Spanish Economy: PSOE and PP Governments Essay

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What measures have PSOE and PP governments taken to restructure and modernize the Spanish economy since 1977 and how successful have they been?

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Spain is largely agricultural land; it produces wheat, barley, olives, vegetables, tomatoes, grapes, and cork. Agriculture did favorably well in the ’40s but not until the country was caught up with the dilemma of government preoccupation with industrial self-sufficiency ignoring agricultural modernization (Harrison 1978:187). However, major industries produce textiles and apparel, foods and beverages, metals and metal products, chemicals, ships, motor vehicles, machinery, clay and refractory products, footwear, pharmaceuticals, and medical equipment (Harrison 1978:187).

PSOE (Spain Socialist Party) and PP (Peoples Party) are some of the major political parties in Spain. These two political parties have all been in power and at the same time opposing each other, but the people’s party is said to be the main right political party in Spain as it is the largest opposition party (Pierre 1967: 140).

Spain under PP government

The Spanish economy has flourished much under the leadership of the Peoples party government. This is seen in the authoritarian regime of General Franco. Unlike in other authoritarian governments, Franco opened up Spain’s border through liberalization schemes which included; devaluation of peseta, introduction of a single exchange rate, liberalization of price controls and a program of monetary and fiscal restraint and trade restrictions (Harrison, 1978: 187). This made Spain’s economy to be rapidly industrialized affecting every segment of the economy.

Foreign machinery energized Spain’s modernization as foreign products competed with domestic ones. Under this government political and economic reforms were made which included the formation of a constitution and this enabled Spain to be on the same footage with other European capitalist states.

Spain under PSOE government

PSOE went into privatization to increase competition in the Spain market. It further went into budget cuts to decrease the role of government in human and service sectors in the late 80’s and early 90’s, (Spain Economic Development). It started some projects like airport, highway, high-speed rail line construction which received EU funding and promoted growth (Kennedy, 1996: No.2). In 1994, PSOE government passed the Labour Reform Law, which included the deregulation of labor market, there was a tax cut for the rich and casualization of jobs. Despite all this, unemployment reached 25 percent and this made the ruling elite regard PSOE government as a spent force. This led to the government encouraging industries to relocate and they advocated labor-intensive technology to increase high value-added products.

Summary

Based on the above the Spanish economy has shown strong economic growth rates due and also it has gone to its worst due to contributions made by the two governments. Under PP era in the early seventies, we see Franco creating conditions that favored the economy and made the economy perform strongly (Salmon, 1994:12). Unemployment rates decreased favorably, inflation marks were seen going down the chart. However, the predecessor of Franco actually was on the contrary and under him the economy came to its knees. This was seen in the fact that the attention was diverted from the economy and it really coincided with the quadrupling of the oil prices which had an adverse effect on the economy as Spain imported 70 percent of its energy (Harrison 1985:88). Under the PSOE government, things are no different and thereby we see the economy characterized with oscillations. This is majorly affected by the government in reign, politics, and terrorism. Also, there are signs of imbalances that threaten to derail the strong performance of the economy. Domestic demand pressure is worsening leading to some current account deficits. (Economic surveys of Spain)

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We may say that the two governments have attributed to something in terms of growth but still, the economy is wanting. They have achieved some certain goals of their visions but they have not fully succeeded.

Policy Recommendation for Spain

  1. The pattern of growth in the Spanish economy now needs to become better balanced, to ensure the durability of the expansion and counter the risks inherent in a prolonged reliance on a subset of internal demand components as the main engines of growth.
  2. Re-balancing growth away from consumption towards investments in export machinery and equipment.

References

F. López-Casero, “The Social Consequences of Economic Development in Spain since 1960”, in Iberian Studies, No. 1-2, 1990.

G. Harrison, The Spanish Economy in the Twentieth Century Routledge, London and New York, 1985, 53-90pp.

Joseph Harrison, An Economic History of Modern Spain. Holmes & Meier. 1978. 187pp.

K. Salmon, The Modern Spanish Economy, Pinter 1994, 12-13.

P. Kennedy, “Europe or Bust? Integration and its Influence on the Economic Policy of the PSOE”, in International Journal of Iberian Studies, No. 2, 1996.

Pierre Vilar, Spain: A Brief History. Pergamon Press. 1967. 140.

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R. S. Chari, “Spanish Socialists, Privatizing the Right Way?”, in West European Politics, No. 4, 1998.

S. Lieberman, The Contemporary Spanish Economy: A Historical Perspective: London; Boston: 1982.45-75pp.

Spain Economic Development an article from www.WorldBank.org. 2009.

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