A

long-term view of the Spanish

economy
“Spain is the problem, Europe the solution”
J. Ortega y Gasset, 1910
 Economic growth: a relative concept
•  “Now, here, you see, it takes all the running
you can do, to keep in the same place. If you
want to get somewhere else, you must run at
least twice as fast as that!"
Red Queen to Alice, in Through the looking
glass (1871)
 A short reminder of some basic concepts

•  Economic growth
•  Backwardness
•  Catching-up (convergence)
•  Modern economic growth (Kuznets)
•  Strong and direct relationship between economic
growth, economic development and prosperity
(well being)
•  GDP per capita and other measures of economic
growth and well being

 Where does currently rank Spain in terms of GDP per capita?

•  In 2016, Spain ranks among the High Income Countries of

the World Bank (Sp. 36,309 US$; HIC 46,704 US$; EU
39,630 US $; World 16,143 US $)
https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?
locations=ES-1W-OE-EU&view=chart
•  With a GDP per capita close to the EU-28 average (92%):
http://epp.eurostat.ec.europa.eu/tgm/table.do?
tab=table&init=1&plugin=1&language=en&pcode=tec00114
•  Spain ranks 16th in the Social Progress Index 2017 (and 23
in GDP PPP per capita), among 128 countries
https://www.socialprogressindex.com/?
tab=2&code=ESP&compare=ESP&compare=NOR&prop=SPI
•  And 26th in the Human Development Index 2015
http://hdr.undp.org/en/countries/profiles/ESP
 Social Progress Index 2017
Map of 2017 Results

Social Progress Tier

Very High
High
Upper Middle
Lower Middle
Low
Very Low
Incomplete Data
 Now, a movie of Spain’s economic development

•  Gapminder
http://www.gapminder.org/videos/200-years-that-
changed-the-world-bbc/
http://www.gapminder.org/world
•  Data and facts, and not media, should shape the
world
•  https://www.gapminder.org/videos/dont-panic-
end-poverty/
•  https://ourworldindata.org/a-history-of-global-
living-conditions-in-5-charts/
Phases of economic growth in Spain

 Phases of economic growth in contemporary Spain
•  1789-1849: institutional and political change -economic backwardness
•  1840-1890, the diffusion of industrialization –same pace than leading
European nations
•  1891-1914, a nationalist turn in economic policy –economic backwardness
•  1914-1936, the silver age of the Spanish economy, catching up
•  1936-1951, Civil war, autarchy, isolation, acute backwardness
•  1951-1959, the ISI experiment and its limits, backwardness
•  1960-1973: the golden age of the Spanish economy and its reintegration
in the international economy, catching up
•  1974-1985: economic crisis and political change –relative backwardness
•  1986-2007, full integration in the European economy –catching up and
convergence (platinum age?)
•  2008-2014, economic and financial crisis, backwardness
 Economic growth, economic development and prosperity: equality and
inequality in wealth distribution

•  Kuznets’ curve: when a given economy develops, market forces first

increase and then decrease economic inequality
•  Between-group inequality measures: labor share in national income, top
incomes share
•  Within-group inequality measures: skill premium, skilled-unskilled wage
gaps and wage dispersion
•  In modern Spain, no trade-off between inequality
and growth is observed:
–  In its most dynamic phases, inequality declined (the
1920s, the Golden Age) but also increased
(1850-1883).
–  In years of sluggish performance, inequality deepened
(1880s-1920, the post-Civil War autarchy), but also
shrank (1931-36, 1976-85)
•  There are other factors to be taken into account
•  Absolute poverty experienced a long-run decline
Structural change (I): Sector distribution of Spanish
GDP, 1850-2015
80,00

70,00

60,00

50,00

40,00

30,00

20,00

10,00

0,00
1850

1858
1862
1866
1870

1878
1882
1886
1890

1898
1902
1906
1910

1918
1922
1926
1930

1938
1942
1946
1950

1958
1962
1966
1970

1978
1982
1986
1990

1998
2002
2006
2010
1854

1874

1894

1914

1934

1954

1974

1994

2014
Agricultura, silvicultura y pesca Industria Construcción y obras públicas Servicios
Structural change (II): Sector distribution of Spanish
working population, 1930-2000 (in %)
90,00

80,00

70,00

60,00

50,00

40,00

30,00

20,00

10,00

0,00
1850

1858
1862
1866
1870

1878
1882
1886
1890

1898
1902
1906
1910

1918
1922
1926
1930

1938
1942
1946
1950

1958
1962
1966
1970

1978
1982
1986
1990

1998
2002
2006
2010
1854

1874

1894

1914

1934

1954

1974

1994

2014
Agricultura, silvicultura y pesca Industria Construcción y obras públicas Servicios
Structural change (III): Exports of manufacturing goods,
1877-2001

60,0#

50,0#

40,0#

Manufactures#(total)#
30,0#
Equipment#goods#
Consumer#goods#

20,0#

10,0#

0,0#
1877# 1889# 1897# 1913# 1926# 1951# 1959# 1967# 1973# 1984# 1989# 1995# 2001#
Structural change (IV): urbanization
Factors of growth (I): External openness (exports + imports/GDP)

60,0

50,0

40,0

30,0

20,0

10,0

0,0
1864

1870

1876

1882

1888

1894

1900

1906

1912

1918

1924

1930

1936

1942

1948

1954

1960

1966

1972

1978

1984

1990

1996
España Europa (Alemania, Francia e Italia)
 Factors of growth (I): Foreign sector (M. ptas. 1913)

100.000,0 6.000,0

5.000,0

4.000,0
10.000,0
3.000,0

2.000,0

1.000,0 1.000,0

0,0

-1.000,0
100,0
-2.000,0

-3.000,0

10,0 -4.000,0
1828

1858

1888

1918

1948

1978
1816
1822

1834
1840
1846
1852

1864
1870
1876
1882

1894
1900
1906
1912

1924
1930
1936
1942

1954
1960
1966
1972

1984
1990
1996
Trade Balance Imports Exports
Factors of growth (II): Human capital (level of studies of
Spanish population, 1832-1977)

100

Sin estudios Con estudios primarios

90

80
Con estudios medios Con estudios superiores

70

60

50

40

30

20

10

0
1832

1837

1842

1847

1852

1857

1862

1867

1872

1877

1882

1887

1892

1897

1902

1907

1912

1917

1922

1927

1932

1937

1942

1947

1952

1957

1962

1967

1972

1977
 But still, human capital stock of lower quality than the average, something
that continues to be the case today

•  % Population 18-24 years which do not work neither study (ninis)

35 UE-27

UE-15
30
Españ
26,5 a
25
CAPV

20

15 14,7
13,5

10
9

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Factors of growth (III): A weak innovation system
(R&D expenditures /GDP)

2,5

1,5

0,5

0
1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Spain Basque Country EU15

Historical backwardness in R&D
The legacy of industrial revolution is still visible 100 years later
(1955)

40,00%
% de cada región en el VAB industrial de España

35,00%

30,00%
Cataluña

25,00%

20,00%

15,00%
Andalucía C. Valenciana
Madrid
País Vasco
10,00%

CyLM
5,00% Galicia Asturias
Aragón
CyL
Cantabria
0,00%
0,00% 10,00% 20,00% 30,00% 40,00% 50,00% 60,00%
% Industria en el VAB de cada región
 Less in 2015 but still…
40,00%

35,00%
% Región en e PIB industrial de España

30,00%

25,00%

Cataluña
20,00%

15,00% Madrid
C. Valenciana
País Vasco

10,00%
Cast. León
Andalucía Galicia
5,00% Cast. Mancha
Aragón Navarra
Rioja
0,00%
0,00% 10,00% 20,00% 30,00% 40,00% 50,00% 60,00%
% de la industria en el PIB regional
 Factors of growth (IV): the role of the state and the
government

•  Statistical proxies for the role of government

•  Public expenditure
•  Taxes/GDP:
https://data.worldbank.org/indicator/
GC.TAX.TOTL.GD.ZS?
contextual=aggregate&locations=ES-
EU&view=chart
•  State indebtedness: budget balance
•  Government debt/GDP

 Taxes over GDP
35

30

25

20

15

10

0
1850

1860

1870

1880

1890

1900

1910

1920

1930

1940

1950

1960

1970

1980

1990

2000
Direct taxes Tax burden Tax burden (pensions and social security included)
State indebtedness: Budget balance over public
expenditure (in %)

15,0

5,0

-5,0

-15,0

-25,0

-35,0

-45,0
1850

1860

1870

1880

1890

1900

1910

1920

1930

1940

1950

1960

1970

1980

1990

2000
Circulating public debt over GDP (in %)
(August 2014, 98.4%)
 Summing up: indicators and factors of growth

•  Economic growth: GDP per capita

•  Structural change: sector distribution of GDP and
of working population; distribution of exports
and imports; urbanization…
•  Factors of growth: besides factor conditions
(capital, labor, natural resources), foreign sector
and international economic specialization (rate of
economic openness, trade balance); human
capital (level of studies and literacy rates);
technology and innovative capacity (R&D
expenditure); institutions, government (public
sector, budget balance, circulating public debt).
 Some lessons … and questions
•  Generally speaking, and in relation to the most advanced nations (USA,
UK, Germany and France) the Spanish economy fell behind during the
19th century and recovered during the second half of the 20th century.
•  The Spanish economy tends to grow faster in periods of economic growth
and to decline heavier in depressions: greater volatility in relation to
other countries.
•  Strong correlation between the rate of economic growth and the
structural change: the faster the economy grows, the stronger are the
structural changes.
•  Role of the foreign sector (external openness and internationalization).
The Dutch disease of the Spanish economy (Historically, Spain has had a
chronic deficit in her trade balance thanks to different sources of foreign
income: the Empire, emigrants, tourism, European subsidies…)
•  Backwardness in terms of human capital, knowledge and technology (Let
them invent! Of Unamuno)
•  Role of the State and the Government (poor State, heavily indebted: high
public deficit in relation to GDP)