SPANISH CAPITALISM by PEDRO GARCIA Introduction Toward the middle of 1974 it became clear that a recession had just broken out in Spain and was developing rapidly. The internal contradictions of the capitalist mode of production were reflected in an overproduction crisis, as was also the case for the other links in the imperialist chain. Today, in the autumn of 1975, it can be said that the crisis is not only continuing, but has even worsened. There is no sign that capitalism will soon turn upward again. The structural characteristics of Spanish capitalism, the political impasse in which the bourgeoisie has been caught since 1969, and the rise of the mass movement lend this overproduction crisis specific characteristics that ought to be examined. The crisis in Spain broke out in a context that may be summed up as follows: 18
RECESSION - The economic crisis has developed parallel to the aggravation of the political crisis, which worsens from day to day. - It develops at a time when the mass movement is going through an extraordinary rise, which has prevented Spanish capitalism from increasing the rate of exploitation of the working class at a time when this would have to be done if the effects of the oil crisis and of world inflation were to be countered. - It has affected different groups of capitalists in varying ways, at varying times, and with varying intensity. The impact of the oil crisis hit some branches, like automobiles, harder than others. The backward branches, with a lower organic composition of capital, were harder hit by inflation and wage increases than was big capital. The internal contradictions of the capitalist mode of
production in Spain were decisively aggravated by the unfolding of the crisis. After the boom, which began in 1971 and resulted in rapid growth in 1972 and 1973, the internal dynamic of Spanish capitalism itself would have provoked an overproduction crisis in any case. But that crisis was rendered more profound and more rapid by the effects of two additional factors: 1) The simultaneity with the cycle in the rest of the Imperialist economy as a whole, both in its ascending and descending phases, aggravated by the oil crisis. 2) The rise of the mass movement, which not only dashed the hopes of Spanish capitalists and prevented them from increasing the rate of exploitation, but was also able to prevent the adaptation of production and resources to the new prices of oil and raw materials from taking place at the expense of the workers. Because of the dialectical interaction of these three factors, it is extremely difficult to separate them in the analysis. In what follows, we will not deal with overproduction on a world scale and will instead center the analysis on the effects of this worldwide overproduction on Spain. Evolution of latest cyclical phases The preceding phase of reduced economic activity for Spanish capitalism may be situated in the middle of 1971. Then came the boom, which, for the first time, coincided in all the imperialist countries of the world. The boom attained its culminating point at the beginning of 1974, and then developed into a new recession toward the middle of that year. All this may be summed up in the following figures:
Average Rate of Growth of GNP (in %) 1961-70 7.6 1971 4.5 1972 8.9 1973 8.4 1974 5.0 1975 (est.) 1.0 The boom that began in the middle of 1971 was stimulated by:
- The evolution of the world economy, which was marked by the progressive rise of the rate of inflation and by a rapid upswing in world trade, thus provoking a considerable increase in demand for the products of Spanish capitalism and a clear improvement in the balance of payments, which in turn enabled the government to apply an expansive policy without fear of future devaluations of the peseta;
- The progressive absorbtion of stocks and the reestablishment of the rate of profit at a time when demand was increasing for nearly all products, when inflation was continuing, and when the organization and combativity of the working class was rising rapidly. In 1973 economic activity remained at a high level, which was reflected notably in:
- a very high level of employment, which sometimes approached full employment; there was a shortage of skilled labor;
- big difficulties in obtaining supplies of raw materials, which were rendered increasingly scarce by the boom of the international capitalist economy;
- an increased level of utilization of productive capital, which nevertheless began to diminish with 1973 (slowly falling beneath the utilization level of more than 90% attained at the end of 1972);
- an acceleration of inflation: Although the official figure for the rise in the cost of living was 8.3% in 1972, it rose to 11.5% in 1973. Inflation, which was to accentuate still more later on, undermined the buying power of the masses and accentuated the trend toward depression of consumption. Since the level of organization of the masses was rather high, this became an additional factor in mass mobilization, which culminated in autumn 1974 in a wave of struggles that seriously affected industrial production. All these factors were to lead to the overproduction crisis that appeared in 1974. But the recession would not have been so strong and its effects would not have been so persistent had it not been for the coincidence of two further factors: the international crisis and the rise of the mass movement. It must also be noted that the anti-inflationary policy applied by the government beginning with the end of 1973, which was characterized by significant monetary restrictions, intensified these depressive tendencies. Inflation and the oil crisis further threatened the international positions of Spanish capitalism. The bourgeois state, which had never expected the crisis to be so grave, tried to correct this state of affairs by depressing the economic situation. But this policy was scarcely workable, and Spanish capitalism had to change its economic policy on several occasions during 1974, each time events themselves belied the predictions of the state apparatus. This led to a growing lack of credibility on the part of successive governments. When the ministers appealed to the patriotism of the capitalists, as was done recently, this did not even manage to halt the decline of the stock market. This was a clear sign that the exceptional form taken by the bourgeois state since Franco was not only no longer useful for the faction of the bourgeoisie out of power, but had even ceased to be useful for the faction of the monopolies represented by this form of state.
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SPAIN The culminating point of the boom may be located toward the end of 1973. But the great inertia of the Spanish economy; the fact that order books were still filled and that stocks had been accumulated through speculation on new increases in the prices of raw materials; and the change in the economic policy of the government, which sought to pull through the beginning of 1974 by trying to prevent inflation and the oil crisis from reducing consumption (in order to eliminate one of the causes of increased workers combativity) - all these factors resulted in a continued high level of economic activity during the early months of 1974, thus postponing the outbreak of the recession to around the middle of the year. After that, however, the recession intersified, hitting hard at investments and exports, private consumption and public spending. Role of the workers movement The rigidity that characterizes Spanish capitalism and the capacity to alter the volume of employment in the event of recession (because of the existing laws) prevented unemployment from going up until a few months after the beginning of the decline in economic activity. During a boom period, overtime hours pile up rapidly before new hiring fakes place; in periods of recession, on the other hand, overtime is cut out before layoffs are ordered. Because of the absence of any adequate unemployment insurance, there are no "free layoffs," in view of the rapid rise of social conflicts that would otherwise result. In fact, during an initial phase, the cost of making adjustments in the volume of employment falls on the capitalists, whereas in other countries it falls on the state, which has to cover growing deficits in social security. The inefficiency of the Francoist bureaucracy is especially manifest in this regard. If undermines the competitive capacity of Spanish capitalism, which consequently suffers a major puncturing of its profits during times of crisis. From the beginning of 1974, unemployment began to rise rapidly, even before overall economic activity began to fall. The tendency of official statistics to underestimate the number of unemployed is well known. In general, economists agree that the official Figures have to bemultiplied by two (at leaf) to arrive at a more realistic figure. Between January and December 1974 the officially declared figure on unemployment rose from 100,000 to 250,000. The reason for this was the European recession: more than 35% of the rise in unemployment in Spain resulted from the return of immigrant workers who could no longer find jobs in the other coun tries of West Europe. Spanish capitalism tried to make the working class bear the costs of the adjustments required by the international crisis and the new prices of oil and other raw materials, the aim being to maintain the rate of profit. But workers struggles were able to prevent this. In 1974, for example, wages increased nearly 30%, that is, clearly more than the cost of living. This fact, which had a greater effect on the more backward branches (because of their lower organic composition of capital), had a strong influence on the fall of the rate of profit and at the same 20 time prevented the transfer of resources abroad (essentially toward the oil-exporting countries), thus rapidly placing the Spanish bourgeoisie in positions inferior to those of its main competitors because of a growing debt and a higher rate of inflation. But however important the wage increases may have been, the manner in which they were won marked an important qualitative change from the past. In addition to the wage increases called for in the contracts, the workers movement also succeeded in winning a reduction in the workday, broke through the limits on wage increases imposed by government decisions at the end of 1973, and in many cases even obtained equal wage increases for all! In addition, the workers movement once again succeeded in demonstrating the ineffectiveness (from the standgeois state in Spain, which was unable to halt the mopacities. The workers movement broke through the policy of wage freeze; it forced the government to grant compensation to neutralize the reduction in mass consumption, notably through action on inflation that prevented its full weight from falling on the working class. Hence, the fall in the rate of profit was accentuated. In attempting to contain the progress of workers struggles and to attenuate an acute social crisis, the bourgeo is state objectively played a role opposite to what was needed by the monopolist groups the state represents. The importance of the rise of workers struggles in the evolution of the crisis of Spanish capitalism may be measured by the fact that this rise wound up seriously int fluencing the level of industrial production. The highest point of workers struggles, attained during the autumn of 1974, coincided with a sharp decline in industrial production, which all commentators attribute to the social situation:
Percentage Increase in Index of Industrial Production (relative to same quarter of preceding year) 1973: Ist quarter +17 2nd quarter +14 3rd quarter +16 4th quarter +14 1974: Ist quarter +15 2nd quarter +14 3rd quarter + 8 4th quarter + 1 1975: 1st quarter -11 2nd quarter - 9
Although the overproduction crisis is manifested in both the imbalance between the two sectors of the capitalist economy and the fall in the rate of profit - that is, the fall in the rate of capacity utilization and the fall in the volume of accumulation are results of the two factors — we will separate them in the analysis in order to make the analysis easier.
A. The disequilibrium between the two sectors is manifested in the fact that the demand for goods rose less rapidly than productive capacity. 1. Consumption experienced a pronounced deceleration in real terms, although one cannot speak of an absolute decline; for the whole of the year, it is questionable if growth will exceed 5%. During the year, companies order books declined, stocks accumulated, and prognoses became increasingly pessimistic. The rate of utilization of capital fell from 87% at the end of 1973 to 80% for the last quarter of 1974. In 1975 this trend continued; unutilized capacity rose to 23%, a figure that had not been reached since 1967. The cause of this must be sought in the impact of inflation on the buying power of the masses, even though the success of workers strug gles reduced this impact relative to the impact of inflation on the rate of profit. 2. Investments were hit belatedly, but when they were the fall was much sharper than was the case with consumption. This is normal in a declining phase. For the same reason, the priming of investments takes more time than the priming of consumption. While investments still increased 7% for the whole of 1974, this did not prevent a continuous fall in orders for investment goods as the year went on; at the same time, stocks increased, although less intensely than the stocks of consumer goods. The rate of utilization of capital did not decline strongly (falling from 89% to 85% for the year as a whole); the decline took place more particularly af the beginning of 1975. 3. Construction was the sector that made the biggest contribution to unemployment. Adaption of the volume of the work force to current production is much easier in this branch because of its heavy utilization of part-time workers. During 1974, this created an atmosphere of crisis in this branch, which scarcely contributed to improving prospects for the rest of the economy. 4. The repercussions of the international crisis undoubtedly constituted the most important factor. The increase in the prices of oil and of other raw materials had uneven effects on the various branches of the capitalist economy. The importance of this may be measured by the fact that 70% of the increase in the trade deficit was due to increases in the price of oil. As for the effects of the contraction of world trade, it is sufficient to mention that the deterioration of the balance of payments (without taking movements of capital into account) reached 6% of the gross national product, which did not happen in any other imperialist country. The overall result may be estimated as a loss of $770 million for the Spanish economy, despite the increased foreign debt to which the government resorted. B. The fall of the rate of profit. All these phenomena contributed to the fall in the rate of profit. For capitalism, a moderate rate of inflation contributes to the realization of surplus-value, because it permits the maintenance of demand at a high level and at the same time permits the workers struggles to be "integrated" in part. But when the rate of inflation becomes galloping, the resulting workers demands and price increases set in motion an inflationary process that affects various branches of capitalist activity unevenly and aggravates the internal contradictions of the system. This was especially true in 1974, since inflation increased the costs of industrial production much more than it increased sales prices. For the first time, wholesale prices rose even more than the cost of living! The following factors influenced the fall in the rate of profit: a. The effects of inflation on the most backward sectors, especially agriculfure. Spanish agriculture is marked by a pronounced structural imbalance. Certain products, like wheat, rice, citrus fruits, and wine, suffer permanent surpluses with no domestic or international outlets. For other products, like sugar, there is a permanent shortage. In the case of livestock breeding, profitability is problematical because of the shortage of feed that results from the protection the regime accords production of wheat. Average agricultural productivity is low. All this results in a constant increase in the agricultural balance of trade deficit, while 25% of the working population is engaged in agriculture. Spanish agriculture thus acts to accentuate the effects of inflation on the capitalist economy throughout the Spanish state. These tendencies intensified in 1974, The deficit in the agricultural trade balance doubled. The price for the food component of the cost of living index rose 19%. The official policy of "blocking prices" in some precise cases through subsidies granted farmers prevented the basic imbalance of agriculture from having even more serious effects on the cost of living. To sum up, we may report that for Spanish capitalism the backward state of agriculture represents:
- A permanent stimulant to the rise in the cost of living. By increasing the prices of food for the workers, a negative effect is exerted on the rate of exploitation of the working class in the most advanced industrial sectors and also acts to constantly stimulate demands for wage increases;
- A permanent source of increase in the deficit in the trade balance, with losses of exchange reserves that result in a threat of devaluation when the upturn comes, because of the increase in the costs of necessary imports. b. The increase in labor costs, to which we have already alluded, and which is compounded by the increase in employer contributions to social security. The increase in the wage fund (30%) was superior to that of the GNP in current prices (19%), which implies only a very slight increase in nominal profits, if not an actual stagnation. c. The rise in the prices of raw materials and oil, the effects of which continued in 1974, although in varying ways in different sectors. The prices of imports rose 50% on the average during 1974.
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SPAIN d. Speculation on stocks, which occurred in the expectation of further price rises in raw materials, accentuated the fall in the rate of profit, because a reduced profit was made with a capital increased by the value of these stocks.
Sectoral imbalances and the fall of the rate of profit acted in a dialectical manner throughout 1974; their joint action wound up by seriously affecting accumulation and clearly showed that the crisis of overproduction was a fact that could not be resolved within the space of several months. The internal logic of the capitalist cycle was brought into play, aggravated by the specific features of Spanish capitalism. Amplification of the crisis period of the preceding year. The index of apparent investment declined 6%. Official unemployment rose to 300,000; according to the "Inquiry into the Working Population" of the National Statistical Institute, the real figure was 610,000 as of June 1975. Inflation continued at the same rate as 1974, despite the fact that this time there was no increase in the price of oil. In August 1975 the cost of living was more than 10% higher than it had been in December 1974. Forecasts continue to be pessimistic, which is reflected in polls of employers and in the continuing fall of the stock exchange, which had dropped 27% since April 25, 1974. Banking credit in the private sector has slowed down following a decline in the growth rate of investment. This growth rate dropped from an average of 25% in 1974 to 15% in July 1975. The foreign debt, which was still very low back in 1967, has risen to $4, 500 million. Debt servicing now absorbs 9% of the export revenue of the Spanish state; in 1967 it absorbed only 1.8%. Because of all this, order books continue to be sparsely filled, stocks remain high, and underutilization of capital reached 24% in June 1975. It is clear that the cycle is continuing to head downward, the only unknown factor being the evolution of consumption. The small and middle-sized companies have been hard hit. The figure of liquidations and bankruptcies is going up; in a later stage, these effects will also be felt by monopoly capital. As far as banking capital is concerned, the deceleration of credit in the private sector, along with the fall of the stock market, is also hitting hard. Economic policy has done nothing to improve the situation. A decree-law promulgated on November 14, 1975, practically froze wages, no longer permitting increases greater than the official rise in the cost of living, while priming building construction. Because of the reigning social tensions, the short-term effects of these measures will be proctically nil. No conjunctural improvement can be expected before the summer of 1976, things being what they are. D 22