The Spanish economy has three well-differentiated stages during Francisco Franco’s dictatorship. The first stage (1939-1950) was defined by the economic independence or autarky imposed by Franco’s government. After the Civil War, Spain emerged devastated and with alarming economic problems. Most of Spain’s economic reserves (gold and foreign exchange) practically disappeared; and given the reduced productive capacity faced by industrial and agricultural sectors, the government adopted anti-market policies seeking to transform Spain into self-sufficiency. These policies had a devastating impact in the Spanish economy driving a weak economic recovery, high inflation rates, a severe contraction of international trade as well as the development of black markets. By the end of the 1940’s Spanish GDP was barely 40% of the average West European countries.

The second stage (1950-1960) is mainly characterized by the government impetus for economic liberalization. In the early 1950’s some of the autarky policies were relaxed and a slow and cautious liberalization process started allowing the system to reach Pre-Civil War industrial levels by the early 1950’s although agricultural levels remain low until 1968. The international context dominated by the Cold War played a decisive role in the recovery of the Spanish economy. In 1953 Spain signed the Pact of Madrid with the United States. The treaty allowed the establishment of US military bases in Spanish soil in return of economic assistance for the remainder of the decade. The years from 1951 to 1956 saw great economic growth, however, lack of consistency in the implementation of policies drove the economy into stagnation; inflation resumed and foreign currency reserves went from a high of $58 MM USD in 1958 to $6 MM USD by mid-1959. The crisis led to the creation of a new and refreshed technocratic cabinet made up by bankers, industrial executives, academics as well as members from the Opus Dei. The group had had the task of implementing reforms that could break the economic impasse and lead the recovery. As part of this effort Spain joined different economic world organizations such as the Organization for European Economic Co-operation (OEEC), which later became the Organization for Economic Co-operation and Development (OECD), the International Monetary Fund (IMF), and the World Bank, groups that almost immediately became involved in supporting Spain economic liberalization.