In Franco’s Spain

December 1, 1958

MADRID—Spain today has one foot in the present age, the other in the past. It is trying to jump without intermediate steps from the candle to the fluorescent light, from the burro to the Buick. One drives out of a beautiful, expanding modern Madrid to villages where people live much as they did centuries ago. In comparison with all other Western European countries (except Portugal), the Spanish people still have an extremely low standard of living. As one editor put it to me: “We have an Arab economy—without the oil.”

If Germany is the most dramatic example in Western Europe of the miracles of recovery and production that can be brought about by monetary discipline and a free economy, Spain is the outstanding demonstration of how an economy can be unbalanced and shackled by socialism, government planning, and a tangle of interventions and controls.

Take the situation in automobiles. Unless you are a diplomat or have special governmental pull, it is practically impossible to import a foreign car. In fact, the hardest thing to get in Spain seems to be an import license for almost anything at all. Major auto companies are directly or indirectly government-owned or government-operated.

HOW TO GET A CAR

If you want a SEAT (licensed by Italy’s Fiat), you must first file an application accompanied by $400 (translating pesetas into dollars at 50 to 1). A year or so later you may be notified that your car is ready. You must then pay, before delivery, 100 percent of the price of the car—say $2,800. A month or two later you may get actual delivery. But if you sell the car on the black market you may get almost double what you paid for it. At present, I am told, there are 22,000 signed orders for SEAT’s, each accompanied by $400, yet the total production of SEAT’s this year will be only 10,000 and 12,000 next year.

American industrialists here tell me that they could sell 20,000 farm tractors over the telephone if they could get the import licenses. But the government insists that the farmers can wait until domestic industrial production is adequate to take care of their needs. All this, of course, slows down both Spanish agricultural and industrial growth.

Special permission must be obtained not merely to go into a new business, but to manufacture a prescribed maximum of a specific thing. Thus in September a number of firms were finally authorized to make television sets. The Spanish Marconi Co. was allowed to make 5,000; the Standard Electric, 5,000; the Spanish RCA, 3,500 sets, etc.

WHY IT FUNCTIONS

There is extensive price fixing and completely unrealistic rent control. As a result there are periodic shortages of, for example, oil, eggs, potatoes. Most new apartments are not rented but sold. There are periodic power shortages in Madrid, and the electricity is rationed or turned off. There has been great inflation. Between 1950 and 1957 the wholesale price index advanced 84 percent. Between July 1957 and July of this year the official cost-of-living index jumped 13 percent. The official rate for the peseta is 42 to the dollar, but the free-market rate in Tangier has been between 58 and 60.

What is amazing is how such an economy functions at all. And yet it does, and in some directions shows surprising growth. One reason seems to be that many of the controls that exist on paper are evaded or laxly enforced. It is widely admitted that the Spanish economy has been saved from grinding to a halt by the smugglers and the black marketeers.

The other main reason for Spain’s recent economic progress is that Franco has brought and kept domestic peace and order. All criticism of his economic policy (voluble in private conversation, but prohibited in the press) is tempered by the feeling that Franco is still the only alternative in Spain to the nightmare of Communist rule. Peace and order have enabled people to work, and the workers work hard for incredibly long hours. But Spanish recovery would jump forward dramatically if Franco could be brought to see that while a rich country does not need socialism, monopolies, and controls, a poor country cannot afford them.