The Institutional Foundations of the Spanish Economic Miracle, 1950-2000. a New Institutionalist Approach

Abstract

At the beginning of the fifties, the Spanish economy had an agricultural basis and was characterised by isolationism, autocracy and underdevelopment, while the industrialisation process was much delayed and had critical problems and shortages. On the other hand, at the end of the XX Century, the Spanish economy showed a very different face, similar to those of the other developed economies all over the world. The economic history of Spain during the second half of the XX Century represents a story of success. The key of this “Spanish economic miracle” resides in the process of institutional change of the country, which includes the making of markets with their key date of 1959, the political reform of democratisation between 1975 and 1978 and a general evolution towards the european institutional framework. From the theoretical approach of New Institutional Economics and Douglass North theory of the State, in this article we analyse the institutional foundations of the Spanish economic development during the period 1950-2000, and we expose interesting lessons on the relations between institutional change and economic development. In the northian work, the Spanish institutional framework and the existence of a predatory State appear as explaining factors of the economic failure of Spain for several Centuries. The Franco dictatorship constituted the last example of this predatory State, and implied a “selfdestructing” institutional framework, according to the definition by Avner Greif. While in the first francoism of the forties the institutional formula combined a genuine predator with economic depression, the decade of the fifties meant an institutional adaptation provoked by a change in the set of possibilities, in the objectives and in the subjective model of the State. This process of change flowed into the making of a market economy that allowed a stage of strong growth and of change in the Spanish informal institutions during the sixties (corroborating the hypotheses of Yoram Barzel, Douglass North and Mancur Olson). It generated a new economy and a new society (a return of the civil society) that, after the death of General Franco, constituted a contractual State in the northian sense, across a transitive and transactional political transition adopted by consensus (the new Constitution was passed in 1978). The new rules for the political game have produced since the early eighties a clear improvement in Spanish economic evolution, expanding the possibilities for cooperation. Above this new formal framework, a social economy of market, with a Welfare State and a modern economic policy (fiscal, monetary, financial), and a high degree of decentralisation were built. Moreover, some new institutions began to operate in the nineties, with the practical implementation of the Maastricht requirements, on the road to EMU. All these factors implied the consolidation of a new situation that signifies a “self-reinforcing” institutional framework (in the sense of Avner Greif) with economic and political freedom. In this way, the path of the Spanish economy changed course in the second half of the XX Century.

Cite this paper

@inproceedings{Caballero2002TheIF, title={The Institutional Foundations of the Spanish Economic Miracle, 1950-2000. a New Institutionalist Approach}, author={G Iturri Caballero}, year={2002} }