Revamping the Weak, Protecting the Strong, and Managing Privatization

Abstract

Conventional wisdom holds that liberal economic policy and a hasty integration into the European Union is the central feature of Spain's successful adaptation to the globalization wave. This study argues that a set of illiberal and protectionist policies are crucial to understanding the Spanish transformation. Spain's reorganization of its economy displayed three broad components: the revamping of industrial sectors from above; the targeted protection granted to the energy, banking, and telecommunications sectors; and a defined strategy of privatization that prevented any major international player from taking part in a given business. The author argues that this statist model of market transition in Spain was decisively shaped by two concrete features of the Spanish political economy as it unfolded under the import substitution industrialization model: the organizational and economic weakness of the domestic industrial bourgeoisie and the comparatively entrenched position of financial capital and its energy-controlled companies.

Europeanization and the retreat of the state

“…This model replicates the regression for model 5a but excludes Spain from the calculations, which emerged as a severe outlier from the regression diagnostics. As the Spanish case is characterized by almost complete privatization through left wing governments (which is still a puzzle in political research where different explanations compete, see for instance Etchemendy 2004), this is clearly deviant from the overall pattern. Spain's privatization process thus exerted an unjustifiably strong influence on the results of the analysis.…”

“…A related interpretation was that privatization served to weaken trade unions. However, a recent "political alliance" based explanation of the Spanish privatization process may also be grouped under this theoretical roof (Etchemendy 2004).…”

The Spanish corporate structure through interlocking directorates

“…As previously indicated, it is more frequent that a non-financial company has representatives of various banks and savings banks on its board, than a bank has shareholdings in various industrial companies. This fact shows that, although the Spanish capital market gained in dynamism and size (Etchemendy 2004), in some sectors it is considered necessary to maintain interlocking directorates in order to diversify sources of banking finance.…”

“…While state shareholdings in industrial companies were sold to foreign multinational groups, shareholdings in communication, electrical and energy companies were placed on the capital market through initial public offering (IPO) (Etchemendy 2004). Governmental policy and the scarce return from the banking business at the time meant that domestic banks endorsed the majority of the institutional tranches of the flotation and a large part of the minority tranches endorsed by the public through the very same banks (Etchemendy 2004). This led to a model in which state control in these companies was replaced by control of hard core of stable shareholders, essentially banks.…”

New forms of industrial policy in the age of regulation: A comparison of electricity and telecommunications in Italy and Spain

“…With the advent of democratization, successive Spanish governments embarked on a process of industrial restructuring aimed at making Telefonica the leader of a group of new Spanish service multinationals (Etchemendy, 2004). With the advent of democratization, successive Spanish governments embarked on a process of industrial restructuring aimed at making Telefonica the leader of a group of new Spanish service multinationals (Etchemendy, 2004).…”