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2020 | OriginalPaper | Chapter

6. 1977: Hopes Fulfilled—Building Democracy in Turbulent Economic Times

Authors : Joaquim Cuevas, María A. Pons

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

Publisher: Springer International Publishing

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Abstract

This chapter offers an analysis of the main economic and institutional transformations in Spain from 1977 onwards. The severe economic and financial crisis that hit Spain in the mid-1970s coincided with the arrival of democracy after Franco’s death and shaped the nature and scope of the implemented reforms (Pactos de la Moncloa). While the crisis and political instability limited the possibility of making a more radical adjustment, the consensus among different social actors, unions and political parties was fundamental to the reforms. This time hopes were fulfilled and although some reforms were left pending, those that were adopted played a seminal role in putting the Spanish economy and society on the path to international standardization and integration into Europe.

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previous chapter 1959: The Stabilization Plan and the End of Autarky
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Footnotes
1
The economic crisis started in 1976 but worsened in 1977 as a consequence of the banking crisis that erupted in that year.
 
2
The economic situation was probably not correctly assessed, and the crisis was considered as temporary (Betrán et al. 2010).
 
3
The output loss is a way of determining the loss associated with a crisis. This is estimated by summing the differences between trend growth and output growth following the crisis, up to the point where annual output growth returns to its trend (see Betrán and Pons 2017).
 
4
The agrarian population as a share of the total population in Spain dropped from 50% to 25% in less than twenty years. The share of agriculture in GDP, which represented around 25% in 1960, fell to less than 10% in 1975 (Prados de la Escosura 2017).
 
5
During the 1960s and until 1975, the Spanish economy diversified and improved efficiency significantly, with an annual increase in total factor productivity from 1965 to 1975 of 3.8% for the whole economy (Prados de la Escosura 2017).
 
6
The decision had an asymmetric effect on different consumers because the subsidized prices were mainly for industrial producers and less so for end consumers.
 
7
The costs of loans doubled as a consequence of the peseta devaluation. This mainly affected certain sectors, such as the electricity sector. Eleven out of the fifteen most indebted companies in dollars belonged to the electricity sector (De la Torre and Rubio 2015).
 
8
In relative terms, unemployment rates in the 1970s were higher than in other countries but lower than the peaks of 21.5% in 1985, 24.5% in 1994 or 27% in 2008.
 
9
As explained in more detail in Sect. 6.3, the fiscal system was very underdeveloped and did not have the capacity to increase revenues, while the monetary policy lacked the necessary instruments to be effective.
 
10
The McCracken Report issued by the OECD in June 1977 was widely referenced (Trullen 1993). For details about other experiences in Europe of agreed wage policies, see Flanagan, Soskice and Ulman (1985).
 
11
For a history of the social security system, see Boldrin, Jiménez- Martín and Perachi (1999) and Pons and Silvestre (2010).
 
12
For example, during the 1960s Fuentes Quintana published several works about the need for tax reform, in the journals Información Comercial Española and Anales de Economía.
 
13
VAT was introduced in the EEC in the late 1960s, when that body consisted of only six members (Belgium, France, West Germany, Italy, Luxembourg and the Netherlands). However, in the UK it was introduced in 1973. Several reasons were given to justify why it was not introduced in Spain in the 1970s, such as the impact on prices (in an inflationary context) and the possible negative impact on exports.
 
14
In 1975 pensions represented around 36% of total public spending, rising to 40% in 1980, whereas unemployment was around 2.98% in 1975 and increased to 12.5% in 1980 (Espuelas 2013).
 
15
It was also a consequence of the compulsory eight years of basic education imposed by the General Law of Education in 1970.
 
16
In 1976, Spanish women’s level of education was very low and from the late 1970s the number of female graduates from tertiary education increased substantially (Rodríguez-Modroño et al. 2016).
 
17
However, not to other public goods, such as justice.
 
18
Only thirty-five foreign banks entered the Spanish market and their market share in terms of deposits never exceeded 2%. However, their presence boosted the level of competition and also had a positive influence on financial innovations such as the loans tied to floating interest rates or the interbank market development (Álvarez and Iglesias 1992).
 
19
For information about the current structure of the Spanish labour market, as well as the effects of the Great Recession, see Andrés and Doménech (2015).
 
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Metadata
Title
1977: Hopes Fulfilled—Building Democracy in Turbulent Economic Times
Authors
Joaquim Cuevas
María A. Pons
Copyright Year
2020
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_6