2010) that, in turn, increased migration costs, reducing the outward flow of labor. Quantitative evidence shows that, in the absence of depreciation, Spanish emigration could have been more than 40% higher during the period 1892–1905 (Sánchez-Alonso, 2000a). During a period otherwise entirely favorable to international migration on account of low transport costs, higher demands for unskilled labor in New World economies, and large wage differentials between Europe and the Americas, emigration of labor remained low in Spain compared to other southern European countries like Italy. Spanish emigration was income-constrained and any potential emigrants could not afford the costs of external migration (Sánchez-Alonso 2000b). Internal migration remained low until World War I. The modest pace of industrialization was the main reason for low internal migration rates (Silvestre, 2005)

The 1920s represented the period of most intense growth prior to 1950 . The hypothesis that government intervention, through trade protectionism, regulation, and investment in infrastructure, was a driver of growth has been widely accepted (Velarde, 1969). The emphasis on tariff protectionism neglects, however, the fact that Spain opened up to international capital during the 1920s, allowing the purchase of capital goods and raw materials, hence, contributing to growth.

Structural change and labor market integration accelerated during the 1920s. Low levels of internal migration during the 19th century were, according to Tortella (2000) and others, one of the reasons of agrarian backwardness and by extension of the Spanish economy. Internal migration reached a peak after World War I (Silvestre, 2005). The spectacular growth of the Spanish economy in the 1920s drove the development of industries, such as construction, with a greater pull for migrants. Urbanization rates also increased during the decade.

Substantial wage convergence across regions took place prior to World War I, despite low rates of internal migration. The process of wage convergence was interrupted by World War I, which produced a sharp increase in regional wage differentials. These increases proved to be temporary, however wage convergence re-emerged in the 1920s, this time accompanied by internal migration and substantial re-allocation of labor from agriculture to industry (Rosés & Sánchez Alonso, 2004).

A major political change, from a monarchy to a republic, happened in 1931 . The new political system coincided with the Great Depression. The Depression, measured by the contraction in real GDP per capita, extended in Spain, as in the United States, until 1933 , with a 12% fall (against 31% in the United States). The Depression, with GDP per capita falling at -3.1% annually, was milder than in the United States, but similar in intensity to Western Europe’s average (Maddison Project, 2013), challenging the traditional view of a weaker impact due to Spain’s relative international isolation and backwardness. The Civil War ( 1936–1939 ) prevented Spain from joining the post-Depression recovery and resulted in a severe contraction of economic activity (nearly one-third drop in real per capita income) but did not reach the magnitude of the impact of World War II on main belligerent countries of continental Western Europe (Maddison Project, 2013). A consensus appears to exist in the literature pointing to non-economic causes of the Civil War. Expectations after the collapse of the monarchy in 1931 were not fulfilled, as proposal for land reform, industrial labor legislation, and welfare improvements were not completed or enforced, leading to social unrest, civil conflict, and political polarization (Domenech, 2013 Palafox, 1991).

Growth Under the Dictatorship, 1939–1975

Since 1939 Spain entered a long dictatorship that lasted until 1975 . When Franco died, the Spanish economy had experienced a major transformation thank to high rates of growth during the 1960s and structural changes.

The weak post-Civil War recovery implied that the pre-war GDP per capita peak level ( 1929 ) was not reached until 1954 in contrast with the six years that, on average, took to return to the pre-World War II peak in Western Europe. Looking for an explanation of Spain’s idiosyncratic behavior, the hypothesis that the larger loss of human capital vis-à-vis physical capital contributed to the delayed reconstruction can be put forward. The destruction of physical capital during the Civil War was about the Western European average during World War II. However, the exile after the Civil War and, possibly to a larger extent, the internal exile resulting from the new regime’s political repression, meant a significant depletion of Spain’s limited human capital (Núñez, 2003 Ortega & Silvestre, 2006 Prados de la Escosura & Rosés, 2010).

The early years of the dictatorship—from the Civil War up to the early 1950s—represented a dramatic rupture with the economic policies prevalent in Spain from the mid- 19th century . Economic policy during the 1940s was based upon the state’s direct intervention, indiscriminate import substitution, severe restrictions on imports and capital inflows, and a complex exchange rate system. The new authorities shared a strong anti-market attitude, and their economic policy often threatened private initiative and investment (Fraile, 1998). Severe market controls aimed at economic autarchy were implemented (Barciela, 2002). The new state-owned enterprises began by controlling “strategic” industries, seeking technical solutions to maximize the amount of production, and bypassing the opportunity cost of their decisions (Martín Aceña & Comín, 1991). Labor relations were strictly regulated.

The situation began to change in the 1950s when, in per capita terms, the Spanish economy grew at a similar rate as the Western European average, but with the significant difference that Spain started from a substantially lower level. Spain and Western Europe grew at 4.4% and 3.9% yearly during the 1952–1958 period.

However, countries that experienced a reconstruction process grew at a much faster pace. For example, Italy grew at 4.9% and Germany at 6.5%. It was during the last period of Franco’s rule ( 1959–1975 ) when per capita GDP growth reached an unprecedented intensity in Spain, not far behind that of 1950s Germany and significantly above Western Europe and the United States.

During the 1950s increasing confidence in the viability of Franco’s dictatorship after the U.S.–Spain military and technological cooperation agreements ( 1953 ) together with the regime’s moderate economic reforms favored investment and innovation, contributing to accelerated economic growth (Calvo-González, 2007 Prados de la Escosura et al., 2012). The institutional reform initiated with the 1959 Stabilization and Liberalization Plan, a response to the exhaustion of the inward-looking development strategy, set policies that favored the allocation of resources along comparative advantage and allowed sustained and faster growth during the 1960s and early 1970s. However, without the moderate reforms of the 1950s and its growth outcome it seems unlikely that the Stabilization Plan would have succeeded (Prados de la Escosura et al., 2012). Thus, the new available evidence blurs the view of a neat discontinuity between autarchic ( 1939–1959 ) and moderately free market ( 1959–1975 ) periods.

Franco’s regime also represented an exception from the point of view of Spain’s integration in the international economy, as it started with a dramatic closing down followed, after the Stabilization Plan of 1959 , by an opening-up to a historical maximum. After establishing links with international economic organization, a gradual opening and factor mobility (capital inflows and labor migration to Europe) were achievements of the new pro-market orientation of the dictatorship. The lack of structural reforms affecting the tax system and labor and financial markets represented the main shortcomings of economic policy during the 1960s.

The Post-1975 Era

The oil crisis of the 1970s happened at the time when Spain transitioned from a dictatorship to a democracy ( 1975–1985 ). During the transition decade, per capita GDP growth fell to one-fourth of that achieved over 1959–1974 . Was the slowdown exogenous simply as a result of the international crisis? Did it derive from the Francoism legacy of an economy sheltered from international competition? Was it caused by the policies of the new democratic authorities? Accession to the European Union ( 1986 ) heralded another long phase of per capita GDP growth that came to a sudden halt with the Great Recession ( 2008–2013 ). What explain Spain’s comparatively deeper contraction and weaker recovery? Answering these questions provides a research agenda for historians.

It is worth pointing out that the post- 1975 era introduced a new pattern according to which phases of acceleration in labor productivity correspond to those of sluggish progress in GDP per person, and vice versa. Thus, periods of sluggish ( 1975–1985 ) or negative ( 2008–2013 ) per capita GDP growth were paralleled by vigorous or recovering productivity growth. However, during the “transition-to-democracy” decade, labor productivity offset the sharp contraction in hours worked –resulting from unemployment—with the consequence of preventing a decline in GDP per capita. During the Great Recession ( 2008–2013 ), however, the timid improvement in output per hour worked was not enough to offset the contraction in employment and, hence, output per person fell sharply, in a similar fashion to the contraction experienced during the Great Depression ( 1929–1933 ). Conversely, the years between Spain’s accession to the European Union ( 1986 ) and the eve of the Great Recession ( 2007 ), particularly since 1992 , exhibited substantial per capita GDP gains while labor productivity slowed down. Thus, in the three decades after Spain joined the EU, in which GDP per capita doubled, growing at 3.0% per year, more than half was contributed by the increase in hours worked per person.

The opposite trends in GDP per capita and per hour worked since the mid-1970s can be attributed to the fact that the Spanish economy has been unable to combine employment creation and productivity growth, with the implication that sectors that expanded and created new jobs (mostly in construction and services) did not succeed in attracting investment and technological innovation.

Was the transition to democracy in Spain facilitated by the decrease in inequality after 1950 ? Prados de la Escosura (2008) suggests that this was the case, contrary to what happened in the interwar period. The elimination of absolute poverty and the growth of the middle had positive effect on the stabilization of democracy. Torregrosa-Hetland (2016) argues, however, that democracy brought about new distributive forces and the new political system did not turn out to disproportionately favor the less well-off. At least, it could not effectively counteract market forces toward growing inequality.


Since 1815 , income per person has improved remarkably, driven by increases in labor productivity. Up to 1950 and since 1986 —when Spain became part of the European Union—capital deepening has been the main driver behind long-run labor productivity growth, while efficiency gains (total factor productivity) led it in the 1920s and during 1953–1986 . The re-allocation of resources from lower productivity sectors, such as agriculture, toward sectors with higher productivity contributed significantly to the acceleration of productivity growth. Exposure to international competition represented a decisive element behind growth performance, with sluggish growth and retardation associated to closing-up and accelerated growth and catching-up to openness. Spanish performance in Western European perspective confirms this assertion. Spain underperformed up to 1950 and, then, caught up with advanced countries until 2007 , with the years 1960–1974 standing out for its remarkable performance and the transition to democracy ( 1975–1985 ) as the exception.

Income distribution did not follow a linear path. After an upswing in inequality up to World War I, a declining trend initiated in the interwar years Although it reversed in the post-Civil War autarchy, it resumed strongly in the late 1950s and early 1960s, stabilizing at a relatively low level in the last half a century. Higher levels of income per capita were matched by lower inequality, suggesting that economic growth percolated through to reach the lower income groups. Therefore, improvements in average incomes went along a more egalitarian income distribution.

Research on modern Spain’s economic history is clearly unbalanced. Economic history research has been focused overwhelmingly in the “long” 19th century reaching up until the Civil War. Old debates and controversies about the determinants of Spanish failure to industrialize are largely settled on topics such as the economic impact of the loss of the colonies in the early 19th century or the shared responsibility of agriculture and industry in Spain’s economic backwardness.

The absence of debate about long-run Spanish economic performance during the 20th century is striking. The Civil War has marked a dividing line in research that seems to prevent a global vision of the last century. The Francoist era continues to be analyzed chronologically, assuming a sharp discontinuity around 1960 while ignoring persistence within Francoism. New available evidence challenges the view of a neat cut-off between autarchy and moderately free market periods. A convincing explanation of why the historical determinants of Spain’s economic backwardness weakened or faded away from the 1960s onward is still lacking.

Moreover, although the political transition to democracy after 1975 was a success, and Spanish experience may be relevant to countries on their way to democracy and aiming to open up, while maintaining social and political stability, scholars are far from certain about the economic costs of the transition and whether it could have been achieved at lower economic cost.

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