Thursday, July 25, 2019

Why is Spain so successful?

In 1950, Spain was poorer than Argentina, Chile, Mexico, Peru, Uruguay, and Venezuela, and roughly equal to Colombia, Bolivia, Costa Rica, Cuba, Ecuador, Guatemala, and Panama. This is 11 years after the end of the Spanish Civil War, and Spain of course stayed out of World War II.

 Now it is the richer than all of them.
The [1959] “stability plan” broke an inward-looking development model with growing barriers to trade that had been followed since 1874. ... The combination of macroeconomic stability, freer flow of goods and capital, and stronger state capability triggered several decades of fast economic growth.
To a considerable extent, the economic history of Spain since 1959 is a textbook example of modern economic growth: get a few institutions right and ride them into prosperity. European transfers after Spain joined the E.U. in 1985 are a rounding error. And joining the E.U. was the consequence of growth, not the cause.
Interestingly enough, Cuba had the same income per capita than Spain in 1959 and better literacy, education, and many other indicators. A few decades of ignoring markets and see what happens.


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