The political economy of conditional foreign aid to Spain, 1950-1963 : relief of input bottlenecks, economic policy change and political credibility
This thesis advances our understanding of the effects of foreign aid programmes in the Spanish economy during the 1950s. It does so by concentrating on three aspects. First, it considers the contribution to economic growth of aid-financed goods by relieving input bottlenecks. Results from an input-output analysis downplay the alleged importance of aid in increasing Spanish output by providing raw materials and other inputs. Second, it discusses the extent to which foreign donors influenced Spanish economic policy-making. Based on original archival sources from both recipient and donors, it is argued here that the United States was particularly ineffective at imposing its economic policy agenda. Surprisingly, the best way to increase the likelihood of the adoption of economic policy reform was not to exercise outright leverage but to provide further unconditional aid disbursements. The analysis of the involvement of the International Monetary Fund and Organisation for European Economic Co-operation to underwrite the 1959 Spanish Stabilisation Plan suggests that the multilateral organisations were acutely aware of the overriding importance of a true commitment to the reforms by the local policy-makers. Rather than relying on formal conditionality, they ascertained such commitment by monitoring the internal support for the reform programme whilst carefully avoiding any instance that may jeopardise the cohesion of the domestic pro-reform coalition. Third, the dissertation motivates a 'credibility hypothesis' under which the American aid-for-bases programme improved the political credibility of the regime and with it private businesses' expectations. A range of both qualitative and quantitative evidence, of which the use of financial market data is paramount, supports the hypothesis. This result contributes to solving the puzzle of Spanish economic history during a period that sees the resumption of economic growth after a stagnant first decade under Franco's rule despite very limited policy change.