25 - The Iberian Economy in Comparative Perspective, 1800–2000

Summary

This chapter collects the historical threads about the economic growth of the two Iberian nations. From a disappointing nineteenth century, during which they fell behind the rest of Europe, and the conflicts of the first half of the twentieth century, the two nations quickly caught up from the 1950s. Growth was mostly extensive and pulled by physical capital accumulation, with small contributions from human capital or productivity. The Iberian divergence from its European peers has often been blamed on natural endowments, modest domestic markets and savings, as well as on second-nature geography (market access). However, this volume shows that all of these were endogenous to the growth itself, which requires looking for deeper explanations. Institutions and the political equilibria that underpin them loom large here. After a century of fragile liberal monarchies and radical republican regimes, the two nations stood out for their long authoritarian regimes. Inward-looking economic policies promoted by the dictators favoured domestic incumbents but harmed the growth potential of the two countries. Only their gradual reopening from the 1950s unleashed this potential. Nevertheless, the gains from growth have not been equally distributed and convergence stalled in the new millennium, with the adoption of the Euro.