Economic History of Spain - 1898 To 1920

1898 To 1920

At the beginning of the 20th century, Spain was still mostly rural; modern industry existed only in the textile mills around Barcelona in Catalonia and in the metallurgical plants of the Basque provinces. The loss of Cuba and the Philippines benefited the country by causing capital to return and to be invested in updated domestic industries. But even with the stimulus of World War I, only Catalonia and the two principal Basque provinces, Vizcaya and Guipuzcoa, did the value of manufacturing output in 1920 exceed that of agricultural production. Agricultural productivity was generally low compared with that of other West European countries because of a number of deficiencies: backward technology, lack of large irrigation projects, inadequate rural credit facilities, outmoded landtenure practices, as well as the age old problems of difficult terrain, unreliable climate, isolation and difficult transportation in the rugged interior. Financial institutions were relatively undeveloped. The Bank of Spain (Banco de España) was still privately owned, and its public functions were restricted to currency issuance and the provision of funds for state activities. The state largely limited itself to such traditional activities as defense and the maintenance of order and justice. Road building, education, and a few welfare activities were the only public services that had any appreciable impact on the economy.