Workers in an olive orchid

IN THE MID-1980s, Spain's per capita gross domestic product ranked low among the industrial countries represented in the Organisation for Economic Co-operation and Development, though well ahead of such nations as Greece, Yugoslavia, and Portugal. In the latter half of the decade, however, the Spanish economy entered a phase of strong expansion and employment.

Spain was a latecomer to economic and industrial modernization. Early in the twentieth century, economic progress was made in fitful starts, but in the 1960s the process of renewal began in earnest. Before then, the Spanish economy was one of the most underdeveloped in Western Europe, and it was sometimes characterized as a Third World economy. A spectacular period of growth and modernization during the 1960s and the early 1970s profoundly transformed the Spanish economy, bringing it much closer to the West European consumer society prototype. However, in late 1975, when the authoritarian rule of Francisco Franco Y Bahmonde (in power, 1939-75) came to an end, and democratic processes were restored, there were huge increases in the price of imported oil upon which Spain was heavily dependent for its energy needs. Vigorous economic expansion was replaced by recession, stagnation, and a dizzying increase in the number of unemployed wage earners.

The Socialist government, headed by Felipe Gonzalez Marquez, that came to power in late 1982--the first post-Franco government with an absolute parliamentary majority--was committed to a program of industrial renewal and economic modernization and, at the same time, to lowering the rate of inflation. Under its guidance, in the second half of the 1980s the economy experienced a growth rate and a level of foreign capital investment that were the highest in Europe. Budget deficits were reduced, inflation was lowered, foreign currency reserves were greatly increased, private enterprise enjoyed record profits, and consumer spending grew. A major accomplishment during this period was the liquidation of excess personnel and overcapacity in key industries, such as steel and shipbuilding, and the redirection of substantial capital resources to more promising hightechnology industries.

Despite the excellent economic performance of the late 1980s, the Gonzalez government was unable to reduce an unemployment rate that was then the highest among the members of the European Community (EC--see Glossary). The number of workers employed as a result of the economic boom was equivalent to the number of new entrants into the labor market, so that the boom only marginally reduced the number of job seekers. A mitigating circumstance, however, was that although the official unemployment rate was 20 percent, perhaps as many as one-third of those registered as unemployed were working in the "underground economy."

Spain's accession to the EC on January 1, 1986, was a driving force behind the country's accelerated modernization effort. Under the terms of its33f ts entry into the EC, Spain was required to adapt to EC norms and regulations, over a period of seven years. The EC plan to eliminate existing barriers to trade, employment, and the flow of capital throughout the EC by the end of 1992 was still another impetus. Observers believed that, barring unforeseeable adverse developments in the international economic situation, by the year 2000 Spain would at last closely resemble its neighbors, who, for most of the twentieth century, had been socially and economically more advanced.

Data as of December 1988