1808: the Napoleonic Wars and the loss of the American colonies

Napoleon’s invasion sparked the liberal revolution in Spain and led to the loss of its continental American colonies. Civil wars and a series of coups ensued, giving rise to successive regime changes. The liberal reforms were followed by absolutist counter-reforms that allowed the survival of corrupt institutions and behaviours from the Old Regime. From 1845, a moderate State favourable to landowners was established, preventing the implementation of an industrial policy. The progressive revolutions of 1854 and 1868 liberalized the banking, railway and mining laws, allowing foreign investment. This change along with the introduction of capitalist institutions paved the way for the industrial revolution; however, it was not fully completed due to Spain’s poor factor endowment, political instability and huge budget deficits and outstanding public debt.