Spain: From Protectionism to Advocacy of Liberalisation

In the closing years of the twentieth century Spain took a decisive turn towards liberal capitalism. As recently as the early 1980s, markets had been protected by a battery of import tariffs and non-tariff barriers. Capital controls restricted inward and outward investment. Services were frequently offered under monopoly conditions, either national monopolies such as Campsa in petrol and Telefónica in telecommunications, or through the provision of territorially based licenses for example in public road transport, or under restrictive statutes such as those limiting savings banks to their locality of origin and regulating the minimum distance between fuel service stations. Building land was strictly limited by local authority planning controls. There were tight controls on property rental and long minimum rental periods for agricultural land. Labour markets were extremely rigid, making it almost impossible to shed staff. Economic relations were everywhere governed by social connections and obscure agreements rather than by contract and transparency. Liberalisation, which had been making inroads into this environment since the 1960s, mainly in terms of international trade, quickened during the 1980s and stepped up a gear in the 1990s. To a considerable extent change was externally imposed. But with the election to office of the People's Party (Partido Popular, PP), Spain emerged as an advocate of liberalisation, demonstrating its credentials through a series of policy initiatives (Ariño Ortiz 2000). In the first six months of 2002, as holder of the Presidency of the European Council, it was given a platform on which to display its leadership in this area. The following discussion looks at the process of liberalisation, the particular character, tensions and contradictions of liberalisation within Spain and the contribution of the Spanish Presidency. It concludes with an assessment of the credibility of Spain as an advocate of liberalisation.