INTRODUCTION

At the end of the nineteenth century, the Spanish economy was still largely agrarian. Its exports, mainly oriented toward Western European countries, were primary products – mainly agricultural and mineral. Since the 1850s it attracted much foreign investment in railway building and mineral development. Railway and telegraph networks, the essential base for large-scale industrial enterprise, although not very large, were completed. With a population of about 17 million inhabitants, and a low density for European standards, it constituted a medium-sized market.

By 1890 the government was a constitutional monarchy with a bicameral legislature. Universal suffrage for males only was approved this year. A stable political system was in place with Conservatives and Liberals alternating in office. The Spanish policy was basically liberal and favorable to business development. Government itself played a minimal direct role in the economy, operating the postal and telegraph systems. As many other European countries, Spain switched to higher tariffs in 1891 because of the impact of the agrarian depression. Textile and steel producers took advantage of the new protectionist mood.

The victory of the United States over Spain in 1898 and the resulting loss of its once global empire brought a regeneracionismo movement in politics, with a strong bias for economic development and industrial growth. The succeeding years were marked by a wave of new investments (increasingly by Spaniards as well as foreigners) in urban transportation and utilities, shipping, sugar refining, the growth of universal banking enterprises and stock exchanges and more public investments in port development, roads, irrigation schemes, and the like. These investments brought a dramatic increase in investment-output ratios.