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2020 | OriginalPaper | Chapter

4. 1936. Frustrated Hopes: The Great Depression, the Second Republic and the Civil War

Author : Concha Betrán

Published in: Historical Turning Points in Spanish Economic Growth and Development, 1808–2008

Publisher: Springer International Publishing

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Abstract

The Great Depression was accompanied by the collapse of the monarchical regime and the establishment of a modern democracy with the Second Republic in April 1931. The new regime had to balance the importance of gaining domestic and international respectability (using orthodox fiscal and monetary policy) with efforts to shift towards a moderate protectionist policy, and enact land, labour and educational reforms. There were fierce confrontations from 1934 on, eventually culminating in a civil war in 1936. The consequences included a long-lasting impact on economic growth; autarky and interventionist policies; a huge loss of human capital; poverty and rising inequality; and a 40-year-long dictatorship. Hopes of reform were left unfulfilled, with a severe backlash against the earlier social and economic restructuring.

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previous chapter 1898: The “Fin de Siècle” Crisis

next chapter 1959: The Stabilization Plan and the End of Autarky

This was not the first time in Spain’s history; it had also happened in 1873–1874, which is why this was called the Second Republic. In 1874, the monarchy was restored, bringing back elitist liberalism. However, from 1890 there was universal male suffrage.

The poorest and most remote regions, farthest away from the industrial centres in Andalusia and the north, had the fewest internal migrants (Silvestre 2005).

The periods with the most strikes were 1917–1922 and the first years of the Second Republic, occurring mainly in the industrial sector and also in agriculture in the latter period. The number of strikes diminished in the Primo Rivera dictatorship (Silvestre 2003).

Azaña (1986: 24–25) addressed these issues in his writings on the causes of the Civil War.

Azaña (1976) explained it in his diaries.

Azaña (1986: 26–28) mentioned that the “traditional liberalism” policy was impossible when it came to economic questions, as the most important difficulties came from the international crisis. The State had to intervene and these interventions were considered as a threat of impending statism.

This was how Juliá (2008) interpreted the period. In Azaña opinion’s, the start of the Civil War was not a desperate solution on 14th July 1936 from a part of the country opposed to a precarious situation (Azaña 1976: vol. I, II and 1986: 27).

These figures contrast with the 53% decrease in deposits in the US in the same period (data for the US from The Federal Reserve Bank of St. Louis, Economic Data).

The banking crisis mainly affected the Banco de Cataluña, Banco de Reus and Banco de Tortosa. With the exception of the Banco de Cataluña, which held 25% of all deposits in Catalonia, the rest were small banks. Therefore, the banking crisis did not have major repercussions on the Spanish financial structure.

The representatives were Flores de Lemus and his disciples Agustín Viñales and Gabriel Franco. Flores de Lemus was against the exchange rate intervention; this became clear in 1929 when he was director of a government-commissioned report to a group of prestigious economists, Dictamen de la Comisión de Patrón Oro. He believed that relative prices between the Spanish and international economies and the current account deficit prevented Spain from being on the gold standard. However, as Flores de Lemus was a government representative in the Bank of Spain he upheld the government’s policy.

El Financiero (24 April 1931); this intervention was justified due to the regime change and the need for political stability.

Servicio de Estudios del Banco de España and El Financiero; the latter journal represented business interests.

The most prominent economists during the period 1931–1936 were José Larraz, Olegario Fernández Baños and Germán Bernacer.

According to Palafox (1991: 224), over this whole period but particularly at the outset, the Republicans wanted to differentiate themselves from the dictatorship’s budgetary dislocation, which created fiscally autonomous bodies, and this policy aggravated the continuing downward trend.

This process of income tax implementation started in 1900 with a new tax called the Contribución de Utilidades (a profit tax), which was transformed substantially in 1920 and 1927 to convert it into a tax on income and profits. The architect of the new income tax was Flores de Lemus, who collaborated with the Finance Ministry from 1906 to 1936 and was also involved in the previous tax reforms during the 1920s.

Carner explained in an article titled “The Economy of the Republic” in Economia Nacional, num. 1, January 1933, pp. 5–10, how the economy of the Republic should be, the need for intervention and the importance of making Spain’s economy more competitive and reducing production costs in a difficult international context.

Palafox (1991) argues that this was a shift away from spending on railways and economic services, affecting certain sectors more deeply.

The tariff on iron and steel, heavy industry, textiles, horses, and olive oil, among other products, increased in 1926–1927.

Additional tariffs on aluminium and aluminium goods in 1928, and in 1930 on cars, and films, among other items, as a retaliation against the US.

Viñas et al. (1979) and Serrano Sanz (1987) summarize trade policies during the period.

For the importance of following the League of Nations rules, Saz (1985), Azaña (1986).

The Republicans followed the republic French model of 1789 in which reforms in land distribution, education, the State-Church relationship, and the army were essential part of the new constituent regime (Graham 2005).

Given the expected consequences, the commission that studied and prepared the reform had wanted a quick implementation ordered by decree without parliamentary discussion. But again the Republican government sought the most legal and democratic process of implementation.

One example of the difficulties and unrest was the forceable land occupation in Casas Viejas (Cadiz) in January 1933, where, during an anarchist uprising, the Civil Guard took action against the peasants, resulting in fatalities and a serious political crisis.

Own calculation using data from Tafunell (2005).

However, in 1930 this figure was 4.3% in the US, and in the UK, France and Germany it was 3%, 5.3% and 1.5%, respectively. However, Italy registered high rates of illiteracy: 23.1% in 1930 (Betrán and Pons 2013).

A long-term loan of 400 million pesetas to municipalities was approved to finance school construction in 1932 (Jackson 1965).

From 2.86% to 4.72% in 1930 and 1934, respectively, considering students between 14 and 19 years old. School enrolment data taken from Nuñez (2005).

In comparison with other civil wars, the cost in terms of destruction and population loss was higher than in the Mexican Civil War but lower than in the Russian one. Although the American Civil War had an intermediate impact as great as in Spain, its destruction was higher (Martín-Aceña 2006).

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Title: 1936. Frustrated Hopes: The Great Depression, the Second Republic and the Civil War
Author: Concha Betrán
Publisher: Springer International Publishing
Book: Historical Turning Points in Spanish Economic Growth and Development, 1808–2008
Print ISBN: 978-3-030-40909-8

Electronic ISBN: 978-3-030-40910-4

Copyright Year: 2020
DOI: https://doi.org/10.1007/978-3-030-40910-4_4