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A Difficult Consensus: The Making of the Spanish Welfare State

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Standard of Living

Part of the book series: Studies in Economic History ((SEH))

Abstract

Since the 1880s, the Spanish government tried to promote social insurance to achieve political stability. However, a proper welfare state did not develop until the late 1970s. Weak fiscal capacity plus persistent disagreement on who should assume the financial cost of new social programs explain this delay. Before the Spanish Civil War (1936–1939), social reform advanced very slowly. Given the lack of fiscal capacity, Spanish policy makers initially promoted contributory social insurance schemes, mostly financed by employers’ and employees’ compulsory contributions with little public subsidy. To reduce social conflict, rural laborers were included in these programs along with industrial workers. This, however, generated strong business opposition from both rural landowners and small-sized, labor-intensive businesses (which predominated in Spain). With the advent of democracy in 1931, new social programs were devised, but redistribution demands focused on land reform, an ambitious and controversial policy that eventually led to the outbreak of the Spanish Civil War. After the war, the Franco dictatorship consolidated a conservative social insurance model. Social benefits were kept very low and funding relied on employers’ and employees’ compulsory contributions. The repression of the labor movement alongside trade protectionism allowed companies to easily transfer the cost of social insurance to wages and final prices. The introduction of income tax, after the restoration of democracy in 1977, led to a new social protection model. Tax-funded, noncontributory programs increased and social protection was extended beyond those in stable employment. Unlike in 1931, in 1977, the political consensus necessary to develop social policy was reached. In addition to economic modernization and population aging, decreasing inequality and the example set by the social pacts that spread throughout Europe after World War II must have been crucial in this sense.

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Notes

  1. 1.

    Allegedly, La Mano Negra was a secret anarchist organization to which the government attributed a number of violent actions, including the destruction of crops and even murders. According to Tuñón de Lara (1972), however, as a formal organization, La Mano Negra never existed. Rather, the Spanish government leveraged political violence in rural Andalusia as an excuse to initiate severe repression and quell peasant revolts.

  2. 2.

    In 1882, 20,915 of the 57,934 members of the Spanish Anarchist Federation were agricultural workers, mostly from Andalusia, and total Andalusian membership (38,349) still far exceeded that of industrial Catalonia (13,201) (Malefakis 1970, p. 159). In 1919, the anarchist union CNT (Conferederación Nacional del Trabajo) had 700,944 members, while the socialist union UGT (Unión General de Trabajadores) had 150,382 members (Silvestre 2003, appendix). The initial growth of the UGT was slower than that of the anarchist unions, and more restricted to industrial and urban areas such as Madrid and the Basque Country. When the UGT eventually surpassed the number of affiliates of the CNT in the 1930s, it was possible due to a large increase in its rural affiliates.

  3. 3.

    In 1910, the average daily wage in industry was 2.88 pesetas. Assuming 280 working days per year, this would indicate an annual wage of 806.40 pesetas (see Vilar (2004), p. 156).

  4. 4.

    Prados de la Escosura (2003), p. 521

  5. 5.

    See, for example, INP (1936) and Maluquer (1926).

  6. 6.

    Rural laborers were excluded from old-age pensions before 1943. Permanent rural laborers were excluded from health insurance until 1953, and nonpermanent rural laborers until 1958.

  7. 7.

    Data on insured persons and beneficiaries from INP (1960); data on active population and total population from Nicolau (2005)

  8. 8.

    GDP figures from Prados de la Escosura (2003)

  9. 9.

    To qualify for contributory pensions in the Spanish system, a previous contribution record is required, whereas for noncontributory pensions, it is not. Before the Toledo Pact, social insurance funds (receiving compulsory contributions plus government subsidies) could be used to finance either contributory or noncontributory benefits. For more details, see Comín (2010).

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Acknowledgments

I thank Alfonso Herranz, Peter Lindert, Javier San Julián, Sara Torregrosa-Hetland, and the participants at the fifth Finland in Comparison Conference and the second Workshop on Public finance in the History of Economic Thought for their comments. Also acknowledged is Javier Silvestre’s patience and help. The usual disclaimers apply.

Most of all, I would like to thank John E. Murray. I met John in 2008, when he visited the University of Barcelona as a visiting scholar. At that time, I was in the early stages of my PhD. I distinctly remember John being kind enough to discuss with me what, at the time, were just a few research ideas and bits of data. He made a number of suggestions and even gave me some ideas on how to start publishing my work. My later research departed a bit from the preliminary ideas that I presented to John. But for me (a young scholar who was just starting out) it was very important that a professor from the United States listened to me and gave me advice on how to continue. Of his work, I followed with particular attention his studies on social insurance. I always found his book on the Origins of American Health Insurance to be an excellent example of combining quantitative and qualitative methods. I admired his ability to illustrate through examples and testimonies of the time some of the most relevant findings of the book, as well as the attention that John paid to the incentive problems associated to the design of social insurance. Some of the ideas I had the opportunity to discuss with him are captured in this chapter.

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  1. Universitat de Barcelona, Barcelona, Spain

    Sergio Espuelas

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  1. Sergio Espuelas
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Correspondence to Sergio Espuelas .

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  1. Religious Studies, Rhodes College, Memphis, TN, USA

    Patrick Gray

  2. College of Business and Economics, West Virginia University, Morgantown, WV, USA

    Joshua Hall

  3. Department of History, Bowling Green State University, Bowling Green, OH, USA

    Ruth Wallis Herndon

  4. Applied Economics, Facultad de Economia y Empresa, Zaragoza, Spain

    Javier Silvestre

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Espuelas, S. (2022). A Difficult Consensus: The Making of the Spanish Welfare State. In: Gray, P., Hall, J., Wallis Herndon, R., Silvestre, J. (eds) Standard of Living. Studies in Economic History. Springer, Cham. https://doi.org/10.1007/978-3-031-06477-7_6

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