A Difficult Consensus: The Making of the Spanish Welfare State

Since the 1880s, the Spanish government tried to promote social insurance to achieve political stability. However, a proper welfare state did not develop until the late 1970s. Weak fiscal capacity plus persistent disagreement on who should assume the financial cost of new social programs explain this delay. Before the Spanish Civil War (1936–1939), social reform advanced very slowly. Given the lack of fiscal capacity, Spanish policy makers initially promoted contributory social insurance schemes, mostly financed by employers’ and employees’ compulsory contributions with little public subsidy. To reduce social conflict, rural laborers were included in these programs along with industrial workers. This, however, generated strong business opposition from both rural landowners and small-sized, labor-intensive businesses (which predominated in Spain). With the advent of democracy in 1931, new social programs were devised, but redistribution demands focused on land reform, an ambitious and controversial policy that eventually led to the outbreak of the Spanish Civil War. After the war, the Franco dictatorship consolidated a conservative social insurance model. Social benefits were kept very low and funding relied on employers’ and employees’ compulsory contributions. The repression of the labor movement alongside trade protectionism allowed companies to easily transfer the cost of social insurance to wages and final prices. The introduction of income tax, after the restoration of democracy in 1977, led to a new social protection model. Tax-funded, noncontributory programs increased and social protection was extended beyond those in stable employment. Unlike in 1931, in 1977, the political consensus necessary to develop social policy was reached. In addition to economic modernization and population aging, decreasing inequality and the example set by the social pacts that spread throughout Europe after World War II must have been crucial in this sense.