Spanish Economy


Figure 1.--Large areas of Spain are arid and rocky which impaired the country's agricultural productivity. Some countries by developing their human resources were able to overcome the geographic limitations. Spain as a result of the Inquisition and Counter Reformation was unable to do this until modern times. Here we see a rural Spanish sdcebne, we think in the 1920s.

Geography is a powerful forcing shaping both history and economics. This is demonstrated in Spain, but also that cultural factors are also important. The most important economic sector in the ancient world was agriculture and this a cuilture's wealth was primarily determined by geography. Modern wealth is more importatly shaped by the utilization of human resources and technology. In early periods geography was more important. And two factors affected the Iberian Peninsula, climate and location. Large areas of the Iberian Peninsula are not well watered. Thus in comparison to France and other areas of Europe, agriculture is less productive in Spain. however, mineral wealth. Tin was particularly important. A trade in tin began during the Neolithic era. The Greeks and Cartheginians established colonies on the Iberian Peninsula. Many coastal cities like Barcelona were founded in this period. Rome seized control of Spain during the Punic Wars and remsained a Roman colony until the fall of the Roman Empire. The mineral wealth continued to be great economic importance. Spain was almost overwealmed by the Muslim invaders (8th century AD). Gradually the Christian kingdoms reaserted themselves and the Reconquista began. For centuries, Spain was the only place in Europe where Christains, Mudlims, and Jews lived in relative harmony. And as a result of that toleration and resulting intelectual development, Spain during the Dark Ages was the most advanced and economically sucessful area of Europe. The modern values of tolerartion and diversity were not seen as a positive in the medieval era. And both Muslims and Christians vied for control of the Iberian Peninsula. The year 1492 was a turning point not omly politically and cukturally, but also economically. The Christia morarchs Ferdinand and Isabella completed the Reconquista when they seized Granada. Once that was accomplished they approved Columbus' voyage. Here geography was again imnportant as the Iberian Peninsula is the western most promitary of Europe--key factors in the European maritime outreach. This led to the foundation of vast colonial empires. Unbelieveable quatities of gold and silver bullion poured into Spain making it the richest both powerful country in Europe. Most of that wealth proved empheneral. Rather than founding new industries like other ciuntries as Europe entered the modern age, Spain purchased goods made abroad. Also in 1492, Spain expelled it Jews and thus lost some of its most productive citizens. The Inquisition established earlier was used to track down Jews who persisted in their faith as well as free thinking Christians. Shortly afterwards the Protestan Reformation began to reshape Europe. The Inquisition and Counter Reformation not only batteled Protestantism, but also intelectual thought in general. The result was that as science began to emerge as a powerful European development, Spain did not participate and the country gradually declined to a poverty-stricken backwater. The Spanish Civil War and the Franco's victory had the impact of continuing Spain's isolation. Only with the death of Franco did the Spanish economy begin to enter the modern economic mainstream (1975). Spain and Portugal entered the European Union (1986).

Geography

Geography is a powerful forcing shaping both history and economics. This is demonstrated in Spain, but also that cultural factors are also important. The most important economic sector in the ancient world was agriculture and this a cuilture's wealth was primarily determined by geography. Modern wealth is more importatly shaped by the utilization of human resources and technology. In early periods geography was more important. And two factors affected the Iberian Peninsula, climate and location. Large areas of the Iberian Peninsula are not well watered. Thus in comparison to France and other areas of Europe, agriculture is less productive in Spain. however, mineral wealth was important.

Ancient Times

Tin was particularly important in ancient times. A trade in tin began during the Neolithic era. The Greeks and Cartheginians established colonies on the Iberian Peninsula. Many coastal cities like Barcelona were founded in this period. Rome seized control of Spain during the Punic Wars and remsained a Roman colony until the fall of the Roman Empire. The mineral wealth continued to be great economic importance.

Medieval Era

Spain was almost overwealmed by the Muslim invaders (8th century AD). Gradually the Christian kingdoms reaserted themselves and the Reconquista began. For centuries, Spain was the only place in Europe where Christains, Mudlims, and Jews lived in relative harmony. And as a result of that toleration and resulting intelectual development, Spain during the Dark Ages was the most advanced and economically sucessful area of Europe. The modern values of tolerartion and diversity were not seen as a positive in the medieval era. And both Muslims and Christians vied for control of the Iberian Peninsula. The year 1492 was a turning point not omly politically and cukturally, but also economically. The Christia morarchs Ferdinand and Isabella completed the Reconquista when they seized Granada. Once that was accomplished they approved Columbus' voyage.

Imperial Outreach

Here geography was again imnportant as the Iberian Peninsula is the western most promitary of Europe--key factors in the European maritime outreach. This led to the foundation of vast colonial empires. Unbelieveable quatities of gold and silver bullion poured into Spain making it the richest both powerful country in Europe. Most of that wealth, however, proved empheneral. Rather than founding new industries like other countries as Europe entered the modern age, Spain purchased goods made abroad. Also in 1492, Spain expelled it Jews and thus lost some of its most productive citizens. The Inquisition established earlier was used to track down Jews who persisted in their faith as well as free thinking Christians. Shortly afterwards the Protestan Reformation began to reshape Europe.

European Backwater

The Inquisition and Counter Reformation not only batteled Protestantism, but also intelectual thought in general. The result was that as science began to emerge as a powerful European development, Spain did not participate and the country gradually declined to a poverty-stricken backwater. The Spanish Civil War and the Franco's victory had the impact of continuing Spain's isolation.

European Integration

Only with the death of Franco did the Spanish economy begin to enter the modern economic mainstream (1975). Spain and Portugal entered the European Union (1986). The Spanish economy benefitted from European integration. It is like much of the EU a mixed capitalist economy. It is the 12th largest economy in the world and in the EU the four largest country (after Germany, Britain, France, and Italy). Spain reported several years of rapid economic expansion. The construction industry was particularly important in the economic expansion. As a result, today the living standard is now similar to that of the other major EU countries. Socialist governments offering extensive benefits have won wide appeal among Spanish vioters. The country as in the rest of the EU has expanded its social welfare system. At the same time, policies instead of promoting the private sector have either restricted the sector or placed shjort-sighted restrictions on it. Labor laws make it virtually impossible for companies to fire workers. As a result, the country's productive sector, as in many other European countries, is no longer capable of financing the extensive social welfare system. And a housing and contruction bubble which burst (2008), has left the country's banks weakened by bad loans. Unemployment skyrocketed. The Government has attempted to help the caja system (akind of sabings and loans). The Spanish government has adopted austerity policies, attempting to reduce the budget defecit and cutting back on social benefits. The Government does not seem to recognize the importance of a pro-growth business climate. And a wide swath of the population seems to have accepted the Socialist promise that the Government can be relied on to provide basic benefits even though the future entitlements promised are now far beyond the Government's ability to pay. Spain has so far been able to finance its debts and bond rates through mid-2011 have remained relatively low. The future of the EU and especially monetary union will in large measure depend on Spain's ability to deal with its economic crisis. The EU is today dealing with periferal countries (Greece, Ireland, and Portugal) which have gone bankrupt. Spain is a much larger economy and the EU weakened by costly programs to shore up the perfiferal countries, will find it much more difficult to assisst Spain if needed.






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Created: 10:11 PM 11/23/2007
Last updated: 11:26 PM 6/20/2011