DP7731 Stabilization and Growth under Dictatorship: The Experience of Franco's Spain

Author(s): Leandro Prados de la Escosura, Joan R. Rosés, Isabel Sanz Villarroya
Publication Date: March 2010
Keyword(s): anti-market policies, dictatorship, growth, liberalization, macroeconomic policy, Spain, stabilization
JEL(s): E65, F43, N14, N44, O43
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=7731

Stabilizing and liberalizing policies are key elements of the Washington Consensus. This paper adds a historical dimension to the ongoing debate by assessing the economic impact of market-oriented reforms undertaken during General Franco?s dictatorship, the 1959 Stabilization and Liberalization Plan. Using an index of macroeconomic distortions (IMD) the relationship between economic policies and the growth record is examined. Although a gradual reduction in macroeconomic distortions was already in motion during the 1950s, the 1959 Plan opened the way to a new institutional design that favoured a free-market allocation of resources and allowed Spain to accelerating growth and catching up with Western Europe. Without the 1959 Plan, per capita GDP would have been significantly lower in 1975.