Spain’s Financial Position in the First Globalization

Spain’s financial position during the late nineteenth and early twentieth century has usually been depicted as one of persistent deficit on current account, resulting from the country’s integration into international commodity and factor markets, which would have slowed down economic growth. In this chapter, this proposition is tested on the basis of a reconstruction of the Spanish balance of payments on current account. At odds with this interpretation, during the first globalization, opening up until 1890 allowed a net capital inflow that made it possible to meet the demand for investment boosting economic performance. Conversely, current account reversals in a context of macroeconomic domestic imperfections help explain the economic slowdown at the turn of the century.