University of Nevada, Reno

Basque Center

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      Lesson 1
      Lesson 2
      Lesson 3
Course Syllabi

Online Course C460 · Bilbao Guggenheim Museum

Lesson three

Required reading
Eduardo J. Glass. “General Economic Development” (Chapter 3, Bilbao’s Modern Business Elite, Univ. of Nevada Press, Reno, 1997.)
Max Weber, letter to his mother from Bilbao.

Suggested reading
Erik Wolf. “The New Laborers” (Chapter 12, Europe and the People Without History, Univ. of California Press, Berkeley, 1982.)

Learning goals
1.  What are the facts of Bilbao’s industrialization?
2.  The spread of capital from mining to metallurgy, shipping, banking, and other industries.
3.  Bilbao’s industrial development and its relationship to the European global capitalist system

“The panorama of the mountains rising above the sea and the Nervion valley, smoking with a hundred chimneys, forms a spectacle that is so stunning as to become unforgettable,” wrote Max Weber to his mother from Bilbao at the turn of the 20th century.

During the first half of 19th century, Vizcaya lagged behind other Spanish provinces in modern industrial development. Even if primarily a rural province, agriculture was still insufficient to feed Vizkaians. The explosive growth took place after 1876. This did not take place ex nihilo; from 1840 to 1875 there had been other modernization attempts.

By 1856 Bilbao was tenth among commercial Spanish ports, but by the mid-1860s it became second after Barcelona. Bilbao’s ascent was a difficult one. Setbacks included the decline of iron and wool (traditional materials for export) during the first part of the century and the First Carlist War of succession to the Spanish throne during the early 1830s. Andalucia established more advanced factories. Bilbao lost the right to import duty-free products and became fully integrated into the Spanish market. This opened new trade opportunities with the Spanish colonies: Cuba, Puerto Rico, and the Philippines. Imports grew during the 1840s, 1850s, and 1860s with Great Britain (textiles, machinery, drugs and chemical products), France (silk and textiles), and Norway (codfish) providing approximately 75% of the imports. Bilbao exported grain, flour, wine, and iron ore, with grain and flour amounting to 72% of the exports during 1858-1866. Still, Bilbao’s port was a distant second to the neighboring port of Santander. Bilbao’s shipyards enjoyed great prosperity during the 1850s and 1860s. Total tonnage went from 30,000 in 1847 to 68,200 in 1858 (739 vessels).

Banking and insurance was another growth industry of the 1850s. The Union Bilbaina insurance company was founded in 1850 by forty of the wealthiest Bilbao merchants. By 1861 seven insurance companies operated in Bilbao. Banco Bilbao was established in 1857 and had the privilege of issuing paper money that served as legal tender. Large partnerships had the advantages of reducing risks and the ambitious project of constructing the railroad line (completed in 1863) between Bilbao and Tudela (necessary to maintain the Castilian market) required such large partnerships. Financed mostly by foreign countries, the Spanish railroad network was extended from 500 to 5,000 kilometers between 1855 and 1865, with most of the materials imported from Great Britain. The Bilbao-Tudela railroad was financed with local capital.

Modernization spread to the manufacturing industries of the mid-1800s. Merchants dominated the iron industry until the 1830s and in the late 1840s there were 621 mills in Vizcaya. The ferrerias or foundries (small earths fueled by charcoal and powered by water), almost unchanged since the Middle Ages, were finally obsolete. In 1848 the iron factory Santa Ana built the first Vizcaian blast furnace. The modern giants facilitated the separation of the smelting and refining processes and their output was much larger, producing as much as one hundred ferrerias. The blast furnace of Nuestra Senora del Carmen followed in 1855. Lack of coal was a serious hindrance to these iron factories. The neighboring region of Asturias produced more iron wrought than Vizcaya in the mid-1860s. The cost of iron ore was 8.75 pesetas in Vizcays versus 14.87 in Asturias; yet the cost of coke was 19.75 in Asturias versus 54.25 in Vizcaya. The failure to find coal near Bilbao forced the Ybarras and Co. to export the metal from Asturias or Great Britain.

Bilbao’s prosperity necessitated urban renewal projects. Water conduits had to be built by the 1860s for the needs of Bilbao’s inhabitants.

As the local iron industry was breaking away from the obsolete ferrerias, the city began to grow as one of the most important ports of Spain. The population growth was double Spain’s during 1859 &endash; 1900. In 1887 41.5% of the town of Valmaseda, 73% of Baracaldo, and 38.2% of Bilbao were immigrants and the industrial and service sectors equaled those in agriculture.

As late as 1900 two-thirds of the active population in Spain were in the primary sector; this proportion was almost reversed in Vizcaya.

The worth of new companies in Vizcaya during the year 1901 was 483 million pesetas. This represented 55% of all investments in Spain. Where did these investments come from? Some historians emphasize the importance of the capital accumulated through mining and its investment in other industries, others tend to underplay the direct contribution of mining. Montero, for instance, calculates that between 1878 and 1898 the mining profits were of the order of 405 million pesetas. Glass puts the number at 324 and not all of these profits belonged to Vizcayan businessmen (between 56 and 74%). Not all of the 240 million of the local entrepreneurs accounted for the Vizcayan investments during the 1880-1900 period. According to the British consul, for example, during 1886-1899 around 420 million pesetas were invested in new companies. These do not include three of the most important steel factories, the renewal of the local fleet, and other companies founded during the 1880s, all of which would require at least another 100 million. Glass concludes that mining profits can account at best for 60% of the investments. The rest of the money could only come from local savings or from outside businesses. Fernández de Pinedo and others have called attention to these outside investors. Thus 57% of Altos Hornos de Bilbao steel factory’s capital was from outside the province. The larger stockholder of La Vizcaya was a shipping company of Basque businessmen based in Liverpool.

The modernization of the iron and steel industry took place between 1879 and 1882 with the establishment of three modern factories with powerful blast furnaces fueled by coke: San Francisco, Altos Hornos de Bilbao, and La Vizcaya. By 1881, San Francisco’s four blast furnaces were producing about 36,000 tons of iron, almost a third of the total Spanish production.

The other two factories soon followed the success of San Francisco. Altos Hornos was the continuation of two Ybarra and Co. factories; they secured the exclusive rights to the Bessemer converter in Spain. La Vizcaya, promoted by Victor Chavarri, was the creation of several prominent mine-owning families. The three factories enjoyed special arrangements that reduced the costs of transportation of the ore. Their location on the Nervion river facilitated the import of British coal, which was the return freight for the ore exported to England, and which made its cost drop dramatically in Bilbao. Vizcaya became hegemonic in Spain in the manufacture of iron and steel. Its share of Spain’s total production increased to 66% between 1880 and 1913 (from 23% between 1861-1879). Vizcaian businessmen also promoted the extraction of other minerals such as lead, coal, sulfur, and copper throughout Spain.

Bilbao could produce steel at one of the cheapest prices in Europe. How much was exported? According to Pinedo 30%; according to Portilla 60%. Italy absorbed 65% of the bars in the 1887-1890 period; Germany 9%; France 7.25%.

Although the furnaces were the main establishment of modernization, railroad lines, chemical factories, and shipping companies were also rapidly developed. Between 1880 and 1885 new railway lines parallel to both banks of the Nervion and connected Bilbao with the seacoast. Bilbao’s Sociedad Española de Dinnertime owned the rights to the Nobel patent to produce dynamite in Spain. In 1878, an oil refinery was established on the banks of the Nervion.

Between 1880 and 1885 the shipping industry attracted vast amounts of capital. The capital amounted to 30.3 million which was more than the combined capital of La Vizcaya and Altos Hornos. The tonnage of local steamers rose from 6 in 1771 to about 90,000 in 1885. This large investment was related to the massive exports of minerals from Bilbao. During the mid-1890s the Spanish government requested three vessels to be built at the shipyard Astillerons de Nervion. They were built successfully, but sank in Cuba during the Spanish-American War. Such promotion of national industries was extended to other companies as well. Shipping continued to attract capital. From 90,000 tons in 1885, it grew to 156,000 tons ten years later. Bilbao’s biggest shipping company, Sota and Aznar, was formed at this period. Assisted by the Boer War, Bilbao’s fleet increased again 50% between 1895 and 1900. It became the largest in the country, accounting for about one half of the total Spanish tonnage.

The Bilbao Stock Exchange was created in 1890 and increased in value 50% during the first five years. Banking was restructured at the turn of the century; it attracted almost one hundred million pesetas. In 1901 Banco de Bilbao and Banco de Comercio merged, while new banks were formed. The seven local banks had a combined capital of 98 million pesetas. Only three of them survived after the 1901 crash. Two of them, Banco de Bilbao and Banco de Vizcaya, were among the five largest Spanish banks until they merged in 1988.

The metallurgic industry attracted less capital than banking, shipping, and mining, but it continued to grow and remained the backbone of the Vizcayan manufacturing sector. In 1901 Altos Hornos de Bilbao, La Vizcaya, and La Iberia merged to create the new company, Altos Hornos de Vizcaya, with a combined capital of 32.7 million pesetas. The tendency towards industrial concentration continued during the first decades of the century. Many of these firms became de facto monopolies, protected from foreign competition with high tariffs, at the expense of Spanish consumers.

In 1929, although Basques constituted a mere 3% of Spain’s population, Basque capital represented 25% of Spanish banking resources, 38% of the investment in shipyards, 40% of the stock in engineering and electrical construction firms, 68% of the funds dedicated to shipping companies, and 62% of the investments in steel factories.

Written Lesson for Submission
Please write a two to three page essay on one of the topics below or choose another relevant topic. Again, the essay should creatively engage with the facts and ideas presented in the written materials and should not consist of merely repeating the information offered by the instructor and the readings.

1. Describe some of the basic dilemmas faced by traditional cultures when confronted with the new wave of globalization.
2. What is your view of the tensions between “universal civilization” and “national cultures?”
3. Is Bilbao’s pre-modern history a closed economic unit or cultural independent configuration in any sense? Or is it, rather, a global construction?
4. To the degree that Bilbao has been at the forefront of Basque commerce, industry and urban life, what are the implications of such global reach for “Basque culture” in general?


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